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Facts
The assessee's original assessment for AY 2017-18 under Section 143(3) included an addition of Rs. 12,00,40,156/- under Section 68 for 18 unsecured creditors. The ld. PCIT initiated a first revision under Section 263, finding a lesser addition for 3 creditors (Sahyog Group), resulting in an understatement of income. Subsequently, the ld. AO's giving effect order was again sought to be revised by the ld. PCIT under Section 263 on two grounds: that the ld. AO failed to make additions for the remaining 15 creditors and that Section 68 was misapplied to an interest payable journal entry (differential amount) for the 3 Sahyog Group creditors.
Held
The Tribunal quashed the second revision order passed by the ld. PCIT under Section 263. It held that the ld. AO had taken a plausible view after proper verification of evidences regarding the 15 loan creditors, and therefore, no error could be attributed to the AO's order. Furthermore, Section 68 of the Act was not applicable to the differential amount of Rs. 3,13,97,257/- which merely represented a journal entry for interest payable, not a physical receipt of money, and thus the ld. AO's view on this issue was also plausible. The Tribunal relied on Supreme Court judgments in Malabar Industrial Co. Ltd. and H H Sri Rama Verma vs CIT.
Key Issues
1. Whether the ld. PCIT's revision order under Section 263 was valid when the ld. AO had taken a plausible view after adequate enquiry regarding 15 loan creditors. 2. Whether Section 68 of the Act could be invoked to make an addition for interest payable recorded as a journal entry, which does not involve a physical receipt of money.
Sections Cited
143(3), 263, 68, 250, 36(1)(iii), 37
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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2017-18, arises out of the order of the Pr. Commissioner of Income Tax (Appeals), New Delhi [hereinafter referred to as „ld. Pr. CIT(A)‟, in short] dated 18.03.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 31.12.2019 by the Assessing Officer, ACIT, Circle-7(1), Delhi (hereinafter referred to as „ld. AO‟).
At the outset, we find that there is delay in filing the appeal of the assessee before us by 66 days. Considering the reasons adduced in condonation petition, we are convinced that the assessee was prevented from sufficient cause for not filing the appeal in time. Hence, in the interest
The assessee has raised the following grounds:-
1. That order dated 18.3.2025 u/s 263 of the Act by the learned Pr. Commissioner of Income Tax (Central), Delhi-1 has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 1.1 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view. 1.2 That the learned Principal Commissioner of Income Tax has failed to appreciate that action u/s 263 of the Act is otherwise too inapplicable on the factual matrix of the facts of the instant case since it is not a case of "lack of enquiry" or "lack of investigation" and therefore the invocation u/s 263 of the Act is not in accordance with law. 1.3 That further more the learned Principal Commissioner of Income Tax has proceeded to set aside the order on mere speculation, generalized observations, theoretical allegations and assertions, without there being any supporting evidence and is therefore not in accordance with law. 1.4 That even otherwise the finding that order of assessment is erroneous in as much prejudicial to the interest of revenue on the ground that "the Id. AR has only submitted that the appeal has been filed by the assessee against the additions made by AO in the earlier assessment orders, but has not been able to submit any arguments why the AO should not be directed to make the addition amounting to Rs. 4,83,07,312/- which was duly made by AO in respect of balance fifteen creditors in the assessment order passed u/s 143(3) dated 31.12.2019"is based on factually incorrect assumption, incorrect application to the provisions of law and therefore untenable.
2. That the learned Principal Commissioner of Income Tax has failed to appreciate that since appeal arising from the order sought to be revised was pending before the learned Commissioner of Income Tax (Appeals).
M/s. Decent Securities (P) Ltd therefore exercise of jurisdiction under section 263 of the Act was beyond the scope and provisions of section 263 of the Act and thus, without jurisdiction.
3. That the learned Principal Commissioner of Income Tax has erred both in law and on facts in invoking section 263 of the Act on vague cryptic contradictory, legally misconceived and factually error conclusion and therefore impugned order is unsustainable.
4. That the learned Principal Commissioner of Income Tax has failed to appreciate that surmises, conjecture and suspicion could not be a basis much less a valid basis to invoke section 263 of the Act.
That addition made of Rs. 4,83,07,312/- representing cash credit in respect of balance fifteen creditors and, erroneously directed to be taxed u/s 68 of the Act is illegal, invalid and untenable 5.1 That finding of the learned Principal Commissioner of Income Tax that "total income of the assessee, as this addition had been duly made by AO in respect of balance fifteen creditors in the assessment order passed u/s 143(3) dated 31.12.2019, but in the assessment order passed on 30.3.2023 (passed in consequence to order u/s 263), the AO had omitted to make this addition. The AO is directed to make addition amounting to Rs. 4,83,07,312/- to the total income of the assessee, in accordance with the provisions of section 68 of the Act." is not based on correct appreciation of facts on record, legally misconceived, misplaced and untenable.”
We have heard the rival submissions and perused the material available on record. the return of income for AY 2017-18 was electronically filed by the assessee company on 02.11.2017 declaring total income of Rs. 42,88,560/-. The assessment was completed u/s 143(3) of the Act on 31.12.2019 determining the total income of Rs. 12,91,28,716/- wherein, the addition was made on account of unsecured loans u/s 68 of the Act amounting to Rs. 12,00,40,156/- being loan received from 18 parties. This assessment was sought to be reopened by the ld PCIT u/s 263 of the Act on the grounds that the ld AO while making the addition u/s 68 of the Act for 18 parties had made lesser addition in respect of 3 creditors i.e. M/s. Sahyog Realcon, Sahyog Kuries Pvt. Ltd and Sahyog Township Pvt. Ltd. M/s. Decent Securities (P) Ltd The ld PCIT noted that the assessee had received a total sum of Rs. 12,35,76,756/- from these 3 parties but the ld AO had made addition u/s 68 of the Act only to the tune of Rs. 7,17,32,844/-. Since, this resulted in understatement of income by Rs. 5,18,43,912/-, the ld PCIT treated the order of the ld AO dated 31.12.2019 as erroneous and prejudicial to the interest of revenue and passed revision order u/s 263 of the Act on 11.03.2022 directing the ld AO to consider the correct figure of loan received from 3 creditors after providing sufficient opportunity to the assessee. It is pertinent to note that against the assessment order framed u/s 143(3) of the act on 31.12.2019, the assessee had preferred an appeal before the ld CIT(A) on 17.01.2020. Hence, on the date of passing of revision order u/s 263 of the Act on 11.03.2022, the very same issue of addition of unsecured loans u/s 68 of the Act was indeed pending before the ld CIT(A). But the assessee did not prefer any appeal against the revision order passed u/s 263 of the act before this Tribunal.
5. The ld AO pursuant to the revision order passed u/s 263 of the Act ld PCIT, pass an order u/s 143(3) read with Section 263 of the Act on 30.03.2023 wherein, the ld AO made an addition of Rs.. 1,23,00,000/- on account of cash deposits made during the period of demonetization and Rs. 9,21,79,000/- on account of unsecured loans and determined the total income of the assessee of Rs. 10,87,67,560/-. Against giving effect order dated 30.03.2023 passed by the ld AO, the assessee preferred an appeal before the ld CIT(A) on 26.04.2023.
The giving effect order to 263 proceedings passed by the ld AO on 30.03.2023 was sought to be revised by the ld PCIT u/s 263 of the act on the ground that the ld AO had merely made addition in respect of 3 loan creditors as under:-
M/s. Decent Securities (P) Ltd a. Sahyog Realcon Ltd Rs. 67,75,000/- b. Sahyog Kuries Pvt. Ltd Rs. 7,28,50,000/- c. Sahyog Township Pvt. Ltd Rs. 1,25,54,000/- Total Rs. 9,21,79,000/-
According to the ld PCIT the first revision order dated 11.03.2022 was passed only to revise the figures of loans in respect of aforesaid 3 parties and the remaining 15 creditors were not disturbed by the ld PCIT at all. Accordingly, the ld AO while passing the order giving effect to 263 proceedings ought to have reopen the additions made in respect of 15 creditors and in addition there to should have added the correct loan amount in respect of aforesaid 3 creditors. Since, the ld AO had not made any addition in respect or original 15 creditors, which was made in the original assessment order dated 31.12.2019, the order passed by the ld AO dated 30.03.2023 was treated as erroneous and prejudicial to the interest of the revenue by the ld PCIT warranting revision u/s 263 of the Act. Further, the ld PCIT noted that even in respect of aforesaid 3 loan creditors added by the ld AO, the correct amount of addition should be Rs. 12,35,76,257/- instead of Rs. 9,21,79,000/-. Hence, show cause notice u/s 263 of the Act was issued by the ld PCIT by 06.03.2025 which eventually culminated in the passing of revision order u/s 263 of the act on 18.03.2025. The present appeal before us is against the 2nd revision order passed u/s 263 of the Act dated 18.03.2025.
Against the original assessment order framed u/s 143(3) of the Act on 31.12.2019, as stated earlier, the assessee had preferred an appeal before the ld CIT(A) on 17.01.2020 that appeal was disposed off by the ld CIT(A)/ NFAC vide order dated 31.07.202 by giving the following findings:- “2.1 The appeal of the assessment order u/s 143(3) has been set aside to the file of the ld AO by PCIT on 11.03.2022 u/s 263. Accordingly, the AO Page | 5 M/s. Decent Securities (P) Ltd has passed an assessment order u/s 143(3) r.w.s 263 on 30.03.2023. The assessee had filed appeal against the assessment order u/s 143(3) r.w.s. 143(3) dated 31.12.2019 is no longer valid. Accordingly, the notice u/s 250 of the Act is infructuous and inadvertent. Therefore, notice u/s 250 is withdrawn. 2.2 In result, appeal is treated as dismissed as withdrawn for statistical purposes.”
Against this order of NFAC, the assessee had preferred an appeal before this Tribunal on 13.10.2025 which has been named as and is pending for disposal. Pursuant to the 2nd revision order passed by the ld PCIT on 10. 18.03.2025, the ld AO passed an giving effect order on 30.06.2025 u/s 143(3) r.w.s 263 of the Act after making the following addition totally:- a. addition on account of cash deposit Rs. 1,23,79,000/- b. addition on account of Sahyog Group 3 parties as was original made Rs. 9,21,79,000/- c. addition on account of Sahyog Group- differential amount brought to tax as directed by the ld PCIT u/s 263 Rs. 3,13,97,257/- d. addition in respect 15 loan creditors- brought to tax per direction of the ld PCIT u/s 263 Rs. 4,83,07,312/-
Against this assessment order dated 30.06.2025, the assessee had preferred appeal before the ld CIT(A) on 29.07.2025 and same is pending.
The ld CIT(A) in the first round of proceedings had also understood that the ld PCIT in the first revision order u/s 263 of the Act had indeed directed the ld AO to pass fresh assessment order. Hence, the ld AO looking into the additional evidences which are available on record in M/s. Decent Securities (P) Ltd respect of 15 loan creditors cannot be treated as not complying with the direction of the ld PCIT. In fact the wording couched by the ld PCIT in the first revision order, understanding by ld CIT(A) in first round of proceedings and understanding by the ld AO in the second round of proceedings are on the same lines that the ld AO was directed to frame fresh assessment. At the time of framing of fresh assessment, the additional evidences that were placed by the assessee before the ld CIT(A) in the first round of proceedings were also available on record. We find that the ld AO in the giving effect proceedings to Section 263 was in possession of additional evidences filed by the assessee before the ld CIT(A) as mentioned in para 4 supra to prove the 3 ingredients of Section 68 in respect of 15 loan creditors. These documents are very much available on record before the ld AO while passing the giving effect order. The ld AO in the giving effect proceedings had understood that he has to frame a fresh assessment order pursuant to the directions of the ld PCIT to frame the assessment afresh. Accordingly, the ld AO on verification of the additional evidences that are already on record, was convinced in respect of 15 loan parties and hence, chose not to make any addition u/s 68 of the Act. Hence, the ld AO, on appreciation of factual evidences available on record had taken a plausible view on the matter of examination of 15 loan creditors. Once a plausible view has been taken by the ld AO, the same cannot be subjected to revision u/s 263 of the Act. Reliance is placed rightly on the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd reported in 243 ITR 83 (SC) and Max India Ltd reported in 295 ITR 282 (SC). Hence, no error could be attributed in the order of the ld AO on account of addition not being made in respect of 15 loan creditors. Accordingly, the ld AO had indeed made verification of evidences in respect of 15 loan creditors proving the 3 ingredients of Section 68 of the Act. Hence, it cannot be said that ld AO has not made adequate enquiries on those 15 Page | 7
With regard to second issue of revision jurisdiction u/s 263 of the Act suggesting an addition of Rs. 3,13,97,257/- in respect of 3 loan creditors of Sahyog Group, the following table would explain the situation better:-
Loan amount Interest payable Total cash credit Sahyog Realcon Ltd Rs. 67,75,000/- Rs. 26,251 Rs. 68,01,251 Sahyog Kuries Pvt. Ltd Rs. 7,28,50,000 Rs. 2,93,96,471 Rs. 10,22,46,471 Sahyog Township Pvt. Ltd Rs. 1,25,54,000 Rs. 19,74,535 Rs. 1,45,28,535 Total Rs. 9,21,79,000 Rs. 3,13,97,257 Rs. 12,35,76,257
From the aforesaid table, it could be seen that the sum of Rs. 3,13,97,257/- represent merely journal entry on account of interest payable to the loan creditors and the same does not constitute any sum of money received during the year. In other words, no fresh sum of money was received from these 3 loan creditors in the sum of Rs. 3,13,97,257/- during the year warranting any addition u/s 68 of the Act. We find that the ld PCIT could have suggested disallowance of interest on these 3 loan creditors either u/s 36(l)(iii) or u/s 37 of the Act since, the loan amount itself was earlier added u/s 68 of the Act, but the ld PCIT in his wisdom, chose not to do so. We find the ld PCIT had only suggested this interest payable emanating from a journal entry in the sum of Rs. 3,13,97,257/- (without physical receipt of money during the year) to be added as unexplained cash credit u/s 68 of the Act. In our considered opinion, the provisions of Section 68 of the Act per se could not be made applicable for the said transaction. Reliance in this regard has been rightly made on the decision of Hon'ble Supreme Court in the case of H H Sri Rama Verma vs CIT reported in 187 ITR 308 (SC) wherein they had explained the expression 'a sum of money' to constitute physical receipt. The Id AO had taken a plausible view on this issue while framing the giving effect order to section M/s. Decent Securities (P) Ltd 263 proceedings. Hence, there cannot be any error that could be attributed in the order of the Id AO warranting any revision by the ld PCIT u/s 263 of the Act. Hence, invocation of revision jurisdiction u/s 263 of the Act on this issue of Rs. 3,13,97,257/- is invalid and unsustainable in the eyes of law.
In view of the aforesaid observations, we have no hesitation to quash the revision order passed by the ld PCIT u/s 263 of the Act on 18.03.2025. Accordingly, the grounds raised by the assessee are allowed.
We find that the ld AR had filed written submissions on various legal facets that were allegedly raised in the additional grounds of appeal. But on perusal of the appeal folder, we find that there were no additional grounds which were even filed by the assessee. Further, no arguments were advanced by the ld AR at the time of hearing on account of alleged additional grounds. Hence, we do not deem it fit to even get into the admission and adjudication of non-existent additional grounds. This observation is hereby made as a matter of abundant caution.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 31/12/2025.