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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
This appeal is filed by the assessee against revisionary order of the Pr. Commissioner of Income Tax-27, Mumbai (the PCIT) under Section 263 of the Income-tax Act, 1961 (the Act) for A.Y. 2017-18, wherein it has been held that assessment order dated 10th December, 2019 under Section 143(3) is erroneous in so far as it is prejudicial to the interest of the Revenue and the learned Assessing Officer was directed to make a fresh assessment.
2. Assessee has preferred the following grounds of appeal: -
“Order passed u/s. 263 of the Act is bad-in-law & liable to be quashed
The Ld. Pr. CIT failed to appreciate that during the course of assessment proceedings, the AO has verified and examined all the issues considered in proceedings u/s.263 of the Act including confirmation letters of lenders supported by their IT Returns, and hence, the order passed under section 263 of the Act dated 30.03.2022 is contrary to factual position and thus, bad in law and liable to be quashed.
Without prejudice to the above:
3. The Ld. Pr. CIT erred in directing the AO the make fresh assessment order and not limiting the fresh assessment order in respect of issues considered in 263 proceedings and hence, the order passed u/s.263 of the Act dated 30.03.2022 is bad in law and needs to be quashed.”
In fact, the grounds of appeal challenge the validity and findings of the order of the PCIT.
The fact shows that assessee is an individual engaged in the business of trading in iron and steel in a proprietary concern of M/s Siddhi Enterprises. Assessee filed his
The learned Authorized Representative referred to the paper book of 386 pages. He first referred to page no. 323 of the Paper Book which is a show cause notice dated 4.3.2022 under Section 263 of the Act and referred to page no. 325 to page no. 346 which is also reply of the assessee before the PCIT. Coming to the assessment proceedings, he referred to the return of income and the annual accounts of the assessee and thereafter referred to notice under Section 142(1) of the Act issued on 3rd June, 2019 by the learned Assessing Officer. He referred to paragraph no.4 wherein the details of loans and interest taken in a tabular form was asked for. As per Para no.6, the details of sundry creditors and debtors were asked for along with paragraph no. 13 where Party wise details of purchase and sales along with complete postal address of the party above ₹10 lacs was asked for. He further referred to paragraph no.14 where the details of major heads of expenditure along with the TDS thereon were called for. He referred to page no. 41 where letter dated 13thNovember 2019 was submitted before the learned Assessing Officer. On page no. 60 there was part compliance and therefore, notice for penalty is also issued by the learned Assessing Officer. He referred to page no.
The learned Departmental Representative vehemently supported the order of the learned PCIT. He specifically referred to page no. 381, wherein the report of the learned Assessing Officer dated 16thMarch 2022 is placed in the paper book. He specifically stated that no confirmation letters and bank statement are found in the scrutiny folder and in the ITBA system of the relevant parties to whom interest has been paid and therefore, the learned PCIT is correct in holding that the order passed by the learned Assessing Officer is erroneous and prejudicial to the interest of the Revenue.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The assessment order in the present case was passed on the basis of inquiries mentioned in notice under Section 142(1) of the Act issued by the learned Assessing Officer on 3rd June, 2019 wherein the return filed by the assessee
The details submitted and examined by the learned Assessing Officer resulted into acceptance of the return
“4.4 As far as unsecured loan of Rs. 7.45 crores and interest of Rs. 1.46 crore claimed to have been paid on such loans is concerned, it is undisputed fact that the assessee had not furnished even confirmatory letters of the parties to whom interest of Rs. 1.46 crore was claimed to have been paid. The Assessing Officer has accepted the claim of the assessee without examining the correctness and genuineness of the claim of the assessee. The Assessing Officer before allowing the deduction for interest paid of Rs. 1.46 crore, should have examined the genuineness of the payment and also whether the borrowed funds on which the interest is claimed to have been paid were utilized for the purpose of business carried on by the assessee. The Assessing Officer has failed to do so.
4.5 The assessee has shown sundry debtors of Rs. 9.35 crores. The AO has not examined, except the two creditors, the creditors appearing in the balance sheet dated 31.03.2017. The Assessing Officer should have analyzed the creditors appearing in the balance sheet and examined the genuineness of such creditors under appropriate sections of the I.T. Act, 1961. The Assessing Officer has failed to do so.
4.6 The assessee has claimed other expenses of Rs. 79.53 lakhs. The Assessing Officer has accepted the claim of the assessee and allowed the deduction without examining the correctness and genuineness
4.7 The assessee has claimed deduction in respect of brokerage paid of Rs. 1.36 crore. The Assessing Officer has allowed a deduction without examining the nature of the services rendered by the recipients of the brokerage. The Assessing Officer before completing the assessment should have examined whether the persons whom the brokerage is claimed to have been paid, had rendered any service and whether the services so rendered were for the purpose of business carried on by the assessee. The Assessing Officer failed to do so.”
On careful examination of the same, we find that the learned Assessing Officer has called for all the information required for making assessment, have perused the relevant details filed by the assessee, wherever the details are not coming forth the requisite penalty notices were issued and the balance information was obtained and verified. The learned PCIT has also called for the report of the learned Assessing Officer where the learned Assessing Officer has also shown that requisite notices under Section 133(6) of the Act were issued and replies were obtained from lenders. It is not the case of the learned PCIT that the learned Assessing Officer has allowed the claim of
It is true that if the order has been passed without making enquiries or verification which are reasonable and prudent officer should have carried out, in that case no doubt the order passed by the learned Assessing Officer becomes erroneous. However, the learned PCIT should have shown that what are the further enquiries or verification should have been made by the learned Assessing Officer which he has failed to do. The revisionary authority should be in a position to show that failure to make the enquiry in a particular fashion, which should have been made by the man of reasonable prudence, and learned Assessing Officer has failed to do so. This could have been shown by also looking at the past assessment history of the assessee. In fact the assessee has shown that in earlier assessment year passed under scrutiny assessment did not result into any addition. There is nothing in the revisionary order to show that the claim of deduction of expenses with respect to the purchase, expenses,
In the result, the order passed by the learned PCIT under Section 263 of the Act is not sustainable, hence, quashed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21.10.2022.