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TMI Blog2024 (4) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... g jurisdiction u/s. 263 of the Act, 1961. 3. On the facts and in the circumstances of the case as well as law on the subject, the learned Pr. Commissioner of the Income Tax has erred in violating the principles of natural justice by not the mentioning the grounds for initiating action u/s. 263 of Income Tax Act, 1961 in the show cause notice issued. As such the order passed u/s. 263 is void ab-initio. The action of the Ld. CIT was wholly unreasonable, uncalled for the bad in law. 4. On the facts and in the circumstances of the case as well as law on the subject, that the order of u/s. 263 is merely 'change in opinion' The order u/s. 143(3) of the Income Tax Act passed by the Ld AO does not in any way represent erroneous order. The action of the Ld. Pr. CIT was wholly unreasonable, uncalled for and bad in law. 5. On the facts and in the circumstances of the case as well as law on the subject, the learned Pr. Commissioner of Income Tax has grievously erred in assuming that the assessing Officer had not verified the Unsecured Loan and genuineness of the creditors and not made proper inquiry on finalized the order of assessment u/s. 143(3) of the I.T. Act is contrary to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he merit of the case. 5. Brief facts of the case are that the assessee is a company, engaged in the business of Textile, handloom and powerloom , filed its return of income for A.Y. 2017-18 declaring loss of Rs. 97,31,904/- on 08/12/2017. The case was selected for scrutiny. The assessment was completed on 11/12/2019. The Assessing Officer while passing the assessment order, made disallowance under Section 36(1)(va) of the Act of Rs. 94,830/-. The assessment was revised by the ld. Pr.CIT by exercising his jurisdiction under Section 263 of the Act on 25/03/2022. Before passing the order under Section 263 of the Act, the ld. Pr.CIT noted that on going through the assessment record, he found that the assessee has received unsecured loan of Rs. 3.11 crores during the assessment proceedings and that the assessee has given confirmation in respect of four lenders only and no details with regard to other lenders were furnished. No independent enquiry was made by Assessing Officer during assessment to establish the genuineness of transaction of unsecured loan of Rs. 2.31 crores. The ld. Pr.CIT further noted that in the Profit & Loss Account (P&L Account), the assessee has shown trade payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liers from whom they made purchases of Rs. 5.00 lacs and above. The Assessing Officer accepted their submission. The assessee enclosed the submission filed during the assessment proceedings. The assessee prayed for dropping of proposal of revision. Reply of assessee was not accepted by ld. Pr.CIT. The ld. Pr.CIT reiterated that only four confirmation of lenders were filed and no documentary evidence in respect of six lenders of unsecured loan was filed. The case of assessee was selected for complete scrutiny. During the assessment proceedings, no documentary evidence like bank statement, balance sheet and return of income of unsecured loans were furnished. The assessee failed to establish the genuineness of transactions. No independent enquiry was made by Assessing Officer during assessment to establish the genuineness of transaction. In respect of trade payables, the ld. Pr.CIT held that no confirmation, ITR of other parties were submitted. As per list submitted by assessee wherein more than Rs. 5.00 lacs is payable by assessee, the assessee has not furnished copy of ITR, confirmation and bank statements of trader suppliers. On the basis of such observation, the ld. Pr.CIT by refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y explained and were verifiable. The trade payables were part of normal practice, which were paid in subsequent years. The ld. AR for the assessee submits that making allowance of trade payable after due verification by Assessing Officer. There was no prejudice to the interest of revenue. The finding of ld. Pr.CIT that the assessee has not furnished copy of ITR or bank statement, such observation is absolutely uncalled for, so far as issue of trade payable is concerned. The trade payable is not a credit entry which required triple onus as per Section 68 of the Act to prove the identity, creditworthiness or genuineness, even otherwise the assessee has furnished the details of trade payable. It is beyond imagination that the assessee can ask for income tax return from the person to whom they owe. Thus, there was no prejudice to the interest of revenue. So far as unsecured loans are concerned, the Assessing Officer as per requirement of Section 68 of the Act satisfied about explanation offered by assessee which was satisfactory in the opinion of Assessing Officer about the sum so credited in the books of assessee. The ld. AR of the assessee reiterated that he has filed confirmation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, has not given specific finding as to why the order is erroneous and in so far as prejudicial to the interest of revenue not only on the issue of unsecured loan but in respect of trade payable as well. 8. On the other hand, the ld. CIT-DR for the revenue supported the order of ld. Pr.CIT. The ld. CIT-DR for the revenue by referring various paragraphs of order of ld. Pr.CIT would submit that during the assessment, no documentary evidence and confirmation of lender was submitted by the assessee. The case of assessee was selected for complete scrutiny and aspect of genuineness of unsecured loan should have been verified by the Assessing Officer by obtaining necessary details. No documentary evidence such as bank statement, identity, balance sheet and return of income of unsecured lenders were furnished. The assessee failed to discharge onus on triple test prescribed under Section 68 of the Act. Similarly on the issue of trade payable, the ld. CIT-DR for the revenue submits that the assessee has not furnished copy of ITR, confirmation and bank statements of trade suppliers. Further no independent inquiry was made by Assessing Officer by issuing notice under Section 133(6) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and the material placed on record by both the parties. We find that the case of assessee was selected for scrutiny. The assessment was completed under Section 143(3) of the Act by making disallowance on account of delay in deposit of employees' contribution towards ESI and PF. We further find that during the assessment, besides the other show cause, the Assessing Officer vide show cause notice dated 16/11/2019 asked the complete details with regard to unsecured loan as well as trade payable. We further find that the assessee vide reply dated 22/11/2019 as well as 15/12/2019 furnished the complete details required by Assessing Officer. It is a matter of record that no such reference or show cause notice with regard to both the issues is referred in the assessment order, however, the facts remained the same that both the issues were examined by the Assessing Officer extensively. 11. We further find that in the present case, the audit objection was raised. It seems that on the basis of audit objection with regard to unsecured loan, the revision was proposed. In fact there is no audit objection with regard to trade payables. We find that the Hon'ble Jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this subsection, viz., (i) the order is erroneous; and (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. One finds that the expressions 'erroneous', 'erroneous assessment' and 'erroneous judgment' have been defined in Black's Law 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. The Hon'ble High Court also held that from the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the ITO was erroneous insofar as it is prejudicial to the interests of the revenue and that it must be an order which is not in accordance with the law or which has been passed by the ITO without making any enquiry in undue haste. An order can be said to be prejudicial to the interests of the revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo-moto revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objectives were available from the records called for and examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder is an appealable order. An appeal lies, would be filed, only against disallowances which an assessee feels aggrieved with. 23. As far as absence of discussion in the assessment order is concerned, this is what has been laid down by this court in the case of Rayon Silk Mills v. CIT [1996] 221 ITR 155 :- "In the first instance it was contended by learned counsel for the assessee that the very premise on which order under section 263 was made against the assessee, namely, that the Income-tax Officer has not at all examined the goodwill account is not existent. According to him, it is apparent from the record that the goodwill account was thoroughly examined by the Income-tax Officer before making the assessment and after examining when he accepted the contention of the assessee its discussion did not find place in the assessment order, as no additions were going to be made or no modifications in the return filed by the assessee were required to be made in that regard. This contention of the assessee appears to be well-founded. It is true that the assessment order does not speak about the examination of goodwill account as such. However, as we have noticed above, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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