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Income Tax Appellate Tribunal, DIVISION BENCH’B’, CHANDIGARH
Before: SMT. DIVA SINGH & SHRI B.R.R. KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH’B’, CHANDIGARH
BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA No.1365/Chd/2017 Assessment Year: 2015-16
Oswal Dreamz Ltd. Vs. The Pr. CIT-3 Oswal Road, Industrial Area Ludhiana Ludhiana
PAN No. AAACO5937H
(Appellant) (Respondent)
Assessee By : Sh. M.L. Joshi Revenue By : Sh. Manu Malik
Date of hearing : 19/03/2018 Date of Pronouncement : 06/04/2018
ORDER PER B.R.R. KUMAR A.M.
The present appeal has been filed by the Assessee against the order of the Ld. Pr. CIT-3, Ludhiana dt. 13/07/2017.
The assessee has raised following grounds of appeal : 1. That the Ld. Pr .CIT-3, Ludhiana has erred in law and on the facts in violating the principles of natural justice by not mentioning the grounds for initiating action under section 263 of Income Tax Act, 1961 in the show cause notice issued. As such, the order passed under section 263 is void authorities below-initio. The action of the Ld. Pr. CIT-3, Ludhiana was wholly unreasonable, uncalled for and bad in law. 2. That the Ld. Pr. CIT-3, Ludhiana has erred in law and on the facts and circumstances of the case, while not passing a speaking order against the submissions of appellant. 3. That in the facts and circumstances of the case, the order under section 263 is merely change in opinion. The order under section 143(3) passed by the Ld. Assessing Officer does not in any way represent erroneous order. 3. Ground No. 1 not pressed. Hence needs no adjudication.
Ground No. 2 relates to not passing the speaking order against the submission of the assessee and in Ground No. 3 the assessee submitted that the
order under section 263 of the Pr. CIT is merely a change of opinion and no way represents an erroneous assessment order.
Brief facts of the case are that the Ld. Pr. CIT has passed an order under section 263 as Assessing Officer has failed to investigate the genuineness of transaction and credit worthiness of the lender pertaining to Rs. 45 Crores of loan from M/s Mexican Traders Pvt. Ltd. The Ld. Pr. CIT held that the Assessing Officer has not made proper enquiries, not applied mind to the issue, failed to look into the issue in a right perspective by simply relying on the submissions made by the assessee. He also held that the Assessing Officer should have made independent enquiries verifications, investigations while framing the assessment.
Before us Ld. AR argued that the order of the Pr. CIT is only on suspicion without any tangible material.
It was argued that the Ld. Pr. CIT wrongly issued a show cause on the grounds that no copy of the bank account of M/s Mexican Traders Pvt. Ltd. has been called by the Assessing Officer whereas the entire details of the bank statement have been submitted before the Assessing Officer.
Ld. AR also relied on the ratio in the case of Vingal Leasing & Finance Ltd. Vs. ITO 16 Taxmann Vol. – IV page 62 in ITA No. 5079/Delhi/1987 that the order of the ITO cannot be set aside on mere suspicion unsupported by specific reasons. He further relied on the case of Acme Fabric Plast Co. Vs. ITO (M.P.) wherein it has been held that order passed without giving personal hearing to assessee amounts to violation of natural justice.
On the other hand the Ld. DR argued that notice under section 133(6) of Income Tax Act, 1961 was issued by the assessee on 05/10/2016 and were returned by the postal authorities with remarks ‘left’. He argued that though the amounts have been received from the bank account of RBL all the monies of Rs. 45 Crores have been received in a period of 5 days. It was submitted that the amounts have been received from M/s P.C. Media Systems Ltd. to M/s Mexican Traders Pvt. Ltd. and immediately the amounts have been transferred to the assessee’s account. Further the amounts have been found to be transferred immediately to M/s Oswal Agro Mills Ltd. , M/s Oswal Green Tech Ltd. Thus, he argued that the amount of Rs. 45 Crores is being moved across various entities
and the Assessing Officer has failed to conduct the minimal enquiries required to examine the source of the loan parties leading to passing of an order which is erroneous and prejudicial to the interest of the Revenue.
We have heard Ld. Representatives of both the parties and also perused the records place before us. We find that the amounts have been received by the assessee from 21/03/2015 to 26/03/2015. From the perusal of the bank account it can be found that the Mexican Traders Pvt. Ltd. have received these amounts from one M/s P.C. Media Systems Ltd. and the amounts have been transferred to other companies immediately from the assessee’s bank account. The lender company has filed return with an income of Rs. 2,79,070/-. The P&L Account of the lender company has shown loss of Rs. 43.31 Lacs. The Assessment Order does not speak of any third party enquiries conducted.
The Assessing Officer has not conducted any direct cross verification pertains to the loans received by the assessee with reference to the genuineness and credit worthiness of the loan parties.
Co-ordinate bench of ITAT Delhi held in the case of G. E. Money Financial Services Ltd. vs. DCIT in ITA No. 2123/Del/2009 dt. 30/10/2015 that where AO has not verified the factual contents, exercise of powers u/s 263 is in accordance with law.It is well settled that in case of no enquiry, it would be a case of non application of mind, resulting in an error in the assessment order which causes prejudice to the interest of the Revenue. The Hon’ble Delhi High Court in the case of Duggal & Co. Reported in 220 ITR 456 (Del.) held that the lack of enquiry by the A.O. can be considered as erroneous and prejudicial assessment order passed by the A.O.
In the case of Malabar Industrial Company Ltd. vs. CIT [2000] 243 ITR 83 (SC), a locus classicus on the subject. The hon'ble apex court therein laid down a four- way test for invocation of a provision. Succinctly put, these are:
(a) incorrect assumption of facts;
(b) incorrect application of law;
(c) without applying the principles of natural justice; and
(d) without application of mind.
We shall, for the reason that the present case involves the application of section 263 on ground (d) above, dwell on this aspect in some detail. An order, as explained in Malabar Industrial Company Ltd., is in such a case subject to revision under section 263 not for the reason that some error may be found upon enquiry, but because of non- application of mind per se. The hon'ble Delhi high court, per its landmark decision in Adl. CIT v. Gee Vee Enterprises [1975] 99 ITR 375 (Del) (cited before us by the ld. DR), relying on two celebrated decisions by the apex court [reported at 67 ITR 84 and 88 ITR 323], explained that an assessing authority is both an adjudicator and investigator. That is, he is, besides adjudication, also charged with the responsibility of probing the matter and unearthing facts. As such, where he fails to make proper enquiry, as warranted by the facts and circumstances of the case, his order is rendered erroneous in- so-far as it is prejudicial to the interest of the Revenue.
The instant case, in our clear view is therefore a case of lack, nay, absence of enquiry by the A.O., so that the revision jurisdiction in relation to verification of loan is validly assumed by the competent authority.
As a result the appeal of the assessee is dismissed.
Order pronounced in the open court.
Sd/- Sd/- (DIVA SINGH) (B.R.R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 06/04/2018 AG Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR