Case Law Details
Brief Facts of the case:
Mr. Sanka Venkata Rama Rao, is an Individual derives income from business of money lending on hypothecation of gold/silver articles A survey u/s 133A was carried at the premises of the assessee by the department and consequent to survey, the assessee filed his return of income for assessment year 2010-11 on 30.09.2011 admitting a total income of Rs.30,23,250. The scrutiny assessment was completed on 18./04.2011 determining the total income at Rs. 53,59,650.The records of the assessment proceedings were examined by the Commissioner of Income Tax who observed that there was a gap between the income admitted during the survey, post survey enquiries and the assessed income in the assessment proceedings. Hence forth , the CIT issued a show cause notice for revising the assessment order considering the order passed by the AO as erroneous so far as prejudicial to the interests of Revenue.
Aggrieved by the same, the assessee in appeal has challenged the order of CIT passed u/s 263.
Contention of the Assessee:
The learned counsel for the assessee contended that apart from filing all the details pertaining to the moneys in circulation, notarized affidavits from the persons concerned, confirming the transactions and other evidences were filed during the assessment proceedings. Further, all the persons were also physically produced before the assessing officer for verification, who had actually reconfirmed the facts regarding the transactions. Thus, all the transactions were genuine and accordingly the assessee has discharged the onus laid down on him by virtue of Sec 68 & 69 to prove the source except in one case where Rs. 19,80,000 remain unexplained and were accordingly added to the total income along with interest amounting to Rs. 3,56,400, total additions amounting to Rs. 23,36,400.
Further, a detailed break-up of the total income declared, the Capital Account and Balance
Sheet as on 31.03.2010 were submitted, along with a detailed note thereto and a reconciliation of the amounts advanced, during the assessment proceedings, were also submitted for perusal of CIT
Thus, the AR submitted that the assessment was, in fact, completed by the A.O. after making due enquiries and thus, the observation of the CIT that the A.O. failed to make necessary enquires is factually incorrect.
Further, he contended that AO had done scrutiny assessment which was completed after application of mind and hence, the order cannot be treated as erroneous and prejudicial to the interests of the Revenue.
Therefore, the revisionary proceedings initiated under sec 263 should be dropped.
Contention of the Revenue:
The CIT observed that the assessee in his first statement accepted the entire amount of
Rs.91,09,805/- as his own funds. In his statement No..2 and 3 introduced the theory of funds lent on behalf of others to the extent’ of Rs.56, 30,000. For this, he has introduced 17 people as others and claimed that Rs.56, 30,000 belong to them and he has furnished a balance sheet as on 31.03.2010. Therein he has admitted debtors to the extent of Rs.35, 47,994 and stating in a separate note, that debtors are exclusive of Rs. 56, 30,000 which is lent on behalf of others.
Further, the CIT pointed out that the assessee has produced some people and filed confirmatory letters but all of them have expressed their inability to produce any sort of evidence in support of the transaction. Further, it is surprising that such funds were claimed to have been given without even a small receipt from the assessee and the assessee was also not found to have any evidence on the alleged loan at the time of survey nor he produced any contemporaneous evidence for the alleged receipt later
Thus, the assessee had failed to prove the genuiness of loan transactions which could have been detected by the AO had the by studying the relevant material and with proper investigation. Therefore, the revisionary proceedings initiated is well within the law as the as the assessment order were erroneous & prejudicial to the interests of revenue.
Decision of the ITAT:
The ITAT after considering the rival contentions observed that the assessee has submitted full information at the time of survey u/s 133A, recording of statement u/s 131. The same information was considered by Assessing Officer for framing assessment, thus, there is application of mind by A.O. before passing the assessment order.
Further, the ITAT relied on the decision of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT wherein the court held that the phrase “prejudicial to the interests of the Revenue” had to be read in conjunction with an erroneous order passed by the AO, that every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an AO adopted one of the courses permissible in law and it had resulted in loss of revenue; or where two views were possible and the AO had taken one view with which the CIT did not agree, it could not be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income Tax Officer was unsustainable in law.
Therefore, considering all these it can be concluded that there has been no erroneous order passed by AO so as to allow CIT to initiate the revisionary proceedings u/s 263.
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