CHANDMAL HUKUMCHAND JAIN,KHANDWA vs. PCIT -1 , INDORE
Facts
The assessee filed a return of income for AY 2013-14. The AO reopened the assessment under Section 148 to assess escaped income related to unsecured loans. The AO made a disallowance of 10% of the loan amount. The PCIT invoked Section 263, considering the addition to be erroneous and prejudicial to revenue, directing a de-novo assessment.
Held
The Tribunal held that the PCIT erred in invoking Section 263 when the issue of unsecured loan was already pending before the CIT(A). The Tribunal noted that the loan transaction was conducted through banking channels and supported by documentation, and that the assessee's appeal against the AO's addition was already pending.
Key Issues
Whether the PCIT can invoke Section 263 when the same issue is pending before the CIT(A)? Whether the unsecured loan transaction was an accommodation entry?
Sections Cited
263, 143(3), 148, 147, 144B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Per Vijay Pal Rao, JM:
This appeal by the assesse is directed against the revision
order dated 18.03.2024 of Principal Commissioner of Income Tax-1
Indore passed u/s 263 of the Act for A.Y. 2013-14.
The assessee has raised following grounds of appeal:
ITA No.313/Ind/2024 Shri Chandmal Hukumchand Jain
1.That on the facts and circumstances of the case Ld. Pr.CIT-1, Indore has erred in invoking provisions of Section 263 of Income Tax Act, 1961 directing AO to frame the assessment de-novo and assess the income in the hands of the assessee. 2. That on the facts and in the circumstances of the case Ld. Pr.CIT-1, Indore has erred in invoking provisions of Section 263 of Income Tax Act, 1961 by blatantly ignoring the jurisdictional judicial pronouncements in favour of the assesse on merits of this case. The action of Ld. Pr.CIT-1, Indore was wholly unreasonable, uncalled for and bad in law. 3.That the impugned order so passed is illegal and wrong 4. That the assessee craves leave to add, amend, alter or delete any of the grounds of appeal and all the grounds are without prejudice to each other.”
We have heard the Ld. AR as well as Ld. DR and carefully
perused the impugned order along with the order of the A.O. The
assessee filed its return of income for the Assessment Year under
consideration on 27.09.2013 declaring total income of
Rs.71,75,100/-. The original assessment order u/s 143(3) of the
Act was completed on 30.11.2015 at total income of Rs.
73,00,000/-. Thereafter the case was reopened by the A.O vide
notice u/s 148 of the Act on 31.03.2021 to assess the income
escaped assessment on account of unsecured loans taken by the
assessee from M/s. Jay Jyoti India Pvt. Ltd. In the reassessment
order passed u/s 147 r.w.s. 144B of the Act dated 30.03.2022 the
ITA No.313/Ind/2024 Shri Chandmal Hukumchand Jain A.O made the disallowance of Rs.4,00,000/- being 10% of the
unsecured loan of Rs.40,00,000/- taken by the assessee.
Thereafter the PCIT on perusal of the assessment recorded observed
that the assessee has received accommodation entry to the tune of
Rs.40,00,000/- during the year under consideration from M/s. Jay
Jyoti India Pvt. Ltd which was liable to be added to the income of
the assessee whereas the A.O has made addition of Rs.4,00,000/-
@10% of the total transaction of Rs.40,00,000/-. Thus the PCIT
was of the opinion that the A.O has passed the reassessment order
without making required enquiry/investigation which has resulted
the assessment erroneous in so far as prejudicial to the interest of
the revenue. He has issued a show cause notice dated 29.02.2024
u/s 263 of the Act. The assessee replied to the show cause notice
and submitted that the reassessment was reopened on the very
issue and the assessee submitted all relevant documents including
the confirmation of the party, statement of bank account and proof
of repayment of the said unsecured loan within a period of 40 days.
Further the assessee also pointed out that the addition made by the
A.O has been challenged by the assessee by filing the appeal before
CIT(A) which is pending for adjudication. Thus, the assessee
ITA No.313/Ind/2024 Shri Chandmal Hukumchand Jain contended before the PCIT that the issue in question is a subject
matter of appeal before CIT(A) and therefore, the jurisdiction of the
PCIT is barred to invoke the provisions of Section 263 of the Act on
the same issue which is a subject matter before CIT(A). The
assessee has also contested the matter on the merits and submitted
that when no unsecured loan was standing in the books of
accounts as on 31.03.2013 as the transaction of taking loan and
repayment of the same was and within 40 days then the same
cannot be treated as an accommodation entry and consequently
added to the income of the assessee. The PCIT has set aside the
order of the A.O with the direction to reexamine the issue to make
de-nova assessment in para 13 as under:
“13. Therefore, in view of the above discussion, I am of the considered opinion that the assessment order dated 30/03/2022 for A.Y. 2013-14 is erroneous in so far as it is also prejudicial to the interest of revenue on account of passing of the assessment order without making required inquiries and verification, which should have been made, Accordingly, I am satisfied that provisions of section 263 of Income Tax Act 1961 are required to be invoked. Therefore, the assessment for A.Y. 2013-14 framed on 30/03/2022 is hereby set-aside to the file of AO to re-examine the issue and to make de-novo assessment, indicated in the preceding discussion, u/s 263 and passing an order as per the law after making necessary verification, inquiries and investigations. It would be not out of place to mention that the AO shall re-examine only the issue which has been indicated for further investigation in the preceding discussion, after according due opportunities of being heard to the assessee”
ITA No.313/Ind/2024 Shri Chandmal Hukumchand Jain
We have further noted that the assessee produced the copies
of the bank accounts of the assessee as well as M/s. Jay Jyoti India
Pvt. Ltd to show that receipt of the loan as well as repayment of the
loan were done through the banking channel and there is nothing
suspicious found either by the A.O or PCIT in respect of these
transaction. The assessee has also filed the ITR of M/s. Jay Jyoti
India Pvt. Ltd along with confirmation of advancing the loan and
repayment of loan by the assessee. Ld. AR has relied upon the
decision of this Tribunal dated 21.08.2023 in case ACIT V/s
Krishna Devcon Ltd in ITA No.8 to 10/Ind/2022 and submitted that
the Tribunal has decided the issue of unsecured loan taken by the
said assessee from M/s. Jay Jyoti India Pvt. Ltd in favour of the
assessee. Therefore, it emanates from the record produced by the
assessee that the alleged transaction of loan of Rs.40,00,000/- was
taken by the assessee through banking channel and it was also
repaid by the assessee through banking channel within the period
of 40 days. The entries of the loan taken by the assessee as well as
repayment of loan are reflected in the bank account of the assessee
and nothing was standing as loan from M/s. Jay Jyoti India Pvt.
ITA No.313/Ind/2024 Shri Chandmal Hukumchand Jain Ltd as on 31.03.2013. Further the addition made by the A.O @10%
of the loan transaction has been challenged by the assessee before
CIT(A) which is pending for adjudication. Thus it is clear that the
very issue of unsecured loan is a subject matter pending before
CIT(A) and therefore as per Clause-(c) of explanation-1 of Section
263(1) of the Act the Commissioner cannot invoke the provisions
u/s 263 of the Act on the issue which is a subject matter of appeal
filed against the order of the A.O. Accordingly in the facts and
circumstances of the case as discussed above when the entire
record was available with the A.O as well as PCIT then the matter
could have been decided conclusively by the PCIT instead of
remanding the matter to the A.O who has already passed an order
on this issue and made the addition @10% of the loan amount.
Moreover, when the issue is a subject matter of appeal pending
before CIT(A) then the PCIT ought to have not taken up the said
issue u/s 263 of the Act. Hence, the impugned order passed by the
PCIT is unsustainable and the same is set aside.
ITA No.313/Ind/2024 Shri Chandmal Hukumchand Jain
The appeal of the assessee is allowed.
Order is pronounced in the open court on 18.10.2024.
Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member
Indore, 18.10.2024 Dev/Sr. PS
Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
