M/S RADHISHWARI DEVLOPERS P LTD,INDORE vs. PR CIT -2 INDORE, INDORE

M/s. Radheshwari Developers Pvt. Ltd. order u/s 263 of the Act framed on 28.03.2018 by Ld. Pr.

Commissioner of Income Tax-2 (in short ‘Ld. CIT], Indore, raising following grounds of appeal:

1.That the order of the Ld. Pro Commissioner of Income Tax, Indore u/ s 263 of the Act is illegal, void and without jurisdiction. 2.That the Ld. Pro Commissioner of Income Tax, Indore has wrongly invoked provision of Section 263 of the Act. The assessment order was framed u/s 143(3) after making due enquiry and was not erroneous or prejudicial to the interest of revenue. 3.That The Ld. PCIT has erred in law and on facts in holding that the sufficient inquiries were not made to ascertain the genuineness and credit worthiness of the loan creditors in respect of unsecured loan undertaken by the Assessee in the Assessment Year 2013-14. 4.That there is a distinction between "lack of enquiry" and "inadequate enquiry". In the present case the Assessing Officer collected necessary details, examined the same and then framed the assessment u/s. 143(3) of the Act. Since the Assessing Officer had investigated/ examined the issue and applied his mind towards the whole record made available by the assessee and collected by the AO u/s 133(6) during assessment proceedings and uncontrovertedly, necessary details/reply to the questionnaire were filed/produced by the assessee and the same were examined by the Assessing Officer, therefore, the present case is not a case of lack of enquiry by the Assessing Officer and thus section 263 cannot be invoked by the Pro CIT. 2 M/s. Radheshwari Developers Pvt. Ltd. 5.That Explanation 2 to S. 263 inserted w.e.f. 01.06.2015 does not override the law as interpreted by the various High Courts whereby it is held that the CIT cannot treat the AO's order as being erroneous and prejudicial to the interest of revenue without himself conducting an enquiry and recording a finding. If the Explanation is interpreted otherwise, the CIT will be empowered to find fault with each and every assessment order and also to force the AO to conduct enquiries in the manner preferred by the CIT, thus prejudicing the mind of the AO as has been done in the present case. Thus the entire order u/ s 263 is vitiated and bad in law on account of the failure of the Pr, CIT to himself first make an inquiry and only then to arrive at any fault in the assessment order. 6.That for the purposes of exercising jurisdiction u/s 263, the conclusion of the CIT that the order of the AO is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. If the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. The second option available u] s 263 (1) of sending the entire matter back to the AO for a fresh assessment. can be exercised by the PCIT only after he undertakes an inquiry himself and not otherwise. Thus the present order u/ s 263 is vitiated on this ground alone.

3. After passing of the assessment order u/s 143(3) of the Act, Ld. Pr. CIT examined the assessment records and documents filed by the assessee and notice that the M/s. Radheshwari Developers Pvt. Ltd. assessment order is prima facie, erroneous and prejudicial to the interest of the revenue and accordingly issued following show cause notice dated 18.01.2018 to the assessee u/s 263 of the Act:

F. No.Pr. CIT-2/IndITech/263117-l8 Date 18.01.2018 To, M/S RADHISHWARI DEVELOPERS PVT. LTD., F/H-198, SCHEME NO. 54, VIJAY NAGAR, INDORE Sub:- Show cause notice Ills 263 of the Income Tax Act, 1961, in the case of M/s Radhishwari Developers Pvt. ·Ltd., F/H-198, Scheme No. 54, Vijay Nagar, Indorc for A.V. 2013-14 PAN: AAFCR1916A_ reg.

Please refer to the assessment order dated 07/03/2016 for A. Y. 2013- 14 in your case. On perusal of case record in your case for the A. Y. 2013-14 it is found that you have furnished your return of income declaring total Loss at Rs. 50,19.5031- on 27.09.2013. Assessment in your case u/s 143(3) of LT. Act 1961 was completed by the ITO - 4(2), Indore vide order dated 07/03/2016 assessing total Loss at Rs. J ,53,066/-.

2. The entire records were gone through by me and on perusal and examination of records it is found that the order dated 07/03/2016 for A. Y. 2013-14 is erroneous in so far as it is prejudicial to the interest of revenue on account of passing of the order without making required enquiries/ investigations.

M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

4. The A.O. should have inquired about the surrounding circumstances in respect of the loan in question. On verification of details submitted by M/s Gliter Deal Mart Pvt. Ltd it is seen that the registered office of the said C0111pany is based at Kolkata, It is further seen that the company has shown income for A.Y. 2013-14 at Rs. 11,457/-. On perusal of annual account submitted by M/s Gliter Deal Mart Pvt. Ltd it is noticed that the company is having share capital of Rs. 32.42 lakhs and is having security premium account of Rs 7.96 Crores. Despite having such huge reserves and surplus the company has not shown any significant business transactions and net income for 31.03.2013 is shown at Rs. 3540/- only. As regards the Source of funds it is seen that the lender company has received an amount of Rs. 55,00,000/- from M/s Gielle Investment on 28/02/2013 out of which Rs. 45,00,0001- has been given to the assessee on the same date. In the same way Rs. 30,00,000/- has been received from GielIe Investment on 28/02/2013 and given to the assessee on the same date. It is also observed from the bank account of M/s Glitter that the company has given advances of huge amounts to many parties. Therefore, prima facie the company appears to be involved in providing accommodative entries. It is a well known modus operandi of such paper companies of Kolkata to raise funds through huge premium despite having no worth on papers and then use these funds for accommodative entries. Therefore looking to the circumstances surrounding the transactions, the A.O. should have made inquiries regarding the creditworthiness of the lender company and also M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

the source of such a huge amounts in the hands of the lender company.

SI.No. Name of the Company Amount received

1.M/s Apanapan Mercantile Pvt. Ltd. Rs.33,00,000/- 2.M/s Bhimthal Nirman Pvt. Ltd. Rs.25,00,000/- 3.M/s Confident Vinimay Pvt. Ltd. Rs.65,00,000/- 4.M/s Crest Vanijya Pvt. Ltd. Rs.31,00,000/- 5.M/s GieIle Investment Pvt. Ltd. Rs.51,00,000/- 6.M/s Tropical Vyapar Pvt. Ltd. Rs.28,00,000/- 7.M/s Winsher Commercial Pvt. Ltd. Rs.89,00,000/-

Total Rs.3,22,00,000/-

6. All the afore-said huge loans are from Kolkata based companies who have given these unsecured loans to the assessee without any securities. The companies are not doing any major financial activities and the same appears to be paper companies created through the receipt of huge premiums on shares which itself is doubtful. Further the Source in the hands of these companies is RTGS/cheques received from some other parties on the very same day. The creditworthiness of these companies should have therefore have been verified by the A.O. properly and the genuineness of the cash credit should also have been verified in view of the fact that the amount in the bank account of the assessee has been deposited just before advancing loan to the assessee. It is not. out of place to mention here that the assessee has received total unsecured loans at Rs. 21.07 Crore during the year under consideration which 7 M/s. Radheshwari Developers Pvt. Ltd. includes unsecured loans of Rs. 1,85,50,000/- during the year from M/s Jayant Securites and Finance Ltd., Baroda, loans from the said company was held as unexplained cash credit in the case of Muktilal Laduram Prop. Shivashakti Trading, Co. , Sendhwa for A. Y. 2014-15. Therefore, in this case also the unsecured loan from the said company should have been treated as unexplained cash credit. You are, therefore, required to show cause why provisions of section 263 be not invoked in your case for the reasons mentioned above as the order of AO dated 07/03/2016 is erroneous in so far as it is prejudicial to the interest of revenue.

7. You are, accordingly, given an opportunity to attend my office on 25.01.2018 at 3:30 P.M. and produce necessary evidences, explanation, etc in support of your contentions and arguments. If you fail to attend the hearing, it shall be presumed that you have nothing to say in the matter and order u/s 263 shall be passed on merit and on the basis of facts available on record.

Yours faithfully, Sd/- (Shelley Jindal) Pr. Commissioner of Income Tax-2 Indore

A M/s. Apanapan Mercantile Pvt. Ltd. B M/s. Bhimthal Nirman Pvt. Ltd. C M/s. Confident Vinimay Pvt.Ltd. D M/s.Crest Vanijya Pvt. Ltd. E M/s. Gielle Investment Pvt. Ltd. F M/s. Tropical Vyapar Pvt. Ltd. G M/s. Winsher Commercial Pvt. Ltd. H Glitter Dealmark P. Ltd. I Jayant Securities & Finance Ltd.

5. It was also submitted that all documentary evidences which could satisfy the identity of the cash creditors, genuineness of the loan transactions and the creditworthiness of the cash creditors were filed before the Ld. Assessing Officer and independent enquiry was also conducted by the Ld.AO calling information u/s 133(6) of the Act to which most of the cash creditors have replied confirming that they have given unsecured loan to the assessee 9 M/s. Radheshwari Developers Pvt. Ltd. on interest. It was also submitted before Ld. Pr. CIT that interest on all the unsecured loans was duly paid/credited after deduction of tax at source and these unsecured loan have been repaid in subsequent years. Reliance was also placed on various judgments submitting that since the Ld. Assessing Officer has made proper application of mind, conducted requisite enquiry, taken one of the plausible views permissible under the Act, the revisionary power used by the Ld. Pr. CIT was not justified and liable to be dropped.

It was also submitted that the most of the cash creditors mentioned by the ld. Pr. CIT in the show cause notice referring them to be accommodation entry provider is not correct since most of these cash creditors have been assessed after scrutiny by the Revenue authorities u/s 143(3) of the Act and even some of the cash creditors have even moved to the higher judicial forums challenging the orders of Ld. Assessing Officer & Ld. CIT(A) which itself prove their identity and genuineness. It was also submitted that all the alleged parties mentioned in the show cause notice have given unsecured loans to the assessee through banking channels and there was no cash deposit just before the issuance of cheque/bank transfer to the assessee. All these companies have sufficient financial strength in the form of share capital, 10 M/s. Radheshwari Developers Pvt. Ltd. share premium and accumulated reserves to lend the money to the assessee company on interest.

2.1 I have carefully considered the facts of the case, the assessment records and the written submission given by the assessee. The issue involved is acceptance of unsecured loans by the assessee which were apparently not properly investigated by the AO for ascertaining whether any addition should be made in the Income Tax Act if the same were not found proper i.e. the genuineness, creditworthiness and the identity of the depositors was proper. It was incumbent upon the AO to have verify everything properly by making necessary investigation and verification before accepting the deposits as correct. The records shows that the AO issued a questionnaire to the assessee on 12.01.2016 and the assessee is asked to submit information about unsecured loans taken during M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 previous year given complete detail thereof. The assessee is also asked to prove the identity of the subscribed, genuineness of the transaction and creditworthiness of the subscribers also. The assessee vive reply dated 08.02.2016 submitted certain information which included confirmation of 21 depositors. The balance sheet, bank statement acknowledgement and computation of income of these depositors were also filed thereafter it appears that AO has issued 133(6) notice to the depositors and certain replies from the depositors are on record which have been filed consequence to 133(6) notices. It appears that somebody on behalf of those parties filed the information before the as there is no evidence of the mode i.e. whether it was received by courier or post, is there these parties are:-

Sr. Name No. 1 Apanapan Mercantile P. Ltd 2 Jayant Security & Finance 3 Vishwajyoti Trading Ltd. 4 Creative Technocom P. Ltd. 5 Enit Investment P. Ltd.

It is further observed from records that the letter issued by speed post to Jayant Security & Finance Ltd. was received back unserved with the remark not know/left however, subsequently somebody filed the information/confirmation on behalf of Jayant Security & Finance Ltd. with the letter 1st April 2013 whereas the notice calling for information was issued on 16.02.2016. Further, information by post was received from Crest Vanijya P. Ltd. Bhimtal Nirman P. Ltd., Tropical Vyapar P. Ltd., Winsher Commercial P. Ltd. Gliter Dealmark P. Ltd. On perusal of the information in the assessment record and various confirmations which have been placed on record by the AO it is seen that the AO has made no effort to further eamine the 12 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 creditworthiness and identity of the depositors and genuineness of the transaction. For example if we take the case of Gliter Dealmark P. Ltd. the company has shown income for AY 2013-14 of Rs. 11,457/-. The company is having share capital of 32.42 lacs and is having security premium of Rs. 7.96 crores. In spite of having such huge funds there is no significant business activity and the income for the year ending 31.03.2013 is only Rs. 3540/-. The company have received Rs. 55 Lacs from M/s Gielle Investment on 28.02.2013 out of which 45 lacs was given to the assessee on the same day similarly, Rs. 30 Lac was received from the same company and given to the assessee on the same day. Incidentally this company i.e. Gielle Investment has also given an unsecured loan to the assessee. An examination of the bank account shows that there are similar circulating entries in the account which show that primafacie the company is involved in providing accommodation entries. This observation significant in the light of detection of several shell companies in Kolkata which were engaged in providing accommodation entries and given bogus share capital. The department of Income Tax, company affairs and SEBI has taken strong action against such companies. In this background it was imperative for the AO to have further enquired whether the company was genuine or was shell companies as primafiacie, as discussed above, the indications are that it should be a shell company engaged in business of providing accommodation entries. He has simply obtained the information and did not make any effort to investigate further. Therefore, this type of action is a case of no enquiry at all. Further, as mentioned above the letter issued to Jayant Security and Finance Ltd. was received back unserved with the remark not known/left and someone filed the information before the AO. In the circumstances it is a clear case for suspicion for the AO and he should have made further enquiries about the existence of the company as in this case the confirmation was dated 1st April 2013 whereas the query was raised in the year 2016. It appears that the assessee has himself 13 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 filed the confirmation before the AO. It is interesting to note that one confirmation for Jayant Security was filed by the assessee himself in response to the questionnaire and another confirmation for the same company was filed before the AO in response to notice u/s 133(6). Both the confirmations are dated 01.04.2013 and have been signed by someone from Jayant Security & Finance Ltd. however, the signatures on both the confirmation s are different. There is another confirmation on record which is dated 19.02.2016 the signatures on these confirmations do not match with the confirmation filed earlier. These signs are clearly that of a company which is involved in entry business or is existing merely on paper. The AO has failed to make further inquiry in this case as well. Incidentally this company has not attached its bank account with the reply filed in response to notice u/s 133(6). However , the bank account was filed by the assessee himself during the course of scrutiny proceedings. The bank accounts of this company also show circulating entries and therefore, this is also clear case of further investigation. The most important point is that all this loans are without any security. It may not be out of place to mention here that an another case running to this charge the loan given by this company totaling to Rs. 1.855 Lacs was held as unexplained. Similar factor such as huge share premium reserve, circulating entries in the bank account and insignificant business activity as compared to the funds in the company is also observed in other companies from which the assessee as taken low the names of such suspects companies are mentioned in preceding discussion and alos in the show cause all these companies have made have given unsecured loans of huge amounts. It is also noted that the director of Glitter Dealmark Shri Santosh Jain is also director in one another company namely Crest Vanijya P. Ltd. It is also important to note that the companies such as Bhimtal Nirman P. Ltd., Winsher Commercial P. Ltd., Tropical Vyapar P. Ltd. are operating for the same address at Kolkata and have cross entries of taking and 14 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 giving loans. As per the preliminary information received from the Investigation Directorate Kolkata, all companies at Kolkata from which the assessee company has taken loan pertain to one group namely Rajesh Jain. It appears that these companies are controlled and managed by same set of persons and it is very suspicious that how three companies fan give loan of several lacs without any security to a company based in Indore. Therefore, the AO should have made further enquiries about the creditworthiness of the loans received from these companies. In this connection further preliminary enquiries were made by the undersigned from the Investigation Directorate Income Tax Department, Kolkata about whether these companies are appearing in the list of the companies who were involved in giving accommodation entries. It has been informed by the Addl. DIT, Investigation, Kolkata That Winsher Commercial and Tropical Vyapar P. Ltd. were found involved in bogus LTCG transactions. Further, the database available with this office also should that Vishvjyoti Trading Ltd. was also involved in bogus LTCG transactions. These set of facts clearly indicates that there is a clear need to investigate the transactions from the bank account to ascertain the genuineness of the transaction and creditworthiness of the depositor companies. I have also written a letter to Investigation Directorate, Kolkata for making further investigation in the loan transactions vide this office letter dated 23.03.2018. The report still awaited. Regarding Jayant Securities and Finance Ltd. it has further been noted that in the case of Girish Kumar Tayalin Circle-5(1) Indore the loan transactions from this company were investigated and the statements of the directors were also recorded in which they have admitted about the bogus nature of transactions. This also clearly shows that the credit entries from this company are also not above board. In this case also I have written a letter to Pr. DIT, Investigation , Surat in whose jurisdiction the registered office of the company falls, to further investigate the transactions of the assessee with the company. 15 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

It is clear from the above that the assessing officer has not made sufficient enquiry and investigation even in spite of several reasons for doing so. He should have made complete enquiry regarding in the creditworthiness of the depositors as the balance sheet, bank account and other facts that the loan was without security. Many companies were operating from Kolkata which is a known place for giving accommodation entries and the manner in which replies were filed before the AO during the course of assessment proceedings. Further, the analysis and preliminary investigation carried out by this office show that some of the entries from which the loans have been taken were found involved in bogus LTCG transactions. As per the database of bogus LTCG, Penny stock companies available with this office the name of Vishvjyoti Trading Ltd. appears in the list. Therefore, the credentials of this company are doubtful and complete investigation is required to be made in respect of transactions of the assessee with this company also. In this connection, I have also issue a letter to Pr. DIT (Inv.), Mumbai for carrying out the enquiries. Recently information has also been received from Investigation Wing that one of the lenders namely KCL Infra Projects from whom the assessee has taken substantial loan during the year has also been found to be involved in penny stock transactions. Therefore, it appears that this company is also involved in accommodative transactions. The balance sheet of the assessee show in opening balance of Rs. 10,73,677/- and closing balance of Rs. 57,67,284/-. Accordingly, the unsecured loan received from this company is also suspicious and needs to be further investigated. Since, majority of the creditors of the company have been found to be of suspicious nature the undersigned also examined the information received from the remaining creditor companies. It is noted from there that the companies are again the one with low turnover, low business profit and apparently the creditworghiness and genuineness is required to be investigated properly. Accordingly, it was required that all the 16 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 creditors/ depositors should have been properly examined to ascertain whether the deposits were genuine or the same were accommodation entries. In this connection letters for conducting enquiry have also been issued to Pr. DIT (Investigation), Bhopal, Ahmedabad and Nagpur. The above discussion clearly shows that the assessment order being erroneous in so far as it is prejudicial to the interest of revenue as per the provision of section 263 and explanation 2 to the section. The AO completed the assessment without making necessary investigation and enquiries which were necessary to arrive at the correct taxable income of the assessee. He didn’t examine the creditors from the point of view of proviso to section 68, which is applicable from 01.04.2013. He should have enquired in detail about the sources of the credit given by the creditors. It may not be out of place to refer to the provisions of Explanation-2 to section 263 which reads as under :- Explanation 2.- For the purpose 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 wihtout 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.” Accordingly, the provisions of clause (a) of the explanation are applicable in the present case. 2.2 Remarks on the assessee’s submission :- 17 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

The first objection raised the 263 proceedings are being initiated due to audit objection raised by the audit party. The objection is not acceptable as the audit has only suggested that the matter should be examined. The notice u/s 263 was issued after ddetailed examination of the case record and examining information about each creditor. There has been proper application of mind by the undersigned and proper reasons for treating the order of the AO as erroneous have been given it is not a case where blindly the remarks of the audit have been followed without application of mind. The judgments relied by the assessee are also accordingly distinguished. The audit party can point out certain infirmities and mistakes in the order and if after due application of mind the same is found to be correct and actionable, there is nobar and taking the action on such suggestion. Reliance is placed on the judgment of Allahabad High Court in the case of Mannulal Matadeen – 277 ITR 346. It has also been pointed out by the assessee the assessing officer made independent enquiry u/s 133(6). In this conenection it is pointed out that it has been had in the preceding discussion that why the action of the AO in accepting the information was erroneous. The objection is therefore not accepted. The assessee has also pointed out to the internal correspondence which was made by the AO with the undersigned regarding the audit objection in which he had relied on certain judgements for justifying the action of the AO and not accepting the audit objection. First of all the internal correspondence made by the officer with its superior can not be relied by the assessee as an evidence or an opinion. However, the action of the AO i.e. the assessment order was erroneous and that is why the same is being set a side by invoking the provision 263 therefore, the views taken by the AO cannot supersede the view taken by the superior authority i.e. Pr. Commissioner exercising its judicial powers as per the provisions of the Act.

M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 The assessee has pointed out that the invocation of 263 proceedings without making require enquiries/investigation. The objection is not acceptable as there were several indicators and evidences available on record which shows that the assessing officer has not make any sufficient enquiries or verification in the matter. The judgement relied by the assessee in the case of Hotz Industries Ltd. (49 Taxman.com367) (Delhi) is also respectfully distinguished. In the present case it is clear from the facts that the creditworthiness of the creditors was not adequate. Regarding the issue of inadequate enquriy/lack of enquiry/no enquiry, the objection is not acceptable as with the amendement in Explanation 2 to section 263 the issue has been taking care of. The present case is the case where inadequate enquiry or lack of enquiry is there. He just issued notice u/s 133(6) and didn’t make any further investigation inspite of so many apparent discrepancies in the responses received. The judgments which have been relied by the assessee are prior to amendement of Explanation 2. The reliance is also to placed on the judgement of ITAT Kolkata in the case of Subhlakshmi Vanijya P. Ltd. 172 TTJ 721 (KOL). This judgment has been discussed in detail in the subsequent paras. The judgements in the case of Ameera Eneterprises Ltd. and Naryan Rane which deals with the amended Explanation 2 are also respectfully fdistinguished as theh facts of the present case are different for which the detaileed discussion has been made in the preceding paras. The assessee has also submitted that both the limbs of section 263 should be satisfied the objection is not accepted as the AO erred in making sufficient enquiry which resulted in an order prejudicial to the interest of revenue. The judgements relied by the assessee in support of its claim regarding the acceptance of credits u/s.

M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

The assessee has also submitted that the loans have been repaid through proper banking channel. The submission has no relevance as the repayment of loan cannot act as a proof of creditworthiness and genuineness of the transaction. 3.0 Legal Position on Power of Commissioner for Revision u/s 263: Case laws on the power of Commissioner, favour Revenue, in folloiwng situations as regards enquiry by Assessing Officer : a. Complete failure to conduct relevant enquiry. b. Conducting enquiry but not taking it to its logical conclusion. c. Conducting enquiry but drawing the wrong conclusion. 6.1 Reference is invited to recent judgement of Kolkata Tribunal in the case of Marigold Nirman Pvt. Ltd. and related cases ITA 1365/KOL/2013 J.DATED 30.07.15, also reported as Subhlakshmi Vanijya (P.) Ltd. in 172 TTJ 721 (KOL) has..........virtually the whole law on 263. It has answered following questions most clarity; Q. Whether the enquiry conducted by the Assessing Officer in such cases can be as a proper enquriy ? A. Though the Assessing Officer issued notices under section 133(6) but it failed to comprehend the rationale or logic behind.............., nor to examine any of the ....................It is highly improbable for any person having sound mind to purchase at arm’s length the shares of a private limited company, hardly having any worth, with face value of Rs.10 at a premium of Rs.190. This mere fact should have been cornerstone for the Assessing Officer to embark upon further enquiry to unearth the truth. The genuineness of transactions of issue of share at such hefty premium in this background of the matter was under dark cloud and it skipped the attention of the Assessing Officer. [Para 17.c.] There remains no doubt whatsoever that in the given circumstances, the Assessing Officer conducted half-baked enquiry ignoring vital aspects which were required to be examined, ........................confronted with 20 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 such peculiar and hair-raising circumstances, the Assessing Officer should have not alerted and dug the matter deep for unearthing the reality of the transaction. Unfortunately, nothing of this sort was done by him. It is a perfect citation for a complete non-application of mind by the Assessing Officer and of passing the assessment order in undue haste. [Para 17.h] Thus, there can be no escapee from an axiomatic conclusion that in all these cases the enquiry conducted by the Assessing Officer’s is exceedingly inadequate and hence fall in the category of “no enquiry” conducted by the Assessing Officer, what to talk of charactering it as an ‘inadequate enquiry’. The highly inadequate enquiry conducted by the Assessing Officer resulting in drawing incorrect assumption of facts, makes the orders erroneous and prejudicial to the interests of the revenue. [Para 17.i] Q. Whether Commissioner can set aside the assessment order and direct the Assessing Officer to conduct a thorough enquiry, thereby interfering with the jurisdiction of the Assessing Officer conferred on him in terms of sections 142(1) and 143(2) of the Act ? A. A Careful perusal of the provisions of section 142(1)/143(2) unveils that it is the prerogative of the Assessing Officer to require the information ‘on such points or matters’ as he may require. Ordinarily it is not possible for the Assessing Officer to inquire into each and every entry recorded in the books of account of the assessee. He has to exercise his acumen in extracting out the relevant points or matters on which he wants to concentrate. But, what is important in this regard is that the operation of section 142(1)/143(2) comes to an end when an assessment is completed after examining such point or matters which the Assessing Officer feels to inquire before finalizing the assessment. It is only thereafter that the revisional powers of the Commissioner under section 263 can come into play for ascertaining if the Assessing Officer examined all the relevant points, which ought to have been eexamined. If M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 the Commissioner, on examination of trecords of assessment, comes to the conclusion that the assessing officer failed to enquire into certain other relevant aspects which, in facts, necessitated thorough investigation, then he has all the power to revise the assessment order. In the instant case, the assessment already stands finalized and now teh Commissioner is examining whether the Assessing Officer properly examined the facts of the case. In such circumstances, it is impermissible to have a recourse to the provisions of sections 142(1) and 143(2) for demolishing the order under section 263 [Para 18.b] Q. Whether inadequate inquiry conducted by the Assessing Officer empowers the Commissioner to revise the assessment order ? A. It is imperative for the Assessing Officer to conduct enquiry to satisfy himself about the genuineness of transactions. Scope of the term ‘enquiry’ can be diverse in different circumstances. There cannot be straitjackket formula to positively conclude as to conducting or non- conducting of ‘enquiry’ by the Assessing Officer. It depends on the facts and circumstances of each case. Where the facts are just oridinary and prima facie there is nothing untoward the recorded transaction, in such circumstances, the obtaining of the documents and the application of mind thereon, without a further outside enquriy, may mean that the Assessing officer did conduct enquiry, leaving the question open as to whether it was a proper or an improper enquiry. But, where the factual scenario of a case prima facie indicates abnormalities and cry for looking deep into it, then a mere collection of documents cannot be held as conducting enquiry, leave aside, adequate or inadequate. In such later cases, only when the Assessing Officer, after collection of the initial documents, embarks upon further investigation, that it can be said that he initiated enquiry. Where the facts of a particular transaction cry hoarse about its non-genuineness and even a casual look at such facts, prima facie, divulges foul play, then the alarm bell must ring in the mind of the Assessing Officer for making further examination. Collection of papers on record in such circumstances cannot be construed as 22 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 conducting a proper enquiry. If in such circumstances, the Assessing Officer simply gathers documents and keeps them on record, then such nominal enquiry falls within the overall category of ‘no enquiry’ because of the inaction on the part of the Assessing Officer to read a writing on the wall. [Para 19.a) Thus, the instant case is a glaring example of not making relevant enquiry, which amounts to ‘no enquriy’ and hence it becomes a case of non-application of mind by the Assessing Officer. [Para 19.e] Q. Whether the order of the Commissioner was based or irrelevant consideration and was he supposed to point out specifically where the Assessing Officer went wrong in not properly examining the issue of share capital ? Where the Assessing Officer has made proper enquriy and still comes to a wrong conclusion, which renders the assessment order erroneous and prejudicial to the interest of the revenue, it becomes the duty of the Commissioner to expressly point out where the Assessing Officer went wrong on merits. But in a case, where no enquiry has been conducted at all or the so-called enquiry conducted by the Assessing Officer is as good as on enquiry, as is the case under consideration , in such circumstances, the Commissioner simply needs to point out those relevant aspects of assesseent, which the Assessing Officer lost sight of, but were required to be properly probed. There can be no way for the Commissioner to tell erroneous approach of the Assessing Officer on merits in such circumstances because the view of the Assessing Officer on merits is not available. Requiring the Commissioner to indicate where the Assessing Officer went wrong on merits in the cases of no enquiry cases, is like requiring an impossible thing to be done. It is axiomatic that the law does not require an impossible to be complied with. In the instant case the extent of enquiry conducted by the Assessing Officer, being as good as no enquiry, is sufficient in itself to empower th Commissioner for invoking his jurisdiction under section 263. Under such circumstances, M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 no impossible burden can be cast on the Commissioner to show the positive leakage of income in concrete terms, when he has simply set aside the assessment order and restored this aspect of the assessment to the file of the Assessing Officer for making a proper enquiry and then deciding . [Para 20.g] Q. If the Assessing Officer has taken a possible view, can still the revision be ordered ? A. Where the Assessing Officer fails to conduct an enquiry or proper enquiry, which is called for in the given circumstances, the commissioner is empowered to set aside treh assessment order by treating it as erroneous and prejudicial to the interests of the revenue. In such circumstances, the Assessing Officer can’t be said to have taken a possible view and it is not further required on the part of the Commissioner to expressly show where the assessment order went wrong. The very fact that no enquiry was conducted or no proper enquiry was conducted in the required circumstances, is sufficient in itself to invoke the provisions of section 263. [Para 21.g] 6.2 The excerpts from other important judgments on the revisionary powers of Commissioner are reproduced hereunder. 6.2.1 CIT VS AMITABH BACHCHAN [2016] 384 ITR 20 (SC): Making a claim which would prima facie disclose that the expense in respect of which deduction had been claimed had been incurred and thereafter abandoning/withdrawing the same gave rise to the necessity of further enquiry in the interest of the revenue. The notice issued under section 69C could not have been simply dropped on the ground that the claim has been withdrawn. Therefore, the Commissioner was perfectly justified in coming to his conclusions in respect of this issue. [Para 21] 6.2.2 Toyota Motor Corpn. [2008] 174 Taxman 395 (Delhi) Affirmed in [2008] 173 Taxman 458 (SC) The reasoning given by the Tribunal could not be accepted simply because the Assessing Officer himself did not say any such thing in his 24 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 order. There is no doubt that the proceedings before the Assessing Officer are quasi-judiucial proceedings and a decision taken by him in this regard must be supported by reasons. Otherwise, every order, such as the one passed by the Assessing Officer, could result in a theoretical possibility that it may be revised by the Commissioner under section 263. Such a situation is clearly impermissible. [Para 9] It is also necessary for the parties to know the reasons that have weighed with the adjudicating authority in coming to a conclusion. The order passed by the Assessing Officer should be a self-contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law. [Para 10] Therefore, the matter was to be remanded to the file of the Assessing Officer to decide the issue afresh in terms of the order passed by the Commissioner under section 263. [Para-12] 6.2.3 Jagdish Kumar Gulati [2004] 139 TAXMAN 369 (ALL) When an assessment is done under section 143(3), it is expected that the Assessing Officer will make a detailed enquiry to find out the correct income of the assessee and not to take the facts placed by teh assessee on their face value. No proper enquiry appeared to have been made by the Assessing Officer in the instant case. It is well settled that if the Assessing Officer fails to make a proper enquiry this is erroneous and prejudicial to the interest of the revenue. [Para 13] 6.2.4 Malabar Industrial Co. Ltd. [2000] 109 Taxman 66 (SC) Whether in order to invoke section 263 Assessing Officer’s order must be erroneous and also prejudicial to revenue and if one of them is absent, i.e. if order of income-tax officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1) – Held, yes- Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue held, yes.

M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the revenue. If one of them is absent – if the order of the ITO is erroneous ............prejudicial to the revenue or if it is not erroneous but is prejudicial to the .........ecourse cannot be had to section 263(1). ..........rompton Greaves Ltd. [2017] 82 taxmann.com 246 [Mumbai-ITAT ...........C) .......that on perusal of the said assessment order it was clear that the Assessing ........had not made any enquiry with respect to the claim of deduction of the assessee-company with respect to provisions for warranty charges, excise duty, .......tax and liquidity damages amounting to Rs.17.72 crores claimed as deduction by the assessee- company from the income of the assessee-company and the claim made by the assessee-company was accepted by the Assessing Officer without any further enquiry, examination or verification as was warranted. 6.2.6 Commissioner of Income v/s Vallabhdas Vithaldas- Gujarat High Court (2002) 253 ITR 0543] Held that Revision –Record of proceedings- Statements of third party in search operations – Explanation to s. 263 clarifies that “record” would include all records relating to any proceedings under the Act available at the time of ....amination by the CIT- Provisions of said Explanation are to be deemed to have always been in existence- Thus, it cannot be said that power under s.263 can be exercised only on the basis of the statements which are recorded in the course of search and seizue operations in respect of the very assessee and not in respect of any other M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 person- For the purpose of exercising his power, the examination by CIT is not required to be confined to the record in assessee’s case. 6.2.7 [2016] 237 Taxman 211 (Madras) N. Mohammed Ali Vs. Income- Tax Officer, Ward-VII(2), Chennai During relevant year, assessee made cash payments to suppliers of crackers-without examining details of expenditure involved, Assessing Officer allowed said payments- commissioner found that assessee had made cash payments in excess of Rs.20,000 to some suppliers on day- to-day basis- He thus passed a revisional order disallowing said payments under section 40A (3)- Whether on facts, impugned revisional order did not require any interference- Held, yes [Para-16] [ In favour of revenue] 4.0 Therefore, in view of the above discussion I am of the considered opinion that the order dated: 06.01.2016 for A.Y. 2013-14 is erroneous in so far as it is also prejudicial to the interest of revenue on account of passing of the order without making required enquiries/investigations. Accordingly, I am satisfied that provisions of section 263 of I.T. Act. 1961 are required to be invoked. Therefore, the assessment for A.Y.2014-15 framed on 06.01.2016 is hereby set-aside to the file of AO to re-examine all the unsecured loans taken by the assessee company which are reflected in schedule Note 6 of the annual audited accounts for FY 2012- 13 submitted by the assessee before the AO during the assessment proceedings He is directed to get complete investigation done about various unsecured loans taken by the assessee company. He is directed to also verify the entries in the bank account, nature of business of the company and check from the investigation Directorate of the Jurisdiction to which the lender company belongs. The database which contains information about the Penney stock/shell companies and the companies in the business of issuing accommodation entries should be verified to check whether these companies are involved in this business and whether any investigation has been done by the departmental M/s. Radheshwari Developers Pvt. Ltd. authorities earlier. For this purpose, he is directed to take help of the Investigation Wing to get the matter completely examined. The line of investigation/inquiry is only inclusive and he is free to make any other investigation on the issue as deemed fit by him. He is further directed to pass a detailed speaking order as per the law after making necessary verification, inquiries and investigations as indicated above.,

7. Being dissatisfied with the impugned order u/s 263 of the Act the assessee preferred an appeal before this Tribunal. Ld. Senior counsel for the assessee firstly took us through following submissions filed by the assessee before Ld. Pr. CIT during the proceedings u/s 263 of the Act.

On the date of hearing which was fixed for 25.01.2018, an adjournment was sought for compilation of details as well as inspection and obtaining of copy of case records of the learned Assessing Officer. Our request was accepted and date of hearing was adjourned for 09.02.2018. Thereafter, we have obtained the copy of assessment record from the learned Assessing Officer, which consist of the following :-

1. 1. Copy of return and Balance Sheet of the company: 2. Notice u/s 142(1) dated: 27.11.2015.

3. Reply dated: 30.12.2015 in response to notice u/s.142(1) 4. Questionnaire dated: 12.01.2016 5. Reply dated: 18.01.2016 and 08.02.2016 in response to questionnaire dated:12.01.2016 6. Replies alongwith requisite information received from following cash creditors to whom notice u/s. 133(6) were issued :- A M/s. Apanapan Mercantile Pvt. Ltd. B M/s. Bhimthal Nirman Pvt. Ltd. C M/s. Confident Vinimay Pvt.Ltd. D M/s.Crest Vanijya Pvt. Ltd. 28 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 E M/s. Gielle Investment Pvt. Ltd. F M/s. Tropical Vyapar Pvt. Ltd. G M/s. Winsher Commercial Pvt. Ltd. H Glitter Dealmark P. Ltd. i. Jayant Securities & Finance Ltd.

response to notice u/s 133(6). After reaching to the satisfaction with the after inquiry, the learned Assessing Officer has passed the order. During the course of inspection of records with Assessing Officer it is found that the reply was forwarded wherein audit objection was not accepted for the reason that there was no evidence on record which was not considered by the then Assessing Officer while accepting cash creditors as proper. It is further submitted that the learned Assessing officer relied on the decision of jurisdictional High Court in the case of CIT V/s Metachem Industries (245 ITR 160) (MP) have held that once the creditor has confirmed the transaction by owning the same, it is treated that the assesse has discharged his onus. After that it is for the Assessing Officer or department to verify the transaction in the hands of creditor. In this regard further, it is submitted by him that in the case of Sona Electric Company V/s. CIT (1985) (152 ITR 507) (Delhi HC), it is held that it is prerogative of the Assessing Officer to reject the explanation offered by the assesse on cogent reasons. Non-acceptance of credits on presumptions is not possible. In view of the above it was submitted that as the responsibility of the assessee is concerned, it is satisfactorily discharged. As such as satisfactory explanation was given it is treated that onus is discharged. Thereafter it is open to the Assessing officer to initiated action against the creditor. In view of the aforesaid discussions and facts of the case and perusal of records reveals that the learned Assessing Officer exercising his quasijudicial power had issued a detailed questionnaire u/s 142 (1) of the Act, which was duly answered by way of various details, explanations and letters. Complete books of account, details of incomes, supported with documentary evidences were produced and examined by the learned Assessing Officer during the assessment proceedings. The counsel of the assessee company had appeared before the learned Assessing Officer and filed replies. Thereafter, after due/required enquiry/ verification u/s M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

133(6), which shyould have been done at the end of the learned Assessing Officer, order was passed u/s.143(3). Thus, the prime reason so mentioned in the show-cause notice for invoking of section 263 is without making required enquiries/investigation is having no force. Our contention finds support from the decision of Hon’ble Delhi High Court in the case CIT-IV v. Hotz Industries Ltd. 226 TAXMAN 0252, wherein it is held that – “Commissioner in the orfder under section 263 observed that the ‘assessing officer it appears’ had not caused any inquiries or investigation, but accepted the contention of the assessee. Commissioner observed, ‘therefore, meaningful inquiry should be conducted.’ This does not meet the requirement that the decision of the assessing officer should be erroneous. Once inquiries were conducted and a decision was reached by the assessing officer, it cannot be said that it was a case of no inquiry. In such cases, the Commissioner must reach a finding that the finding of the assessing officer was erroneous, not because no inquiries were conducted, but because the final finding was wrong and untenable. Once inquiries were held and the assessing officer formed a belief, the finding/opinion formed can be set aside only when it is erroneous and not because no inquiries or inadequate inquiries were conducted.” From the above it is clear that the power u/s 263 is to be exercised in the case of “no inquiry” and not in the case of “inadequate inquiry” or “lack of inquiry” whereas the cawe of the assessee is not even a case of lack of inquiry. The learned Assessing Officer had passed the assessment order only after conducting detailed enquiry on various issues including unsecured loans taken/availed by the assessee company. The assessment order is passed after due application of mind, therefore the impugned notice u/s 263 of the challenging that proper and adequate enquiry was not made, rendering the assessment order erroneous and prejudicial to the interest of revenue, is having no force. Similar, views have also, been taken by various judicial authorities, as under :-

M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 a. Merely because from a perfectionist point of view, it is felt that some more enquiries and verifications could have been made by Assessing Officer while making assessment/assessment order cannot be declared to be erroneous and prejudicial to interest of revenue. Salora International Ltd. v. Addl. CIT 2 SOT 705 (Delhi) (Trib.); b. When the Asseessing Officer takes one of the two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. CIT v. Max India Limited 295 ITR 282(SC), Malbar Industries Co. Ltd. v. CIT 243 ITR 83 (SC); d. Since the Assessing Officer made proper enquiry and examined accounts, it could not be said that there was non-application of mind by him. Hence, the action under section 263 was held invalid. Antala Sanjay Kumar Raviji Bhai V. CIT 135 ITD 506 (Rajkot) (Trib.), Roshan Lal Vegetable Products (P) Ltd. v. ITO 51 SOT 1 (URO) (Asr.)(Trib.), Fine Jewellery (India) Ltd. v. ACIT 19 ITR 746 (Mum.) (Trib.); e. In case, where the High Court found that the Assessing Officer examined all the details with respect to assessee’s claim of deduction, the order could not be said to be erroneous or was passed without application of mind merely because the same was not elaborate order. CIT v. Design & Automation Engineers (Bombay)(P) Ltd. 323 ITr 632 (Bom.)(HC), Manish Kumar v. CIT 134 ITD 27 (Indore) (Trib); f. Prakash Asphalting & Toll Highways (India) Ltd.Vs. Pr. Commissioner of Income Tax (ITAT, Indore Bench, Indore) (32 ITJ 141); g. Shri Narayan Tatu Rane vs. ITO, Mumbai (Mumbai ITAT). h. It the Income Tax Appellate Tribunal, Delhi “A” Bench, New Delhi in M/s. Amira Enterprises Ltd. Vs. The Pr. C.I.T. wherein it is held that the Id. PCIT has not referred to Explanation 2 of section 263 which has been inserted with effect from 01.06.2015 however 32 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 we agree with the finding of the coordinate bench in the case of Narayn Tatu Rane (supra), wherein it has been held that Explanation cannot said to have overridden the law as interpreted by the various High Courts, where the High Courts have held that before reaching a conclusion that the order of the AO is erroneous and prejudicial to the interest of revenue, the Commissioner himself has to undertake some enquiry to establish that the assessment order is erroneous and prejudicial to the interest of revenue. In the case of Naryan Rane a doubt is also expressed regarding the applicability of Explanation 2, which was inserted by Finance Act.2015 w.e.f. 01.06.2015, the bench also observed that if the Explanation is interpreted to have overridden the law as laid down by various High Courts, then the same would empower the Pr. CIT to find fault with each and every assessment order and also to force the AO to conduct enquiries in the manner preferred by the Prt. CIT, thus prejudicing the mind of the AO, however, the intention of the legislature behind the explanation could not have been so as the same would lead to unending litigation and no finality in the legal proceedings. Accordingly, in view of our detailed discussion, we allow the grounds of appeal raised by the assessee. In such circumstances, the words without making enquiries/verification which should have been made have been interpreted beyond the intent of law. The intent of law is that where no enquiry is made, which the Assessing Officer should have done in such case the provisions of section 263 can be invoked. It is therefore, prayed that the learned Assessing Officer has made proper enquiry and passed order u/s 143(3) and thus, the reason for show-cause is having no force and needs to be quashed. This contention also, finds support from the reply of the learned Assessing Officer addressed to audit objection (supra). Without prejudice to the above further, it is submitted that if an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner of Income M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

Tax, simply because, according to him, the order should have been written more elaborately. It is pertinent to note that the Hon’ble Supreme Court in the case of Malabar Industrial Co. Limited v. CIT 243 ITR 83 (SC), have held that when the Assessing Officer takes one of th two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. In this regard reliance is also place on the following decisions :- a. Section 263 does not visualize a case of substitution of judgment of Commissioner for that of the Assessing Officer, unless the decision is held to be erroneous. Antala Sanjay Kumar Ravjibhai v. CIT 135 ITD 506 (Rajkot) (Trib.), Manish Kumar v. CIT 134 ITD 27 (Indore) (Trib.) b. The error envisaged by Section 263 is not one that depends on possibility or guess work, but it should actually be an error either of fact or of law. ACIT v. Technip Italy Spa 150 Taxman 13 (Delhi) Trib.), Pratap Footwear v. ACIT SOT 638 (Jabalpur) (Trib.). c. CIT v. Gabriel India Ltd. [203 ITR 108] Bom HC). From the aforesaid discussions it is clear that the order so passed by the learned Assessing Officer in the instant case cannot be termed as erroneous unless it is not I accordance with law. Since, there is no issue in the order which can be said that the same is unsustainable in law and therefore, the first limb of section 263 i.e. the order is erroneous, is absent and needs to be quashed. Without prejudice further, to the above fit is submitted that the second limb of section 263 ie. The subject order is prejudicial to the interest of revenue. It is submitted that the instant case is related to receipt of unsecured loans and the same is covered by the provisions of section 68 of the Act, which have been judicially considered by several courts of law, wherein it is categorically been held that addition u/s 68 can be made 34 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 where an assessee fails to prove identity of the creditor; his creditworthiness and genuineness of the transaction. In the present case it is necessary to prove that on all 3 ingredients the assessee had failed and, therefore, addition is warranted. It is addition u/s 68 of the Act. In this case all the evidences were filed which have been verified by the learned Assessing Officer independently by way of issue of notices u/s 133(6) of the Act to the loan creditor companies, which were duly served at the addresses furnished by the assessee. This proves the identities of the loan creditor companies. Further, in response to the said notice u/s 133(6), loan creditor companies have furnished their replies confirming the transactions with the assessee company. The loan creditor companies not only admitted the fact of granting of loan to the assessee company, but also, substantiated their confirmation by filing copies of the audited accounts, bank statement, acknowledgement of filing of I.T. returns for the assessment year under consideration so also, the details of cheque of loans. In the audited accounts of the loan creditor companies and also, in the books of account of the assessee, the impugned loadn transactions by account payee cheques have been duly reflected. The loan creditor companies have also explained the immediate source out of which they have claimed to have granted loans to the assessee company. Further, from the bank statements of the loan creditor companies it is reveled that no cash was deposited prior to acknowledgement of cheques or such loans. It is pertinent to mention here that the assessing officer at his own collected the above information/evidences directly from the loan creditor companies, u/s 133(6) of the Act. It is also, a fact appearing from the assessment order that the Assessing Officer has not disputed the correctness of all these documents or made any adverse comments in respect of the same. Further, there is no adverse information from Investigation Wing or from any other source. These facts with supporting evidences, therefore, cumulatively prove the identity of the loan creditors, their crteditworthiness and genuineness of the transactions. There is thus no ground or basis to dispute the correctness of the loan transactions as M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 the same is fully supported from facts and settled legal principles laid down from time-to-time. Therefore, the onus cast on the assessee u/s 68 of the Act was duly discharged by it. Therefore, when all the ingredients contained in section 68 are fulfilled, there is hardly any scope to invoke the provisions of section 263 of the Act, alleging introduction of unexplained funds in the form of cash credits. The burden so shifts on revenue to establish that such credits has actually come from Asseessee Company itself. However, as stated above, no evidence was available on record by which the department may reach to the conclusion that the unsecured loan money has been brought in the name of the loan creditor companies by the assessee company itself. In this regard reliance is placed on the following decisions.:- a. Jt. CIT v. Durga Charitable Society & Vice-Versa 2017 TaxPub(DT) 4549 (Del-Trib); b. Reliance Corpoation & Anr. V. ITO & Anr. 2017 TaxPub(DT) 1443 (Mum-Trip); c. ACIT v. Prem Anand 2017 TaxPub(DT 1296 (Del-Trip); d. Sanghvi Realty (P) Ltd. V. Dy. CIT 060 ITR (Trib) 0150 (Mum-Trib). Hon’ble Apex Court in the case of CIT vs. Daulat Ram Rautmal 87 ITR 349 (SC) has held that onus to prove that the apparent is not the real is on the person who claims it to be so. Therefore, the onus is on the department to prove that the unsecured loan granted to the assessee company by the above named loan creditor companies are not the money of the loan creditor companies but, of the assessee company. However, your goodself has doubted the genuineness of the insecured loan money on surmises and conjecture and has not brought cogent material on record to establish the bogus nature of the subject transactions. This, under such circumstances the order passed by the learned Assessing Officer u/s 143(3) cannot be said as prejudicial to the interest of the revenue and thus, needs to be quashed.

M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

Without prejudice further, to the above it is submitted that the recourse to section 263(1) can be taken as twin conditions viz order must be erroneous as well as prejudicial to the interest of the revenue must be satisfied simultaneously. Thus if any order so passed is proved to be non- erroneous one then provisions of section 263 cannot be invoked even if the same is prejudicial to the interest of revenue. In this regard reliance is placed on the decision of Apex Court in the case of Malabar Industrial Co. Ltd. V. CIT [2000] 243 ITR 83 (SC) and it is submitted that the power of CIT u/s 263 can only be exercised by the PCIT when the twin conditions of the order being erroneous as well as prejudicial to the interest of revenue, are satisfied and the same cannot be exercised to substitute its own finding in place of the AO therefore, the PCIT cannot re-examine the issues already inquired into by AO, Similar views have been taken in the following decisions:- a. CIT v. Vikash Polymers 194 Taxman 57 (Delhi) (HC) b. S. Murugan. V. ITO 135 ITD 527 (Chennai) (Trib.), c. J.K. Construction Co . v. ITO 162 Taxman 46 (Jodhpur) (Trib). In viewof the facts of the case and legal position on this issue, it is therefore, prayed that the proposal of reassessment by invoking the provisions of section 263 may kindly be dropped. Without prejudice to the above as far as merit of the issues reaised in show-cause notice in question are concerned, we have to submit that the learned Assessing Officer has issued notices u/s 133(6) in loan creditor companies (supra). That after getting the requisite details and satisfying with the documents / evidences, the learned Assessing Officer has accepted all the loan credits as genuine. This, from the perusal of the audit objection reveals that audit party was satisfied with the enquiries and the issues under the present assessment related to credits on account of acceptance of loans, which was explained and justified initially by providing requisite details by the M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 assessee company and subsequently independent enquiries were made by the learned Assessing Officer by way of issue of notice u/s 133(6). Such details must have been examined by the departmental audit team and after their examination only in the matter of M/s Gliter Dealmart P. Ltd. They could have observed that credit worthiness was not established. In this regard it is submitted that once the enquiries have been made and the Assessing Officer is satisfied as per his own discretion, no comment is permissible unless contrary is available in case records. Presuming but, not admitting the observation of the learned Audit party is within their jurisdiction, their observation is also, having no force. In this regard it is submitted that the said company has advanced funds in ordinary course of their activities to the asseessee company and so also, replied to the summons / notice issued to it u/s 133(6) by the learned Assessing Officer. The perusal of the Balance Sheet of the said creditor reveals that as on 31.03.2012 net worth of the company8 was at Rs. 8,28,82,924/- and as on 31.03.2013 was at Rs. 8,28,88,407/-. Revenue from operations of these two years were at Rs. 15,29,013/- and Rs. 65,84,827/- respectively. This, objection raised by the audit team on creditworthiness of said tender is factually incorrect. That perusal of their Balance Sheet also, reveals that there is no increase in share capital and/or loans during the year in question and considering the fact that the lender company is having substantial funds, to make advance to Assessee Company. The availability of funds with loan Creditor Company was assessed u/s 143(3) for the assessment year in question (copy enclosed). This, It is a matter of quest work without any cogent material by stating in notice u/s 263 that prima facie the company appears to be involved in providing accommodative entries. It is a well-known modus operandi of such paper companies of Kolkata to raise funds through huge premium despite having no worth on papers and then huge these funds for accommodative entries. In absence of any objection towards creditors stated herein above except M/s Glitter Dealmamrt P.Ltd., it seems that audit party was 38 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 satisfied with the acceptance of cash credits by the learned Assessing Officer. This the reasons so stipulated in the show cause notice that all the aforesaid huge loans are from Kolkata based companies who have given these unsecured loans to the assessee without any securities. The companies are not doing any major financial activity and the same appears to be paper companies created through the receipt of huge premiums on shares which itself is doubtful. Further, the source in the hands of these companies RTGS/ Chequs received from some other parties on the very same day is a guess work. It is pertinent that when audit party was satisfied with remaining companies, after perusal of compliances and information obtained u/s 133(6), there seems to be no reason to raise doubt, only based on presumption. That being finance companies, funds were utilized for optimum yield and thus, the observation that funds were received on the same day through RTGS/ Cheques, is having no force. It is also, pertinent to note that funds with the loan creditor companies are not pertaining to the year in question. Even though in support of genuineness we are enclosing herewith copies of assessment orders passed in the case of following companies, wherever possible:- a. Tropical Vyapaar P.Ltd.; b. Bhimatal Nirman P.Ltd; c. Winsher Commerical P.Ltd.; As regards the observation regarding unsecured loan shown in the name of M/s Jayant Securities & Finance Ltd. At Rs. 1,85,50,000/- even no question was raised on the genuineness of such lenders in audit objection and it is referred only in show-cause notice u/s 263 stating that loans from the said company was held as unexplained cash credit in the case of Muktilal Laduram Prop. Shivashakti Trading Company, Sendhwa, for A.Y. 2014-15. In this regardit is submitted that the acts of the above case are not made known to the assessee company. It is mandatory for the authorities to provide copy of evidences, if the same is being used 39 M/s. Radheshwari Developers Pvt. Ltd. against the assessee. It is also, pertinent to note that the assessment of M/s Jayant Securities and Finance Ltd. Was completed u/s 143(3) (copy enclosed). Thus, the all ingredients are automatically treated as complied with as the assessment is completed u/s 143(3) of the cash creditor company. And thus, there is no reason to treat the cash credits in the name of M/s Jayant Securities & Finance Ltd., as unexplained on the strength of addition made in other cases and therefore, the reason about alleged paper companies is having no force. It is also, important to note that most of the loan credits have been repaid through proper banking channels. Copies of accounts of aforesaid creditors and enclosed herewith. In view of legal as well as factural position discussed hereinabove it is __red beyond doubt that there was no lack of inquiry in the case of assessee company and thus, show-cause notice so issued u/s 263 is void ab-initio and ------ it is prayed that the proceedings so initiated u/s 263 may kindly be dropped and oblige.

S.No. Name of the Company Amount Received 1 M/s. Apanapan Mercantile Pvt. Rs.33,00,000/- Ltd. 2 M/s. Bhimthal Nirman Pvt. Ltd. Rs.25,00,000/- 3 M/s. Confident Vinimay Pvt.Ltd. Rs.65,00,000/- 4 M/s.Crest Vanijya Pvt. Ltd. Rs.31,00,000/- 5 M/s. Gielle Investment Pvt. Ltd. Rs.51,00,000/- M/s. Radheshwari Developers Pvt. Ltd. 6 M/s. Tropical Vyapar Pvt. Ltd. Rs.28,00,000/- 7 M/s. Winsher Commercial Pvt. Rs.89,00,000/- Ltd. 8 M/s. Jayant Securities and Rs.1,85,50,000/- Finance Ltd. 9 M/s. Gliter Deal Mart Pvt. Ltd. Rs.75,00,,000/- Total Rs.5,82,50,000/-

When the Ld. Assessing Officer enquired about these additional expenses the assessee withdrew this claim and the Ld. Assessing Officer accepted the same and did not make any further enquiry.

Thus, in this case the enquiry which was to be conducted was abated by the Ld. Assessing Officer, whereas in the present case detailed enquiry have been conducted by the Ld. Assessing Officer calling requisite information and also issuing notice u/s 133(6) of the Act which were duly replied and thus the explanation filed by the assessee was found to be satisfactory in the opinion of the Ld. Assessing Officer.

DIT (Investigation), Bhopal, Ahmedabad and Nagpur but surprisingly, Ld. Pr. CIT has passed the impugned order without receiving any replies to the letters so sent which shows that the impugned order was passed by the ld. Pr. CIT without conducting any further enquiry which in itself makes the proceedings void in view of the judgment of Hon’ble Delhi High Court in the case of D.G. Housing Projects Ltd. 92012) 343 ITR 329 (Delhi).

S.NO PARTICULARS PAGE NOS. 01 Cadila Pharmaceuticals Ltd (ITAT Ahmedabad Bench) 01-10 02 Madhusudan Industries Ltd (ITAT Ahmedabad Bench) 13-22 03 Pr Commissioner of Income-Tax Vs Narayan Balmukand 23-35 Dubey [2017 30 ITJ 335 (M.P)] 04 Director of Income Tax Vs Jyoti Foundation 36-41 [(2013) 357 ITR 355 (Delhi)] 05 Commissioner of Income Tax VS Ratlam Coal Ash. Co 42-43 [(1988) 171 ITR 141 (M.P)] 06 Commissioner of Income Tax Vs Mehrotra Brothers 43-44 [(2004) 270 ITR 157 (M.P)] 07 Commissioner of Income Tax, Delhi Vs International Travel 45-51 House Ltd [(2012 ITR 554 (Delhi)] 44 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

08 Income Tax Officer Vs D.G Housing Projects Ltd. 52-59 [(2012) 343 ITR 329 (Delhi)] 09 M/s Amira Pure Foods Pvt Ltd (ITAT Delhi Bench) 60-96 10 M/s Narayan Tatu Rane (ITAT Mumbai Bench) 97-117 11 Pr Commissioner of Income Tax v Delhi Airport Metro 118-122 Express Pvt Ltd (High court of Delhi) 12 Moil Ltd v Commissioner of Income Tax-1 Nagpur((2017 81 123-126 Taxman 420 Bombay) 13 Commissioner of Income –tax-Delhi v Contimeters 127-129 Electricals (P) Ltd [(2009) 178 Taxman 422 (Delhi) 14 Commissioner of Income Tax-XIII v Ashish Rajpal [(2009) 130-140 180 Taxman 623 (Delhi)]

15. Per contra Ld. Departmental Representative (DR) vehemently argued supporting the detailed finding of Ld. Pr. CIT and various judgments and decisions referred therein which already stands reproduced in the preceding paras. Vide letter dated 25.05.2021 Ld. DR furnish enquiry report in the case of assessee which are dated 06.11.2018 issued by DIT(investigation) Kolkata.

17. We observe that the assessee is a builder and developer. Loss was declared in the e-return of income filed u/s 139(1) of the Act.

Case selected for scrutiny through CASS for the reason “large unsecured loans taken during the year and ITRs of few companies not filed”. Detailed questionnaire issued by the Ld. AO. Notice u/s 142(1) was duly replied. Independent information called u/s 133(6) of the Act from various cash creditors. After making few addition income assessed u/s 143(3) of the Act. Subsequently, notice u/s 263 of the Act was issued by Ld. Pr. CIT mentioning few cash creditors alleged to be accommodation entry provider.

Assessee applied for inspecting the assessment records as submitted by the assessee in the submission filed during the revisionary proceedings that audit objection was with regard to one of the cash creditor and certain documents were needed. The same stood filed in the assessment records and Ld. AO duly replied to the audit team.

18. However, Ld. Pr. CIT has observed that he had made an independent decision on the basis of his examination of M/s. Radheshwari Developers Pvt. Ltd. assessment records to invoke the provisions of section 263 of the Act and issued show cause notice.

(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court.

Explanation.--In computing the period of limitation for the purposes of sub- section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.

M/s. Radheshwari Developers Pvt. Ltd.

Under section 263(1) two pre-requisites must be present before the Commissioner can exercise the revisional jurisdiction conferred on him. First is that the order passed by the ITO must be erroneous. Second is that the error must be such that it is prejudicial to the interests of the revenue. If the order is erroneous but it is not prejudicial to the interests of the revenue, the Commissioner can not exercise the revisional powers under section 263(1) of the Act. There cannot be any prejudice to the revenue on account of the ITO's failure to follow the procedure prescribed M/s. Radheshwari Developers Pvt. Ltd. under section 144B, and unless the prejudice to the interests of the revenue is shown, the jurisdiction under section 263(1) cannot be exercised by the Commissioner, even though the order is erroneous.

The argument that such an order may possibly be challenged in appeal by the assessee, and for this reason it is prejudicial to the interests of the revenue, has no merit. Section 263(1) clearly contemplates that the order of assessment itself should be prejudicial to the interests of the revenue and this prejudice has to be proved by reference to the assessment order only. It cannot be argued that there is some possibility of the assessment order being challenged or revised in appeal and, therefore, on account of this contingency, the order becomes prejudicial to the interests of the revenue." [emphasis supplied]

Parikh - [1995] 215 ITR 81 - order pronounced on 17.10.1994 - Para 12 - "From the aforesaid, it can well be said that the well- settled principle in considering the question as to whether an order is prejudicial to the interests of the revenue or not is to address oneself to the question whether the legitimate revenue due to the exchequer has been realised or not or can be realised or not if his orders under consideration are allowed to stand. For arriving at this conclusion, it becomes necessary and relevant to consider whether the income in respect of which tax is to be realised, has been subjected to tax or not or if it is subjected to tax, whether it has been subjected to tax at a rate at which it could yield the maximum revenue in accordance with law or not. If income in question has been taxed and legitimate revenue due in respect of that income had been realised, though as a result of erroneous order having been made in that respect, in our opinion, the Commissioner cannot exercise powers for revising the order under section 263 merely on the basis that the order under consideration is erroneous. If the material in that regard is available on the record of the assessee concerned, the Commissioner cannot exercise his powers by ignoring that material 53 M/s. Radheshwari Developers Pvt. Ltd. which links the income concerned with the tax realization made thereon. The two questions are inter-linked and the authority exercising powers under section 263 is under an obligation to consider the entire material about the existence of income and the tax which is realizable in accordance with law and further what tax has in fact been realised under the alleged assessment orders.[emphasis supplied]

Krishnamurthy - [1985] 20 Taxman 65 - order pronounced on 19.03.1984 - Para 10 - "Section 263 can be invoked by the Commissioner only when he prima facie finds that the order made by the ITO was erroneous and was prejudicial to the interests of the revenue. Both these factors must simultaneously exist. An order that is erroneous must also have resulted in loss of revenue or prejudicial to the interests of the revenue. Unless both these factors co-exist or exist simultaneously, the Commissioner cannot invoke or resort to section 263. It cannot be exercised to correct every conceivable error committed by an ITO. Before the suomoto power of revision can be exercised, the Commissioner must at least prima facie find both the requirements of section 263, namely, that M/s. Radheshwari Developers Pvt. Ltd. the order sought to be revised is prima facie erroneous and prejudicial to the interests of the revenue. If one of the other factor was absent, the Commissioner cannot exercise the suomoto power of revision under section 263." [emphasis supplied]

(i) The Commissioner of Income-tax must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. Both the conditions must be fulfilled. (ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer M/s. Radheshwari Developers Pvt. Ltd. and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree. If cannot be treated as erroneous order, unless the view taken by the Assessing Officer is unsustainable under law . (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the Commissioner of Income-tax, while exercising his power under section 263 is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income-tax does not feel satisfied with the conclusion. (viii) The Commissioner of Income-tax, before exercising his jurisdiction under section 263 must have material on record to arrive at a satisfaction. (ix) If the Assessing Officer has made enquiries during the course assessment proceedings on the relevant issues and the assessee has detailed explanation by a letter in writing and the Assessing allows the claim on being satisfied with the explanation of the assessee, the decision of the 56 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018 Assessing Officer cannot be held to be simply because in his order he does not make an elaborate discussion in that regard.

S.No. Name of the Company Amount Received 1 M/s. Apanapan Mercantile Pvt. Rs.33,00,000/- Ltd. 2 M/s. Bhimthal Nirman Pvt. Ltd. Rs.25,00,000/- 3 M/s. Confident Vinimay Rs.65,00,000/- Pvt.Ltd. 4 M/s.Crest Vanijya Pvt. Ltd. Rs.31,00,000/- 5 M/s. Gielle Investment Pvt. Ltd. Rs.51,00,000/- 6 M/s. Tropical Vyapar Pvt. Ltd. Rs.28,00,000/- 7 M/s. Winsher Commercial Pvt. Rs.89,00,000/- Ltd. 8 M/s. Jayant Securities and Rs.1,85,50,000/- Finance Ltd. 9 M/s. Gliter Deal Mart Pvt. Ltd. Rs.75,00,,000/- Total Rs.5,82,50,000/-

Dosani (2008) 280 ITR 275 that Ld. Pr. CIT cannot go beyond the reasons mentioned in the show cause notice and therefore, giving direction to examine all the unsecured loans is prima facie not at all justified and beyond jurisdiction of Ld. Pr. CIT. We will, therefore, confine our further adjudication with regard to the 9 lender companies mentioned in the show cause notice issued u/s 263 of the Act. 58 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

16. Please give the details of any loans or deposits or the aggregate of any such loans or deposits exceeding Rs.20,000/- or more taken or accepted otherwise than by an account of payee cheque or account payee bank draft. If there are any, your are requested to explain the reasons for the some in detail within the meaning of section 269T and as to why appropriate actions not taken against your as per law.

18. Please give the confirmation of all unsecured loans taken during the previous year and of all additions to the old unsecured loans. Please give the confirmations of the squared-up loans as well. The confirmations should be in the standard format(complete in all respect) giving all details like the ledger accounts, PAN of lender, complete postal address, his signature with date, the signature of the assessee and so on and so forth. You are kindly requested to prove the identity of the subscribers, the genuineness of the transactions and the creditworthiness of the subscribers as required as per law.

M/s. Radheshwari Developers Pvt. Ltd.

19. Please give the details of the security in the form of properties/assets/valuables etc. mortgaged with the banks etc. for taking loans and other facilities etc. please also provide the ownership details of such securities and the income derived, if any from such properties.

“1. Details of purchase of land has been annexed in Annexure no.1 containing details of seller of the assets, survey no., areas in hectare, cost of land, stamp value, registry expenses and total value of land. In the above annexure S.No.28 registry expenses amounting to Rs.3,81,220/- have not been debited in profit & loss account. Assessee wasn’t to voluntarily offer the amount of Rs.3,81,220/- to buy peace and avoid litigation with the department.

2. Confirmation, balance sheet, profit & loss account & acknowledgement of Gille Investment Limited has been annexed in Annexure No.2

M/s. Radheshwari Developers Pvt. Ltd. 1)Apnapan Merchantile Private Limited 2)Beryl Drugs Limited 3)Beryl Securities Limited 4)Bhimtal Nirman Private Limited 5)5) CMM Infraprojects Limited 6)Confident Vinimay Private Limited 7)7) Creative Technochem Private Limited 8)Crest Vanijya Private Limited 9) Dishman Pharmaceuticals and Chemicals Limited. 10)Enit investment Private Limited 11)Hitwin Finance Company Private Limited 12) Gliter Deal Mart Private Limited 13) JV Modi Securities Private Limited 14) Jayant Securities and Finance Limited 15)Jay Jyoti India Private Limited 16)KCL Infraprojects Limited 17)Palasia Leasing and Investments Private Limited 18)Ronima Finance and Investment Private Limited 19) Tropical Vyapar Private Limited 20) Vishwajyoti Trading Limited 21) Winsher Commerce Private Limited

M/s. Radheshwari Developers Pvt. Ltd. M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

S. No. Annexure Particulars Page

No.

III Submissions/documents filed by creditor companies in response to notice issued u/s 133(6) of the Act during the assessment proceedings of M/s Radheswari Developers Pvt. Ltd. A Regarding M/s Winsher Commercial Pvt. Ltd. 1 Notice issue u/s 133(6) to M/s Winsher 1 Commercial Pvt. Ltd. dated 16.2.2016 by ITO Indore 2 Submission made in response to notice 2 u/s 133(6) of the act dated 29.2.2016 alowng with annexures A-1 Ledger account for the transaction with 3 the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 A-2 Details of Mode of Transaction 4

A-3 Bank statement from 01.09.2012 to 5-7 30.11.2012 A-4 Auditors Report and balance sheet for 8-27 F.Y. 2011-12 and 2012-13 A-5 Loans & advances (Group Summary) 28-30 B Regarding M/s. Jayant Security & Finance Limited 1 Notice issue u/s 133(6) to M/s. Jayant 31 Security & Finance Limited dated 16.2.2016 by ITO Indore 2 Submission made in response to notice 32 u/s 133(6) of the act dated 19.2.2016 along with annexures 65 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

B-1 Ledger account for the transaction with 33-34 the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 B-2 Bank statement from 25.04.2012 to 35-44 30.03.2013 B-3 Confirmation of account from 1.4.2012 45-46 to 31.3.2013 B-4 Income Tax return (ITR) 47 acknowledgment for A.Y. 2013-14 B-5 Audited balance sheet, P & L account 48-66 for the A.Y. 2012-13 & 2013-14 C Regarding M/s Apnapan Mercantile Pvt. Ltd. 1 Submission made in response to notice 67 u/s 133(6) of the act dated 22.2.2016 along with annexures C-1 Ledger account for the transaction with 68 the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 C-2 Audit Report for the F.Y. 2011-12 & 69-88 2012-13 C-3 Bank Statement from 09.10.2012 to 89-90 04.01.2013 D Regarding M/s Crest Vanijya Pvt. Ltd. 1 Submission made in response to notice 91 u/s 133(6) of the act dated 23.2.2016 along with annexures D-1 Income Tax return (ITR) 92-93 acknowledgment for A.Y. 2012-13 & 2013-14 D-2 Audit Report for the F.Y. 2012-13 94-104

D-3 Loans & advances (Group Summary) 105

D-4 Ledger account for the transaction with 106 the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 D-5 Bank statement from 01.09.2012 to 107 05.12.2012 D-6 Copy of Postal Acknowledgment 108 E Regarding M/s Bhimtal Nirman Pvt. Ltd. 1 Submission made in response to notice 109 u/s 133(6) of the act dated 23.2.2016 along with annexures 66 M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

E-1 Income Tax return (ITR) 110-111 acknowledgment for A.Y. 2012-13 & 2013-14 E-2 Audit Report for the F.Y. 2012-13 112-121

E-3 Loans & advances (Group Summary) 122

E-4 Ledger account for the transaction with 123 the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 E-5 Bank statement from 01.07.2012 to 124 11.12.2012 E-6 Copy of Postal Acknowledgment 125 F Regarding M/s. Gliter Dealmark 126 Pvt. Ltd. 1 Submission made in response to notice 127-128 u/s 133(6) of the act dated 23.2.2016 along with annexures F-1 Income Tax return (ITR) 129-138 acknowledgment for A.Y. 2012-13 & 2013-14 F-2 Audit Report for the F.Y. 2012-13 139

F-3 Loans & advances (Group Summary) 140

F-4 Ledger account for the transaction with the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 F-5 Bank statement from 10.07.2012 to 141 04.03.2013 G Regarding M/s Tropical Vyapar Pvt. Ltd. Submission made in response to notice 142 u/s 133(6) of the act dated 24.2.2016 along with annexures G-1 Income Tax return (ITR) 143-144 acknowledgment for A.Y. 2012-13 & 2013-14 G-2 Audit Report for the F.Y. 2012-13 145-154

G-3 Loans & advances (Group Summary) 155

G-3 Ledger account for the transaction with 156 the M/s. Radheswari Developers Pvt. Ltd. during the F.Y.2012-13 M/s. Radheshwari Developers Pvt. Ltd. G-5 Bank statement from 13.11.2012 to 157 20.11.2012 G-6 Copy of Postal Acknowledgment 158

"16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has OM Prakash Badaya directed the Assessing Officer to decide the aspect/question.

M/s. Radheshwari Developers Pvt. Ltd. ITA No.493/Ind/2018

17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT vs. Shree Manjunathesware Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous.

prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue.

19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent‟s computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and OM Prakash Badaya prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer M/s. Radheshwari Developers Pvt. Ltd. on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.

CIT records a finding that Ld. AO has issued notices u/s 133(6) of the Act to the depositors and reply from depositors are on record so Ld. Pr. CIT accepted that Ld. AO has raised enquiry, collected information from assessee and also collected information from independent source. Then Ld. Pr. CIT mentions that “it appears that somebody on behalf of those parties filed the information”.

Jayant Security Finance Ltd. it is mentioned that “subsequently somebody filed the information/confirmation”. Similarly, he calls for a report from Investigation wing but he does not wait for it before framing his view. So it is an admitted fact that no new enquiry was conducted by ld. Pr. CIT to come to the conclusion of holding the assessment order as erroneous so far as prejudicial to the interest of revenue even when he himself mentions that the various enquiries were conducted by the Ld. AO including the information called u/s 133(6) of the Act but still terms it as inadequate enquiry.

M/s. Radheshwari Developers Pvt. Ltd.

M/s. Radheshwari Developers Pvt. Ltd. Name of creditor As on 31.03.2012

Paid up share Reserve & Cash and bank capital surplus balance Gliterdeal Mart 32,42,400 7,96,46,007 4,91,586 Pvt. Ltd. Apnapan 13,05,000 5,90,46,971 2,54,378 Mercantile Pvt. Ltd. Bhimtal Nirman 22,72,400 9,27,00,568 76,408 Pvt. Ltd. Winser 1,34,09,300 28,75,79,224 35,48,721 Commercial Pvt. Ltd. Crest Vanijya Pvt. 8,94,000 3,89,09,628 8,69,704 Ltd. Tropical Vyapar 7,93,880 12,11,88,583 29,778 Pvt. Ltd. Jayant Securities 2,84,18,000 2,06,05,823 83,96,995 & finance Ltd. Confident 12,07,000 7,83,68,708 7,32,75,226 Vinimay Pvt. Ltd. Gills Investment 6,00,000 4,40,364 1,12,152 Ltd.

Name of creditor As on 31.03.2013

Paid up share Reserve & Cash and bank capital surplus balance Gliterdeal Mart 32,42,400 7,96,40,524 10,78,109 Pvt. Ltd. Apnapan 13,05,000 5,88,49,812 22,62,991 Mercantile Pvt. Ltd. Bhimtal Nirman 22,72,400 9,26,70,936 3,67,096 Pvt. Ltd. Winser 1,34,09,300 28,73,00,396 95,26,271 Commercial Pvt. Ltd. Crest Vanijya Pvt. 8,94,000 3,88,68,340 17,39,179 Ltd. Tropical Vyapar 7,93,880 12,11,61,536 15,28,037 Pvt. Ltd. Jayant Securities 2,84,18,000 18,66,24,192 13,45,225 & finance Ltd. Confident 12,07,000 7,85,75,475 7,79,42,367 77 M/s. Radheshwari Developers Pvt. Ltd. Vinimay Pvt. Ltd. Gills Investment 6,00,000 4,89,498 23,71,254 Ltd.

For instance of M/s. Gliter Deal Mark Pvt. Ltd. gave unsecured loan of Rs.75,00,000/- to assessee for which M/s. Gliter Deal Mark Pvt. Ltd. received sum of Rs.55,00,000/- and Rs.44,00,000/- from M/s Gielle Investment Pvt. Ltd. on 28.02.2013 and this fund was used to give loan to the assessee companies. So even the source of source has been mentioned and accepted by Ld. Pr. CIT in case of few cash creditors.

All the grounds raised in this appeal by the assessee are allowed and the assessment order u/s 143(3) of the Act dated 07.03.2016 is restored.