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TMI Blog2022 (4) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... e of lack of enquiry on the part of the AO as once he was satisfied with the supporting evidences produced by the assessee he has accepted the claim. Question of lack of enquiry does not arise when the AO has taken up the scrutiny and issued the notice under section 142(1) along with a questionnaire calling for all the details relevant to the Interest expenses and Increase in Capita - assessee produced the relevant details and evidences and specifically the purchase bills of the assets, return of income, computation of total income, balance sheet, profit loss account, capital account and personal bank statement of the assessee and complete books of accounts. It is further noticed from the reply furnished by the assessee to the AO as well as to the ld. PCIT that the interest expenditure claimed in Profit Loss account were of car loan and there was no work-in-progress, and no other interest was claimed out of business income on account of alleged addition to fixed assets. In the fixed assets the additions were of computer for ₹ 11,700/- and Refrigerator AC of ₹ 38,800/- during the year. Accordingly no high interest expenses were claimed very against the new ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the copy of bank statement and other relevant supporting documentary evidences were also filed before the ld. Pr. CIT. The ld. A/R further submitted that the ld. Pr.CIT has also not pointed out any defect or deficiency in the said documents filed. In view of the above facts duly supported by documentary evidences available on assessment record, the sources of fresh capital introduced were duly explained by the assessee and which were after taking possible view and a considered opinion the ld. AO has correctly accepted as explained.- Decided in favour of assessee. - ITA No. 32/JP/2021 - - - Dated:- 12-4-2022 - Shri Sandeep Gosain, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Shri S.R. Sharma (CA) And Shri R.K. Bhatra, (CA) For the Revenue : Smt. Savita Bundas, (CIT D/R) ORDER PER: SANDEEP GOSAIN, J.M. This appeal by the assessee is directed against the revision order dated 31.03.2021 of ld. PCIT, Jaipur-2, Jaipur passed under section 263 of the IT Act, 1961 for the assessment year 2015-16. The assessee has raised the following grounds :- 1. That on the facts and in the circumstances of the case the impugned order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case was selected for scrutiny and a notice under section 143(2) of the IT Act was issued on 20.09.2016. Notice under section 142(1) along with questionnaire seeking details was issued on 20.09.2016 for limited scrutiny for the reasons (1) High interest expenditure against new capital added in work in progress or addition made to the fixed assets and (2) Substantial increase in capital in a year. In compliance to the notices aforesaid and the points raised under section 142(1) of the IT Act, 1961, the assessee during the course of assessment proceedings submitted in respect of issue (1) above that there is no work in progress/substantial addition to the fixed assets during the year under assessment. The only addition in fixed assets during the year under consideration was computer for ₹ 11,700/- and Refrigerator and AC for ₹ 38,800/- in proprietorship concern M/s. Green Leaf for which no interest was incurred. In support of his contention, the assessee furnished the copies of purchase bills of said assets. The only interest debited to the profit loss account was ₹ 2,23,258/- which was paid on secured loan taken for purchase of Motor Car in the preceding yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in his reply submitted the complete facts of the case along with documentary evidences of fresh unsecured loans fresh capital introduced and accepted by the AO after application of his mind on evidences submitted during the course of hearing. As such it is quite wrong to allege that the AO failed to enquire into genuineness of unsecured loans and source of fresh capital introduced. The ld. Pr.CIT considered the reply of the assessee dated 22.03.2021 but could not find favour, and on the findings given in Show Cause notice held that the assessment order dated 21.12.2017 for A.Y. 2015-16 passed by the ld. AO is erroneous in so far as it is prejudicial to the interest of revenue and accordingly set aside the assessment order only on two issues discussed above and directed the AO to pass a fresh assessment order on those issues. Aggrieved by the order of the ld. Pr. CIT, the assessee is in appeal before us. 4. Before us, the ld. A/R of the assessee submitted that the assessment for the year under consideration was selected for limited scrutiny for the reasons (a) High interest expenditure against new capital added in work in progress or addition made to the fixed assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. A/R placed on record copy of capital account and personal bank statement of the assessee. Further, addition in individual capital account of M/s Radha Govind Lashkari is self-explanatory being the only addition in capital account is out of profit of current year. Thus, the addition in capital account is fully verifiable. The assessee further submitted that he does not know how a conclusion has been drawn that veracity of capital added during the year has not been proved. It is verifiable from the records available on assessment record that addition in capital account of proprietorship concern M/s Green Leaf was made by assessee proprietor in his personal capacity from his saving bank account. Thus the amount was transferred from one pocket to another pocket of same persons then how the department concluded that addition to capital account is not verifiable. 4.2. The ld. A/R further submitted that the ambit of the assessment for limited scrutiny under CASS was admittedly in relation to the verification of Increase in capital and High interest expenditure against new capital added in work in progress or addition made to the fixed assets , in response to which the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Financial Year-one is Limited Scrutiny and other is Complete Scrutiny . The assessees concerned have duly been intimated about their cases falling either in Limited Scrutiny or Complete Scrutiny through notices issued under section 143(2) of the Income-tax Act, 1961 ( Act ). The procedure for handling Limited Scrutiny cases shall be as under: (a) . (b) The Questionnaire under section 142(1) of the Act in 1Limited Scrutiny * cases sha l re nut in confined only to the specific reasons/issues for which case has been picked upforscrutiny.Further, the scope ofenquiry sha l be restricted to the Limited Scrutiny issues. CBDT Instruction No. 5/2016 4. It is further clarified that in cases under Limited Scrutiny \ the scrutiny assessment proceedings would initia l y be confined only to issues under Limited Scrutiny and Questionnaires, enquiry, investigation etc. would be restricted to such issues. Only upon comers ion of case to Complete Scrutiny after following the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in Limited Scrutiny . The AO shall also expeditiously intimate the taxpayer concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase is selected for limited scrutiny- Assessee firm is a real estate firm engaged in colonizing and developing residential projects-Case of assessee was selected for limited scrutiny through CASS on account of mismatch of AIR and CIB data, and mismatch in sale turnover reported in audit report and ITR-An addition for wrong calculation of LTCG was made by A.O. which was not challenged by assessee-Subsequently, on basis of certain audit objections, PCIT issued notice u/s 263-Assessee submitted that it is a case outside jurisdiction of Commissioner of Income tax to raise objections outside scope of limited scrutiny-PCIT ordered for 'Denovo' assessment without considering reply filed by assessee-Held, there is no dispute that scope of enquiry in case of limited scrutiny is only to extent of issues for which case was selected for scrutiny under CASS-CBDT has issued instructions from time to time in this respect and has specifically instructed taxing authorities that scope of enquiry should be limited to verification of all particulars for which limited scrutiny was taken up under CASS-However, in case during assessment proceeding if AO is of view that substantial verification of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed AO to make assessment afresh on issues mentioned in notice-Held, Tribunal in case of M/s Su-Raj Diamond Dealers Pvt. Ltd. CIT ITA No 3098/ Mum has quashed order passed u/s 263 in case of limited scrutiny assessment, holding that Pr. CIT under garb of section 263, cannot exceed his jurisdiction holding that when case of assessee was selected for limited scrutiny for reasons viz. (i) Large other expenses claimed in P L A/c; and (ii) Low income in comparison to High Loans/advance /Investment in shares, therefore, no infirmity could be attributed to assessment framed by A.O on ground that he had failed to deal with other issues which though did not fall within realm of limited reasons for which case was selected for scrutiny assessment-In other words, Pr. CIT in garb of his revisional jurisdiction u/s 263 cannot be permitted to traverse beyond jurisdiction that was vested with A.O while framing assessment-As A.O had aptly confined himself to issues for which case of assessee was selected for limited scrutiny, therefore, no infirmity can be attributed to his order, for reason, that he had failed to dwell upon certain other issues which did not form part of reasons for which cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hands of assessee. Once, no such opinion has been formed by the Assessing Officer, the Commissioner has erred in holding the order of the Assessing Officer to be erroneous and prejudicial to the interest of revenue in this regard. Accordingly, we reverse the findings of the Commissioner. Accordingly, we hold that the order passed by the Commissioner under section 263 of the Act is invalid and the same is quashed for both the assessment years. B) In M/s R.H. Property vs. PCIT, ITA No. 1906/Mum/2019 it was held that,- As a matter of fact, what cannot be done directly cannot be done indirectly . Accordingly, in terms of our aforesaid observations, we are of the considered view that as the A. O had aptly confined himself to the issue for which the case of the assessee was selected for limited scrutiny, therefore, no infirmity can be attributed to his order for the reason. that he had failed to dwe ll upon certain other issues which were clearly beyond the realm of the reason for which the case of the assessee was selected for limited scrutiny as per the AIR information. We thus not being able to concur with the view taken by the fJr. CIT that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 108 (Bom.) and CIT Vs. Shakti Charities (2000) 160 CTR 107 (Mad.). The facts and submissions are verifiable from the assessment record. The Hon ble Supreme Court in case of CIT Vs. Green World Corporation (2009) 314 ITR 81 (SC) held that The jurisdiction under section 263 can be exercised only when both the following conditions are satisfied (i) the order of the assessing officer should be erroneous and (ii) it should be prejudicial to the interest of the Revenue. These conditions are conjunctive. An order of assessment passed by the Assessing officer should not be interfered with only because another view is possible. The Rajasthan High Court in a recent judgement in case of CIT Vs. Chambal Fertilizers and Chemicals Ltd. (2013) 258 CTR (Raj.) 540 has held The law is that the CIT cannot invoke the powers to correct each and every mistake or error committed by the A.O. Every loss to the Revenue cannot be treated as prejudicial to the interest of the Revenue and if the AO has adopted one of the courses permissible under the law or where two views are possible and the AO has taken one view which the CIT does not agree, it cannot be treated as an order erroneous and prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Mumb-Trib). 4.6. Further, the ld. A/R submitted that it seems the ld. Pr. CIT has not gone in to the merits of the assessee s case or arguments or contentions available on assessment record, if it is so then how it can be said or found out whether any prejudice in fact has been caused to revenue or not due to lack of inquiry on the part of the AO. If no loss of revenue is caused, the result remains the same even after conducting the inquiry. It is very settled principle and legal position by various courts or judgments that it will be wrong to say that merely because proper enquiry was not conducted, the assessment would become prejudicial. It was incumbent upon the Pr. CIT to have shown as to how the order was prejudicial to the interest of the Revenue. In the instant case, the appellant had furnished a detailed reply which was available in the record by making the reference to the facts of the case. Despite that, the Pr. CIT did not prove or bring any material or circumstantial evidence on record in support of his contention. Thus, he has not looked into the merits of the case in their true perspective and sense and not applied his mind on the same despite available before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g enquiries may be endless. For someone, some enquiries may be sufficient, however, the same may be insufficient for the others. There is no straight jacket formula or parameter to make inquiry in the assessment proceedings. What is required is that the AO should frame the assessment in accordance with the provisions of the Act, as interpreted and in the light of the relevant judicial pronouncements, as available on the date of framing the assessment or material available before him. The AO being a quasi-judicial authority can also take support from one set of the decisions, if there are diversions of opinion. He can t be directed to make an assessment in a particular manner, as specifically prohibited by Section 119. Kindly refer recent decision of Jodhpur Bench in the case of Ritesh Suhalka V/s Pr. CIT Udaipur in ITA No. 383/Jodh/2019 dt. 21.12.2020. The ld. A/R submitted that on same plea, the Mumbai Bench of the Tribunal in the case of Dorabji Tata Trust vs. DCIT (EXEMPTION) ITA No. 3909/Mum/2019 28th December, 2020 (2021) 209 TTJ 0409 (Mumbai), has observed as under: 20. Undoubtedly, the expression used in Explanation 2 to Section 263 is when Commissioner is of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warrant, nor can a public authority exercise the powers, to the detriment of anyone, unless circumstances so justify or warrant. What essentially follows is that unless the Assessing Officer does not conduct, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant-that an Assessing Officer is expected to be, Commissioner cannot legitimately form the view that the order is passed without making inquiries or verification which should have been made . The true test for finding out whether Explanation 2(a) has been rightly invoked or not is, therefore, not simply existence of the view, as professed by the Commissioner, about the lack of necessary inquiries and verifications, but an objective finding that the Assessing Officer has not conducted, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant that the Assessing Officer is expected to be. 21. That brin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present context) is not bound to be a detective, or, as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watchdog, but not a bloodhound. . Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedings. When the facts as emerging out of the scrutiny are apparently in order, and no further inquiry is warranted in his bonafide opinion, he need not conduct further inquiries just because it is lawful to make further inquiries in the matter. A degree of reasonable faith in the assessee and not doubting everything coming to the Assessing Officer s notice in the assessment proceedings cannot be said to be lacking bonafide, and as long as the path adopted by the Assessing Officer is taken bonafide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the powers under section 263. In the case of Malaba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which a reasonable and prudent officer would have claimed out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. The ld. A/R submitted that on perusal of the order in the present case, the ld. Pr. CIT has taken action u/s 263 only on the assumption and presumption that the no inquiry has been made by the AO on the issues and not verified. In this regard he has referred the judgment of Hon ble Rajasthan High Court in the case of CIT v/s Paras Cotton Co. 288 ITR 211(Raj.) wherein it has been held that CIT could not have acted on mere assumption. Mere suspicion cannot take place of proof and the order of CIT u/s 263 cannot be sustained. 4.8. The ld. A/R further submitted that proceedings under sec. 263 cannot be taken on the ground that the AO has not made sufficient enquiry. The learned PR. CIT can assume jurisdiction if there has been lack of enquiry. In the instant case, the enquiry has been made, though the enquiry may not be sufficient in the opinion of the learned PR. CIT. The reliance is placed upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the AO shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue if in the opinion of the ld. PCIT or ld. CIT the order is passed without making enquiry or verification which should have been made. Further, if the order is passed allowing any relief without enquiring into the claim. Thus, in the case in hand, the AO has not conducted any enquiry on the issue of unsecured loans of ₹ 2,59,25,611/- and fresh capital introduced of ₹ 11,59,55,000/- reflected in the balance sheet. The ld. D/R has relied upon the decision of Mumbai Benches of the Tribunal dated 01.02.2016 in the case of Crompton Greaves Ltd. vs. CIT in ITA No. 1994/Mum/2013. The ld. D/R has further relied upon the decision of Hon ble Supreme Court in the case of CIT vs. Amitabh Bachchan, 384 ITR 200 (SC) as well as a series of other decisions including the decision of Hon ble Jurisdictional High Court. The ld. D/R submitted that the specific provisions of section 263 of the Act lays down that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interests of the revenue is the basic pre-condition for exercise of j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income for the Assessment Year 2015-16 on 31.08.2015 at total income of ₹ 1,88,03,770/-. The case was selected for limited scrutiny through CASS and accordingly, notice u/s 143(2) of the I.T. Act, 1961 was issued on 20.09.2016 by DCIT, Circle-3, Jaipur, which was duly served. Notice u/s 142(1) along with questionnaire seeking details was issued on 20.09.2016. The case was transferred from DCIT, Circle-3, Jaipur to this circle, vide order u/s 127. Due to change of incumbent, notice/s 142(1) was issued on 18.12.2017 fixing hearing on 19.12.2017. In compliance to the notices so issued, Shri R.K. Bhatra, CA/AR appeared from time to time, furnished relevant details and the case was discussed with him. The assessee is engaged in the business of real estate. After discussion returned income is accepted. Issue necessary forms. Computation in ITNS 150 is enclosed which is part of this order. Thus in response to the notice issued under section 142(1), the assessee attended the proceedings through his A/R and also furnished the required details/documents as well as books of account which were examined by the AO. There is no dispute that the AO(s) has conducted the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th a questionnaire calling for all the details relevant to the Interest expenses and Increase in Capital. It is also not in dispute that the assessee produced the relevant details and evidences and specifically the purchase bills of the assets, return of income, computation of total income, balance sheet, profit loss account, capital account and personal bank statement of the assessee and complete books of accounts. It is further noticed from the reply furnished by the assessee to the AO as well as to the ld. PCIT that the interest expenditure claimed in Profit Loss account were of car loan and there was no work-in-progress, and no other interest was claimed out of business income on account of alleged addition to fixed assets. It is also undisputed fact that in the fixed assets the additions were of computer for ₹ 11,700/- and Refrigerator AC of ₹ 38,800/- during the year. Accordingly no high interest expenses were claimed very against the new capital added and addition made to the fixed assets. Regarding the addition in capital account, the assessee furnished a copy of his personal bank account explaining the nature and source of the credit entries and the ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources and was claimed by the assessee u/s 57 of the IT Act, 1961 against the interest income shown under the head income from other sources. It is also submitted that said entire interest of ₹ 39,94,965/- was paid to the following family members old and running accounts :- Radha Govind Lashkari HUF (Assessee is Karta in HUF) 23,76,792/- Sunita Devi Garg (Wife of assessee) 13,80,369/- Rimika Lashkari (Daughter of Assessee) 1,64,767/- Kratika Lashkari (Daughter of Assessee) 56,237/- Asha Devi Garg (Sister in Law of assessee) 16,800/- Total : 39,94,965/- As per above particulars it is verifiable that out of the above said total interest expenses amounting to ₹ 39,94,965/-, a sum of ₹ 37,57,161/- were paid to assessee s own HUF and his wife Sunita Devi Garg. Confirmation letters of both the loan creditors along with their return of income, balance sheet and Bank statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT vs. Shakti Charities (2000) 160 CTR 107 (Mad.), Deccan Paper Mills Co. Ltd. vs. CIT in ITA No. 1013 1635/Pun/2015 (Pune Bench), M/s. R.H. Property vs. PCIT in ITA No. 1906/Mum/2019 (Mumbai) and Shri Balvinder Kumar vs. PCIT in ITA No. 485/Del/2020 (Delhi). Further the issue of loan creditor of ₹ 2,59,25,611/- was not in the limited scrutiny notice. The ld. PCIT after considering the reply of the assessee had arrived to the conclusion that the AO has failed to consider/apply his mind to the information available on record with regard to the verification and examination of the unsecured loans as shown in the Balance sheet filed during the course of assessment proceedings and failed to verify the increase in capital. The ld. PCIT has turned down the contentions of the assessee and has gone further to verify the facts by conducting an enquiry. Accordingly, the order passed by the AO was set aside with the direction to reframe the assessment denovo after providing adequate opportunity to the assessee. In our considered view that this exercise of the ld. PCIT of conducting the enquiry on the same issue which have already been examined and accepted by the AO and the issue of lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank account, and a copy of bank account explaining the nature and source of credit which were either withdrawal from the partnership firm s capital account or realization from debtors. The said copy of bank account along with copy of Balance Sheet and other financial statements were duly produced before the ld. AO and the copy of bank statement and other relevant supporting documentary evidences were also filed before the ld. Pr. CIT. The ld. A/R further submitted that the ld. Pr.CIT has also not pointed out any defect or deficiency in the said documents filed. In view of the above facts duly supported by documentary evidences available on assessment record, the sources of fresh capital introduced were duly explained by the assessee and which were after taking possible view and a considered opinion the ld. AO has correctly accepted as explained. 8. On the other hand, the ld. CIT D/R has supported the order of the ld. Pr.CIT and also relied on the various judgments cited by the ld. Pr.CIT. 9. In the re-joinder, the ld. A/R has further submitted that the case laws relied upon by the ld. Pr.CIT are distinguishable on facts of the case which is evident from the issues discu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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