M/s. Radhe Exim Pvt. Ltd. , Rajkot V. The Pr. CIT-1, Rajkot, Rajkot

ITA 75/RJT/2021

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6472 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-07-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 18-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRISHRAMDEEPSINHA; FORTHEASSESSEEISRIGHTINHISSUBMISSIONTHAT; FORTHEREVENUEANDPERUSEDTHEDOCUMENTSONRECORD; ISSUINGSHOW
• Assessee Lawyers: SHRIMEHULRANPURA
• Keywords: TDS

Judgement Text

आयकरअपीलीयअधिकरण,अहमदाबादनायपीप INTHEINCOMETAXAPPELLATETRIBUNAL, (ConductedthroughE-Court,Rajkot) BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRIT.RSENTHILKUMAR,JUDICIALMEMBER आयकरअपीलसं./ITANo.75/Rjt/2021 निर्धररवरध / Asstt.Year:2016-2017 M/s.RadheEximPvt.Ltd., PlotNo.G-557, GIDCMetoda, KalawadRoad, Metoda, Rajkot-360021. PAN:AADCR1763P Vs. ThePrincipalCommissioner ofIncome-tax-1, Rajkot. (Applicant)(Respondent) Assesseeby:ShriMehulRanpura,A.R Revenueby:ShriShramdeepSinha,CIT.D.R सुिव्ईकीत्रीख /DateofHearing:20/07/2023 घोरर्कीत्रीख/DateofPronouncement:16/10/2023 आदेश/ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheAssessee againsttheorderoftheLearnedPrincipalCommissionerofIncomeTax-1,Rajkot, (inshort“Ld.Pr.CIT”arisinginthematterofassessmentorderpassedunders.263 oftheIncomeTaxAct1961(here-in-afterreferredtoas"theAct")relevanttothe AssessmentYear2016-17. ITAno.75/Rjt/2020 Asstt.Year2016-17 2 2.ThesolitaryissueraisedbytheassesseeisthatthelearnedPCITerredin holdingtheassessmentframedundersection143(3)oftheActaserroneous insofarprejudicialtotheinterestofrevenueundertheprovisionsofsection263of theAct. 3.Thefactsinbriefarethattheassesseeinthepresentcase,aprivate limitedcompany,isengagedinthebusinessofmanufacturingandtradingof crumbrubber,steel,andcarbonblack.Theassesseefortheyearunder considerationfiledreturnofincomedeclaringlossat₹19,90,333/-only.Thecase oftheassesseewasselectedforlimitedscrutinytoverifythereceiptofunsecured loanfromthepersonnotfilingthereturnofincome.Assuch,theassesseeduring theyearunderconsiderationhasshownreceiptofunsecuredloanfor₹25lacs and₹1.45croresfromthepartiesnamelyM/sHi-canIndustriesLtdandM/sRNG Fin-leasePvtLtdrespectively.Theassesseeduringtheassessmentproceedings videsubmissiondated17-07-2018providedledgerandcontraledgercopy,PAN, ITR-Vandbankstatementsofthelendertoestablishidentity&creditworthiness oflenderandgenuinenessoftransactions.Theassesseefurthervidesubmission dated17-09-2018explainedthattheentireloanamountreceivedfromHi-can IndustriesLtdwassquaredup/paidbackduringtheyear.Likewise,theotherloan partynamelyM/sRNGFinleasePvtLtd,aNBFC,havingsharecapitaltothetune ofRs.3.33croreandreserve&surplustothetuneofRs.26.22crores.Therefore, thelendingcapacity/creditworthinessoftheimpugnedNBFCcannotbedoubted basedonincomedeclaredinthereturnofincome.Thus,theAOonthestrength oftheabovesubmissionmadebytheassesseeacceptedthegenuinenessof unsecuredandcompletedtheassessmentundersection143(3)oftheActby acceptingthereturnedloss. 4.Subsequently,thelearnedPCITonverificationoftheassessmentrecords foundthatthepartiesfromwhomtheassesseehasshownreceiptofloanwere notdoingsubstantialbusinessandtheirbooksofaccountwereprima-facienot reliable.Thus,thecreditworthinessandgenuinenessofloanwerenotproperly ITAno.75/Rjt/2020 Asstt.Year2016-17 3 establishedbuttheAOacceptedthereturnincomewithoutproperlyexamining thisaspect.Thus,thelearnedPCITproposedtoholdtheassessmentorderofthe AOaserroneousinsofarprejudicialtotheinterestofRevenuebyissuingshow causenoticedated23-12-2020. 5.TheassesseeinresponsetoshowcausenoticesubmittedthattheAO duringtheassessmentproceedingproperlyexaminedtheissueofcreditof unsecuredloanafterapplyinghismindonmaterialsmadeavailablebeforehim. Thereafter,theAOacceptedthegenuinenessofimpugnedunsecuredloan.The viewtakenbytheAOafterverifyingnecessarydetailsandafterapplyinghismind cannotbehelderroneousandprejudicialtointerestofrevenuemerelybecause moreenquiriesshouldhavebeenmadeasobservedbytheld.PCIT.Assuch,the orderpassedbytheAOcannotbeheldaserroneousonaccountofchangeof opinion. 6.However,thelearnedPCITrejectedthecontentionoftheassesseeby observingasunder: 12.Inthepresentcase,onperusaloftheBalancesheetandProfit&LossAccountofM/s RNGFinleasePvtLtd,itcanbenotedthatthecompanyhasreportednon-current investmentsofRs.220.05,000/-andshort-termloansandadvancesofRs.13.87,11,165/-, ithasreportedrevenuefromoperationofRs5,24,700/-.Thus,thegrossrevenueispity 0.33%oftheinvestments,loansandadvances.Moresurprisingly,thenetincomeisonly Rs.17,840/-.Thesefiguresloudlyestablishthefacttheentityiscreatedsolelyforthe purposeofprovidingaccommodationentrieschargingearningverypityornoincomeatall. Besides,aspertheauditreportthecompanybelongstoKolkata(WestBengal)whereas theassesseeisoperatingfromRajkot(Gujarat).Howtheycontactedeachotherandwhat werethetermsandIconditionsoftheloanwasalsoaquestionworthaskingorexplaining. However,nothingofthissorthaseverappearinthemindoftheAOwhilepassingthe orderwhichhaslefttheresultantordernotonlyerroneousbutalsoprejudicialtothe interestoftherevenue. 13.Assuch,whentheAOisfoundtohavenotverifiedtheaforementionedaspectsduring theassessment,thereisnoquestionofchangeofopinionascontendedbytheassessee. RelianceisplacedonratioofthedecisionofHon'bleKeralaHighCourtinthecaseofP.V. Sreenijinv.CommissionerofIncome-tax(Central)[2014]47taxmann.com61(Kerala), whichprescribedthatwhereentirematerialavailablewithdepartmentwasnotconsidered byAssessingOfficer,itcouldnotbesaidthatrevisionorderofCommissionerwasa substitutiontothatofopinionofAssessingOfficer 14.Moreover,theargumentsoftheassesseethattherevisionpowercannotbeexercised fordirectingafullerinquirytomerelyfindoutiftheearlierviewtakeniserroneous ITAno.75/Rjt/2020 Asstt.Year2016-17 4 particularlywhenaviewwasalreadytakenafterinquiryandthatthatsuchrevisionshould berestrictedtoaverygrosscaseofinadequacyisalsomisplacedinthefactsofthecase. Asdemonstratedabove,theAO,thoughhewassupposedtoverifytheaboveaspectsof theassessment,hasnotcarriedoutanyindependentinquiryandhasacceptedthe contentionsoftheassesseeonitsfacevalueandassuch,itisacaseofcompletelackof inquiryandisnotacaseofinadequateinquiry.Inthefactsofthecaseasdiscussedherein above,thedecisionscitedbytheassesseearemisplaced. 15.ThisindicatesthattheAOfailedtomaketherelevantvitalinquiriesastowhetherthe depositors/subscribersaregenuineandverifiable,whetherthedepositorsare creditworthy,etc.Perusalofthecaserecordsrevealsthatthereisnothingonrecordto showthattheAOhaseverconfrontedtheassesseeontheseissuesandhadtheAssessing Officerexaminedalltheaboveissues,heshouldhavemadesomenotingeitherinthe ordersheetoranykindofreferencewouldhavebeenmadeinthesubmissionsmadeby theassessee.Therefore,itisnotacaseofinadequateinquirybutaclearcutcaseoflack ofinquiryThelackofinquiryorverificationattherelevanttimebytheAOwouldconstitute prejudicetotheinterestofrevenueandwouldinvolveerroroffactaandlawwhichare vitaltotheissueonwhichthecasewasselectedforscrutiny 16.TheAssessingOfficerisbothaninvestigatorandanadjudicator.IftheAssessing Officerasanadjudicatordecidesaquestionoraspectandmakesawrongassessment whichisunsustainableinlaw,itcanbecorrectedbytheCommissionerinexerciseof revisionarypower.Asaninvestigator,itisincumbentupontheAssessingOfficerto investigatethefactsrequiredtobeexaminedandverifiedtocomputethetaxableincome. IftheAssessingOfficerfailstoconductthesaidinvestigation,hecommitsanerrorandthe word'erroneous'includesfailuretomaketheenquiry.Insuchcases,theorderbecomes erroneousbecauseenquiryofverificationhasnotbeenmadeandnotbecauseawrong orderhasbeenpassedormerits.InthiscasetheAOhasnotconductedthecriticalenquiry andnothingisonrecordtoshowthatanyverificationofdetailstoestablishthe genuinenessoftheclaimasmadebytheassesseehasbeencarriedoutbytheAssessing Officer.ThorderoftheAssessingOfficerissilentandtheclaimshavebeenallowed withoutanyinquiry,examinationorindependentverificationfromoutsideagencies. 17.Asmentionedaboveintheassessee’scase,theAOwhilecompletingtheassessment didnotconductsuchenquiryaswasessentialonthefactsandcircumstancesofthecase andthereforetheorderpassedbytheAOwaserroneousinasmuchasitwasprejudicial totheinterestofrevenue.Therefore,thisisacaseofabsolutelackofinquiriesbytheAO andnotacaseofinadequateinquiries.Relianceisplacedonthefollowingcaselaws whereinithasbeenheldthatproceedingsu/s.263canbejustifiedwherethereislackof inquiriesonthepartoftheA.O. 7.BeingaggrievedbytheorderofthelearnedPCIT,theassesseeisinappeal beforeus. 8.ThelearnedARbeforeusfiledapaperbookrunningfrompages1to78 andcontendedthattheAOduringtheassessmentproceedingshasmade necessaryenquiries.Thereafter,theassessmentcannotbeheldaserroneous insofarprejudicialtotheinterestoftheRevenue. ITAno.75/Rjt/2020 Asstt.Year2016-17 5 9.Ontheotherhand,theDRbeforeussupportedthefindingofthelearned PCIT. 10.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Theissueinthepresentcaserelateswhetherthe assessmentorderhasbeenpassedbyLd.AOwithoutmakinginquiriesor verificationwithrespecttothecreditofunsecuredloanasdiscussedaboveand hencetheassessmentiserroneousinsofarprejudicialtotheinterestofthe RevenueandthusrequiringrevisionbyPr.CITu/s263oftheAct. 10.1AninquirymadebytheAssessingOfficer,consideredinadequatebythe CommissionerofIncomeTax,cannotmaketheorderoftheAssessingOfficeras erroneousinsofarprejudicialtotheinterestoftheRevenue.Inourview,theorder canbeerroneousiftheAssessingOfficerfailstoapplythelawrightlyonthefacts ofthecase.Asfarasadequacyofinquiryisconsidered,thereisnolawwhich providestheextentofinquiriestobemadebytheAssessingOfficer.Itis AssessingOfficer’sprerogativetomakeinquirytotheextenthefeelsproper.The CommissionerofIncomeTaxbyinvokingrevisionarypowersundersection263of theActcannotimposehisownunderstandingoftheextentofinquiry.Therewere anumberofjudgmentsbyvariousHon’bleHighCourtsinthisregard. 10.2DelhiHighCourtinthecaseofCITVs.SunbeamAuto332ITR167 (Del.),madeadistinctionbetweenlackofinquiryandinadequateinquiry.The Hon’blecourtheldthatwheretheAOhasmadeinquirypriortothecompletionof assessment,thesamecannotbesetasideu/s263oftheActonthegroundof inadequateinquiry.TherelevantobservationofHon’bleDelhiHighCourtreadsas under: “12......TherearejudgmentsgalorelayingdowntheprinciplethattheAssessing Officerintheassessmentorderisnotrequiredtogivedetailedreasoninrespectof eachandeveryitemofdeduction,etc.Therefore,onehastoseefromtherecordasto whethertherewasapplicationofmindbeforeallowingtheexpenditureinquestionas revenueexpenditure.Learnedcounselfortheassesseeisrightinhissubmissionthat onehastokeepinmindthedistinctionbetween“lackofinquiry”and“inadequate inquiry”.Iftherewasanyinquiry,eveninadequate,thatwouldnotbyitself,give ITAno.75/Rjt/2020 Asstt.Year2016-17 6 occasiontotheCommissionertopassordersundersection263oftheAct,merely becausehehasdifferentopinioninthematter.Itisonlyincasesof“lackofinquiry”, thatsuchacourseofactionwouldbeopen.——— Fromtheaforesaiddefinitionsitisclearthatanordercannotbetermedaserroneous unlessitisnotinaccordancewithlaw.IfanIncome-taxOfficeractinginaccordance withlawmakesacertainassessment,thesamecannotbebrandedaserroneousbythe Commissionersimplybecause,accordingtohim,theordershouldhavebeenwritten moreelaborately.Thissectiondoesnotvisualiseacaseofsubstitutionofthejudgment oftheCommissionerforthatoftheIncome-taxOfficer,whopassedtheorderunless thedecisionisheldtobeerroneous.CasesmaybevisualisedwheretheIncome-tax Officerwhilemakinganassessmentexaminestheaccounts,makesenquiries,applies hismindtothefactsandcircumstancesofthecaseanddeterminestheincomeeither byacceptingtheaccountsorbymakingsomeestimatehimself.TheCommissioner, onperusaloftherecords,maybeoftheopinionthattheestimatemadeby theofficerconcernedwasonthelowersideandlefttotheCommissionerhe wouldhaveestimatedtheincomeatafigurehigherthantheonedetermined bytheIncome-taxOfficer.ThatwouldnotvesttheCommissionerwithpower tore-examinetheaccountsanddeterminetheincomehimselfatahigher figure.ItisbecausetheIncome-taxOfficerhasexercisedthequasi-judicialpower vestedinhiminaccordancewithlawandarrivedatconclusionandsuchaconclusion cannotbetermedtobeerroneoussimplybecausetheCommissionerdoesnotfeel satisfiedwiththeconclusion.Theremustbesomeprimafaciematerialonrecordto showthattaxwhichwaslawfullyexigiblehasnotbeenimposedorthatbythe applicationoftherelevantstatuteonanincorrectorincompleteinterpretationalesser taxthanwhatwasjusthasbeenimposed. 15.Thus,eventheCommissionerconcededthepositionthattheAssessing Officermadetheinquiries,elicitedrepliesandthereafterpassedthe assessmentorder.ThegrievanceoftheCommissionerwasthattheAssessing Officershouldhavemadefurtherinquiresratherthanacceptingthe explanation.Therefore,itcannotbesaidthatitisacaseof‘lackofinquiry’.” 10.3TheHon’bleBombayHighCourtincaseofGabrielIndiaLtd.[1993] 203ITR108(Bom),discussedthelawonthisaspectinlengthinthefollowing manner: “TheconsiderationoftheCommissionerastowhetheranorderiserroneousinsofar asitisprejudicialtotheinterestsoftheRevenue,mustbebasedonmaterialsonthe recordoftheproceedingscalledforbyhim.Iftherearenomaterialsonrecordonthe basisofwhichitcanbesaidthattheCommissioneractinginareasonablemanner couldhavecometosuchaconclusion,theveryinitiationofproceedingsbyhimwillbe illegalandwithoutjurisdiction.TheCommissionercannotinitiateproceedings withaviewtostartingfishingandrovingenquiriesinmattersororders whicharealreadyconcluded.Suchactionwillbeagainstthewell-accepted policyoflawthattheremustbeapointoffinalityinalllegalproceedings, thatstaleissuesshouldnotbereactivatedbeyondaparticularstageandthat lapseoftimemustinducereposeinandsetatrestjudicialandquasi-judicial controversiesasitmustinotherspheresofhumanactivity. ITAno.75/Rjt/2020 Asstt.Year2016-17 7 10.4TheMumbaiITATinthecaseofSh.NarayanTatuRaneVs.ITO,I.T.A. No.2690/2691/Mum/2016,dt.06.05.2016examinedthescopeofenquiry underExplanation2(a)tosection263inthefollowingwords:- “20.Furtherclause(a)ofExplanationstatesthatanordershallbedeemedtobe erroneous,ifithasbeenpassedwithoutmakingenquiriesorverification,whichshould havebeenmade.Inourconsideredview,thisprovisonshallapply,iftheorderhasbeen passedwithoutmakingenquiriesorverificationwhichareasonableandprudentofficer shallhavecarriedoutinsuchcases,whichmeansthattheopinionformedbyLdPr.CIT cannotbetakenasfinalone,withoutscrutinisingthenatureofenquiryorverification carriedoutbytheAOvis-à-visitsreasonablenessinthefactsandcircumstancesofthe case.Hence,inourconsideredview,whatisrelevantforclause(a)of Explanation2tosec.263iswhethertheAOhaspassedtheorderaftercarrying ourenquiriesorverification,whichareasonableandprudentofficerwouldhave carriedoutornot.ItdoesnotauthoriseorgiveunfetteredpowerstotheLdPr. CITtoreviseeachandeveryorder,ifinhisopinion,thesamehasbeenpassed withoutmakingenquiriesorverificationwhichshouldhavebeenmade.Inour view,itistheresponsibilityoftheLdPr.CITtoshowthattheenquiriesor verificationconductedbytheAOwasnotinaccordancewiththeenquriesor verificationthatwouldhavebeencarriedoutbyaprudentofficer.Hence,inour view,thequestionastowhethertheamendmentbroughtinbywayofExplanation2(a) shallhaveretrospectiveorprospectiveapplicationshallnotberelevant.” 10.5TheHon’bleSupremeCourtinrecentcaseofPrincipalCommissionerof Income-tax2v.ShreeGayatriAssociates*[2019]106taxmann.com31 (SC),heldthatwherePr.CITpassedarevisedorderaftermakingadditionto assessee'sincomeundersection69Ainrespectofon-moneyreceipts,however, saidorderwassetasidebyTribunalholdingthatAOhadmadedetailedenquiries inrespectofsuchon-moneyreceiptsandsaidviewwasalsoconfirmedbyHigh Court,SLPfiledagainstdecisionofHighCourtwasliabletobedismissed.The factsofthiscasewerethatpursuanttosearchproceedings,assesseefiledits returndeclaringcertainunaccountedincome.TheAssessingOfficercompleted assessmentbymakingadditionofsaidamounttoassessee'sincome.ThePrincipal Commissionerpassedarevisedorderundersection263ongroundthatAssessing Officerhadfailedtocarryoutproperinquirieswithrespecttoassessee'son moneyreceipt.Inappeal,theTribunaltookaviewthatAssessingOfficerhad carriedoutdetailedinquirieswhichincludedassessee'son-moneytransactionsand Tribunal,thus,setasidetherevisedorderpassedbyCommissioner.TheHon’ble HighCourtupheldTribunal'sorder.TheHon’bleSupremeCourtwhiledismissing theSLPfiledbytheDepartmentheldasunder:- ITAno.75/Rjt/2020 Asstt.Year2016-17 8 “WehaveheardlearnedcounselfortheRevenueandperusedthedocumentsonrecord. Inparticular,theTribunalhasintheimpugnedjudgmentreferredtothedetailed correspondencebetweenAssessingOfficerandtheassesseeduringthecourseof assessmentproceedingstocometoaconclusionthattheAssessingOfficerhadcarried outdetailedinquirieswhichincludesassessee'son-moneytransactions.Itwason accountofthesefindingsthattheTribunalwaspromptedtoreversetheorderof revision.Noquestionoflawarises.TaxAppealisdismissed” 10.6TheSupremeCourtintheanotherrecentcaseofPrincipal CommissionerofIncome-tax-2,Meerutv.CanaraBankSecurities Ltd[2020]114taxmann.com545(SC),dismissedtheRevenue’sSLPholding that263proceedingsareinvalidwhenAOhadmadeenquiriesandtakena plausibleviewinlaw,withthefollowingobservations: “Havingheardlearnedcounselforthepartiesandhavingperusedthedocumentson record,weseenoreasontointerferewiththeviewoftheTribunal.Thequestion whethertheincomeshouldbetaxedasbusinessincomeorasarisingfromtheother sourcewasadebatableissue.TheAssessingOfficerhastakenaplausibleview.More importantly,iftheCommissionerwasoftheopinionthatontheavailablefactsfrom recorditcouldbeconclusivelyheldthatincomearosefromothersources,hecouldand oughttohavesoheldintheorderofrevision.Therewassimplynonecessitytoremand theproceedingstotheAssessingOfficerwhennofurtherinquirieswerecalledforor directed” 10.7Fromananalysisoftheabovejudicialprecedents,theprinciplewhich emergesisthatthephrase'prejudicialtotheinterestsoftherevenue'hastobe readinconjunctionwithanerroneousorderpassedbytheAssessingOfficer. EverylossofrevenueasaconsequenceofanorderoftheAssessingOfficer cannotbetreatedasprejudicialtotheinterestsoftherevenue,forexample,when anAssessingOfficeradoptsoneofthecoursepermissibleinlawandithas resultedinlossofrevenue;orwheretwoviewsarepossibleandtheAssessing OfficerhastakenoneviewwithwhichtheCommissionerofIncome-taxdoesnot agree,itcannotbetreatedasanerroneousordercausingprejudicetothe interestsoftheRevenueunlesstheviewtakenbytheAssessingOfficeris unsustainableinlaw,ortheAOhascompletelyomittedtomakeanyenquiry altogetherortheorderdemonstratesnon-applicationofmind. 10.8Nowinthefactsbeforeus,inthecaseoftheassesseetheAOduringthe courseofassessmentproceedings,madeenquiriesonissueofcreditofunsecured ITAno.75/Rjt/2020 Asstt.Year2016-17 9 loanandafterconsiderationofwrittensubmissionsfiledbytheassesseeand documents/evidenceplacedonrecord,andthenframedtheassessmentunder section143(3)acceptingthegenuinenessofsuchunsecuredloans.Thisfactcan beverifiedfromthenoticeundersection142(1)oftheActbytheAOand submissioninreplyoftheassesseeagainstsuchnotice. i.Noticedated04-07-2018: 11.Providethedetailsoftheunsecuredloansinthefollowingformat: S.NoNameofthelenderPANofthelender Foreachoftheabovelenders,pleaseestablishgenuineness,identityandcreditworthiness ofthelenderbyfillingcopyofbankstatement,copyofreturnandanyothersuitable documents.Pleaseexplainhowtheloanswerearranged. i.Replydated17-07-2018 Statementshowingdetailsofunsecuredloanaccepted/repaidduringtherelevantprevious yearalongwithcopiesofaccounts,contraaccountsacknowledgmentsofreturnofincome andbankstatementofdepositorsareattachedatPage165to185 ii.Noticedated26-10-2018: WithregardtounsecuredloansgivenbyHi-CanIndustriesPvt.Ltd(PANAACCH2331N) andRNGFinleaseLtd(PANAAACR9073P),theassesseewasaskedtoshowhowtheywere capahleoflendingsomuchamountwhilehavingalowreturnedincome.Thatis,the assesseewasaskedtoshowthecreditworthinessofboththelenders. TheassesseerepliedthatbothofthesecompanieshavesharecapitalofRs.6.25crores andRs.26.22crorerespectively,whichismorethanamountlent.But,theassesseegave nosatisfactoryreply.Whenaskedtosubmitotheraccountsanddetailsofthelenders, therewasnoreplyfromtheassessee.Astheassesseefailedtoprovethecreditworthiness ofthelenders,explainwhytheunsecuredloansgivenbyHi-CanIndustriesPvt.Ltd(PAN AACCH2331N)andRNGFinleasePvt.Ltd(PANAAACR9073P)shouldnotbeaddedtototal incomeu/s.68. ii.Replydated12-09-2018 3.0Sincevidenoticedated26102018youstillnotsatisfiedwiththecreditworthiness ofthelenders,weattheoutsetsubmitthattheincomeofanassesseeinparticularhas hardlyanyconcernwiththecapacitytolendparticularlythesharecapitalandreserveof thecompanyissubstantialascomparedtoloanedamountAnassesseemayhave substantialwealth/capital,FDRs,butthereturnedincomemaybeatmoderatefigureor evensometimesbelowthemaximumnotchargeabletotaxbutreturnsfiledforthe purposeofcontinuityandseekingrefundsfromTDS,whichcannotbeareasontohold ITAno.75/Rjt/2020 Asstt.Year2016-17 10 thattheassesseehasnocapacitytolendthemoneyortoobtainFDRSHowever,forthe purposeofrecordsweattachatPage5&6,theauditedbalancesheetandschedule16in thecaseofHi-canason31.03.2015whereintheloanandadvanceoutstandingatRs. 52.09lacsinthecaseoftheassesseereflect.Sincetheaccountissquaredupduringthe yearitisobviouslydidnotappearintheintheauditreportfortheyearunderassessment. 4.0AsregardstheunsecuredloansfromRNGthecopyofauditreportu/s44ABofthe Actason31.03.2016isattachedatPage7to25.Itmaybeseenfromtheschedule10 thatRNGhadadvancedanamountofRs.13.80croresason31.03.2015inwhich assessee'sbalanceisRs1.45coresonlywhichintermofpercentagecomesaround10% oftotaladvancesofthelender.Thisprovesthatthelenderisanonbankingfinance companyengagedinthebusinessofprovidingfinances 5.0AsregardsthecreditworthinessofthelendersHi-can,andRNG,ittostatethatin thecaseofM/sRadheRenewableEnergyDevelopmentPvt.Ltd,anassociatecompanyof theassesseehadtakenloanofRs.15.00leesandRs.57.50lacsrespectivelyinAY2015- 16TheassesseeM/sRadheRenewableEnergyDevelopmentPvt.Ltdvideitsletterdated 11.052017videpara5haddischargedtheonusliesonitinrespectofqueryrelatedto unsecuredloanswhichwasfoundexplainedbytheLd.DCIT.Circle1(2),RajkotCopyof letterdated11.05.2017andtheassessmentorderisattachedatPage26to39.Similarlyin theearlieryearAY2014-15M/sRadheRenewableEnergyDevelopmentPvt.Ltdobtained similarunsecuredloansfromthesetwoentitieswhichwasstandexplained.Thus,inthe caseofboththelenders,thecreditworthinesshasbeenestablishedbeyonddoubtas availableonrecordswhichispossessionofthedepartment.Canacreditoraskmore detailsfromthelenderthanwhatisfurnishedabove?Itisgoodgestureonthepartofthe lendertomakeavailablethedetailsofitsfinancialstatementsasfurnishedaboveinthe assessmentproceedingsinprogressofthedebtorandnotinitowncase. 10.9FromtheaboveitisrevealeditisnotthecasethattheAOhasnotmade anyenquiry.IndeedthePr.CITinitiatedproceedingsundersection263oftheAct onthegroundthattheAOhasnotmadeenquiriesorverificationwhichshould havebeenmadeinrespectofcreditworthinessandgenuinenessofthelender.It isnotthecaseofthePr.CITthattheLd.AOdidnotapplyhismindtotheissue onhandorhehadomittedtomakeenquiriesaltogether.Intheinstantsetoffacts, theAOhadmadeenquiriesandafterconsiderationofmaterialsplacedonrecord acceptedthegenuinenessoftheclaimoftheassessee. 10.10Atthisjuncture,itisalsoimportanttonotethatthelearnedPCITinhis orderpassedundersection263oftheActhasreferredtotheexplanation2of section263oftheAct.ItwasattemptedbythelearnedPCITtoholdthatthere werecertainnecessaryenquirieswhichshouldhavebeenmadebytheAOduring theassessmentproceedingsbutnotconductedbyhim.Therefore,onthis reasoningtheorderoftheAOisalsoerroneousinsofarprejudicialtotheinterest ITAno.75/Rjt/2020 Asstt.Year2016-17 11 ofrevenue.Inthisregard,wemakeourobservationthatthelearnedPCIThasnot invokedtheexplanation2ofsection263oftheActintheshowcausenoticedated 23-12-2020aboutthesame.Therefore,theopportunitywithrespecttothe explanation2ofsection263oftheActwasnotaffordedtotheassessee.Thus,on thiscountthelearnedPCITerredintakingthecourseofsuchprovisionswhile decidingtheissueagainsttheassessee.Secondly,thelearnedPCIThasalsonot specifiedthenatureandthewaytheenquirieswhichshouldhavebeenconducted bytheAOintheassessmentproceedings.Thus,intheabsenceofanyspecific findingofthelearnedPCITwithrespecttotheenquirieswhichshouldhavebeen made,wearenotconvincedbyhisorderpassedundersection263oftheAct. 10.11Inviewoftheaboveandafterconsideringthefactsintotality,weholdthat thereisnoerrorintheassessmentframedbytheAOundersection143(3) causingprejudicetotheinterestofrevenue.Thus,therevisionalorderpassedby thelearnedPCITisnotsustainableandthereforewequashthesame.Hencethe groundofappealoftheassesseeisallowed. 11.Intheresult,theappealfiledbytheassesseeisallowed. OrderpronouncedintheCourton16/10/2023atAhmedabad. Sd/-Sd/- (T.RSENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated 16/10/2023 Manish