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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANTSHRI SANDEEP SINGH KARHAIL
Date of Hearing – 05/11/2024 Date of Order – 31/01/2025
O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 30.03.2024, passed under section 263 of the Income Tax Act, 1961 (“the Act”) by the Principal Commissioner of Income Tax–3, Mumbai, [“learned PCIT”], for the Assessment Year 2015-16.
2. In this appeal, the assessee has raised the following grounds: - “1. The learned Pr. CIT, Mumbai-3, has erred in law and on facts passing order u/s.263 of the Act without valid jurisdiction.
The learned Pr. CIT, Mumbai-3, has further erred in law and on facts in unlawfully re-assuming jurisdiction after having passed order u/s. 127(2) dt.16-03-2024, accepting lack of jurisdiction, and transferring the PAN to the charge of Pr. CIT, Vadodara-1 (who transferred the PAN to the charge of Pr. CIT, Ahmedabad-3, who again passed order dt.22-03-2024 returning the PAN to Pr. CIT, Mumbai-3, none giving notice to the appellant), and then resuming the process at his end and in passing order u/s.263 of the Act without valid reasons.
3. The learned Pr. CIT, Mumbai-3, has also erred in law and on facts in passing order u/s. 263 of the Act, disregarding the written submission dt.15-03-2024, failing to provide essential information as requested for and without meeting with appellant's specific contentions raised before him violating principles of natural justice.
4. On the facts and in the circumstances of the case and in law the learned Pr. CIT ought not to have passed the order u/s.263 of the Act and ought not to have set aside the assessment. 5. It is therefore prayed that the order u/s.263 of the Act passed by the Pr. CIT, Mumbai-3, may be cancelled.”
The brief facts of the case are that the assessee is engaged in the business of manufacturing frits and ceramics glare mixture. For the year under consideration, the assessee filed its return of income on 23.09.2015 declaring a total income of Rs.2,05,30,760/-. Vide order dated 04.05.2017 passed under section 143(3) of the Act scrutiny assessment proceedings were concluded in the case of the assessee accepting the income returned. Subsequently, on the basis of information received from the Investigation Wing, based on the search action conducted under section 132 of the Act in the case of Shri Jignesh Shah and Shri Sanjay Shah, it was found that the assessee is one of the beneficiaries of accommodation entry transaction. As per the Investigation Report, the assessee has obtained accommodation entries from Shri Jignesh Shah to the extent of Rs.1,15,58,838/-. Accordingly, notice under section 148 of the Act was issued on 30.03.2021 and proceedings under section 147 of the Act were initiated. In response to the notice issued under section 148 of the Act, the assessee filed its return of income on 30.04.2021 declaring the same income as per the original return of income. After considering the details and submissions filed by the assessee, in response to the statutory notices issued under section 143(2) and section 142(1) of the Act, the Assessing Officer (“AO”) vide order dated 29.03.2022 passed under section 147 r.w.s 144B of the Act assessed the total income of the assessee without making any addition.
4. Subsequently, the learned PCIT issued a notice dated 12.02.2024 under section 263 of the Act on the basis that the issue of the fictitious loan of Rs.1,15,58,838/- from Shri Jignesh Shah and the issue of cash transaction of Rs.64,83,428/- with M/s. Mehta Finance was not inquired/examined by the AO while finalizing the assessment order under section 147 r.w.s 144B of the Act. The notice issued by the learned PCIT under section 263 of the Act is reproduced as follows: - “2. In the subject case the return of Income for A.Y. 2015-16 was filed on 23/09/2015, on total income of Rs. 2,05,30,760/- and the assessment was completed u/s 143(3) r.w.s. 147 of the Act accepting the returned income 3. Subsequently, in this case information received from Investigation Wing that the assessee company is a recipient of fictitious loan of Rs 1,15,58,838/-from Jignesh Shah where in search u/s 132 was conducted. Accordingly, the case was reopened /s 147 of the Act and notice u/s 148 was issued on 30.03.2021 for reopening the assessment for A.Y. 2015-16 as the income to the extent of the information was escaped to be assessed. Further another information was received from Central Circle 1(4), Ahmedabad regarding Cash transaction of Rs. 64,83,428/-with M/s. Mehta Finance for the said Financial year.
The case was transferred to National Faceless Assessment Centre and the assessment was completed on 29/03/2022 accepting the returned income of the assessee company. From the perusal of the record it is noticed that the AO has not verified the issue of fictitious loan of Rs. 1,15,58,838/- from Jignesh Shah and the issue of cash transaction of Rs. 64,83,428/- with M/s. Mehta Finance. It is also noticed that there is no enquiry was conducted by the AO while finalising the assessment order
5. In view of the aforesaid reasons, it is proposed to revise the assessment order u/s 147 r.w.s. 144B dt. 29.03.2022 under section 263 of the Income Tax Act, 1961, being erroneous in so far as it is prejudicial to the interest of revenue.”
In response to the notice issued under section 263 of the Act, the assessee, inter alia, submitted that the very basis for initiating the re- assessment proceedings under section 147 of the Act against the assessee was the information received from the Investigation Wing that assessee is a beneficiary of accommodation entry transaction with Shri Jignesh Shah and the details were furnished by the assessee. The AO, after considering the details, was convinced that the assessee did not have any transaction whatsoever with Shri Jignesh Shah. Accordingly, no addition was made by the AO vide assessment order passed under section 147 r.w.s. 144B of the Act. As regards the other allegation of cash transaction of Rs.64,83,428/- with M/s. Mehta Finance, the assessee submitted that the learned PCIT has not given any details as to who had received the information and when the same was received. Further, no details have been furnished regarding the proof of receipt of such information by the AO. Thus, the assessee submitted that such information as alleged to have been received from Central Circle-1(4) Ahmedabad does not form part of the record and cannot lead to the conclusion that the AO has not made any inquiry in respect of same.
The learned PCIT, vide impugned order, disagreed with the submissions of the assessee and set aside the assessment order passed under section 147 r.w.s. 144B on the basis that the same is erroneous insofar as it is prejudicial to the interest of the Revenue and accordingly directed the AO to examine the issue of accommodation entries in the form of a fictitious loan of Rs.1,15,58,838/- from Shri Jignesh Shah and the issue of cash transaction of Rs.64,83,428/- with M/s. Mehta Finance and pass the assessment order de novo after giving the opportunity to the assessee. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. In the present case, the original return of income filed by the assessee was selected for scrutiny and vide order dated 04.05.2017 passed under section 143(3) of the Act, the total income of the assessee was assessed at the returned income. Subsequently, on the basis of the information received from the Investigation Wing pursuant to the search conducted in the case of Shri Jignesh Shah and Shri Sanjay Shah the assessee is a beneficiary of accommodation entry transaction pertaining to a fictitious loan amount to Rs.1,15,58,838/-, notice under section 148 of the Act was issued on 30.03.2021 and proceeded under section 147 of the Act were initiated. We find that during the re-assessment proceedings, vide notice dated 23.03.2022 issued under section 142(1) of the Act, the assessee was asked to furnish the following details: -
“In connection with the re-opened assessment proceedings in your own case for A. Y. 2015-16, you are requested to furnish the following details:
1. 1. Details of unsecured loan obtained during the FY 2014-15 2. Mode of obtaining such loan, purpose for which such loan was obtained.
3. Details of repayment of such and interest if any paid thereon.
4. Provide documentary evidence to substantiate the identity of the lenders and ITR of lenders along with computation of total income to substantiate the credit worthiness of the lenders.
5. Bank statement of the loan creditors highlighting the above transactions to prove the genuineness of the loan creditors.
6. Details of transactions entered into by your company with MSP group with copy of bills, invoices and purchase register and bank statements indicating the payments made to MSP group of companies.”
In response to the notice, the assessee vide submission dated 25.03.2022 furnished the details as called for, which form part of the paper book from pages 69-111. We find that during the re-assessment proceeding while replying to the query seeking details of the unsecured loan obtained and repayment of such loan, mode of obtaining such loan, purpose for which loan was obtained during the year under consideration, the assessee furnished the following details:
In order to prove the identity and creditworthiness of the lenders, we find that the assessee furnished the ITR, confirmation of accounts, bank statements and computation of income of the parties from whom it availed the unsecured loans. These details have also been furnished before us in the paper book filed by the assessee.
After considering the details filed by the assessee, the AO vide re- assessment order dated 29.03.2022 passed under section 147 r.w.s. 144B of the Act accepted the return of income filed by the assessee. From the perusal of the details filed by the assessee, it is evident that the transaction of unsecured loans was only made with parties, namely, Shri Pradeep Patel Upesh Thakker and M/s. Mehta Finance and no transaction of unsecured loan was made by the assessee with Shri Jignesh Shah as alleged vide reasons recorded for reopening the assessment under section 147 of the Act. Accordingly, we find merits in the submission of the assessee that since the AO, after considering the submissions/details filed by the assessee, was satisfied that the assessee did not enter into any transactions with Shri Jignesh Shah, accepted the return of income filed by the assessee pursuant to the notice issued under section 148 of the Act and made no addition. Therefore, we find no merits in the allegation of the learned PCIT vide impugned order passed under section 263 of the Act that the issue of the fictitious loan of Rs.1,15,58,838/- was not examined by the AO while passing the re-assessment order under section 147 r.w.s 144B of the Act.
As regards the allegation of issue of cash transaction of Rs.64,83,428/- with M/s. Mehta Finance, we find that vide its notice dated 12.02.2024 issued under 263 of the Act, the learned PCIT has referred to the information received from Central Circle-1(4) Ahmedabad. However, despite the specific objection by the assessee, vide its reply to the aforesaid notice, no material was brought on record by the Revenue, furnishing the details as to who had received the above information and when such information was received.
Thus, we agree with the submissions of the assessee that there is no material available on record to prove that the AO received the information pertaining to cash transaction with M/s. Mehta Finance from Central Circle-1(4) Ahmedabad, and therefore, it cannot be considered to be forming part of the record available with the AO. It is pertinent to note even during the hearing before us no information was brought on record by the Revenue contrary to the submission of the assessee. Thus, we agree with the assessee’s submission that there was no information available with the AO pertaining to the issue of cash transaction with M/s. Mehta Finance. It is further relevant to note that the impugned order is completely silent on this submission of the assessee, despite specific objection being raised by the assessee in response to the notice issued under section 263 of the Act. Accordingly, we find no basis in sustaining the revisionary proceedings initiated under section 263 of the Act in respect of the issue of cash transaction of Rs.64,83,428/- with M/s. Mehta Finance. Thus, on both issues, the order passed under section 263 of the Act is not sustainable.
As regards the contention of the assessee that the learned PCIT passed the impugned order under section 263 of the Act without having proper territorial jurisdiction, we find that even though on 16.03.2024, the learned PCIT, Mumbai, migrated the PAN of the assessee from its charge to DCIT- 2(1)(1), Vadodara, which was subsequently migrated to the charge of DCIT Circle-4(1)(1), Ahmedabad, and ultimately, vide order dated 22.03.2024 passed by the learned PCIT-3, Ahmedabad, the PAN of the assessee was transferred to the jurisdiction of the learned PCIT, Mumbai, however, it is pertinent to note that as on the date of passing of the impugned order under section 263 of the Act on 30.03.2024, the PAN of the assessee was lying in charge of the learned PCIT, Mumbai. The assessee did not bring any material on record to show that the transfer order passed by the learned PCIT, Ahmedabad, transferring the jurisdiction to the learned PCIT, Mumbai, has been set aside by any higher Court. Thus, it is ostensible that on the date of passing the impugned order on 30.03.2024, the learned PCIT, Mumbai, had jurisdiction over the assessee and has accordingly passed the impugned order. Further, as per the provisions of section 127(4) of the Act, it is not necessary to re-issue any notice which was already issued. Thus, we find no merits in the submissions of the assessee.
Therefore, in view of the aforesaid findings, the revisional order passed under section 263 of the Act is quashed.
In the result, the appeal by the assessee is allowed. Order pronounced in the open Court on 31/01/2025