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TMI Blog2024 (1) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 68 of the Act apparently appears beyond the scope of PCIT as the amount was received from the Company in the financial years 2013-2014 and 2014-2015 which were pertaining to the assessment years 2014-2015 and 2015-2016 respectively. According to the findings recorded by the learned Tribunal, the credit entries appearing in the accounts of the assessee were taken into account and section 68 could not have been invoked for the past credits which were carried forward. The order passed by the PCIT also suffers from lack of due opportunity of hearing as the PCIT while making such observation that the lender Company was classified as shell company and relied on some statement recorded but before such finding was recorded which was prejudicial to the right of the assessee, no opportunity of hearing was given to the assessee. The reliance of credit worthiness of lender Company which dominated the track for PCIT to arrive at a finding to invoke Section 263 was defective. Thereby the PCIT has not followed the rules of natural justice and admissibility of such document or the statement becomes doubtful as the rules of natural justice were given a go-bye. The finding of fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 43CA it records that the transaction was duly reported in tax audit report and the appellate authority was unable to find any error in action of the Assessing Officer to accept the transaction outside the ambit of Section 43CA where the variations in actual consideration qua assessable value for the purposes of stamp duty does not exceed 10%. The Tribunal has upheld the direction of PCIT to the extent that the difference upto 10% is only saved by the amendment made in the Finance Act and the enquiry directed by PCIT in respect of transaction covered u/s 43CA where the difference exceeds 10% appears to be justified and the direction of the PCIT to the limited extent was upheld. Therefore considering the totality of the aforesaid averments, we are of the view that the order of Tribunal does not give rise to a substantial question of law warranting interference of this Court in the order of Tribunal. Decided against revenue. - Hon'ble Shri Justice Goutam Bhaduri, Judge And Hon'ble Shri Justice Sanjay S. Agrawal, Judge For the Appellant : Mrr. Amit Chaudhari with Ms. Naushina Ali and Mr. Topilal Bareth, Advocates For the State/Respondents : Mr. Sumit Nem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 68 of the IT Act, 1961 ; (2) To verify the genuineness of both stamp papers with the competent authority who issued those stamp papers ; (3) To invoke the doctrine of substance over form in respect of transaction with M/s. Gangotri Tracon P. Ltd., after due verification ; (4) To verify the unsecured loan, repayment of loan and interest payment of sum of Rs. 7,63,19,047/-, Rs. 5,59,31,494/- Rs. 19,71,250/- respectively ; (5) To verify the applicability of Section 43CA in respect of sale deed executed below stamp duty value; and (6) To verify the applicability of Section 40A(3) in respect of payment for purchase of land ; 3) The facts of Tax Case No. 7 of 2022 are that the return of income was electronically filed by the assessee company for the year under consideration on 29.09.2015 declaring total income of Rs. 49,48,309/- for the assessment year 2015-2016. The case was selected for scrutiny through CASS and accordingly, assessment u/s 143(3) of the IT Act was completed on 21.08.2017. The Revenue having considered that the order passed by the Assessing Officer was prejudicial to the interest of the Revenue initiated the revision proceeding . The Principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action on the part of Assessing Officer (AO) in not examining the genuineness of the cash credit under Section 68 of the Act and not making enquiry in terms of section 68 of the Act, does not render the assessment order passed under Section 143(3) of the Act erroneous and prejudicial to the interest of the Revenue ? (3) Whether the ITAT was justified in the interpretation given to Section 263 of the Act contrary to law and in holding that an order passed by the AO ignoring the relevant materials does not give jurisdiction to the PCIT for exercise of revisional jurisdiction under Section 263 of the Act ? 6) Similarly, this Court on 12.01.2023 has admitted the appeal (TAXC No.7 of 2022) on the following substantial questions of law : (1) Whether the ITAT was justified in holding that the inaction on the part of the Assessing Officer (AO) in not examining the genuineness of the cash credit under Section 68 of the Act and not making enquiry in terms of Section 68 and 69C of the Act, does not render the assessment order passed under Section 143(3) of the Act erroneous and prejudicial to the interest of the Revenue ? (2) Whether the ITAT was justified in the interpretation gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anand Dadariya appearing on behalf of the respondent would submit that - (i) the legal proposition as has been narrated by the appellant is not in dispute, however, the foundation of the entire genesis of the case is based on Section 68 of the I.T. Act. He would submit that when any sum is found credited in the books of assessee maintained for the previous year, the sum so credited may be charged to income tax as the income of the assessee of that previous year and not beyond. (ii) according to the admitted facts, the assessment made in this case was of 2012-2013 and the assessment year in this case was of 2015-2016. Therefore, the cash credit entry which was of the previous year and the closing balance which was carried forward ought not to have been taken for the assessment year and the subsequent year of 2015-2016, for which, the previous year ended on 2014-2015 and the assessment year of 2016-2017 for which the previous year would end before it i.e., 2015-2016. (iii) He further submits that the assessment order would reflect that certain deductions were disallowed as the document could not be produced but the very genesis of section 68 of the IT Act which was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dictionary. According to the definition, erroneous means involving error; deviating from the law . Erroneous assessment refers to an assessment that deviates from the law and is, therefore, invalid and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, erroneous judgment means one rendered according to course and practice of court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles. (Emphsis supplied) 11) The Apex Court in Commissioner of Income Tax vs. Shree Manjunathesware Packing Products and Camphor Works {(1998) 231 ITR 53 (SC)} held as follows: Section 263 of the Income Tax Act, 1961 enables the Commissioner to call for and examine the record of any proceeding under the Act and 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 a fresh assessment, if he considers that any order passed by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the lender company . According to the assessee, the amount of Rs. 18.12 crores was received through banking channel in the F.Y. 2013-2014 and 2014- 2015 which was pertaining to the Assessment Years 2014-2015 and 2015-2016. At this juncture, section 68 of the Income Tax Act which deals with cash credits would be relevant here to read and quoted below: 68. Cash Credits . - Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year; Provided that where the assessee is a company, (not being a company in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless - (a) the person, being a resident in whose name such credit is recorded in the books of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportunity of hearing was given to the assessee. The entire observation made by PCIT is on a foreign subject, which was not a matter of lis. Therefore the reliance of credit worthiness of lender Company which dominated the track for PCIT to arrive at a finding to invoke Section 263 of I.T. Act was defective. Thereby the PCIT has not followed the rules of natural justice and admissibility of such document or the statement becomes doubtful as the rules of natural justice were given a go-bye. The finding of fact that the amount of unsecured loan got by the assessee from the lender Company was not received in assessment year in question on the basis of a finding which was never before the assessee to counter it. As such, section 68 cannot be invoked in the garb of Section 263 as fiscal statute is to be given a strict interpretation. 16) Further observation made by the appellate Tribunal that consequential direction towards genuineness of stamp paper of receipt of advance from GTPL etc., being relatable to receipt of loans in other assessment year are apparently farfetched and have no relevance for assessment of income of this year, appears to be reasonable as no prejudice is caused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the factual aspect of applicability of Section 43CA it records that the transaction was duly reported in tax audit report and the appellate authority was unable to find any error in action of the Assessing Officer to accept the transaction outside the ambit of Section 43CA where the variations in actual consideration qua assessable value for the purposes of stamp duty does not exceed 10%. The Tribunal has upheld the direction of PCIT to the extent that the difference upto 10% is only saved by the amendment made in the Finance Act and the enquiry directed by PCIT in respect of transaction covered u/s 43CA where the difference exceeds 10% appears to be justified and the direction of the PCIT to the limited extent was upheld. Therefore considering the totality of the aforesaid averments, we are of the view that the order of Tribunal does not give rise to a substantial question of law warranting interference of this Court in the order of Tribunal. 19) In view of the aforesaid discussion and after going into the merits of the case, we are of the considered view that the appeals do not involve any substantial question of law and accordingly, both the appeals are dismissed. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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