Citystar Ganguly Projects Ltd. Vs PCIT (ITAT Kolkata)
The issue under consideration is whether CIT is correct in invoking revisional jurisdiction u/s 263 on the ground of alleged inadequate enquiry by AO into loan transactions of assessee?
ITAT states that the CIT invoked the revisionary jurisdiction on the broad allegation that the AO failed to make adequate enquiries with regard to the creditworthiness of the four loan creditors, from whom the assessee had received huge loan during the year, when the information gathered u/s 133(6) showed that they had reported ‘NIL’ or low income and claimed huge TDS refund or they had accepted huge unsecured loans. It is noted that the impugned loan is the subject matter of SCN issued u/s 263 of the Act, which the assessee received from two bodies corporate i.e. Anadya Technologies Pvt Ltd & Hotahoti Wood Products Ltd. Although in the SCN, the ld PCIT while proposing to usurp the revisional jurisdiction found fault with the Assessment order on the ground of non-enquiry by AO into the loan transaction by the assessee, which ITAT find that enquiry under Section 133(6) was in fact carried out by the AO from the said party and evidence in support of compliance made by the said party was also furnished before the ld. Pr. CIT. ITAT therefore note that since the evidence led by the assessee in this regard was found to be factually true, the ld. Pr. CIT did not pursue this ground any further while passing the impugned order. Therefore ITAT have no hesitation in observing that on this ground of non-enquiry, the order u/s 263 holding the assessment order to be erroneous and prejudicial to the interests of the Revenue per-se erroneous.
Further, ITAT states that AO had made specific enquiry into loan transactions of assessee based on the CASS parameter. In response to enquiries made under section 133(6), loan creditors had filed their documents/details to substantiate/prove their identity(ies), creditworthiness and genuineness of the loan transactions. AO having examined all the details had not drawn any adverse inference against any loan creditors and did not follow a view ‘unsustainable in law’ and assessment order was not the result of non-application of mind or any inadequate enquiry, accordingly, invocation of jurisdiction under section 263 was untenable.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal is preferred by the assessee against the order of Ld. Pr. CIT-9, Kolkata dated 28-03-2019 for the assessment year 2014-15 passed u/s. 263 of the Income-tax Act, 1961 (hereinafter in short ‘the Act’).
2. The main grievance of the assessee is against the action of the ld. PCIT in assuming his jurisdiction u/s. 263 of the Act without satisfying the condition precedent prescribed by the statute.
3. The brief facts of the case are that the assessee has filed its R.O.I (Return of Income) for the A.Y under consideration on 29-09-2014 declaring total income of Rs. 8,75,470/-. Thereafter, the case was selected for scrutiny under CASS. The AO noted during the assessment proceedings that the assessee was engaged in construction business under the name and style of ‘M/s. City Star Ganguly Projects’ and disclosed the total turnover of Rs.90,25,099/- along with income from other source amounting to Rs. 21,768/-. Since the assessee’s case was selected for scrutiny through CASS with the reasoning ‘unsecured loans were taken from persons who have not filed their ITR’, the AO therefore asked the assessee to file loan confirmation of every loan creditors. Pursuant to which, the assessee filed the list of loan creditors along with their PAN details etc, which has been acknowledged by the AO. It was also brought to our attention that prior to completion of assessment, the AO had also made enquiries from the loan creditors u/s 133(6) of the Act, who all had advanced fresh loans/advances to the assessee during the year, which were also duly complied by each of them. Thereafter, the AO records specific finding that there was no adverse inference needs to be drawn on CASS point. The AO accordingly concluded the assessment after making additions of Rs.1,90,792/- at total income of Rs.10,66,260/- by an order dated 22-08-2016.
Thereafter, the ld. PCIT has issued show cause notice dt. 13-03-2019 to the assessee by stating as under:-
“2. It is seen that your return for the assessment year 2014-15 was selected for complete scrutiny through CASS and assessment under section is u/ s. 143(3) of the I.T. Act, 1961 was completed on 22-08-2016 at an assessed income of Rs. 10,66,260/-.
3. On perusal of the assessment records it is evident that that the case was taken up for complete scrutiny for the reason that unsecured loans were taken from persons who have not filed their ITR. Records reveal that unsecured loans of Rs. 1,27,47,000/- were taken from the following companies :-
(a) North Eastern Publishing & Advertising Ltd.
(b) Hotahoti Wood Products Ltd.
(c) Purbanchal Prestressed Ltd., and V
(d) Anadya Technologies Pvt. Ltd.
4. The A.O. had issued notice u/s.133(6) to the entities mentioned at (a), (b) & (d) but no information was called for from M/ s. Purbanchal Prestressed Ltd. Copy of ITR of M/ s. Purbanchal Prestressed Ltd. is also not found on record. Thus, the reasons for selection remained unverified to that extent.
5. Information gathered through issuance of notice u/s.133(6) reveal that all the above entities have shown very low and even ‘Nil’ income for the year and claimed huge TDS refunds. Copy of their annual accounts reflect huge unsecured loans that are invested in a battery of apparently shell companies. The onus lies on the assessee to establish the credit worthiness of the loan creditors which is not discharged through mere filing of all primary evidence. The Assessing Officer in his turn had failed to take note of the dings on record and thereby did not cause any field enquiry regarding the genuineness and credit-worthiness of the loan creditors through field enquiry and even summon them to furnish their explanation as to how they had provided such high loans.
6. In this regard, reference may be made to the Hon’ble Supreme Court’s decision in the case of CIT vs. N. Tarika Properties Investment (2014) reported in 51 taxmann 387 (SC) where it has been held that – ‘ PAN cannot be treated as sufficient disclosure of identity of the person. PANs are allowed on the basis of application without actual de facto clarification of identity or ascertainment of activities, nature of business activity and are just as to facilitate the Revenue to keep track of transactions and thus PAN cannot be blindly and without consideration of surrounding circumstances treated as sufficient disclosing the identity … ‘
7. In view of the above, the order passed u/s.143(3) dated 22-08-2016 appears to be erroneous in so far as it is prejudicial to the interest of Revenue and accordingly, proceedings u/s. 263 of the I.T Act, 1961 is being initiated in your case”.
4. In its reply dated 18-03-2019, the assessee furnished its objections to the SCN. The assessee brought to the notice of the ld. PCIT that on the issue of loan creditors, specific queries were raised by the AO and in pursuance of it, the assessee had filed before him (the AO) all details along with documents, PAN, etc about loan creditors, who after conducting enquiries with the loan creditors and thereafter being satisfied with the result of his enquiry, has not drawn any adverse view against the loan creditors or assessee, which is clear from para-2 of the assessment order itself. The assessee further brought to the notice of the Ld. Pr. CIT, that out of the four bodies corporate named in the SCN, the impugned loan amount of Rs.1,27,47,000/- was received from two of them, namely M/s Anadya Technologies Pvt Ltd & M/s Hotahoti Wood Products Ltd during the relevant FY 2013-14. However, the ld. PCIT did not agree with the contention, he was pleased to set aside the assessment order for framing de-novo assessment on the reason that the documents submitted by the assessee in support of the claim of genuineness and creditworthiness of the loan creditors were not subjected to verification by the AO during the assessment proceedings. Aggrieved by the aforesaid action of the ld. PCIT, the assessee is before us.
5. We have heard both the parties and perused the records. We note that Shri Damle, FCA, ld.AR of the assessee assailing the impugned order of the ld. PCIT submitted that the condition precedent for invoking/ assuming revisional jurisdiction u/s. 263 is absent in this case. According to him, the AO is not only an adjudicator, but he is also an investigator/investigating authority. According to the ld. AR, the AO has carried out both the roles given by the statute. According to him, as an investigating authority he has called upon the assessee to file the details of loan creditors. Pursuant to which, the assessee had filed full details before the AO, who after satisfying with the same has not drawn any adverse inference against the assessee on this count. Elaborating this fact the ld. AR drew our attention to pages- 11 & 12 of the Paper book, wherein the AO had issued 133(6) notices to M/s.Anadya Technologies Pvt Ltd and M/s. Hotahoti Wood Products Ltd, wherein following query(ies) was raised against both the loan creditors:
“Record that you have given loan ‘UNSECURED LOAN’ to Smt of ‘CITYSTAR GANGULY PROJECTS LTD’92/1B Mualana Abul Kalam Azad Sarani, Kolkata-54, PAN AADCA7382F so that you are directed to request to provide relevant documents viz. highlighting the Bank Transaction Statement, B/Sheet as at 31.03.2014 highlighting the Asset vide specific transaction with name and amount including a submission duly fill up with following format accordingly within three days from the receipt of this letter providing the copy of the undersigned. Notice u/s 133(6) with postal stamp received date.
