BRAHM PRECISION MATERIALS PVT. LTD. ,AURANGABAD vs. PCIT , , NASHIK

PER Dr. DIPAK P. RIPOTE, A.M : This is an appeal filed by the assessee against the order of the Learned Pr. Commissioner of Income Tax, Nashik-1 [Ld.PCIT], passed u/s. 263 of the Income Tax Act, 1961 (‘the Act’) for AY 2020-21 on 20-03-2025, emanating from the Assessment Order u/s 143(3) r.w.s. 144B of the Act, dated 26-09-2022.

2.1. The Pr. Commissioner of Income Tax, Nashik on examination of the records prima-facie believed that AO had not carried out the enquiries qua loan of Rs. 95,74,14,407/- given by Mr. Bhavook Tripathi, who is majority shareholder of the assessee company. The Ld.PCIT issued notice u/s. 263

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of the Act. Ld.PCIT after considering the submission of the assessee, set aside the assessment order dt. 26-09-2022 to the AO for denovo adjudication. Aggrieved by the order u/s. 263 of the Act, assessee has filed appeal before the Tribunal.

3.1. Ld.AR invited our attention to page No. 84 of the paper book, which was e-proceeding acknowledgment, demonstrating the submission by the assessee during the assessment proceedings. Ld.AR submitted that during the assessment proceedings, copy of income tax returns and computation of income of Mr. Bhavook Tripathi was filed.

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3.2. Ld.AR invited our attention to page No. 296-306 of the paper book which was show cause notice dt. 14-09-2022 issued by the AO during the assessment proceedings.

3.3. Vide the show cause notice dt. 14-09-2022, the AO again asked the assessee why addition u/s. 68 of the Act shall not be made of loan of Rs. 95,74,14,407/- obtained from Mr. Bhavook Tripathi. Ld.AR invited our attention to Pg. 307 to 309 which was e-proceeding acknowledgment, demonstrating submission made by the assessee in response to show cause notice. Ld.AR invited our attention to page No. 310-487 which was copies of the reply filed by the assessee during the assessment proceedings. Ld.AR submitted that assessee filed copy of return of income, computation of income of Mr. Bhavook Tripathi for the last nine years. Ld.AR submitted that entire loan was through banking channel. Ld.AR invited our attention to page No. 312, which shows the income earned by Mr. Bhavook Tripathi for the last nine years. Ld.AR submitted that elaborate submission was made by the assessee during the assessment proceedings, proving identity, genuineness and creditworthiness qua the loan amount. AO had considered the elaborate submissions of the assessee and then, arrived at a conclusion that loan amount is genuine and was satisfied with the creditworthiness of Mr. Bhavook Tripathi and accordingly, AO passed assessment order without making any addition u/s. 68 of the Act. Therefore, the assessment order is not erroneous and prejudicial to the interest of the Revenue. Ld.AR requested that the order u/s. 263 of the Act may be quashed. Ld.AR also filed case law paper book and referred those decisions.

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scrutiny proceedings in the case of the assessee and assessment order was passed u/s. 143(3) r.w.s. 144B of the Act on 26-09-2022. The Pr.Commissioner of Income Tax invoked the provisions of section 263 of the Act. The Ld.PCIT observed in the order u/s. 263 of the Act that AO has failed to carry out enquiries regarding the loan taken by the assessee from Mr. Bhavook Tripathi of Rs. 95,74,14,407/-. During the proceedings u/s. 263 of the Act, assessee made elaborate submissions again explaining the identity of Mr. Bhavook Tripathi, genuineness of loan and creditworthiness of Mr. Bhavook Tripathi. This fact has been accepted by the Ld.PCIT in the order in para No. 7 that assessee had filed elaborate details to prove genuineness of the loan, identity and creditworthiness of Mr. Bhavook Tripathi. However, Ld.PCIT observed that those documents were not filed during the assessment proceedings and, therefore, the Ld.PCIT held that the assessment order was erroneous and prejudicial to the interest of the Revenue.

5.1. However, we have gone through the paper book filed by the Ld.AR. We have gone through the notices issued by the AO dt. 17-11-2021, 19- 08-2022, show cause notice dt. 14-09-2022. It is observed that AO has specifically asked the assessee to prove genuineness of the loan, identity and creditworthiness of Mr. Bhavook Tripathi. We have gone through the submissions filed by the assessee dt. 22-12-2021 which is at page No. 22- 80 of the paper book, reply dt. 08-09-2022 which is at page No. 84-295 of the paper book and reply dt. 14-09-2022 which is at page No. 307-488 of the paper book. Ld.DR has not doubted these facts that assessee had filed elaborate reply during the assessment proceedings.

5.2. It is observed that Mr. Bhavook Tripathi holds almost 99% of share capital of the assessee company. He is also Director of the assessee company. Mr. Bhavook Tripathi had filed return of income regularly and copies of the same return of income were filed during the assessment proceedings along with computation of income and balance sheet. Assessee had filed return of income of Mr. Bhavook Tripathi from AY. 2012-2013 onwards before the AO. Mr. Bhavook Tripathi’s PAN is ABBPT7159D. The income details of Mr. Bhavook Tripathi filed before the AO in response to show cause notice are as under:

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Assessee also filed balance sheets, computation of income of Mr. Bhavook Tripathi along with its schedules for almost nine years before AO during the assessment proceedings.

5.3. On carefully studying all these details, it is observed that AO had specifically asked question regarding the impugned un-secured loan and assessee filed elaborate details before the AO. The AO considered the elaborate submission of the assessee and then, arrived at the conclusion that the impugned unsecured loan was duly explained and hence, there is no requirement to make addition u/s. 68 of the Act.

5.4. During the proceedings before this Tribunal, we specifically asked Ld.DR whether any action has been taken by the Income Tax Department regarding the earlier assessment of the assessee wherein identical loan appears. It is observed that opening balance of the impugned loan on 01- 04-2019 was Rs. 1,00,33,69,160/-. Ld.DR could not answer the question. However, Ld.AR submitted that Income Tax Department has not taken any action either reopening or 263 for the earlier years. It means the Revenue has accepted the earlier years’ loans as genuine, which were given by Mr. Bhavook Tripathi. It is also observed that PCIT himself noted in the order that all the details pertaining to impugned loans were filed by the assessee during the proceedings u/s. 263 of the Act. However, PCIT chose not to verify the details and preferred to set aside the assessment order for denovo adjudication.

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5.5. Ld.DR submitted that the Ld.PCIT had invoked explanation-2 to section 263 of the Act, therefore, Ld.DR submitted that relative satisfaction of Ld.PCIT that no enquiries were conducted matters. We have considered the submission of the Ld.DR. We have carefully studied explanation to section 263 of the Act. sub-clause (a) of explanation-2 reads as under:

“(a)The order is passed without making inquiries or verification which should have been made” Thus, explanation-2 to section 263 says that order which is passed without making enquiries which should have been made is erroneous. We have no quarrel with the said proposition. However, in this case, for the purpose of loan, only three factors needs to be proved. Identity of the lender, creditworthiness of the lender and genuineness of the transaction. In the case of the assessee, lender is a Director and 99% shareholder of the assessee-company. Therefore, identity is not in dispute. The entire amounts were given through banking channels. Copies of the bank statements were filed during the assessment proceedings, which demonstrate the impugned loans. It proves genuineness of the transaction. As far as creditworthiness of the lender is concerned, the assessee filed during the assessment proceedings and during 263 proceedings, copies of return of income, balance sheet, computation of income of the lender for almost nine years. Assessee also provided a chart, which demonstrates income earned by the lender in last nine years. Ld.PCIT has not doubted any of these documents. We are of the considered opinion that after filing above mentioned documents, the assessee had fulfilled onus casted on him. It was upto the PCIT to specifically bring out the defect, if any, in the above mentioned document. Also, in the order u/s. 263 of the Act, Ld.PCIT has not mentioned which document was required, which was not filed by the assessee during the assessment proceedings. It is also a fact that no action has been taken by the Income Tax Department for any of the earlier years wherein identical loan appears. In these facts and circumstances, we are of the considered opinion that reliance placed by the PCIT on explanation-2 to section 263 is of no help.

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5.6. Hon’ble jurisdictional High Court in the case of CIT vs. Reliance Communication Ltd. [2016] 69 taxmann.com 103 (Bombay), has held as under: Quote“10. In the case before us, the concession of the assessee's authorized representative apart, what the Tribunal found and on all the three items highlighted by Mr. Tejveer Singh is that there were materials before the Assessing Officer. The Assessing Officer made enquiries about the above referred aspects and which have been noted by the Commissioner. The assessee made submissions by placing all relevant documents before the Assessing Officer. Thus the case does not fall within the parameters laid down in the decision of the Hon'ble Supreme Court and other High Courts. The mere fact that the Assessing Officer did not make any reference to these three issues in the assessment order cannot make the order erroneous when the issues were indeed looked into. The entire details were filed and the order itself indicates that it can be inferred that the Assessing Officer not only made enquiries, but satisfied himself with the assessee's replies furnished from time to time in support of its stand. When the Tribunal concludes in this manner and finally in paragraph 16 holds that the Assessing Officer took a perfectly correct or a possible view, then, the order passed by him cannot be termed as erroneous insofar as it is prejudicial to the interest of the Revenue. The Commissioner of Income Tax was not, therefore, justified in invoking section 263 of the Act. 11. We are of the view that the Tribunal's order and conclusions are essentially on facts. They cannot be termed as perverse and after it adverted to the rival contentions and all the materials on record. The Tribunal's order cannot thus be held to be vitiated by an error of law apparent on the face of record so as to call for interference in our further appellate jurisdiction. The appeal, therefore, does not raise any substantial questions of law, but the attempt of the Revenue is to have a reappreciation and reappraisal of the same factual material. That is impermissible. The appeal is, therefore, devoid of merits and is dismissed. No order as to costs.”Unquote 5.7. On identical facts, the Hon’ble Calcutta High Court in the case of PCIT vs. Prabhu Poly Pipes Ltd., [2025] 176 taxmann.com 693 (Calcutta) has held as under: Quote “3. We have heard Mr. Amit Sharma, learned standing counsel appearing for the appellant/revenue and Mr.Pranit Bag, learned advocate appearing for the respondent/assessee. 4. The short issue involved in the instant case is whether the Principal Commissioner of Income Tax, Central -1, Kolkata [PCIT] was justified in invoking his power under Section 263 of the Act. The learned Tribunal upon going through the facts has recorded the following finding : "11. We notice that ld. AO has called for all the details of the unsecured loans taken by the assessee during the year and has also referred to the seized material in the notice issued u/s 142(1) of the Act and all necessary replies along with the evidences have been filed during the assessment proceedings. It is not the case of no enquiry rather it is a case where ld. AO has raised necessary queries with regard to the issue under consideration and on being satisfied with such details and accepting the identity, creditworthiness and genuineness of the cash creditors took a plausible view as provided under the Act and completed the assessment proceedings u/s 153A r.w.s. 143(3) of the Act. Ld. Pr. CIT in the impugned order has only give general observation that ld. AO has not conducted the necessary enquiry but in the impugned proceedings has not given any specific

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finding as to what was the information which ld. AO has not called for and also has not given any comment on such information which ld. Pr. Cit was required to call for during the course of revisionary proceedings before holding the assessment order in question as erroneous and prejudicial to the interests of the Revenue. We, therefore, are of the considered view that since sufficient enquiry has been documented regarding the unsecured loans taken by the assessee during the year and details submissions have been filed by the assessee, we find that the assessment order passed u/s 153A r.w.s 143(3) of the Act dated 26.12.2017 is neither erroneous nor prejudicial to the interests of the Revenue. We, thus, do not concur with the finding of ld. Pr. CIT and quash the impugned order and restore the assessment order dated 26.12.2017." 5. From the above factual finding it is seen that the learned Tribunal was satisfied that it was not a case where the assessing officer has not conducted any enquiry. The Tribunal on facts found that the assessing officer has raised necessary queries with regard to the issue under consideration and was fully satisfied with the details furnished by the assessee and also accepted the identity, creditworthiness and genuineness of the cash creditors and took a plausible view as provided under the Act and completed the assessment under Section143A read with Section 143(3) of the Act. The learned Tribunal also faulted the PCIT for making a general observation stating that the assessing officer has not conducted necessary enquiry and failed to give any specific finding as to what was the information that the assessing officer had not called for and has also not given any comment on such information which the PCIT was required to call for during the course of revision proceedings before holding the assessment order in question as being erroneous and prejudicial to the interest of the revenue. Thus, we find that no question of law much less substantial question of law arises for consideration. 6. Accordingly, the appeal fails and is dismissed.” Unquote 6. Considering all the above mentioned facts, considering the decisions of Hon’ble High Courts supra, we are of the opinion that assessment order was not erroneous and prejudicial to the interest of the Revenue. Accordingly, we quash the order u/s. 263 of the Act. 7. There was a delay of 261 days in filing appeal before this Tribunal. We have perused the condonation petition filed by the assessee and observed that there was sufficient and reasonable cause for the delay. Substantial justice is more important than procedural delays. No assessee is going to gain anything by delaying the appeal. Accordingly, we done the delay. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 25th May, 2026 Sd/- Sd/- (VINAY BHAMORE) (Dr. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे/Pune; दिन ांक/Dated : 25-05-2026 TNMM

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आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: अपील र्थी / The Appellant 1. प्रत्यर्थी / The Respondent 2. 3. The concerned Pr.CIT, Pune 4. DR, ITAT, ‘A’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Assistant Registrar आयकर अपीलीय अदिकरण ,पुणे / ITAT, Pune