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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABRAHAM P.GEORGE & SHRI DUVVURU RL REDDY
Vs. Smt. S.Latha, The Income Tax Officer, No.1203/6, Rajivnagar, 6th St., Ward-2, Kovilpatti-628 501. Tuticorin. [PAN: ABKPL 0577 C] (अपीलाथ(/Appellant) ()*यथ(/Respondent) : अपीलाथ( क+ ओर से/ Appellant by Mr.K.Balasubramanian, CA : Mr.S.Bharath, CIT )*यथ( क+ ओर से /Respondent by : सुनवाई क+ तार"ख/Date of Hearing 15.10.2018 : 16.10.2018 घोषणा क+ तार"ख /Date of Pronouncement आदेश / O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER:
These are appeals filed by the assessees against orders dated 28.03.2018 of the Principal CIT, Madurai-1, Madurai, u/s.263(1) of the Income Tax Act, 1961, (in short “the Act”).
ITA No.1819/Chny/2018 & :- 2 -:
Ld.Counsel for the assessees submitted that assessee Shri S.Sekar was engaged in civil contract work and assessee Smt.S.Latha was deriving income from commission. As per the Ld.AR, the former had filed return of income for the impugned AY declaring income of Rs.3,44,530/- and the latter had filed return of income for the impugned AY declaring income of Rs.3,52,860/-. According to the Ld.AR, these returns were processed u/s.143(1) of the Act and income returned accepted. Thereafter, as per the Ld.AR, notices u/s.148 of the Act was issued to the assessee Shri S.Sekar on 05.01.2015 and to the assessee Smt.S.Latha on 30.09.2014. Submission of the Ld.AR was that the reasons for issuing such notices were cited an escapement of income due to addition of capital of Rs.68,50,000/- in the case of Shri S.Sekar, and unsecured loan of Rs.65,00,000/- shown in the case of assessee Smt.S.Latha. Thereafter, as per the Ld.AR, the assessments were completed by the AO after verifying the evidences filed by the respective assessees for the credits in the Balance Sheet. Further, as per the Ld.AR was that the assessments were duly completed u/s.143(3) r.w.s.147 of the Act for both the assessee’s cases.
Continuing his submission, the Ld.AR stated that Ld.CIT had thereafter invoked the powers vested on him u/s.263 of the Act and issued notices.
As per the Ld.AR, the reasons cited in such notice for the assessee Shri S.Sekar read as under:
ITA No.1819/Chny/2018 & :- 3 -:
The assessee has shown Rs.80,00,000/- as advances in the liability side of the balance sheet and part of the said advances was invested in M/s Sri Jeyanthi Builders, a firm in which the assessee was a partner. During the assessment proceedings u/s.143(3) r.w.s.147, ‘genuineness of transaction’ was not properly examined by the Assessing Officer.
The reasons cited for Smt S.Latha were as under:
The assessee has shown Rs.65,00,000/- as unsecured loan received from friends and relatives, in the liability side of the balance sheet and part of the amount received as unsecured loan was invested in M/s.Sri Jeyanthi Builders, a firm in which the assessee was a partner. During the assessment proceedings u/s.143(3) r.w.s.147, ‘genuineness of transaction was not properly examined by the Assessing Officer.
Contention of the Ld.AR was that the aspects on which the Ld.CIT had sought to invoke the powers vested on him u/s.263 of the Act were properly examined by the AO during the course of re-assessment proceedings. As per the Ld.AR, it was only after finding the explanation offered by the assessee to be satisfactory that the AO had completed the assessment. Contention of the Ld.AR was that the Ld.CIT was endeavouring to substitute his view with a lawful view taken by the AO.
According to him, powers u/s.263 of the Act could not be invoked for substituting a lawful view taken by the AO.
Per Contra, Ld.DR strongly supporting the orders of the Ld.CIT submitted that the AO had not done proper verification of the records submitted by the assessee during the course of the re-assessment proceedings. According to him, failure of the AO to do so, rendered the order erroneous and prejudicial to the interest of the Revenue. Reliance & :- 4 -: was placed on the judgment of the Hon’ble High Court in the case of K.A.Ramasamy Chettiar Vs. CIT (1996) 220 ITR 657.
We have heard the rival contentions and perused the orders of the authorities below carefully. It is not disputed that in both the assessee’s cases Shri S.Sekar & Smt.S.Latha, original assessments were completed u/s.143(1) of the Act, and these were later re-opened. Reasons for such re-opening mentioned in the Assessment Order of Shri S.Sekar was under:
“Subsequently, a notice under section 148 was issued on 05/01/2015 as there was an escapement of income due to fresh addition in capital to the tune of Rs.68,50,000/-“.
In the case of Smt.S.Latha, the reason was mentioned under:
To verify the genuineness of the unsecured loan of Rs.65,00,000/- shown in the balance sheet of the assessee, the case was selected for scrutiny That the AO had duly verified the details filed by the assesses during the re-assessment proceedings, is clear from the following excerpts taken from the respective Assessment Orders:
Shri S.Sekar:
During the course of hearing, it was explained by the assessee’s representative that the amount credited under advances of Rs.80,00,000/- in the balance Sheet was the advance received from sub contractors. It is also added that the fresh investment in Sri Jeyanthi Builders of Rs.68,50000/- is out of the above advances received from sub contractors. The assessec has filed details regarding the persons from whom the advances were received. The assessee has also filed copies of return of income filed by the persons from whom advances were received and also confirmation letters from the persons concerned. On perusal of the details, it is found that the assessee’s contentions are acceptable and considered.
ITA No.1819/Chny/2018 & :- 5 -:
Smt. S.Latha: When the assessee’s representative was asked to produce evidence to prove the genuineness of the unsecured loan, he has filed confirmation letters from the persons from whom the assessee has received unsecured loan to the extent of Rs.65,00,000/- and the same have been verified.
In our opinion, It is clear that the AO had examined the credits shown by the assessees in their respective Balance Sheet, with the details filed by them. In the case of Shri S.Sekar, the AO clearly mentioned that the assessee had filed required information regarding the persons from whom he had claimed receipt of advance and also filed confirmation letters. The AO also mentioned that he had verified such details and found it to be acceptable.
A reading of the reasons mentioned by the Ld.CIT for invoking the powers vested on him u/s.263 reproduced by us at Para 3 clearly show that they were on issues which stood already verified by the AO. It is trite law that powers u/s.263 of the Act can be invoked only where there is an error in the order of the Assessment Order and such error has caused prejudice to the Revenue. No doubt, failure to enquire into an issue which any prudent person would have done can render the order erroneous and prejudicial. However once enquiries are done, just because the CIT found the results of the enquiry not to his liking, we cannot say that there was absence of application of mind or inadequate application of mind. Such powers cannot be used for substituting a lawful view taken by the AO.
Coming to the judgment of the Hon’ble High Court in the case of & :- 6 -: K.A.Ramasamy Chettiar Vs. CIT (1996) 220 ITR 657, relied upon by the Ld.DR, there the concerned Officer had not done the enquiries which were expected from him. As against this, in both the cases before us, it is clear that the AO had made the necessary enquiries. We are of the opinion that the Ld.CIT fell in error in invoking jurisdictional power u/s.263 of the Act. Accordingly, the orders of the Ld.CIT are set-aside.
In the result, the appeals filed by the assessees in & 1820/Chny/2018 are allowed.
Order pronounced on the 16th day of October, 2018, in Chennai. (धु"वु आर.एल. रे"डी) (अ"ाहम पी. जॉज") (DUVVURU R.L. REDDY) (ABRAHAM P.GEORGE) "या$यक सद"य/JUDICIAL MEMBER लेखा सद"य/ACCOUNTANT MEMBER