ADITYA SHAH,AHMEDABAD vs. THE PR. CIT, AHMEDABAD-1, AHMEDABAD

Ld. PCIT has erred in not considering various facts, submissions, explanations and clarifications as given by the appellant and further erred in not appreciating the facts and law in their proper perspective.

The assessee is in appeal before us against the order passed u/s 263 of the Act by Principal Ld. CIT(Appeals).

Before us, the Counsel for the assessee submitted that firstly, that no loan was received from Dishman during the relevant assessment year. Rather, the assessee repaid back a loan amount of Rs. 37,41,557/- along with interest. It was submitted the case was previously reopened under Section 147 of the Act based on the same ground, and finally, the assessment was passed without any additions being made. The Counsel for the assessee placed reliance on several documents including the confirmation from Dishman Group, relevant extracts of bank statements, approval under Section 151, notices issued under Sections Aditya Shah vs. PCIT Asst.Year –2015-16 - 4– 143(2) and 142(1) by the Assessing Officer, the order passed by the Assessing Officer disposing of objections etc. to substantiate it’s position that no loan was received from Dishman Group during the year in question, and in fact loan was repaid by the assessee, which had been properly accounted for. It was argued that the order passed by the AO is neither erroneous nor prejudicial to the interests of the Revenue. It was submitted that the issue at hand was thoroughly examined during the original assessment stage and once an issue has been examined in the original assessment, the Department cannot invoke revisionary jurisdiction under Section 263. If an issue is considered but not reflected in the final assessment order, it does not automatically imply that the AO’s order should be interfered with by the CIT under Section 263. Reliance is placed on various judicial precedents, such as CIT v. Nirma Chemicals Works (P.) Ltd., Gujarat Power Corporation v. ACIT, and Rayon Silk Mills v. CIT, in support of the argument that once an issue has been examined, it is not open for the Department to revisit the matter under Section 263. Further, the Counsel for the assessee argued that if two views are possible, and the AO adopts one view, the CIT cannot invoke jurisdiction under Section 263 merely because a different view could have been taken. This principle is well-supported by decisions in cases like Malabar Industrial Co. Ltd. v. CIT, Kwality Steel Suppliers v. CIT, and Mehsana Dist. Co-op. Milk Producers Union v. CIT. Further, it was submitted that the inadequacy of inquiry by the AO cannot be a valid ground for invoking revision under Section 263, as established in cases such as CIT v. Sunbeam Auto Ltd. and CIT v. Anil Kumar Sharma.

We have heard the rival contentions and perused the material on record. On going to the case records, the first thing that comes to the notice that the Department has not brought anything on record in the form of any evidence etc. that the assessee had taken loan of the amount which was mentioned in the 263 notice viz. for a sum of ₹52,02,531/- from the Dishman Group. We observe that in the reply to the assessing officer during the course of re-assessment proceedings, similar issue came up for consideration, wherein the assessee had submitted that the assessee had not received any loan from Dishman group during the year under consideration and therefore, 147 proceedings were initiated on an incorrect premise that the assessee had taken loan of the aforesaid amount from Dishman group. We observe that at page 25 of the paper book, the assessee had submitted before the assessing officer that assessee had taken a loan of ₹35 lakhs from the Dishman group in an earlier year and in this year, in fact the assessee had made repayment of the aforesaid amount. The counsel for the assessee has drawn attention to certificate issued by the assessee to Dishman group stating that it had made repayment of ₹35 lakhs to the said group, along with interest on such loan, taken during an earlier assessment year, after deduction of taxes at source. The counsel for the assessee drew our attention to page 47 of the paper book (reply of the assessee to the assessing officer dated 22 February 2022) in which it was submitted that as per the copy of account of the Dishman group and also from the copies of bank statements produced before the assessing officer for the impugned year under consideration, no loan for a sum of ₹52,02,531/- was taken by the Aditya Shah vs. PCIT Asst.Year –2015-16 - 6– assessee from the Dishman group, by way of accommodation entry. Further, we observe that the 263 proceedings have been initiated on the basis that as per information, the assessee is a beneficiary who had availed accommodation entry transaction of ₹52,02,531/- in the form of fictitious loan taken by the assessee from the Dishman group. However, we observe that firstly this aspect was enquired during the course of 147 proceedings in detail, in which the assessee had submitted that the assessee had not taken any accommodation entry of ₹52,02,531/-in the form of fictitious loan during the impugned assessment year under consideration from Dishman group. It was on the basis of submissions filed by the assessee that no additions were made during the course of original assessment proceedings. Therefore, we observe that firstly the 263 proceedings were initiated on an incorrect presumption of fact that the assessee had received accommodation transaction of ₹52,02,531/- from Dishman group during the relevant period, whereas there is nothing on record to demonstrate that the assessee had taken any accommodation entry by way of loan during the impugned year under consideration for the aforesaid amount. Secondly, this aspect was specifically enquired by the assessing officer during the course of reassessment proceedings, wherein the assessee had submitted that the assessee had not taken any loan from the Dishman group for the aforesaid amount and in fact, the assessee had repaid a loan of ₹35 lakhs, along with interest during the impugned year under consideration to the Dishman group. Accordingly, no additions were made in the hands of the assessee. In light of the above facts, we are of the considered view that since the 263 order itself has been passed on an incorrect assumption of facts, the same is liable to be set aside. Also, the aforesaid aspect was specifically enquired in the course of reassessment proceedings and hence, there is no lack of enquiry on the part of assessing officer on this aspect and neither any incorrect view was taken in the course of assessment proceedings by the assessing officer, so as to make the assessment order as being erroneous insofar as prejudicial to the interest of Revenue.

In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 27/02/2025