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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the Pr. Commissioner of Income Tax, Raipur-1 (for short ‘Pr. CIT’) u/s. 263 of the Income-tax Act, 1961 (for short ‘Act’), dated 22.03.2023, which in turn arises from the order passed by the A.O. u/s. 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 17.02.2021 for A.Y. 2018-19. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. That the order passed u/s. 263 by the Ld. Pr. Commissioner is bad in law as well as on facts.
2. That the Ld. Pr. Commissioner is not justified in invoking the jurisdiction u/s. 263 and setting aside the assessment order of the A.O.
3. That the case was selected on limited issues, the Ld. Pr. Commissioner erred in treating the order of the A.O. as erroneous and prejudicial to the revenue without considering that the case was selected on limited issues and which were considered by the A.O.
4. That the Ld. Commissioner erred in not considering the submissions and other supporting documents submitted at the time of proceedings.
5. That the appellant craves leave to add to and/or amend. Alter; rescind the grounds taken here in above, before or the time of hearing of this appeal.”
The A.O. framed the original assessment vide his order passed u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 17.02.2021, wherein the income returned by the assessee was accepted at Rs.30,18,080/-.
3 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur-
After the culmination of the assessment proceedings, the Pr. CIT called for the assessment records. On a perusal of the record, the Pr. CIT was of the view that the order passed by the A.O u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 17.02.2021 was erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act for two-fold reasons, viz. (i) that the A.O while framing the assessment, had summarily accepted the assessee’s claim for depreciation with respect to the addition made in various blocks of assets during the year, i.e., without carrying out necessary verifications and calling for the requisite details, viz., purchase bills of assets, when those assets were put to use, source of investments, ledger, and bank statements, etc.; and (ii) that the A.O had without making necessary inquiries in the backdrop of supporting documentary evidence summarily accepted the unsecured loans aggregating to Rs.15.90 lacs that were raised by the assessee during the year under consideration, viz. (i) Smt. Suman Agrawal: Rs.4,40,000/-; and (ii) Shri Sudeep Bagadia, HUF: Rs.11,50,000/-. Accordingly, the Pr. CIT issued a “Show cause notice” (SCN) dated 22.02.2023 and called upon to put forth an explanation as to why the order passed by the A.O u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 17.02.2021 may not be set-aside.
As the reply filed by the assessee wherein he had tried to impress upon the Pr. CIT that the A.O., after carrying out necessary verifications, had accepted the assessee’s claim for deduction on depreciation and also unsecured loans that were raised during the year under consideration did not find favor with the Pr. CIT, therefore, vide his order passed u/s. 263 of the Act dated 22.03.2023, he set aside
4 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- the assessment order and directed the A.O. to frame the assessment after affording the assessee a reasonable opportunity of being heard. For the sake of clarity, the relevant observations of the Pr. CIT are culled out as under:
“8. The reply of the assessee dated 02.03.2023 has been gone through and following observations are being made: I. It is seen that the main thrust of arguments of the assessee is that this was a limited scrutiny case and not a Complete Scrutiny case. That, therefore, the AO was within his rights not to enquire about the Unsecured Loans. That, the AO was legally bound not to exceed his boundaries laid down by the parameters of the Limited Scrutiny. So, one thing gets established that there indeed was no examination of the Unsecured Loans as regards the identity of the Lenders, the genuineness of the transactions and the credit-worthiness of the Lenders. So, the issue of Lack of enquiry as regards the Unsecured Loans is proved beyond doubts. The jurisdiction to invoke Section 263 is therefore very much in order. Now, coming to the type of case this was, as already stated, the assessee has contended that this was a case of limited scrutiny and that, the points of scrutiny did not cover Unsecured Loans, etc. However, it is interesting to observe here that it is mentioned in the first para of Assessment order dated 17.02.2021 itself that this case was selected for complete scrutiny. Can there be any further arguments on this issue , then !What is more , the assessee has also not raised any doubts over the observations made by the AO in the assessment order. In view of these facts, it is observed that the assessee due to some misunderstanding is taking it as a limited scrutiny case whereas it was a case of complete scrutiny, because this fact is written in the very beginning of the assessment order. Therefore, this argument of the assessee is not found to be tenable. II. In respect of purchase of assets during the relevant period, the assessee has furnished copies of purchase bills of Computer and other requisite papers. The contention of the assessee has been verified with the submission of the assessee and no adverse inference is drawn. In respect of purchase of Tractor and its accessories, the assessee has furnished purchase bills and other supporting evidence. From the perusal of purchase bills of Tractor and accessories/equipment, it is seen that the same were purchased from Raipur on 30.03.2018 but the question still remains unanswered as to when the Tractor was got registered with Road Transport Authority and when it was actually put to use. Therefore, the contention of the assessee needs further verification from the registration of Road Transport Authority, etc. Accordingly, the matter is set aside to the A.O. III. Regarding Unsecured loan from 2 parties i.e Suman Agrawal amounting 2,00,000/ and Sudeep Bagadia HUF amounting 11,50,000/-, following observations are made:
5 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur-
Let us first see the bare provisions of Section 68 : i) Section 68 — Cash Credit "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: [Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever named called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless-
1. 1. the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and 2. such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or venture capital company as referred to in clause (23FB) of section 10]" ii) First, let us try to understand the words used in section namely, nature & source. Various judicial authorities from time to time including the Hon'ble Apex Court have tried to interpret these two phrases, and all of the judicial pronouncements have agreed that while explaining the nature & source, assessee has to offer an explanation and prove the credit to the satisfaction of AO basically on three aspects: 1. Identity of his creditors; 2. Capacity of creditors to advance money and 3. Genuineness of transaction. Reference CIT vs. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal).
1. It is important to reiterate that these three tests has been finalized and accepted by the Hon'ble Apex Court form time to time, even in the recent decision in case of N. Tarika Property Invest.(P.) Ltd. Vs. Commissioner of Income-tax [2014] 51 taxman. Com 387 (SC), and even Gujrat High Court in case of Umesh Krishnani Vs. ITO (2013) 35 Taxman 598 (Gujarat). Earlier, in the case of CIT v Mohanakala(P)(2007)161Taxman 169/291 ITR 278 (SC), while considering the scope of section 68, appex court observed as under:
6 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- “……. The expression 'the assessee offers an explanation means where the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assesses……” 1. iv) Now , let us revert back to the facts of this case. On a perusal of reply of the assessee, it is seen that the assessee has filed ITR, Confirmation and bank statement of Smt. Suman Agrawal and Shri Sudeep Bagadia HUF. On perusal of the bank statement of Smt. Suman Agrawal, it is seen that immediately before the payment of Rs.2,00,000/- to Pooranchand Agrawal on 17.07.2017, a sum of Rs. 2,00„000/- has been transferred by Pooranchand Agrawal on 09.05.2017 in her account. Further, on perusal of the bank statement of Sudeep Bagadia HUF, it is seen that immediately before lending the amount of Rs. 11,50,000/-, cash amounting to Rs. 2,00,000/ was deposited on 24.06.2017 and cash amounting Rs. 2,00,000/ deposited on 01-2. Accordingly, it is concluded that the transactions concerning Unsecured Loans are prima-facie not genuine and needs further verification with regard to genuineness and credit-worthiness.
9. Thus, it can be stated that this is a case of AO not conducting proper and correct enquiries. It is not out of place to mention that the Explanation -2 introduced in section 263 wef 01.06.2015 provides that an order would be deemed to be erroneous, if no enquiries or verifications were carried out by the AO. With insertion of this explanation, the decisions, which hold that PCIT should carry out enquiries, if AO failed to carry out enquiries to show as to how the Order passed by the AO is erroneous, are no longer applicable. Further, it is not out of place to mention that the honorable Supreme Court in the cases of Taradevi Agarwal Vs CIT (1972) 88 ITR 373(SC) and in the case of Rampyari Devi Saraogi Vs CIT (1968) 67 ITR 84 (SC) have already held that failure to conduct enquiries on part of AO constitutes assessment order to be erroneous and prejudicial to the interest of Revenue. Therefore, the decisions rendered without taking into considerations the above decisions of the Supreme Court appear to be incorrect.
10. These fact find support from the judgment of Hon'ble Supreme Court of India in the case of Malabar Industrial Co. Ltd Vs CIT [2000] 109 Taxman 66 (SC) : "In the instant case, the Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appeared that the resolution passed by the board of the appellant-company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts the conclusion that the order of the ITO was erroneous was irresistible. Therefore, the High Court had rightly held that 7 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur-
the exercise of the jurisdiction by the Commissioner under section 263(1) was justified" And in the case of Ambika Agro Suppliers Vs. Income-tax Officer, Wd. 2(6), Jalgaon [2005] 95 ITD 326 (PUNE) IN THE ITAT PUNE BENCH wherein it was held "Commissioner set aside assessment order on grounds that Assessing Officer had not made proper enquiries in regard to (a) considerable increase in salary and account writing fees; (b) genuineness of debts; (c) genuineness of transactions on cash payment exceeding Rs. 10,000, identity of payee and circumstances compelling assessee to make cash payments; and (d) genuineness of unsecured loans taken from certain persons - Whether acceptance of assessee's explanation without any enquiry rendered assessment order erroneous as well as prejudicial to interests of revenue - Held, yes - Whether Commissioner had given cogent reasons in support of his action and, therefore, Commissioner, having wide powers under section 263, had rightly set aside assessment order - Held, yes" Further, in the case of Assam Tea House Vs CIT [2012] 25 taxmann.com 93 (Punjab & Haryana) HIGH COURT OF PUNJAB AND HARYANA wherein it was held that Where Commissioner had recorded that order of Assessing Officer did not show verification of closing stock, purchase, and transportation, etc., he was justified in exercising power under section 263. In the case of Jagdish Kumar Gulati vs. Commissioner of Income-tax [2004] 139 TAXMAN 369 (ALL.) HIGH COURT OF ALLAHABAD " Whether when an assessment is done under section 143(3), it is expected that Assessing Officer will make a detailed enquiry to find out correct income of assessee and not to take facts placed by assessee on their face value - Held, yes - Whether where Assessing Officer completed assessment proceedings under section 143(3) and admitted that he could not make proper enquiries as assessment was becoming time-barred, there was valid assumption of jurisdiction under section 263 by Commissioner, and Tribunal, in such a situation, did not commit any error in law in confirming order of Commissioner in setting aside assessment and directing Assessing Officer to make a fresh assessment - Held, yes" Moreover, in the case of Apollo Tyres Ltd. v. Deputy Commissioner of Income-tax [2014] 46 taxmann.com 421 (Kerala) HIGH COURT OF KERALA " it was held that Commissioner, by detailed order passed under section 263, held that several issues raised in order passed under section 263 were not explained properly and, therefore, matter came to be remanded for fresh consideration by Assessing Officer- on appeal, Tribunal also confirmed opinion of Commissioner that there was no application of mind while considering assessment under section 143(3) and, therefore, it was not only erroneous but also prejudicial to interest of revenue and further, procedure adopted definitely would have implication on tax computation which ultimately caused prejudice to revenue.” .
8 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- Considering the overall legal provision as held in various case laws as enumerated above it leads to conclusion that No enquiry on the issues or non-application of mind for reaching any conclusion would certainly lead to held the order erroneous so far as prejudicial to the interest of revenue.
11. Considering the above legal provisions of the Act and the factual position of this case as emanating from the assessment order and case records as well as the judicial precedents as discussed above, I am of the considered opinion that the assessment order is erroneous in so far as it is prejudicial to the interests of revenue in view of Section 263 of the Income tax Act. Thus, the assessment order is held to be erroneous in So far as it is prejudicial to the interests of revenue. The said assessment order is hereby set aside to the AO with a direction to pass a fresh assessment order in a speaking manner after making all necessary enquiries required and after providing due and adequate opportunity of being heard to the assessee and after considering all the submissions, etc. made and counter-reply submitted by the assessee in a fair and judicious manner.”
The assessee is aggrieved with the order passed by the Pr. CIT u/s. 263 of the Act dated 22.03.2023 and has carried the matter in appeal before us.
We have heard the ld. Authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.
As observed by us hereinabove, the Pr. CIT in the exercise of his powers vested u/s. 263 of the Act, had revised the assessment order passed by the A.O u/s.143(3) r.w.s. 143(3A) & 143(3B) of the Act, dated 17.02.2021 for two-fold reasons, viz. (i) that as the A.O while allowing the assessee’s claim for depreciation on tractor and grader dozer that was purchased on 30.03.2018 without verifying as to when the same was registered with the Road Transport Authority and was actually put to use, therefore, the said matter required to be further verified; and (ii) that as 9 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- the unsecured loan raised by the assessee firm from two parties, viz., (i) Smt. Suman Agrawal; and (ii) Shri Sudeep Bagadia, HUF, as per material available on record, prima-facie did not appear to be genuine; therefore, the same required to be further verified on the aspect of the genuineness of transaction and creditworthiness of the said respective lenders.
We shall first deal with the observation of the Pr. CIT, wherein he had set aside the order of the A.O for the reason that he had summarily allowed the assessee’s claim for depreciation on the tractor and grader dozer that was purchased during the year, i.e., on 30.03.2018 without verifying as to when the registration of the same was done with the Road Transport Authority as well as when the same had been actually put to use.
Before proceeding any further with the aforesaid issue, we may herein observe that Section 32(1) of the Act for allowability of depreciation contemplates two-fold conditions which are required to be cumulatively satisfied, viz. (i) asset should be owned wholly or partly by the assessee; and (ii) asset should be used for the purpose of business or profession. At the threshold, we may herein observe that there is substance in the claim of the Ld. AR that though as per Section 39 of the Motor Vehicle Act, 1988, the registration of a motor vehicle is mandatory, failing which, the said vehicle cannot be driven in a public place, but the same as per the mandate of Sec. 32 of the Income-tax Act, 1961 is not an innate condition for allowability of an assessee’s claim for deprecation on a vehicle. Our aforesaid conviction is fortified by the judgment of the Hon’ble High Court of Bombay in the 10 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- case of CIT vs. Dilip Singh Sardarsingh Bagga (1993) 201 ITR 995 (Bom), wherein the Hon’ble High Court had held that the registration under the Motor Vehicle Act, 1988 is not an essential requirement for the acquisition of ownership of the motor vehicle and the assessee who had purchased the motor vehicle for valuable consideration and used the same for his business, cannot be denied the benefit of depreciation on the ground that the transfer was not recorded under the Motor Vehicles Act. The Hon’ble High Court further observed that non-compliance with the requirement of this section does not in any way affect or invalidate the transfer of ownership of the vehicle; it only makes the transferor or the transferee liable to prosecution or penalty. Based on its aforesaid observations, the Hon’ble High Court had concluded that the assessee who had purchased the motor vehicle for valuable consideration and used the same for his business, cannot be denied the benefit of depreciation on the ground that the transfer was not recorded under the Motor Vehicles Act or that the vehicle stood in the name of the vendor in the records of the authorities under the Motor Vehicles Act. We find that the aforesaid judgment of the Hon’ble High Court had thereafter been followed by the ITAT, Delhi in the cases of Usha Rectifier Corporation (i) Pvt. Ltd. Vs. Inspecting Assistant Commissioner (1989) 35 TTJ 602 (Del) and by the ITAT, Mumbai, Bench “E” in the case of Kisan Ratilal Choksey Shares & Securities Pvt. Ltd. Vs. Addl. CIT (2015) 44 CCH 182 ( Mum.). Thus, in terms of our aforesaid observations, we vacate the order of the Pr. CIT to the extent he had drawn adverse inferences as regards the assessee’s claim for depreciation, inter alia, for the reason that the A.O had allowed the same without
11 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- carrying out any verification as to when the tractor purchased by the assessee was registered with the Road Transport Authority.
At the same time, we find no infirmity in the view taken by the Pr. CIT that as the A.O had failed to verify that when the tractor purchased by the assessee on 30.03.2018 was actually put to use, therefore, the claim of depreciation on the same that was summarily allowed by him without carrying out necessary verification, had rendered his order as erroneous in so far, it was prejudicial to the interest of the revenue within the meaning of Section 263 of the Act.
Although the Ld. Authorized Representative (for short ‘AR’), in order to impress upon us that the vehicle purchased by the assessee on 30.03.2018 was put to use during the year under consideration, had drawn our attention to the purchase bills of the aforesaid tractor and grader dozer, wherein it was mentioned that as of 30.03.2018, the assessee had, to his satisfaction, taken a trial run of the aforesaid vehicles, Page 9-10 of APB. We are unable to concur with the aforesaid claim of the assessee for the reason that the pre-condition contemplated in Section 32(1) of the Act for allowability of depreciation is that asset should have been used for the purpose of business or profession. As the trial run of the aforesaid tractor by the assessee in the dealer’s showroom can by no means be construed as usage of the vehicle in the course of his business, therefore, the aforesaid contention of the assessee cannot be accepted.
12 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur-
Apart from that, the Ld. AR submitted that as the “passive user” of an asset also satisfies the pre-condition of the user of the same for business; therefore, merely because the aforesaid tractor/grade dozer was not actually put to use in the assessee’s business during the year would not justify declining of his claim for depreciation on the same. The Ld. AR, in order to fortify his aforesaid contention, had relied on the judgments of the Hon’ble High Court of Delhi in the case of (i). CIT Vs. Refrigeration & Allied Industries Ltd., (2001) 247 ITR 12 (Del); (ii) National Thermal Power Corporation Ltd. Vs. CIT, (2013) 357 ITR 253 (Delhi) and (iii). CIT Vs. Oswal Agro Mills Ltd. (2012) 341 ITR 467 (Del.).
We have given thoughtful consideration to the contention of the assessee and are unable to persuade ourselves to concur with the same. In our considered view, the Ld. AR had misconceived the term “passive use of the asset,” which had been looked into by the Hon’ble High Court in the aforesaid judgments. The Hon’ble High Court, in its aforesaid orders, had observed that where the asset is in an operational condition and is kept ready for use, then such passive use of the asset would also be eligible for depreciation u/s. 32 of the Act. For instance, in case the asset is purchased by the assessee and is kept on standby in the course of running its business, then it can safely be concluded that there is a passive user of the said asset for the business of the assessee. However, in the present case of the assessee before us, as the assessee had neither filed any material before the lower authorities or before us, which would evidence that the tractor and grader dozer that was purchased by him on 30.03.2018 were either actually used or were kept as stand by 13 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- in the course of his business, therefore, we find no infirmity in the view taken by the Pr. CIT, who in all fairness, had restored the matter to the file of the A.O. with a direction to verify the entire claim of depreciation on the said assets after satisfying that the same had been put to use during the year under consideration for business.
We shall now deal with the grievance of the assessee that the Pr. CIT had erred in setting aside the order of the A.O for the reason that he had summarily accepted the unsecured loans aggregating to Rs.15.90 lacs (supra) that were raised by the assessee during the year, viz. (i). Smt. Suman Agrawal: Rs.4,40,000/-; and (ii). Shri Sudeep Bagadia, HUF: Rs.11,50,000/-.
A). Smt. Suman Agrawal : Rs.4,40,000/-
The assessee in the course of the proceedings before the Pr. CIT had placed on record a copy of the return of income and bank statement of Smt. Suman Agrawal. However, we find that the Pr. CIT had observed that a perusal of the bank statement of Smt. Suman Agrawal (supra) revealed that immediately before payment of Rs.2 lacs to the assessee on 17.07.2017, a sum of Rs.2 lac was transferred by the assessee on 09.05.2017 in her bank account. As stated by the Ld. AR, and rightly so, the Pr. CIT had drawn the aforesaid adverse inference on the basis of misconceived and half-baked facts. On a perusal of the confirmation of Smt. Suman Agrawal, Page 13 of APB, we find an opening “credit balance” of Rs.52.50 lacs (approx.) of the aforesaid lender, viz. Smt. Suman Agarwal (supra) in the books of account of the assessee, i.e., on 01.04.2017. It was, thus, w.r.t the aforesaid running
14 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- account of Smt. Suman Agarwal (supra), i.e., the opening balance of Rs.52.50 lacs (Cr.) that the assessee had on 09.05.2017 made a payment of Rs.2 lacs through the banking channel to her. Backed by the aforesaid facts, the adverse inferences drawn by the Pr. CIT w.r.t the aforesaid loan transaction, on the ground that the loan of Rs.2 lacs received by the assessee on 17.07.2017 from Smt. Suman Agrawal (supra) was preceded with a payment of Rs.2 lacs by the assessee on 09.05.2017 to the said lender is based on misconceived facts. As the aforesaid loan transaction between the assessee and Smt. Suman Agrawal does not suffer from any infirmity and, in fact, has duly been supported by the assessee on the basis of documentary evidence that the assessee had filed before the Pr. CIT, i.e., copies of return of income, confirmation, and bank statements of Smt. Suman Agrawal, therefore, we are unable to concur with the view of the Pr. CIT that the said loan transaction requires further verification with regard to the genuineness and creditworthiness of the lender. At this stage, we may observe that in case the Pr. CIT had any doubt as regards the genuineness of the transaction or creditworthiness of the lender in the backdrop of the aforesaid documentary evidence that the assessee filed before him, then he remained under a statutory obligation to have pointed out the same, failing which, there was no justification for him to have held the order passed by the A.O on the said count as erroneous in so far as it was prejudicial to the interest of the revenue. We, thus, in terms of our aforesaid observations, vacate the order of the Pr. CIT to the extent he had set aside the order of the A.O. with respect to the 15 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- aforesaid loan of Rs.4.40 lacs (approx.) received by the assessee from Smt. Suman Agrawal during the year under consideration.
B). Shri Sudeep Bagadia, HUF : Rs.11,50,000/-.
Apropos the amount of Rs..11,50,000/- that the assessee received during the year from Shri Sudeep Bagadia, HUF, we find that the assessee had in the course of the proceedings before the Pr. CIT placed on his record copies of return of income, confirmation and bank statements of Shri Sudeep Bagadia, HUF, Page 17 to 20 of APB. As is discernible from the order of the Pr. CIT, it transpires that he had observed that as there were cash deposits of Rs.2 lacs each on 24.06.2017 and 20.07.2017 in the bank account of the lender, viz. Shri Sudeep Bagadia, HUF, i.e., immediately prior to the advancing of loan of Rs.11,50,000/- to the assessee, therefore, the order passed by the A.O to the extent he had summarily accepted the loan transaction without carrying out any verification as regards the genuineness of the transaction and creditworthiness of the aforesaid lender, had rendered the same as erroneous in so far it was prejudicial to the interest of the revenue.
As stated by the Ld. AR, and rightly so, the Pr. CIT had proceeded with the aforesaid issue based on misconceived facts. We say so for the reason that a perusal of the bank statement of Shri Sudeep Bagadia, HUF, Pages 19 & 20 of APB reveals that cash of Rs. 2 lac was deposited in its bank account on 24.04.2017 and 29.04.2017 and, thus, it had wrongly been observed by the Pr. CIT that the said amounts were deposited on 24.06.2017 and 20.07.2017. Accordingly, the very basis
16 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- for drawing of adverse inferences by the Pr. CIT, i.e., cash deposits of Rs.2 lacs each were made in the bank account of the lender immediately prior to the advancing of a loan of Rs.11,50,000/- to the assessee, i.e., on 20.07.2017, is based on incorrect facts.
Be that as it may, we find that the aforesaid lender, viz. Shri Sudeep Bagadia, HUF, had duly confirmed the aforesaid loan transaction and had supported his creditworthiness by placing on record a copy of the return of income a/w. bank statements. We concur with the claim of the Ld. AR that in case the Pr. CIT had any doubt as regards the authenticity of the loan transaction based on the fact that cash of Rs.2 lacs was deposited in the latter’s bank account on 24.04.2017 and 20.09.2017 then, there was no justification for him to have summarily drawn adverse inferences as regards the aforesaid loan transaction in the hands of the assessee. As the adverse inferences qua the aforesaid loan transaction is in itself based on incorrect facts, therefore, in light of the supporting documentary evidence which the Pr. CIT has not dislodged on the basis of any material proving to the contrary; we are of the view that there was no justification on his part in terming the order passed by the A.O u/s. 143(3) dated 17.02.2021 as erroneous in so far it was prejudicial to the interest of the revenue on the said count under Section 263 of the Act. Thus, in terms of our aforesaid observation, we vacate the order passed by the Pr. CIT to the extent he had set aside the order of the A.O with respect to the aforesaid loan of Rs.11,50,000/- (supra) received by the assessee from Shri Sudeep Bagadia, HUF
17 M/s. Pooranchand Agrawal Vs. Pr. CIT, Raipur- during the year under consideration. Accordingly, the order passed by the Pr. CIT is partly approved in terms of our aforesaid observations.
In the result, the appeal of the assessee is partly allowed in terms of our aforesaid observations.
Order pronounced in open court on 29th day of November, 2023.