CHUNILAL MAHADEVBHAI SANJA,MORBI vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX-1, RAJKOT

Considering above facts, notice u/s 263 of the Income-tax Act, 1961, dated 07.02.2024, was issued by ld PCIT and which was duly served upon the assessee. The notice issued by ld.PCIT, is reproduced in the revision order on page No.2.

In response to the above notice of learned PCIT, the assessee submitted its reply, stating that he denied that he had not taken any loan from any Vasant kumar Thakar. In support of this denial, the assessee had 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. 75,00,000/- was reflected. During the assessment proceedings, the assessing officer conducted sufficient enquiry about this issue, therefore, order passed by the assessing officer is neither erroneous nor prejudicial to the interest of the revenue.

Shri Vimal Desai, Learned Counsel for the assessee submitted that during the assessment proceedings, the assessee has submitted the relevant documents and evidences which are placed in the paper book. The ld. Counsel submitted that in this case, the reasons recorded by the A.O. were vague, therefore, re-assessment proceedings itself is not valid. For that the ld. Counsel, took us through the notice issued by the A.O. during the re- assessment proceedings and stated that reasons recorded by the A.O. were bad in law, therefore, reassessment proceedings itself, is not valid, hence consequential order of the ld. PCIT is going to be invalid. For that, the ld. Counsel took us through the paper book page no. 36, wherein the order sheet the A.O. has stated as follows:

Therefore, the ld. Counsel submitted that reasons recorded by the A.O. were not adequate reasons/valid reasons, therefore, the assessment proceedings should be quashed.

In response to the notice u/s. 142(1) of the Act, the assessee submitted its reply, which is placed at page book page no.

The ld. Counsel further stated that A.O. issued again notice u/s. 142(1) of the Act, which is reproduced at paper book page no. 11, wherein pertinent questions were raised by the A.O. which were raised by the ld. PCIT, the questions raised by the assessing officer is reproduced below:

In response to these notices, the assessee submitted reply which is placed in the paper book. Therefore, the ld. counsel contended that sufficient inquiry was conducted by the A.O. during the assessment proceedings.

The ld. Counsel also submitted that ld. PCIT has exercised the jurisdiction u/s. 263 of the Act, merely on the basis of the proposal of the assessing officer and ld. PCIT did not apply his mind, therefore, order passed by the ld. PCIT may be quashed.

On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Ld. PCIT, which we have already noted in our earlier para and is not being repeated for the sake of brevity.

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 A.Y. 2016-17 7 Chunilal Mahadevbhai Sanja that assessee had taken a fictitious loan of Rs. 75,00,000/- 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. 75,00,000/- 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 on 25.03.2022. Thereafter, the assessee filed a submission before assessing officer dated 25.03.2022, wherein 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. 75,00,000/-, 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. Further, the assessee also requested the FAO to provide him with a copy of the relevant incriminating material and a copy of the statement of said Shri Vasant kumar Keshavlal Thakar. The assessee also requested for a cross-examination. As per the ITBA order sheet, the FAO (Faceless Assessing officer) made efforts to gather the relevant material in support of the allegation but could not bring A.Y. 2016-17 8 Chunilal Mahadevbhai Sanja 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 efforts taken by the FAO, 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."

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:

Considering the above facts, we find that the FAO passed the assessment order in compliance with the principles of natural justice and fairness in as much as he did not make any variation since he was unable to provide any A.Y. 2016-17 9 Chunilal Mahadevbhai Sanja incriminating material to the assessee. 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. 75,00,000/- from Shri Vasantkumar Thakkar. If the assessee had received such loan from Shri Vasantkumar Thakkar, the same must be appearing in his bank statement and bank book. The assessing officer had examined, during the assessment proceedings that there was no entry in the assessee's bank statement and bank book in the name of Shri Vasantkumar Thakkar or of the amount of Rs. 75,00,000/-. In fact, the contention of the Id. PCIT that the assessing officer should have made inquiries to the authority who passed on the information to the assessing officer, is half-hearted and not leading anywhere. Unless the PCIT brings on record some adverse evidence, the mere direction to make inquiries only amounts to roving and fishing inquiries which are not permissible under the law.In this regard, reference may be made to the Hon'ble Bombay High Court judgement in the case of Gabriel India Ltd. (203 ITR 108) wherein it was held as under: "The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity."

While passing the revision order, the Id. PCIT, in para 4.3 contended that the assessee's case was not case of “inadequate enquiry” but a case of “no inquiry” at all. It is evident from the facts explained hereinabove 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 A.Y. 2016-17 10 Chunilal Mahadevbhai Sanja 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 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.