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TMI Blog2023 (1) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... ction and bad in law, and therefore, liable to be quashed. 2. That the appellant reserves the right to add, alter or modify any ground of appeal." 2. Succinctly stated, the assesee firm which is engaged in the business of builder and developer had e-filed its return of income for A.Y.2017-18 on 04.11.2017, declaring an income of Rs.23,59,850/-. Original assessment was, thereafter, framed by the A.O. vide his order passed u/s.143(3) dated 27.12.2019 determining the income of the assessee firm at Rs.23,59,850/- i.e. as returned. 3. After culmination of the assessment proceedings, the Pr. CIT called for the assessment records of the assessee firm. Observing that the order passed by the A.O u/s.143(3) dated 27.12.2019, was erroneous in so far as it was prejudicial to the interest of the revenue on two counts, viz. (i) that the unsecured loan of Rs.20 lac received by the assessee firm from M/s. Alipore Vinimay Private Limited, Kolkata, PAN : AAKCA4171F, a company whose name figured at Sr. No.9976 of the list of shell companies circulated by ITD/SEBI was to be treated as an unexplained cash credits u/s.68 of the Act; and (ii) that the repayment of unsecured loans made by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessment order passed u/s.143(3) dated 27.12.2019 was rendered as erroneous in so far as it was prejudicial to the interest of the revenue u/s.263 of the Act. Accordingly, the Pr. CIT set-aside the assessment order and directed the A.O to frame assessment after examining the issues in question and affording a reasonable opportunity of being heard to the assessee. 5. The assessee being aggrieved with the order passed by the Pr. CIT u/s.263 of the Act has carried the matter in appeal before us. 6. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 7. On a perusal of the order of the Pr. CIT, it transpires that the assessee company had during the year repaid its outstanding loans aggregating to Rs.2,07,61,437/- to 7 companies, as under: Sl. No. Name of payee PAN (As per list of shell companies) Sl. No. of list of shell companies on which listed Amount of repayment during the year under consideration ( in Rupees) 1. Blow Agency Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Section 69C could not have been triggered. 9. Per contra, the Ld. Departmental Representative (for short 'DR') relied on the orders of the lower authorities. 10. Having given a thoughtful consideration to the issue in hand, i.e., addition of the repayment of outstanding loans by the assessee firm to 7 companies, which, as observed by the Pr. CIT were shell companies, we are unable to fathom as to how and on what basis the Pr. CIT had arrived at a conclusion that the amount of the impugned repayments was to be added u/s.69C of the Act. Before proceeding any further, we deem it fit to cull out the provisions of Section 69C of the Act, which reads as under: "69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year :] [Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner, but it means the record as it stands at the time the order in question was passed by the ITO?" After exhaustive deliberation on the scope of the term "record" as contemplated in Section 263 of the Act, it was held by the Hon'ble Apex Court that it was open to the Commissioner to take into consideration all the records available at the time of examination by him. For the sake of clarity the relevant observations of the Hon'ble Apex Court are culled out as under: "It, therefore, cannot be said, as contended by the learned counsel for the respondent, that the correct and settled legal position, with respect to the meaning of the word "record" till 1st June, 1988, was that it meant the record which was available to the income Tax Officer at the time of passing of the assessment order. Further, we do not think that such a narrow interpretation of the word "record' was justified, in view of the object of the provision and the nature and scope of the power conferred upon the Commissioner. The revisional power conferred on the commissioner under Section 263 is of wide amplitude. It enables the Commissioner to call for and examine the record of any proceeding under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Officer while computing loss and income of the assessee had accepted the claim of the assessee in respect of those three items. Obviously in the appeals filed by the assessee those items were not the subject-matter of the appeals as the decision in respect thereof was in its favour. In respect of those three items the Commissioner had exercised his power under Section 263 of he income-Tax Act and , therefore, the question which had arisen for consideration was "whether on the facts and in the circumstances of the case, the order of assessment passed by the ITO u/s 143(3) read with section 144B on 31.7.1978 had merged with that of the Commissioner (appeals) dated 15.10.1979 in respect of the three items in dispute so as to exclude the jurisdiction of the Commissioner of Income-Tax under sec 263?" Thus the amendment made in clause @ was held applicable to the orders passed before 1st June, 1988. In South India Steel Rolling Mills, Madras vs. Commissioner of Income Tax, Madras [1997 (9) SCC 728], the Commissioner in exercise of his power under Section 263 had withdrawn the development rebate granted for the years 1962- 63, 1963-64, 1967-68 and 1968-69 on the ground that sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the order passed by him was legal. The High Court was wrong in taking a contrary view. We, therefore, allow this appeal, set aside the judgment and order passed by the High Court and answer the question referred to the High Court in the negative i.e. in favour of the Revenue and against the assessee. In view of the facts and circumstances of the case, there shall be no order as to costs." Also, support is drawn from the memorandum explaining the provisions of the Finance Bill, 1988, vide which an amendment was made available on the statute as regards the meaning of the term "record" in the "Explanation" to Section 263 of the Act, as under (relevant extract) : "48. x xxxxxxxx (a) On the interpretation of the term 'record'. It has been held in some cases that the word 'record' in section 263 (1) could not mean the record as it stood at the time of examination by the Commissioner but it meant the record as it stood at the time of examination by the Commissioner but it meant the record as it stood at the time when the order was passed by the Assessing Officer. Such an interpretation is against the legislative intent and defeats the very objective sought to be ach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests of Revenue,, he may pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the same or directing a fresh assessment. By the Finance Act, 1988, an Explanation was substituted with effect from 1st June, 1988, to the relevant sections of the Income-tax Act, Wealth-tax Act and Gift-tax Act to clarify that the term "record" would include all records relating to any proceeding available at the time of examination by the Commissioner. Further, it was also clarified that the Commissioner is competent to revise an order of assessment passed by the Assessing Officer on all matters except those which have been considered and decided in an appeal. The above Explanation was incorporated in the Finance Act, 1988, to clarify this legal position to have always been in existence. Some Appellate Authorities have, however, decided that the Explanation will apply only prospectively, i.e., only to those orders which are passed by the Commissioner after 1.6.1988. Such an interpretation is against the legislative intent and it is, therefore, proposed to amend section 263 of the income tax Act, so as to clarify that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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