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TMI Blog2022 (8) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... r. During the course of assessment proceedings, AO made detailed enquiries on this issue and after consideration of time-to-time written submissions filed by the assessee and documents / evidence placed on record, AO made additions (inclusive of the cash deposits) by treating the same as unexplained cash credits. Pr. CIT initiated 263 proceedings on the ground that the AO has not made enquiries or verification which should have been made in respect of share capital introduced during the year under consideration. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the Ld. AO had made detailed enquiries and after consideration of material placed on record, made an addition - We thus find no error in the order of AO so as to justify initiation of 263 proceedings by the CIT. The Ground of appeal raised by the assessee is thus allowed. - ITA No. 191/Rjt/2019 - - - Dated:- 29-7-2022 - Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Assessee : Shri Mehul Ranpura, A.R For the Revenue : Shri Aarsi Prasad, CIT.D.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction of loan/deposit. On verification of the details submitted, the assessee was further requested to show cause as to why the share application money amounting to Rs. 8,00,28,000/- (including the amount of Rs. 2,26,82,500/- of cash deposits) should not be treated as unexplained cash credit and added to the income of the company in view of the updated provisions of section 68 of the Income Tax Act w.e.f. 01/04/2013. The assessee filed a reply vide letter dated 14/12/2017 and also filed Balance Sheets in respect of several persons vide letter dated 22/12/2017 in order to produce the details as to the source of the money received through cheques in the bank accounts of the share applicants. On appreciation of replies filed by the assessee and evidence placed on record, the AO concluded that the assessee was able to prove the credit worthiness of the share applicants except for the sum of Rs. 4,83,98,000/- (inclusive of the cash deposits of Rs. 2,24,57,500/-). Thus the Ld. Assessing Officer made an addition of a sum of Rs. 4,83,98,000/- (inclusive of the cash deposits of Rs. 2,24,57,500/-) by treating the same as unexplained cash credits under section 68 of the Act. 4. The Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed by the Assessing Officer in respect of A.Y.2015-16 is erroneous in so far as it is prejudicial to the interests of the Revenue as the AO has passed the assessment order without making inquiries or verification which should have been made during the assessment proceedings. 5. Being aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 6. The ld. Authorized Representative before us filed two sets of paper book running from pages 1 to 118 and 1 to 930 and submitted that during the course of assessment proceedings, the Ld. Assessing Officer had raised specific queries with regard to the creditworthiness of share applicants, in response to which the assessee had filed details from time to time. The ld. Authorized Representative drew our attention to pages 87 to 233 of Paper Book Part-1(Chart showing details of credit worthiness of share applicants) which were duly submitted during the course of assessment proceedings. The ld. Authorized Representative submitted that since all details were filed with the ld. Assessing Officer and assessment order was passed after consideration of all the materials, it cannot be stated that the enquiries made wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing afresh assessment. Explanation 1.-.... Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 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 Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119 or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 19. It is the bounden duty of the Assessing Officer to collect proper facts, is make necessary enquiries, appreciate the facts so collected and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of lack of inquiry , that such a course of action would be open. --- From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 12. The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:- 20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provison shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis - vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh assessment order under section 143(3) of the Act, 1961 on the aspect of unsecured loans shown by the respondent assessee. The Hon ble Supreme Court made the following observation while deciding in favour of the assessee:- Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the Revenue. 15. The Supreme Court in another recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revisional order making addition to assessee's income under section 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of on-money receipts and said view was also confirmed by High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies were called for or directed 17. The Supreme Court in the case of Principal Commissioner of Incometax- -8 Mumbai v. Sumatichand Tolamal Gouti [2019] 111 taxmann.com 287 (SC) held that where High Court upheld Tribunal's order holding that AO had made detailed enquiries while allowing assessee's claim for deduction of business expenditure and, thus, revisional order passed by Commissioner was not sustainable, SLP filed against High Court's order was liable to be dismissed. The facts of this case were that in course of assessment, Assessing Officer allowed assessee's claim for deduction of certain expenditure on purchase of CDs on Jain Religion by expending an amount of Rs. 10.4 crores, after due examination. The Commissioner passed revisional order holding that Assessing Officer had not carried out any enquiries as to nature of expenditure being capital or not. The Tribunal, however, allowed assessee's appeal holding that Assessing Officer had carried out detailed enquiries and taken a view which was a plausible view. Accordingly, Tribunal set aside revisional order passed by Commissioner. The Hon ble High Court upheld the order passed by the Tribunal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny visible abnormality. On consideration of these facts, the Tribunal held that since there was sufficient verification by Assessing Officer, revision under section 263 was unjustified. The Hon ble ITAT made the following observations: The assessment is also carried out on year-to-year basis. In such a scenario, where the AO has rejected substantial amount from the claim of expenditure after reasonably verifying bills and vouchers, the allegation of the Pr.CIT appears misconceived. Ordinarily, it is only in a very gross case of inadequacy in inquiry and lack of application of mind that the order of AO is open to attack as erroneous. In the context of a turnover and scale of operation of this magnitude, the expenditure incurred on business advancement of such amount does not indicate any visible abnormality. This apart, the AO did take cognizance of the issue and made substantial disallowance. Thus, it cannot be outrightly alleged that the AO has omitted to apply its mind to the issue. The allegation thus appears unintelligible. The AO, in our view, has not committed any error in not chasing will of the wisp in the absence of any brazen circumstances. The action of the Pr.CIT o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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