Vijay Prakash Mittal, Meerut vs Assessee

Appellant by : Shri Anoop Sharma, Advocate Respondent by : Shri Ramesh Chandra, CIT DR

ORDER

PER GEORGE GEORGE K, JUDICIAL MEMBER

This appeal at the instance of assessee is directed against CIT's order u/s 263 of

the Act dated 25.3.2013. The relevant assessment year is 2008-09. Grounds raised reads

as under :-

1. "That the Learned Commissioner of Income Tax, Meerut, has erred in invoking jurisdiction under section 263 of the Income Tax Act, 1961.

2. That the Learned Commissioner of Income Tax, Meerut, has erred in invoking jurisdiction under section 263 of the Income Tax Act, 1961 when it was discernible from record that Assessing Officer had applied his minds to the issues in questions, commissioner could not invoke section 263 merely because he had different opinion.

3. That the Learned Commissioner of Income Tax, Meerut, has erred in making arbitrary additions based on conjectures and surmises.

4. That the Learned Commissioner of Income Tax, Meerut, has erred in setting aside the assessment order dated 12.11.2013 to the file of assessing officer to verify different claims.

ITA No.3369/Del /2013 2 5. That the Learned Commissioner of Income Tax, Meerut, has further erred in not following the principles of natural justice while deciding the appeal.

6. That the Learned Commissioner of Income Tax, Meerut, has further erred in deciding the 263 proceedings in undue haste without giving the assesee an adequate opportunity to contest the same. "

2. The assessee an individual, filed his return of income on 26.3.2009 declaring Rs.

9,14,344/-. The assessment order u/s 143(3) of the Act was passed on 12.11.2010

accepting the returned income. Subsequently CIT issued notice u/s 263 of the Act

(dated 12.3.2013). According to CIT, assessment was completed without proper enquiry.

The CIT in notice u/s 263 pointed out the following infirmities in the assessment order :-

a) "This case was selected in scrutiny through CASS and reason was that assessee has purchased mutual fund of Rs. 2,34,76,644/- but AO has not enquired any aspect in this regard nor has made the verification of AIR information of Rs. 2,34,76,644/-.

b) Another point for examination by the AO was regarding the genuineness of STCGs shown and their claim vis-à-vis business income but case records are silent on this issue.

c) Unsecured loan of Rs. 37,14,212/- have not been enquired into by the AO who has simply accepted the same.

d) As per balance sheet loan and advances given to others but interest was not charged on the same amount and on the other side assessee had paid interest on unsecured loans. Therefore, interest shall be disallowed on proportionate basis.

e) As per balance sheet, an addition of Rs. 3,38,660/- was made in fixed assets but AO has not verified the source of addition.

f) During the year, assessee has made a gift to Ruchika Dass, Ghaziabad, but copy of gift deed and source of investment has not been obtained by the AO.

g) Income other than capital gains amounting to Rs. 17,70,684/- has been allowed by the AO without making a single enquiry.

h) The assessee has shown capital gains of Rs. 9,14,343/- and AO has accepted the same without asking for any detail or making any enquiry.

i) P & L a/c of the assessee shows the following income:

ITA No.3369/Del /2013 3 1. By Capital Gain Rs. 3,33,413/-

2. By Capital Gain (Short Term) Rs. 9,14,343/-

3. By Dividend Rs. 10,80,607/-

4. By Interest on PPF Rs. 1,90,603/-

5. By Interest A/c Rs. 2,51,656/-

6. By Interest on RBI Exempt Rs. 2,13,099/-

7. By Interest UTI ARS Bonds Rs. 9,953/-

8. By Rent Rs. 24,766/-

_____________________________________________ TOTAL Rs. 30,18,443/-

Against the same, the asessee has shown a net profit of Rs. 28,34,029/- thus claiming expenses of Rs. 1,84,414/-. None of these expenses is related to or allowable against any of the Income shown as above.

j) The assessee has returned the income at merely Rs. 9,14,344/- even as against the N.P. of Rs. 28,34,029/-, other income are claimed as exempted as follows :

1 Profit from Firm H L Warehousing Corporation Rs. (-) 2,02,929/- 2 Capital Gain (STT) as per annexure u/s 10(38) Rs. 3,33,410/- 3 RBI Rellief Bonds Rs. 2,13,099/-

4 PPF Interest and ARS Bonds Rs. 2,00,557/-

5. Dividend from Shares Rs. 10,80,608/-

______________________________

TOTAL Rs. 16,24,745/-

_______________________________"

3. Assessee filed objections / written submissions dated 18.3.2013 to the notice

issued u/s 263 of the Act. The CIT however, rejected the objections raised by the

assessee and passed an order u/s 263 dated 25.3.2013. The CIT in so far as the

infirmities pointed out at serial number (a)(b)(d) to (i) and (J) referred to above,

remanded the issues to AO for fresh examination. The relevant finding of the CIT reads

as follows :-

"The AO did not make any verification on AIR information on mutual fund of Rs. 23476644/- purchased by the assessee. The genuineness of STCG and deemed capital gain was also not examined. The additions made to fixed assets shown at Rs. 338660/- also remained unexamined and uninquired so was the case with the ITA No.3369/Del /2013 4

gift stated to be made to M/s. Ruchika Das, the income other than capital gains amounting to Rs. 1770684/- has been allowed by the AO without making a single query capital gain shown at Rs. 914343/- have been accepted without making a single inquiry. The Ld. Counsel for the assessee has given some details and explanation during the course of 263 proceedings. However, it is well established that furnishing some information during 263 proceedings does not absolve the AO from his duty to call for such details and examination them. The AO is now directed to examine each and every aspect of above after giving the assessee proper opportunity."

4. As regards the unsecured loans of Rs. 37,14,212/- (point mentioned by CIT in serial

No. (c). The CIT directed the AO to add the same. The relevant finding of the CIT at

page 8 of the impugned order reads as under :-

"As regards the unsecured loans of Rs. 3714212/-, the AO has accepted the same without any inquiry or verification. During the course of 263 proceedings, a copy of confirmation is stated to have been filed, however, it is reiterated that furnishing the same information during 263 proceedings, it does not absolve the AO of his duty to make proper inquiry and call for such information to examine them before accepting the same. As regards credits are concerned, identity, creditworthiness and genuineness that has to be proved remained totally unexplained since the assessee failed to confirm the same whereas heavy onus lies on the assessee solely to explain all kinds of credits appearing in its books failing which the same are liable to be added under section 68 of the Income Tax Act, 1961 as unexplained cash credits."

5. Similarly expenses of Rs. 1,84,414/- was directed by the CIT to be disallowed [point

at serial No. (1)]. The relevant finding of the CIT reads as under :-

"The assesee in its P & L A/c has shown income under several heads which is reproduced at para 2 (i) of notice under section 263 and is not being repeated here for the sake of brevity. All these income falls under the had other than business income yet the assessee has claimed expenses to the tune of Rs. 184,414/- none of which related to or were allowable against any such income since this claim is wrong, the sum of Rs. 184,414/- is added to the income of the assessee along with initiation of penalty under section 271(1)(c) of the Income Tax Act ."

6. The assessee being aggrieved is in appeal before us. The authorized representative

for the assesee submitted that the notice u/s 263 of the Act dated 12.3.2013 was ITA No.3369/Del /2013 5

received by the assesee only on 13.3.2013 and the order u/s 263 was passed on

25.3.2013. It was submitted that CIT has erred in not following the principles of natural

justice, since proceedings u/s 263 was passed in undue haste without giving the

assesses an adequate opportunity to contest the same. The assesese has also filed a

paper book of 156 pages comprising of the written submissions filed before the CIT,

confirmation of unsecured loans etc.

7. The Ld. DR strongly supported the order of the CIT.

8. We have heard rival submissions and perused the material on record. On perusal of

assessment order dated 12.11.2010, we noticed that the same is passed without any

proper enquiry. The AO accepted the returned income of the assessee by holding as

under :-

"Considering all the facts, detailed submitted by the assessee and after examination of account books/documents and after discussion of the various issue, the assessment is completed on returned income."

There is nothing on record even remotely to suggest that the issues on which the CIT

had pointed out the infirmities was properly examined by the AO. Therefore, we hold

that the CIT is justified in invoking his revisionary jurisdiction u/s 263 of the Act.

9. The CIT after pointing out the infirmities, directed the AO to make addition of Rs.

37,14,212/- (unsecured loans) and Rs. 1,84,414/- (disallowance of expenses). The

assessee had given confirmation for the unsecured loans and copies of the bank

accounts of the creditors are placed on record. Similarly assessee had given explanation

for disallowance of expenses (Rs. 1,84,414/-) which seems not to have been taken note

off by the CIT, while passing order u/s 263 of the Act. Moreover, the order u/s 263 was

passed within a period of 12 days from the date of issuance of notice u/s 263. Therefore,

in the interest of justice and equity, we modify the order of the CIT and direct the AO to ITA No.3369/Del /2013 6

examine afresh the issues regarding unsecured loans of Rs. 37,14,214/- and

disallowance of expenditure amounting to Rs. 1,84,414/-. The AO shall examine these

two issues afresh de hors the directions given by the CIT, after affording a reasonable

opportunity of being heard to the assessee. It is ordered accordingly.

In the result the appeal of the assesee is partly allowed as indicated above.

The decision was pronounced in the open court on 30th January, 2015.

sd/- sd/-

(S.V. MEHROTRA) (GEORGE GEORGE K.) Accountant Member Judicial Member

Dated: 30th January, 2015 'veena' Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Deputy Registrar, ITAT, New Delhi