SAHARA INDIA MUTUAL BENEFIT COY vs. DCIT CC VI,

O R D E R PER BENCH: The instant batch of appeals, preferred by the assessees herein, arise against separate orders, all dated 30.03.2024, passed by the Ld. Pr. CIT(Central) KNP at Meerut in proceedings under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). Since common issues are involved for adjudication in these appeals in respect of the assessees who are husband and wife, the same were taken up together for hearing and are being disposed of by a common order for the sake of convenience. taken as a lead case and our decision therein shall follow mutatis mutandis in all other appeals.

(A.Y. 2013-14) – Raghav Bahl:

1. That initiation of impugned revisionary proceeding u/s 263 of the Income Tax Act, 1961 (hereinafter referred as 'the act') was bad in law as intended revision of original assessment completed in contravention of applicable statutes, would result in non-est assessment and thereby, impugned initiation of revisionary proceeding deserves to be quashed.

2. That initiation of impugned revisionary proceeding u/s 263 of the act was bad in law as being the original assessment order was not erroneous or prejudicial to the interest of revenue as per Explanation 2 to section 263 of the act as necessary enquiry was duly conducted during original assessment proceeding, and no specific order /directions/instruction has been violated by the then assessing officer. Accordingly, impugned notice issued u/s 263 of the act deserves to be quashed.

3. That the Ld. Pr. Commissioner of Income Tax (Central), Kanpur (hereinafter referred as 'Pr. CIT') had erred in interfering with the original assessment order on facts of the matter as impugned revisionary proceedings u/s 263 of the act has been initiated without any valid reason or justification, and without conducting any proper enquiry/ investigation or cross verification of the facts. Therefore, the order passed u/s 263 of the act is illegal and invalid and deserves to be annulled.

5. That the Ld. Pr. CIT had erred in interfering with original assessment order without appreciating the fact that said original assessment order has been passed after collective application of mind by the Ld. AO and authorities placed higher in hierarchy including office of Ld. Pr. CIT as well being concurrent discussion between adjudicating authority and senior authorities while making assessment in the case of main searched person at Central Charges is general practice. Therefore, the order passed u/s 263 of the act is illegal and invalid and deserves to be annulled.

6. That the Ld. Pr. CIT had erred in passing impugned revisionary order u/s 263 of the act without providing reasonable opportunity of being heard to 1835/Del/2024 to the appellant being the time allowed for complying to show cause notice dated 20.03.2024 issued u/s 263(1) of the act was merely 3 days. Therefore, the order passed u/s 263 of the act in gross contravention of principle of natural justice deserves to be quashed.

7. That the Ld. Pr. CIT had erred in setting aside the original assessment order and directing the Ld. AO to pass fresh order without appreciating the fact that at most, if any issue to be enquired into shall be restricted to issue indicated in the impugned order passed u/s 263 of the act relating to deduction claimed u/s 24(b) of the act. Therefore, the directions issued for fresh assessment order deserves to be restricted to issues observed during said revisionary proceeding itself.

8. All the aforesaid grounds of appeal

are independent, in the alternative and without prejudice to one another.

9. The assessee craves to add, alter, delete, modify or withdraw any of the above grounds at the time of hearing.”

4. The short point involved in these appeals is as to whether the order impugned issued under the signature of Ld. Pr. CIT(Central) KNP at Meerut dated 30.03.2024 in regard to all the assessment years under reference are sustainable in the eyes of law.

As such reassessment was completed u/s 153A read with section 143(3) of the Act vide order dated 30.9.2021 at assessed income of Rs. 12,29,57,441/- upon making addition of Rs. 11,25,04,111/- u/s. 69A & 69C of the Act. Thereafter it was found by the Ld. PCIT upon verification of the order passed u/s 153A/143(3) of the Act that the said assessment was erroneous in so far as it was prejudicial to the interest of the revenue in as much as necessary enquiries or verification to verify the genuineness and correctness of the claims of the assessee was not made by the Assessing Officer. The assessee duly filed his reply the contents whereof are as follows:

“..This is in regard to the captioned matter. I, Raghav Bahl, the captioned assessee had received captioned notice dated 20.03.2024 in physical through speed post on 23.03.2024, wherein your goodself had show caused the captioned assessee to explain why assessment order dated 30.09.2021 passed u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred as 'the act') should not be considered as erroneous in so far prejudicial to the interest of the revenue being interest of Rs. 3,88,43,773/- claimed as deduction u/s 24b of the act has not been allegedly incurred in respect of loan availed exclusively for the purpose of purchase of property In this regard, our detailed submission is as under: 1. At the outset, it is most humbly submitted that impugned show cause notice dated 20.03.2024 issued by your goodself is against the basic principle of natural justice as the same doesn't provide reasonable opportunity of being heard to the captioned assessee and to file a proper & comprehensive reply to the impugned notice issued by your goodself. Vide impugned notice dated 20.03.2024 received in physical in evening on to 1835/Del/2024 23.03.2024, your goodself had required the captioned assessee to file detailed reply and explanation by 11:30 Hrs of 27.03.2024 1.e. within less than I working day being 25.03.2024 is a Sunday and 26.03.2024 is once in a year festival of Holl, which is absolutely unfair and arbitrary. Henceforth, the time allowed for making compliance is unreasonably inadequate, the interest of justice and fair play and keeping in view the principles of natural justice. It is most humbly submitted that as per second principle of natural justice i.c. audi alteram partem which means 'to hear the other side', no one should be condemned unheard. Besides that notice is the first limb of this principle and it must be precise, unambiguous and it should apprise the party determinatively the case the captioned assessee has to meet, time provided for the purpose of filing response should be adequate so as to enable captioned assessee to make their proper representation. Thereby, impugned notice shall be dropped and thereby no cognizance in such regard may please be drawn.

, is attached herewith at Page No. 1-8 for your kind perusal. Apparently, said assessment order dated 30.09.2021 is pending for adjudication before Hon'ble Delhi ITAT and thereby, any proceeding emanating from legally unsustainable order would also be legally void-ab- initio. Thereby, it is most humbly requested that impugned notice dated 20.03.2024 deserves to be dropped.

3. Further, your goodself may kindly appreciate the fact that at the time of finalization of assessment u/s 153A of the act in the captioned matter, it is understood by the captioned assessee that concurrent discussions must have been conducted at Income Tax Department, NOIDA between the then Assessing Officer le. Ld. Deputy Commissioner of Income Tax, Central Circle, Noida, the then Jurisdictional Additional Commissioner Le. Ld. Additional Commissioner of Income Tax, Central Circle, Meerut, the then Jurisdictional Commissioner of Income Tax i.e. Ld. Incumbent Officer as well as Ld. Director General of Income Tax Investigation and as such, the said order must have been passed after thorough discussion. Thereby, such order could not be considered as prejudicial to the interest of revenue u/s 263 of the act.

4. Without prejudice to aforesaid submission, on perusal of provisions of section 263 of the act, it is clearly evident that any order of assessment shall be considered as erroneous in so far as prejudicial to the interest of revenue, either of the following case exists: -Either the order was passed without making inquiries and verification which should have been made, or to 1835/Del/2024 -the order was passed allowing any relief without enquiring in the claim, or the order has not been made in accordance with any order, direction or instruction issued by CBDT u/s 119, or -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. In the impugned matter in hand, the then assessing officer had duly conducted comprehensive enquiries during the course of impugned assessment proceeding and more specifically, detailed enquiry has been conducted in respect of deduction claimed u/s 24b of the act during the course of impugned assessment proceeding. Pertinently, it is most humbly submitted that the then assessing officer had duly conducted enquiry regarding interest expense claimed by the captioned assessee during the period under consideration vide notice dated 08.09.2021 issued u/s 142(1) of the act and necessary response to such query alongwith relevant documentary evidences were duly filed before the then assessing officer vide online submission dated 20.09.2021. (Copy of said notice dated 08.09.2021 is attached herewith at Page No. 912 for your kind perusal whereas, copy of submission dated 20.09.2021 filed in respect of period under consideration alongwith relevant annexures are attached herewith at Page No. 13-83 for your kind perusal.) Pertinently, your goodself may kindly appreciate that the then assessing officer had raised specific query in respect of impugned issue indicated in the impugned notice dated 20.03.2024 and necessary response thereto alongwith relevant documentary evidences were filed by the captioned assessee to satisfy the then assessing officer in such regard. Accordingly, the matter in hand is nowhere covered by any of the condition prescribed under Explanation 2 to Section 263 of the act and thereby, invocation of provisions of section 263 of the act in the impugned matter is bad in law and deserves to be dropped.

5. Further, impugned invocation of provisions of section 263 of the act in the impugned matter would tantamount to change of opinion' being considering all relevant documentary evidences available on record, the then assessing officer had not drawn any adverse inference but without bringing on record any additional finding, your goodself had proposed to invoke provisions of section 263 of the act. In this regard, the captioned assessee places reliance on the Judgement of Hon'ble Supreme Court of India in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC), wherein it was held as under: to 1835/Del/2024 "A bare reading of section 263(1) makes it clear that the pre-requisite to exercise of Jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (1) the order of the Assessing Officer sought to be revised is erroneous; and (II) It is prejudicial to the interests of the revenue. If one of them is absent if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue-recourse cannot be had to section 263(1). There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning, it is of wide Import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the Interests of the revenue' has to be read in conjunction with an erroneous order passed by the Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by the Supreme Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue." In light of aforesaid submission, impugned invocation of provisions of section 253 of the act is unjustified and against the intent of law. to 1835/Del/2024 Thereby, it is most humbly requested that Impugned Show Cause Notice dated 20.03.2024 may please be dropped being Issues identified by your goodself were duly examined specifically by the then assessing officer during the course of impugned assessment proceeding conducted u/s 153A of the act. Further, it is understood by the captioned assessee that impugned issue has been addressed by your goodself after independent verification of assessment records by your goodself and not on the basis of some recommendation, If so, the copy of such recommendation has not been provided with impugned notice. In view of the above submissions specially on legalities of the present proceedings, the initiation of proceeding at the fag-end of time barring is bad in law and facts. Accordingly, the same may please be dropped..."

7.2. Further, during the assessment proceedings the assessee had also submitted that no new property in India was acquired during the AY 2013- 14 relevant to previous year 2012-13. it was noticed from the assessment records that the assessee had made payment of Rs. 28,10,63,500/- in 2007,2008 and 2009 through Cheques and RTGS against the purchase of the said property at Bangalore but neither any such investment had been shown nor declared any capital borrowed for the purchase of the properties rented prior to the search operation. It is pertinent to mention here that the gross income of the assessee was above Rs. 50,00,000/-in the AY 2009-10, therefore, the assessee was required to declare his liabilities and assets. However, the assessee had file ITR-2 contrary to the provisions of the I.T. Act, 1961. It shows that there was no liability of the assessee. 7.3 Further, On perusal of assessment records revealed that the assessee claimed interest of Rs. 3,88,43,773/- on loan for Small & Medium Enterprise (SME). but shown ont account of rental lease (The lease i.e. Robert Bosch Engineering and Business Solution Limited). It was noticed that the loan was not used for purchase of property (neither before nor during F.Y. 2012- 13 relevant to AY 2013-14. The assessee had used the loan amount for other to 1835/Del/2024 business purposes as the assessee had admitted that during the year under consideration no property was acquired in India, during the assessment proceedings the assessee had not submitted the details of the loan as when the loan was taken. R On verification of records it is notice that the property of Bangalore was acquired in 2008 by the assessee from unknown sources which was never reported before search and there was no connection between loan and property acquired. 7.4 Verification of assessment records shows that the assessee had claimed deduction of interest of Rs. 3,88,43,773/- under section 24 of the IT, Act, 1961 and the assessing officer allowed the same. However, keeping in view of the above discussion the said interest is not allowable and the same should have been disallowed by the assessing officer, which the assessing officer failed to do so.”

(ii) That the assessee has used the loan for other business purposes inasmuch as assessee had stated that no property was purchased by him during the year under reference.

(iii) According to Ld. PCIT the assessee has not submitted details of loan obtained for purchase of the property in question.

(iv) The property acquired in Bangalore was not reported before the search operation on the assessee.

AO in A.Y. 2012-13 which is evident from the order passed by the Ld. AO being the DCIT Circle 25(1), New Delhi dated 5.3.2015 under Section 143(3) of the Act, a copy whereof has already been filed before us. Needless to mention that it is the continuing cause of action and once the interest has been allowed by the AO initially in A.Y. 2012-13 the same cannot be disturbed subsequently without finding of any different fact which has already been narrated by us hereinbefore against the assessee. Thus, taking into consideration the entire aspect of the matter we find that the order impugned is nothing but the non application of mind having regard to the order passed by the Ld. AO in the reassessment proceedings under Section 153A of the Act accepting the claim of interest income under Section 24B of the Act upon examination of the issue after verification of the details filed by the circumstances of the matter it cannot be said that no inquiries what-so-ever have been conducted by the AO with respect to the claims under consideration. In support of his contention he has relied upon the judgment of Hon’ble Delhi High Court in the case of PCIT v. Clix Finance India (P) Ltd. [2024] 160 taxmann.com 357(Delhi). It was also mentioned by him that the plausible view having been taken by the AO in the assessment order the same cannot be held to be prejudicial to the interests of Revenue. In support of his contention Ld. AR relied upon the decision of the Hon’ble Delhi High Court in the case of CIT v. Sunbeam Auto Pvt. Ltd. [2011] 332 ITR 167 (Del.), which has been duly considered by us and found to be applicable in the case in hand having regard to the facts and circumstances of the case. Thus, when the claims of the assessee have been duly examined during original assessment proceedings and also the reassessment proceedings under Section 153A of the Act itself, there could have been no error, neither the same is found to be prejudicial to the interest of Revenue as observed by the Ld. PCIT in the order impugned before us. The order passed under Section 263 of the Act is, therefore, found to have no legs to stand and thus quashed. Assessee’s appeal in for A.Y. 2013-14 stands allowed accordingly.

Order pronounced in open court on 20.06.2025.