M/s. Savalia Cotton Ginning & processing Pvt. Ltd., RAJKOT-GUJARAT V. The Commissioner of Income Tax-1, RAJKOT-GUJARAT

ITA 12/RJT/2021

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 6429 (ITAT-RAJKOT)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 22-02-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY PRATAP SINGH
• Keywords: Unexplained cash credit; Assessment record; TDS; Set aside
• Section: 68; 263; 143(3); 142(1)

Judgement Text

Page 1 of 8 आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E-COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER अपील सं./ITA No.12/Rjt/2021 िनधाᭅरण वषᭅ/Asstt. Year: 2016-2017 Savalia Cotton Ginning & Pressing Pvt. Ltd., Plot No.242, Opp. 66 KVA Power Station, Shaper(Veraval) Dist. Rajkot. PAN: AAECS9628M Vs. Pr. Commissioner of Income Tax-1, Rajkot. (Applicant) (Respondent) Assessee by : Shri R.D. Lalchandani, A.R Revenue by : Shri Ajay Pratap Singh, C.I.T. D.R सुनवाई कᳱ तारीख/Date of Hearing : 24/11/2021 घोषणा कᳱ तारीख /Date of Pronouncement: 14/12/2021 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Principal Commissioner of Income Tax, Jamnagar, dated 04/02/2021 arising in the matter of assessment order passed under s. 263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2016-2017. ITA no.12/Rjt/2021 Asstt. Year 2016-17 Page 2 of 8 2. The only issue raised by the assessee is that the learned PCIT under section 263 of the Act erred in holding the assessment framed by the AO under section 143(3) of the Act as erroneous insofar prejudicial to the interest of revenue. 3. The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of Ginning and Pressing of Cotton Bales and Cotton Seeds. The assessee in the year under consideration has taken unsecured loan from different parties amounting to ₹ 8,40,50,000/-which was accepted as genuine by the AO in the assessment framed under section 143(3) of the Act vide order dated 9 th December 2018. 3.1 However, the learned PCIT on examination of the assessment records found that the assessee in case of 3 loan parties has filed only the copy of the ledger account. The details of such parties along with the amount of loan stand as under: Sr.No Name PAN Amount 1 M/s Tulsi Enterprise Not Provided 50,00,000 2 M/s Balkrishna Steel Forge Not Provided 15,00,000 3 M/s Kadvani forge Ltd Not Provided 1,52,00,000 TOTAL 2,17,00,000 3.2 The learned PCIT was of the view that the conditions imposed under section 68 of the Act i.e. identity, creditworthiness of the parties and genuineness of the transactions were not satisfied but the AO has accepted the impugned amount of loan as genuine under the provisions of section 68 of the Act. Accordingly, the PCIT proposed to hold the assessment framed under section 143(3) of the Act vide order dated 9 th December 2018 as erroneous insofar prejudicial to the interest of revenue by issuing notice under section 263 of the Act dated 9 th November 2020. 3.3 The assessee in response to such show cause notice submitted that it has filed confirmations from all parties of unsecured loan during the assessment ITA no.12/Rjt/2021 Asstt. Year 2016-17 Page 3 of 8 proceedings. The assessee also resubmitted the confirmation from the parties before the learned PCIT. 3.4 The PCIT being dissatisfied with the submission of the assessee held that the assessee failed to furnish the necessary details in support of the amount of loan received by it from the parties as discussed above. Thus, the impugned cash credit received by the assessee cannot be treated as genuine in the absence of necessary verification. However, the AO accepted the same without making proper inquiry and application of mind. Accordingly, the learned principal CIT set aside the assessment framed by the AO under section 143(3) of the Act and directed to make a fresh assessment after necessary verification with respect to the loan taken from the parties as discussed above. 3.5 Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 4. The learned AR before us filed a paper book running from pages 1 to 34 and submitted that the assessment was framed by the AO under section 143(3) of the Act after due and necessary verification of the amount of unsecured loan received by the assessee in the year under consideration. The learned AR in support of his contention has drew our attention on question numbers 7 and 8 of the questionnaire issued under section 142(1) of the Act dated 4 th September 2018. 4.1 The assessee in response to such notice has furnished the necessary details of all the parties from whom loan was taken by it as evident from the reply, dated- 26 th November 2018 and 1 st December 2018, made by the assessee in response to the notice issued under section 142(1) of the Act. 4.2 In view of the above the learned AR contended that assessment order cannot be revised under the provisions of section 263 of the Act. ITA no.12/Rjt/2021 Asstt. Year 2016-17 Page 4 of 8 5. On the contrary the learned DR before us vehemently supported the order of the ld. PCIT. 6. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the necessary verification was carried out by the AO during the assessment proceedings with respect to the loan taken from the following parties: Sr.No Name 1 M/s Tulsi Enterprise 2 M/s Balkrishna Steel Forge 3 M/s Kadvani forge Ltd 6.1 In this connection we find that the assessee was issued a notice under section 142(1) of the Act requiring the assessee to furnish the necessary details. The relevant details sought by the AO during the assessment proceedings stand as under” i. Details of secured and unsecured loans taken during the year ii. Detail of person from whom land taken and confirmation from them along with sources thereof 6.2 The assessee in response to such show cause notice has also made the reply vide letter dated 26 th November 2018 and 1 st December 2018. Necessary reply made by the assessee stand as under: We provide you the following documents: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 5. Details of secured/unsecured loans/advances/deposits taken during the FY relevant to the assessment year under consideration source threof. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Details of secured/unsecured loans/advances/deposits taken during the FY relevant to the assessment year under consideration, source thereof. Earlier we submitted it. Herewith attach ITR & Ledger of all unsecured loan parties. ITA no.12/Rjt/2021 Asstt. Year 2016-17 Page 5 of 8 6.3 On perusal of the reply furnished by the assessee, we note that the assessee has supplied the following details of the three parties as discussed above. i. Ledger copy of parties from its books of account showing transaction carried out through banking channel. ii. Its ledger in the books of accounts of parties. iii. ITR acknowledgment of the parties. iv. And its bank statement 6.4 From the above, there remains no doubt about the fact that the AO during the assessment proceedings has made the necessary enquiries which were duly answered by the assessee as elaborated aforesaid. Thus, to our understanding, the order of the AO cannot be held as erroneous insofar prejudicial to the interest of revenue on account of non-verification. In holding so we draw support and guidance from the judgment of Hon’ble Bombay High Court in case of CIT vs. Nirav Modi reported in 71 taxmann.com 272, the relevant extract of order is extracted below. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no occasion to exercise powers of revision can arise. Nor can revisional power be exercised for directing a fuller inquiry to find out if the view taken is erroneous, when a view has already been taken after inquiry. This power of revision can be exercised only where no inquiry as required under the law is done. It is not open to enquire in cases of inadequate inquiry. 6.5 It is also important to note that learned PCIT has also invoked the provisions provided under clause (a) of explanation 2 of section 263 of the Act which is deeming fiction and provides that the order of the AO shall be deemed to be erroneous insofar prejudicial to the interest of revenue if the same was passed without making enquiries/verifications which should have been made. This clause (a) of explanation 2 to section 263 of the Act cast responsibility upon the PCIT that he has to specify the enquiries which ought to have been made by the AO during the assessment proceedings but the AO failed to do so. On perusal of the order of the learned principal CIT, nothing has been brought on record suggesting about the enquiries which should have been made by the AO during the assessment ITA no.12/Rjt/2021 Asstt. Year 2016-17 Page 6 of 8 proceedings. To our understanding, the learned principal CIT has again set aside the issue to the file of the AO for necessary verification and enquiries in relation to the loans obtained by the assessee during the year under consideration as discussed above without pointing out defect in the details furnished by the assessee during the assessment proceedings before the AO. 6.6 The order of the learned PCIT contains the fact that the assessee has only furnished the copies of the ledgers of the parties whereas on perusal of the details as highlighted by the learned AR for the assessee which has been reproduced in the preceding paragraph, we note that the assessee besides the copy of the ledger has also furnished the other necessary details. But, the order of the learned PCIT is silent on the other details furnished by the assessee. Nevertheless, the order of the learned PCIT cannot sustained for the reason that the learned PCIT failed to bring anything on record about the enquiries/verification which should have been made by the AO during the assessment proceedings as envisaged under clause (a) of explanation 2 of section 263 of the Act. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of Pr. CIT vs. Shreeji Prints (P.) Ltd reported in [2021] 130 taxmann.com 293 wherein the Hon’ble court affirmed the finding of tribunal which reads as under: "17 We thus find merit in the plea of the assessee that the Revisional Commissioner is expected show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action as interpreted by the Revisional Commissioner in the light of the Explanation2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to section263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. The AO in the present case has not accepted the submissions of the assessee on various issues summarily but has shown appetite for inquiry and verifications. The AO has passed after making due enquiries issues ITA no.12/Rjt/2021 Asstt. Year 2016-17 Page 7 of 8 involved impliedly after due application of mind. Therefore, the Explanation2 to section263 of the Act do not, in our view, thwart the assessment process in the facts and the context of the case. Consequently, we find that the foundation for exercise of revisional jurisdiction is sorely missing in the present case. 6.7 Even on merit we note that the assessee has deducted the TDS on the interest cost incurred on the loan received from the party namely M/s Tulsi Enterprises. This fact can be verified from the copy of the ledger of the party which is placed on pages 24 of the paper book. However, there is no whisper in the order of the learned PCIT with respect to the amount of interest cost incurred by the assessee against the loan taken from the party namely M/s Tulsi Enterprise. Thus it implies that the learned PCIT had no grievance for the interest paid by the assessee on the impugned loan which is emerging from the loan transaction only. In other words the amount of interest has direct nexuses with the loan. If the loan is in doubt then it is implied to have a doubt about the interest as well. In simple words, the amount of interest cannot be accepted as genuine until and unless the amount of loan is approved to be genuine. In the given case, since there is no doubt about the interest cost incurred by the assessee, we are of the view that the amount of loan cannot be doubted. 6.8 Likewise, we also note that the assessee has repaid the amount of loan taken from all the parties which can be verified from the copies of the ledgers which are placed on pages 24, 27 and 31 of the paper book. Once, the repayment of the loan has not been doubted then the acceptance of the loan cannot be questioned by holding that it is unexplained cash credit under section 68 of the Act. 6.9 In view of the above and after considering the facts in totality, we are not convinced with the finding of the learned PCIT. Accordingly, we hold that the order ITA no.12/Rjt/2021 Asstt. Year 2016-17 Page 8 of 8 of learned PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 14/12/2021 at Ahmedabad. Sd/- Sd/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 14/12/2021 Manish