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Facts
The assessee appealed against the PCIT's order under Section 263 of the Income Tax Act for AY 2018-19. The PCIT had deemed the original assessment order passed by the AO under Section 143(3) as erroneous and prejudicial to the revenue, primarily concerning TDS disallowance under Section 40(a)(ia), disallowance of proportionate interest, and treatment of unsecured loans as unexplained credit under Section 115BBE. The assessee contended that the AO had already conducted thorough inquiries on these issues.
Held
The Tribunal, after reviewing the records and judicial precedents, found that the AO had indeed made proper inquiries and applied his mind to the issues now questioned by the PCIT. It held that the conditions for invoking Section 263 (erroneous and prejudicial to revenue) were not met, as the AO's order was not found to be erroneous or infirm. Consequently, the PCIT's revisionary order was set aside.
Key Issues
1. Whether the PCIT had valid jurisdiction under Section 263 of the Income Tax Act to revise the assessment order for AY 2018-19. 2. Whether the original assessment order was erroneous and prejudicial to the revenue for not disallowing TDS, proportionate interest, and treating unsecured loans as unexplained credit, despite prior inquiries by the AO.
Sections Cited
263, 143(3), 142(1), 40(a)(ia), 139(1), 201(1A), 206(7), 115BBE, 127(2), 43B, 194J, 194A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI RAJ KUMAR CHAUHAN, HONBLE
PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order dated 13/03/2024 passed by ld. PCIT [hereinafter ‘ld. PCIT'] pertaining to AY 2018-19. 2. The sum and substance of the grievance of the assessee is that the ld. PCIT erred in assuming juri iction u/s 263 of the Act and further erred in holding that the assessment order dated 29/09/2021 is not only erroneous but prejudicial to the interest of the revenue.
Representatives of both the sides were heard at length. Case records carefully perused and the relevant documentary evidence brought on record duly considered.
Briefly stated the facts of the case are that the return of income was originally filed on 31/10/2018 declaring total income at Rs.94,90,890/-. The return of income was selected for scrutiny through CASS and accordingly statutory notices were issued and served upon the assessee. During the course of scrutiny assessment proceedings, the notices u/s 142(1) of the Act dated 04/11/2020 required the assessee interalia to furnish details of unsecured loans/deposits taken during the year including squared up loans and also details of loans/advances and deposits given, including the accounts squared up during the year. Vide reply dated 18/11/2020, the assessee complied with the queries raised by the AO.
Again, a showcause notice was issued on 11/06/2021, which reads as under:- GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 4, THANE To, AKSHAR DEVELOPERS 7,8,PLOT NO.42,SHREEJI SEVA OPP.SEAWOOD RLY STAT NERUL(W) NAVI MUMBAI 400706, Maharashtra India PAN: AAKFA0455B AY: 2018-19 DIN & Notice No: ITBA/AST/F/143(3)(SCN)/20 21-22/1033408553(1) DATED: 11/06/2021 Hearing Date and Time: 16/06/2021 12:30 PM SHOW CAUSE NOTICE This case has been centralized to this charge after transfer from DCIT, Central Circle-4(3), Mumbai vide order u/s 127 of the Income tax Act, 1961 of Principal Commissioner of Income Tax, Central-II, Mumbai dated 15/04/2021, the copy of which is attached herewith. 2018-19
A. Non Payment of TDS deducted but not deposited to government account amounting to Rs 29,76,947/-. As per your submission and on verification of your Form 3CD annexure to the Tax Audit report it is noticed that no payment of TDS has been paid/made to the Government which has been deducted by your goodself during the assessment year 2018-19 before filing of the return of Income. Therefore, in view of the above, you are hereby required to show cause as to why addition u/s 43B for non payment of TDS within the prescribed time limit may not be made and added to your total income.
B. Unsecured loans On perusal of the balance sheet for the year under consideration it is noticed that unsecured loans of Rs 28,56,76,369/- has been claimed by the assessee. The confirmations of the loan parties submitted till date does not include bank statement.
Hence to establish the creditworthiness you are requested to submit the bank statement of the concerned parties showing the transactions done during the year under consideration. In view of the above, you are hereby required to show cause as to why the unsecured loans claimed by you may not be treated as unexplained credit and added to your total income. (3) C. Interest free loans: During the year under consideration the assessee has advanced loans and advances to the tune of Rs 31,16,96,725/- and on the other hand the assessee has obtained unsecured loans on which interest is being paid. Hence showcause as to why the interest paid should not be disallowed proportionately. 4) As per the information available in this office, it is noticed that you have made an accommodation entry of unsecured loan of Rs 58,25,000/- from entry provider Shri Ashwin Kanji Shah for the year under consideration. In this connection you are requested to provide all the relevant documents to substantiate your claim. In view of the above, you are hereby required to show cause as to why the unsecured loans of Rs 58,25,000/- from entry provider Shri Ashwin Kanji Shah may not be treated as unexplained credit and added to your total income. Your reply/submissions should reach in this office on or before 16th June 2021 failing which, it will be presumed that you have nothing to say in the matter and you accept proposed additions as stated above vide this show cause notice and assessment will be completed on the basis of material available on record INCOME TAX DEPARTMENT BHARATH R. CENTRAL CIRCLE 4, THANE For Akshar Developers Partner
On 06/09/2021, another showcause notice was issued which is as under:- GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 4, THANE To AKSHAR DEVELOPERS 7,8,PLOT NO.42,SHREEJI SEVA OPP.SEAWOOD RLY STAT NERUL(W) NAVI MUMBAI 400706, Maharashtra India PAN: AAKFA0455B AY: 2018-19 DIN & Notice No: ITBA/AST/F/143(3)(SCN)/20 21-22/1035306362(1) DATED: 06/09/2021 SHOW CAUSE NOTICE Hearing Date and Time: 09/09/2021 11:12 AM It is noted that during the year under consideration the assessee has granted interest free loans and advances and also paid interest expense. A show cause notice was issued to the assessee to show cause as to why proportionate disallowance should not be made, to which the assessee submitted as the source of interest free loans and advances is the interest free funds. In this regard you are required to furnish the bank statements highlighting the source and the amount of interest free loans and advances given. On failure of which proportionate disallowance would be made for the interest expenses paid during the year. BHARATH R. CENTRAL CIRCLE 4, THANE (In case the document is digitally signed please refer Digital Signature at the bottom of the page) For Akshar Developers Partner
The assessee filed a detailed reply which reads as follows:- BEFORE THE ASST. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 4, THANE M/s. Akshar Developers 7, 8, Plot no. 42, Shreeji Seva, Opp. Seawood Rly. Station, Nerul (West), Navi Mumbai - 400 706, Maharashtra, India. PAN: AAKFA0455B ---Assessee In the matter of show cause notice dated 11/06/2021 issued in case of assessment proceedings for AY 2018-19. The assessee respectfully submits:
That the said notice is issued without juri iction. As per the order dated 26/07/2019 issued by PCIT (Central), Pune u/s. 127(2) of the Income Tax Act, 1961, ITO - Ward 28(1)(1), Mumbai is the juri ictional officer of the assessee. A copy of said transfer order is annexed hereto for your reference and marked as