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TMI Blog2024 (12) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... is erroneous and prejudicial to the interest of Revenue. A perusal of 263 order shows that the only basis of issuance of notice u/s. 263 of the Act is that in case of similar labour payments to one Shri Mahindrakumar Shantilal Mathukiya for AY 2013-14 from Mr. V N Nitin and M/s. Kiran Gems Pvt Ltd. an addition was made u/s. 68 of the Act. However, in our considered view in order to invoke the provisions of section 263 of the Act, the foundation/ basis of initiation of 263 proceedings must emanate from the findings given by the AO in his assessment order of the assessee itself and 263 cannot be initiated on the basis of borrowed satisfaction (i.e on the basis of findings in assessment done in case of a third person). Therefore, in our considered view, the very basis of initiation of 263 proceeding in the present case is fallacious and for this reason u/s. 263 proceedings are liable to be set-aside. Secondly, we observe from the contents of the 263 order that the Ld.PCIT has not given any specific findings or observation nor has pointed any defect in the assessment order so as to make the assessment order erroneous and prejudicial to the interest of Revenue. Further, there is also n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k Chokshi, AR with Shri Biren Shah, AR For the Revenue : Shri V Nandakumar, C.I.T DR ORDER PER BENCH: These are nine appeals filed by the different assessee s arising out of orders passed u/s. 263 of the Act, by the Ld.PCIT for various Assessment Years under consideration before us. Since the basis for initiation of proceedings u/s. 263 are similar for all the assessee s before us, all the cases although relating to different assessee s and different assessment years are being taken up together. 2. We shall take up the case of Manojbhai Padaliya in ITA No.1045/Ahd/2024 for AY 2013-14, which shall serve as the lead assessment year and our observations for this year would be applicable to the case of other assessee s and other assessment years as well. The assessee has raised the following grounds of appeal: 1. In law and in the facts and circumstances of the Appellant's case, the impugned order u/s. 263 passed by the Ld. CIT is bad in law and deserves to be quashed. 2. In law and in the facts and circumstances of the Appellant's case, the Ld. CIT has erred in holding that the assessment order was passed without making enquiry in respect of transactions carried out with M/s V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahendrakumar S Mathukiya, the Ld. AO had made addition u/s. 68 of the Act with respect to similar receipt of income from same parties i.e Mr. V Nitin and M/s.Kiran Gems Pvt. Ltd. and therefore the AO was directed to verify the facts submitted by the assessee and if the assessee is not able to prove the veracity of its submission, the AO would be at liberty to pass an appropriate order in accordance with law. 6. Before us, the first contention of the Ld.Counsel for the assessee is that on perusal of notice u/s. 263 of the Act, it is evident that there is no specific allegation as to how the assessment order was erroneous and prejudicial to the interest of the revenue. Secondly, the Ld.Counsel for the assessee drew our attention on the reasons recorded for re-opening the assessment u/s. 147 of the Act and pointed out that the very reason for re-opening the case of the assessee u/s. 147 of the Act was that the assessee was a beneficiary of suspicious transaction with Mr. V Nitin M/s.Kiran Gems Pvt Ltd. and the assessee was required to furnished details of unexplained credits in his bank account of Rs. 1,64,28,519/- from Mr. V Nitin and M/s.Kiran Gems Pvt. Ltd. The Ld.Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not recorded any satisfaction/has not given any specific finding as to how the assessment order is erroneous and prejudicial to the interest of Revenue. A perusal of 263 order shows that the only basis of issuance of notice u/s. 263 of the Act is that in case of similar labour payments to one Shri Mahindrakumar Shantilal Mathukiya for AY 2013-14 from Mr. V N Nitin and M/s. Kiran Gems Pvt Ltd. amounting to Rs. 1,50,95,178/- an addition was made u/s. 68 of the Act. However, in our considered view in order to invoke the provisions of section 263 of the Act, the foundation/ basis of initiation of 263 proceedings must emanate from the findings given by the AO in his assessment order of the assessee itself and 263 cannot be initiated on the basis of borrowed satisfaction (i.e on the basis of findings in assessment done in case of a third person). Therefore, in our considered view, the very basis of initiation of 263 proceeding in the present case is fallacious and for this reason u/s. 263 proceedings are liable to be set-aside. 9. Secondly, we observe from the contents of the 263 order that the Ld.PCIT has not given any specific findings or observation nor has pointed any defect in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under Section 151 of the Act. (iii) During the course of reassessment proceedings, assessee has submitted complete details relating to labour activities carried out by him and proved that amount received from contractors are offered to tax. On this basis assessee has claimed that Assessing Officer has applied his mind before passing the assessment order. (iv) The assessee has brought on record that reassessment order has been passed in case of V. Nitin and Kiran Gems Pvt. Limited for year under consideration wherein no addition for labour payment made to assessee has been disallowed. 4.1 It is observed that notice under Section 263 of the Act was issued mainly on the ground that in reassessment order passed in one of the labour contractors being Mr. Mahendra Mathukiya for AY 2013-14, addition under Section 68 was made whereas assessee has brought on record that in subsequent year, order under Section 148A(d) for AY 2014-15 was accepted in the case of the, same contractor. The assessee has further claimed that when labour payment has been found to be genuine in the case of V. Nitin and Kiran Gems Pvt Limited for year under consideration, then same labour receipt in the hand of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce of credits from these two parties appearing in the assessee s bank account. The assessee also filed replies to the specific query raised by the AO along with the supporting documents. It was after taken into consideration the replies filed by the assessee that no additions were made in the hands of the assessee. The details of correspondence between the AO and the assessee have been reproduced in earlier part of the order. It is also observed that the assessee had also furnished various details including copy of bank statements, confirmation of ledger account from M/s. Kiran Gems Pvt. Ltd., tax audit report, copy of bank statement, copy of form 26AS which demonstrates that all payment to the assessee were subject to tax deduction at source etc. Therefore, the facts as coming from the case records itself shows that there is no lack of inquiry on the part of the AO, looking into this case. Another noteworthy point is that in the assessment order for M/s. Kiran Gems Pvt. Ltd. which has been produced before us for our perusal for this very assessment year 2013-14, no disallowance was made in the case of M/s. Kiran Gems Pvt. Ltd. with respect to payment made to various parties (incl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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