KAMALSHIL HARISHBHAI SHIRVI,MORBI vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX-1, RAJKOT

Grounds of appeal raised by the assessee, are as follows: “1. The order u/s. 263 of the Act is bad in law.

Brief facts of the case, the assessee has filed return of income on 16/02/2016 declaring total Income of Rs.5,28,300/- The case of the assessee was reopened and notice under section 148 of the Income-tax Act, 1961 was issued on 31.03.2021. In response to the notice, the assessee filed his Return of Income on 31.10.2021. The case of the assessee for the year under consideration was reopened on the basis of information that during the year under consideration, the assessee has taken fictitious loan of Rs. 1,21,14,671/- with Vasant K. Thakkar. During the course of assessment proceeding, the assessee denied having any transaction with Vasant K. Thakkar. The assessment was completed u/s 147 r.w.s. 144B of the I.T.Act dt. 30-03-2022 accepting the returned income.

Upon perusal of the record the Ld.PCIT find that AO has completed the assessment without making any efforts to find out the correctness of the information from the Authority concerned who gave such information to the AO. The notice u/s 263 of the Act, was received for revising assessment passed u/s. 147 r.w.s. 144B dated 30.03.2022 has been proposed. It has been stated in the captioned notice that the AO has simply accepted assessee submission without necessary verification and investigation of the alleged fictitious loan of Rs. 1,21,14,671/- taken by the assessee from Shri Vasantkumar K. Thakkar and therefore, the assessment order is erroneous as well as prejudicial to the interest of revenue.

That the assessee replied that a. The notice u/s. 148 was issued on 01.04.2021 on the allegation of fictitious loan of Rs.1,21,14,671/- However, the name of the lender was not disclosed in the reasons of reopening. In the course of faceless assessment proceedings, the assessee requested the Faceless AO to provide assessee, the details of lender with reference to the allegation of fictitious loan. The Faceless AO informed assessee that the name of the lender was Shri Vasantcumar Keshavial Thakkar. From the copy of order sheet, it appears that the Faceless AO issued a notice u/s. 133/6) to Shri Vasantkumar Keshavlal Thakar. Thus, he made inquiries to the concerned person. Assessee clearly denied by submission dtd 22.03.2022 that assessee have not taken any loan from any Vasantkumar Keshavial Thakar. In support of the assessee denial, assessee provided copy of bank statements wherein neither the name of any Vasantkumar Keshavlal Thakar was appearing nor any amount of Rs.1,21,14,671/- was reflected. Thus, assessee discharged onus by denial of the alleged transaction. Accordingly, assessee requested the Faceless AO to provide the assesee a copy of the relevant incriminating material and a copy of the statement of said Shri Vasantkumar Keshavial Thakar. The AO passed the assessment order accepting the returned income as he did not have any incriminating material on his records which he can provide to assessee

The submission filed by the assessee submitted that AO order is not erroneous in any manner. Thus, the Faceless AO has made due inquiries in the course of the assessment proceedings. The assessee has submitted that the Faceless AO passed the assessment order accepting the returned income as he did not have any incriminating material against the assessee. The assessee has further submitted that the Faceless AO has made due inquiries in the course of the assessment proceedings. After all this, when he did not have any material/evidence against the assessee and the time-barring date approached, he passed the assessment order accepting the returned income.

The Ld.PCIT observed that FAO had the incriminating materials available with him during the assessment proceedings. However, due to technical reasons. he was unable to access the documents available on insight portal. During the assessment proceedings, the AO made efforts to peruse the documents available on insight portal. However, due to some technical reason, the file could not be opened and accessed. As the files available on Insight portal (which contained the details of the transaction of the assessee with the person named Vasant Thakkar) could not be accessed, therefore, due to this technical error, the AO passed the assessment order accepting the return income. The relevant part of the ordersheet of the FAO available on ITBA is reproduced herewith: "Accordingly the information available in respect of the person from which assessee has taken the said loan, as per the insight portal was perused. However it is noticed that the file named "Relevant Portion" which assumingly contained information about the assessee was not opening and file extraction could not be done 4.1 Further as the said information was not being reopened, the Jurisdictional Assessing Officer (JAO) was written a letter dated 23.03.2022, wherein he was informed about the contents of letter written by the assessee. Further he was also asked to supply documents on the basis of which the case was reopened as the information uploaded on insight portal was not opening 4 2 in respond se on 24.03.2022 the JAO forwarded the file which is once again was not reopening. Therefore on 25.03.2022 the JAO was once again informed that the said file was not reopening and requested to furnish the details in some other format. He was also shared the screen shot of the same effect However, no further reply has been received from the end of the JAO till date. Meanwhile assessee further on 25.03 2022 and 26.03 202 2 re-submitted Page 4 of 11 his demand that he may be supplied all the relevant documents including copy of incriminating material, copy of statement and cross examination of witness was asked, before proceeding with the assessment 6 in this regard complain was also launched on ITBA Help Desk However I hey did not solve the problem and suggested a path to extract the relevant information on the mail, but then also the said file did not open in this regard help of IBM people was also taken but they also were not able to solve the problem. 7. Therefore considering the above facts and in absence of any supporting material to counter the assessee's contentions, it is proposed to complete the reassessment proceedings on the basis of materials available on record accepting the returned income of the assessee.

During the 263 proceedings, the order sheet was shared with the assessee. Therefore, the assessee was well aware that the documents pertaining to fictitious loan transactions could not be accessed by the FAO due to technical error on the system. The assessee had obtained a fictitious loan entry of Rs.1,21,14,671/- This information was shared by DCIT Central Circle-4, Surat along with copy of relevant portion of the appraisal report. Thus, the department was in possession of evidence regarding the accommodation entry obtained by the assessee. It is clear that this is not a case of inadequate enquiry but a case of no enquiry at all. Hence, in terms of Explanation 2(a) to section 263 the assessment order passed u/s 147 r.w.s. 144B of the Income Tax Act dated 30.03.2022 is erroneous in for as it is prejudicial to the interests of revenue. Explanation 2-For the purposes 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, it, 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 without 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. Page 5 of 11

That the order is passed without making inquiries or verification which should have been done is not done, such order needs to be treated as "erroneous". It is apparent from assessment order that AO has not applied his mind and has not conducted any enquiry despite the necessary information for making such enquiry being available as noted earlier in this order. Keeping in view these facts. I am of the considered view that this is a fit case for invoking section 263 of 1 T. Act as the twin conditions namely, (i) the order of the Assessing Officer sought to be revised is erroneous: and (ii) it is prejudicial to the interests of the revenue are satisfied Accordingly, the impugned assessment order passed by the A.O. u/s 147 r.w.s. 144B of the Income Tax Act dated 30.03.2022 is set aside for fresh assessment only to the extent of the issues discussed supra and direct the Assessing Officer to pass a fresh assessment order after making necessary enquiries.

That the assessee filed an appeal against the impugned order dated 30.03.2024 before this Tribunal. a. During the course of hearing, the Ld.AR of the assessee submitted that the assessing officer has duly verified and enquiried about documents by issuing notice. That the assessee further submitted that the name of the assessee is not in the beneficiary list under column no. 5, the list is provided in the paper-book page no. 71. That the Ld. AR of the assessee prayed that the order of the Ld.PCIT may kindly be quashed. b. On the other hand, the Ld. DR submitted that the file name reopened "Relevant Portion" which assumingly contained information about the assessee was not opening and file extraction could not be done, DR will be produced before this Court within 15-days. for the revenue relied on the order of the Ld.PCIT.

We have heard, the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. We note that case of the assessee was reopened on the allegation that assessee had taken a fictitious loan of Rs. 1,21,14,671/- from Shri Vasant Thakar, during the year under consideration. We note that by issuing notice u/s 142(1) of the Act, dated 04.01.2022, the Faceless Assessing Officer (FAO) inquired about the alleged fictitious loan of Rs. 1,21,14,671/- taken from Shri Vasant Thakar, during the year under consideration. Before replying to the above notice, the assessee requested the Faceless Assessing Officer to first provide a copy of the reasons for reopening and a copy of the approval granted by the competent authority. The assessing officer provided a copy of the reasons and a copy of the approval. Thereafter, the assessee clearly denied having entered into any loan transaction with Vasant kumar Thakar. In support of his denial, the assessee provided a copy of bank statements and bank-books wherein neither the name of any Vasant kumar Thakar, was appearing nor any amount of Rs. 1,21,14,671/-, was reflected.

Thereafter, a show cause notice was issued by the assessing officer, on 27.03.2022, wherein again the same allegation and the proposal for addition was put forward without bringing any cogent material on records. In response, the assessee reiterated his earlier reply of denial of having entered into any transaction with Vasant kumar Thakar. The assessee also requested for a cross-examination. As per the ITBA order sheet, the FAO made efforts to gather the relevant material in support of the allegation but could not bring any adverse material on records. The FAO also made correspondence with the Jurisdictional assessing officer (JAO) to get the adverse evidences against the assessee. However, the JAO did not have any evidence in his possession. After all the FAO could not find any specific evidences which were the base documents for the allegation of accommodation entry and the reopening. For ready reference, the relevant part of the order sheet of the ITBA portal is reproduced hereunder: "The assessee further requested for providing the information available on record alongwith corroborative evidences for which a letter has been written to the JAO for providing the base documents. But, the documents uploaded by the JAO is the same which are available on insight portal. Since, specific documentary evidences have neither available on insight portal nor provided by the JAO. The assessee has requested Video conferencing for the examination of documents on the basis of which his case reopened. Since no specific documents not available with the FAU and also the FAO has no enough time to issue providing adequate time to assessee to respond." 13. Consequently, in the absence of any incriminating material, the FAO passed the assessment order without making any variation. This is evident from the ITBA order sheet wherein the FAO has mentioned as under: "As, no specific documents regarding information is available with me and the JAO has also not furnish relevant documents which was confronted with the assessee. As the case is time barring matter, this situation is compelled the FAO to accept the version of the assessee. Hence, on the basis of above and without having convincing documentary proof, no addition, if any, is sustainable in this case. Therefore, income returned by the assessee is being accepted. Later on, at any stage of the case anything adverse found in this matter, remedial necessary action under the current provisions of the I.T. Act, 1961 may be taken by the JAO /Authority concerned."

We also note that during the course of hearing that Ld. DR has promised to produce the record on relevant portion of the file on the basis of case was due within 15-days but the same was not submitted.

The provisions of section 263 of the Act, should be exercised in a bona- fide situation. We find that the assessee's case was reopened on the allegation of receiving a fictitious loan of Rs.1,21,14,671/- from Shri Vasantkumar Thakkar. However, we note that the Ld.PCIT observed that it is evident that the FAO, while making the inquiries, went to the extent of issuing Show Cause Notice. The FAO also made correspondence with the JAO to get relevant material. However, after all these efforts taken by the FAO, the FAO could not find any incriminating material against the assessee. Thus, there was no legal or justified option for the assessing officer, except for passing the assessment order without any variation. It is obvious that if the FAO does not have any incriminating material or any adverse evidence against the assessee, on records, he cannot make any addition. Hence, his order is not erroneous in any manner. Thus, FAO has made due inquiries to the assessee`s case and JAO in the course of the assessment proceedings. From the copy of order sheet, it also appears that the Faceless assessing officer made correspondence with the Jurisdictional assessing officer to get the adverse evidences against assessee. However, the jurisdictional assessing officer did not have these evidences in his possession. After all the efforts taken by the Faceless assessing officer, he could not find any specific evidences which were the base documents for the allegation of accommodation entry and the reopening of assessment. In view of the facts of the case and judicial pronouncements relied upon, it is well established that the impugned order passed u/s. 147 r.w.s.144B of the Act dated 30.03.2022, was passed by assessing officer, after calling for relevant information and after detailed examination of the same. The Assessing Officer has passed the assessment order after calling for details on the issue and after considering the reply and documents and after verification of the same and after due application of mind passed the assessment order, so it cannot be termed as erroneous and prejudicial to the interest of the revenue. So, the Ld. PCIT’s finding fault, with the Page 9 of 11 order of the Assessing Officer is erroneous as well as prejudicial to the interest of revenue, on account of lack of inquiry, has to fail. Based on these facts and circumstances, we quash the order dated 30.03.2024 passed by the ld. PCIT under section 263 of the Act.

We have also perused the subsequent order on dated 28.03.2025 passed by the Ld.AO completed after direction of the Ld.PCIT to make an necessary enquiry of transaction of Rs.1,12,14,671/-. From the order of the AO we note that the assessment order dated 28.03.2025 was completed by making an order of Rs.38,00,000/- with a view that in subsequent order, the assessee has failed to establish genuineness and creditworthiness of unsecured loan received by the assessee amounting to Rs.38,00,000/- from the various person, i. Rajubhai D. Bhavar Rs.7,00,000/- ii. Anjanaben A. Mehta Rs.5,00,000/- iii. Devarshi Exports Rs.4,00,000/- iv. Vinod B. Chaplot HUF Rs. 15,00,000/- v. Sonaliben B. Thakkar Rs. 7,00,000/- We note that Ld.PCIT order dated 30.03.2022 speaks that whereby the order of the AO was revised and accordingly the assessment order dated 30.03.2022 was set aside and fresh assessment be completed only after making enquiry of agrigate transaction of Rs.1,12,14,671/-. We note that in the consequence order there was no addition on account of fictitious loan of Rs.1,12,14,671/-. 17. Hence, the submission of the assessee was cored in respect of the vexatious wrong of Rs.1,12,14,671/-. That due relief has been granted to the assessee. Since, there was no addition in this score, the appeal of the assessee is dismissed. There is no reason to interfere with the consequential order of the AO. The assessee is free to take legal process in accordance with law against the consequential order of assessment.

In the result, the appeal of the assessee is dismissed.