Sonali Jewellers, Cuttack V. Principal CIT, Cuttack Charge, Cuttack

ITA 162/CTK/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5388 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 01-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUNAL SINGH
• Assessee Lawyers: D K SHETH
• Section: 133(6); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO S . 162 & 163/CTK/2017 ASSESSMENT YEAR S : 2013 - 14 & 2014 - 15 SONALI JEWELLERS, NAYA SARAK, CUTTACK VS. ITO, WARD - 2(3), CUTTACK PAN/GIR NO. ACDFS 1675 E (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI D.K.SHETH, AR REVENUE BY : SHRI KUNAL SINGH, CIT DR DATE OF HEARING : 28/08 / 2017 DATE OF PRONOUNCEMENT : 19 /09 / 2017 O R D E R PER N.S.SAINI, AM THESE ARE APPEAL S FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDER S U/S.263 OF THE I.T.ACT, 1961 OF THE PR. CIT, CUTTACK BOTH DATED 23.3.2017 FOR THE ASSESSMENT YEARS 2012 - 13 & 2013 - 14, RESPECTIVELY. 2. THE SOLE ISSUE INVOLVED IN BOTH THE APPEAL S IS THAT THE LD PR. CIT, CUTTACK WAS NOT JUSTIFIED IN PASSING ORDER U/S.263 OF THE I.T.ACT, SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER PASSED U/S.143(3) OF THE ACT DATED 15.3.2016 FOR THE ASSESSMENT YEAR 2013 - 14 AND DATED 30.3.2016 FOR THE ASSESSMENT YEAR 2014 - 15. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE PR. CIT, CUTTACK OBSERVED THAT THE ASSESSEE, M/S. SONALI JEWELLERS HAS CLAI MED TO HAVE RECEIVED LOAN OF RS. 1,82,00,000/ - FROM THE LOAN CREDITOR, M/S PYRAMID SUPPLIERS PRIVATE LTD. , DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R 2012 - 13. 2 ITA NOS.162 & 163/CTK/2017 ASSESSMENT YEARS : 2013 - 14 & 2014 - 15 HE ALSO NOTICED THAT THE ASSESSEE HAS CLAI MED TO HAVE RECEIVED LOAN OF RS. 2,62,00,000/ - FROM THE SAME LOAN CREDITOR FOR THE ASSESSMENT YEAR 2013 - 14 AND RS.1,20,00,000/ - IN THE ASSESSMENT YEAR 201 4 - 15 FROM THE SAME CREDITOR, WHICH WAS ACCEPTED WITHOUT CAU SING NECESSARY ENQUIRY/VERIFICATION IN REGARDS THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE LOAN CREDITOR. HE FURTHER OBSERVED THAT ON EXAMINATION OF CASE RECORD FOR ASSESSM ENT YEAR 2013 - 14 OF THE ASSESSEE, IT WAS FOUND THAT THE ASSESSING OFFICER HAS NOT VERIFIED THE CASE RECORDS OF MR GUNVANTRAI SETH FOR THE ASSESSMENT YEAR 2012 - 13 TO BE SATISFIED ABOUT THE ASSETS AND LIABILITIES OF THE PROPRIETORSHIP CONCERN M/S. SONALI JEW ELLERS, TRANSFERRED TO T HE FIRM AS A GOING CONCERN. DUE TO THIS LAPSE ON HIS PART, HE FAILED TO TAKE NOTICE OF THE FACT AVAILABLE ON RECORD. HE FURTHER OBSERVED THAT THE CLAIM OF LOAN FROM THESE LOAN CREDITORS WAS NOT ACCEPTED AS GENUINE AS THERE WAS FA ILURE ON THE PART OF THE LOAN CREDITOR TO CONFIRM THE TRANSACTION INDEPENDENTLY WHEN NOTICE U/S 133(6) WAS ISSU ED TO IT AND THE ASSESSEE WAS UNABLE TO EXPLAIN SUCH LAPSE ON THE P ART OF THE LOAN CREDITOR. THE ASSESSING OFFICER HAD ONLY OBTAINED CONFIRMATIO N LETTER, AUDITED ACCOUNTS FOR THE ASSESSMENT YEAR 2012 - 13 OF THE LOAN CREDITOR FROM THE ASSESSEE AND H AS NOT CAUSED ANY ENQUIRY. THUS, THIS ASPECT IS REQUIRED TO BE EXAMINED. HE FURTHER OBSERVED THAT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED LOAN OF RS. 30,00,000/ M/S SPICE MERCHANTS PRIVATE LTD ., DURING THE ASSESSMENT YEAR 2013 - 14 AND WAS REPAID DURING THE YEAR. FROM THE RECORDS, IT IS OBSERVED THAT NO DUE ENQUIRY HAS BEEN 3 ITA NOS.162 & 163/CTK/2017 ASSESSMENT YEARS : 2013 - 14 & 2014 - 15 MADE REGARDING GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF LOAN AVAILED FR OM M/S. SPI CE MERCHANTS PRIVATE LTD. THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF THE ASSESSEE WITHOUT CAUSING NECESSARY ENQUIRY/VERIFICATION IN REGARDS THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE SO CALLED LOAN CREDITOR. IT IS ESTABLISHED THAT THIS ASPECT IS REQUIRED TO BE EXAMINED AND, THEREFORE, HE CANCELLED THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT DATED 15.3.2016 FOR THE ASSESSMENT YEAR 2013 - 14 AND DATED 30.3.2016 FOR THE ASSESSMENT YEAR 2014 - 15. 4. BEFORE US , LD A.R. OF THE ASSESSEE ARGUED THAT THE PR. CIT, HAS SET ASIDE THE ORDERS OF THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS UNDER CONSIDERATION WITHOUT POINTING OUT HOW THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AS WELL AS PREJUDICIAL TO TH E INTEREST OF THE REVENUE WHEN HE HAD MADE DUE ENQUIRY DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY ISSUING NOTICE U/S.142(1) OF THE ACT ON 28.7.2015 IN ASSESSMENT YEAR 2013 - 14 AND ON 20.11.2015 IN ASSESSMENT YEAR 2014 - 15, COPIES OF WHICH ARE PLACED ON R ECORD AT PAGES 14 & 15 OF THE PAPER BOOK AND PAGES 13 & 14 OF PAPER BOOK RESPECTIVELY. THE ASSESSEE MADE COMPLIANCE IN RESPONSE TO THE SAME BY SUBMITTING HIS REPLY WHICH IS PLACED AT PAGES NO.12 & 13 AND PAGES 11 & 12 OF PAPER BOOK RESPECTIVELY. HENCE, IT WAS HIS A RGUMENTS THAT THE ASSESSING OFFICER AFTER EXAMINING THE LOAN TAKEN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND BEING SATISFIED HAS NOT MADE ANY ADDITION 4 ITA NOS.162 & 163/CTK/2017 ASSESSMENT YEARS : 2013 - 14 & 2014 - 15 THERE AGAINST. LD PR. CIT WAS NOT JUSTIFIED IN PASSING THE ORDERS U/ S.263 OF THE ACT AND SETTING ASIDE THE ORDERS OF THE ASSESSING OFFICER OF THE IMPUGNED ASSESSMENT YEARS ON THE GROUND THAT DUE ENQUIRY WAS NOT MADE BY THE ASSESSING OFFICER, THEREFORE, THE ORDER OF THE PR. CIT SHOULD BE SET ASIDE. 5. ON THE OTHER HAND, LD D.R. FULLY JUSTIFIED THE ORDER OF THE PR. CIT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSE FIRM HAS TAKEN LOAN OF RS.2,6 2 ,00,000/ - FROM M/S. PYRAMID SUPPLIERS PVT LTD., DURING THE ASSESSMENT YEAR 2013 - 14 AND LOAN OF RS.1,20,00,000/ - DURING THE ASSESSMENT YEAR 2014 - 15. FURTH ER, THE ASSESSEE HAS TAKEN LOAN OF RS.30 LAKHS FROM M/S. SPICE MERCHANTS PRIVATE LIMITED DURING THE ASSESSMENT YEAR 2013 - 14, WHICH WAS ALSO REPAID WITHIN THE SAME YEAR. THESE LOANS WERE ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT OF RESPECTIVE ASSESSMENT YEAR. THE LD PR. CIT CONSIDERED THE ORDERS OF THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE IN RESPECT OF ABOVE LOANS. ACCORDING TO LD PR. C IT, THE ASSESSEE FIRM WAS FORMED BY TAKING OVER ASSETS AND LIABIL ITIES OF PROPRIETORSHIP CONCERN OF MR GUNVANTRAI SETH AS A GOING CONCERN. IN THE CASE OF GUNVANTRAI SETH FOR THE A SSESSMENT YEAR 2012 - 13, THE LOAN TAKEN FROM PYRAMID SUPPLIERS PVT. LTD., WAS NOT ACCEPTED AS THE SAID LOAN CREDITOR FAILED TO RESPOND TO THE NOTICE ISSUED U/S.133(6) OF THE ACT. THE APPEAL FILED AGAINST THE SAID ASSESSMENT IS PENDING BEFORE THE APPELLATE 5 ITA NOS.162 & 163/CTK/2017 ASSESSMENT YEARS : 2013 - 14 & 2014 - 15 AUTHORITY. IN THE OPINION OF LD PR. CIT, THE ASSESSING OFFICER MADE NO ENQUIRY BEFORE ACCEPTING THE ABOVE LOANS IN ASSES SMENT YEARS 2013 - 14 AND 2014 - 15 . THE ASSESSING OFFICER HAS GIVEN NO REASON IN THE ORDERS OF ASSESSMENT FOR ACCEPTING THE SAID LOANS AN D, THEREFORE, THE SAID ORDERS OF ASSESSMENT ARE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7. IT IS OBSERVED THAT THE ASSESSEE SUBMITTED BEFORE THE PR. CIT DURING THE PROCEEDINGS U/S.263 THAT THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SUBMIT EVIDENCE IN RESPECT OF LOANS IN QUESTION. THE ASSESSEE POINTED OUT THAT IN PURSUANCE OF THE ABOVE ENQUIRY MADE BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER COPIES OF BANK STATEMENT OF BOTH LOAN CREDITORS FROM WHOM L OANS IN QUESTION WERE RECEIVED BY THE ASSESSEE AND CONFIRMATION OF BOTH LOAN CREDITORS. THE ASSESSING OFFICER AFTER GOING THROUGH THESE MATERIALS AND HAVING SATISFIED WITH THE GENUINENESS OF THE TRANSACTION ACCEPTED THE SAME. LD PR. CIT AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, COULD NOT POINT OUT ANY ERROR THEREIN. FURTHER, IN THE OPINION OF LD PR. CIT, THE ASSESSING OFFICER OUGHT TO HAVE MADE FURTHER ENQUIRIES IN RESPECT OF ABOVE LOAN TRANSACTION AND, THEREFORE, HE INTERFERED IN THE ORDER OF THE ASSESSING OFFICER AND DIRECTED THE ASSESSING OFFICER TO REFRAME THE ASSESSMENT IN RESPECT OF ABOVE ISSUES. 8. WE FIND THAT IT IS CLEAR FROM THE FACTS THAT THE INSTANT CASE IS NOT A CASE OF LACK OF ENQUIRY. THE PR. CIT HAS NOT DISPUTED THE FACT THAT THE ASSESSING OFFICER HAS MADE ENQUIRY IN RESPECT OF LOANS IN QUESTION. IN THE 6 ITA NOS.162 & 163/CTK/2017 ASSESSMENT YEARS : 2013 - 14 & 2014 - 15 OPINION OF LD PR. CIT, THE ASSESSING OFFICER OUGHT TO HAVE MADE FURTHER ENQUIRIES AND, THEREFORE, HE SET ASIDE THE ORDERS OF THE ASSESSING OFFICER. IN OUR CONSIDERED VIEW, THE PR. CIT CAN PASS AN ORDER U/S.263 IN A CASE WHERE ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER ONLY WHEN PR. CIT AFTER MAKING SOME ENQUIRY COMES TO A CONCLUSION THAT THE FINDINGS OR CONCLUSION OF THE ASSESSING OFFICER IS BOTH ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE. 9. FURTHER, IT IS ALSO ESTABLISHED POSITION OF LAW THAT THE ASSESSING OFFICER IS NOT REQUIRED TO RECORD HIS REASON IN THE ORDER OF ASSESSMENT IN RESPECT OF ISSUES WH ERE HE IS SATISFIED WITH THE VIEW CANVASSED BEFORE HIM. 10. WE FIND THAT IN THE INSTANT CASE, LD PR. CIT COULD NOT BRING ANY MATERIAL ON RECORD AFTER MAKING ANY ENQUIRY TO SHOW THAT THE CONCLUSIONS ARRIVED AT BY THE ASSESSING OFFICER IN RESPECT OF LOANS IN QUESTION WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERES T OF THE REVENUE. 11. WE FIND THAT IN THE CASE OF DIRECTOR OF INCOME TAX VS JYOTI FOUNDATION , 357 ITR 388 (DEL), HONBLE HIGH COURT HAS HELD THAT REVISIONARY POWER UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 IS CONFERRED BY THE ACT ON THE COMMISSIONER/DIRECTOR OF INCOME TAX WHEN AN ORDER PASSED BY THE LOWER AUTHORITY IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ORDERS WHICH ARE P ASSED WITHOUT INQUIRY OR INVESTIGATION ARE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF 7 ITA NOS.162 & 163/CTK/2017 ASSESSMENT YEARS : 2013 - 14 & 2014 - 15 THE REVENUE, BUT ORDERS WHICH PASSED AFTER INQUIRY/INVESTIGATION ON THE QUESTION/ISSUE ARE NOT PER SE OR NORMALLY TREATED AS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE BECAUSE THE REVISIONARY AUTHORITY FEELS AND OPINES THAT FURTHER INQUIRY/INVESTIGATION WAS REQUIRED OR DEEPER OR FURTHER SCRUTINY SHOULD BE UNDERTAKEN. IN CASES WHERE THERE IS INADEQUATE INQUIRY BUT NOT LACK OF ENQUIRY, THE COMMIS SIONER MUST RECORD A FINDING THAT THE ORDER/INQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFICATION IS CONDUCTED BY THE COMMISSIONER AND HE IS ABLE TO ESTABLISH AND SHOW THE ERROR OR MISTAKE MADE BY THE AO, MAKING THE ORDER UNSUSTAINABLE IN LAW. AN ORDER OF REMIT CANNOT BE PASSED BY THE COMMISSIONER TO ASK THE ASSESSING OFFICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. 12. IN THE CASE OF INCOME TAX OFFICER VS DG HOUSING PROJECTS LTD. , 343 ITR 329 (DEL), HONBLE DELHI HIGH COURT HAS HELD THAT A DISTINCTION MUST BE DRAWN IN THE CASES WHERE THE ASSESSING OFFICER DOES NOT CONDUCT AN ENQUIRY; AS LACK OF ENQUIRY BY ITSELF RENDERS THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND CASES WHERE THE ASSESSING OFFICER CON DUCTS AN ENQUIRY BUT THE FINDING RECORDED IS ERRONEOUS AND WHICH IS ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THE LATTER CASES, THE COMMISSIONER HAS TO EXAMINE THE ORDER OR THE DECISION TAKEN BY THE ASSESSING OFFICER ON THE MERITS AND THEN FORM AN OPINION ON THE MERITS THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS 8 ITA NOS.162 & 163/CTK/2017 ASSESSMENT YEARS : 2013 - 14 & 2014 - 15 ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THE SECOND SET OF CASES, THE COMMISSIONER CANNOT DIRECT THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT. 13. IN VIEW OF ABOVE, WE SET ASIDE THE ORDER OF THE LD PR. CIT AND ALLOW THE APPEAL OF THE ASSESSEE. ORDER PRONOUN CED IN THE OPEN COURT ON 19 /09 /2017. SD/ - SD/ ( PAVAN KUM AR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 19 /09 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : SONALI JEWELLERS, NAYA SARAK, CUTTACK 2. THE RESPONDENT : ITO, WARD - 2(3), CUTTACK 3. THE CIT(A) - CUTTACK 4. PR.CIT - CUTTACK 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//