ORDER
R.P. Garg, Vice President
1. As there is a difference of opinion between Judicial Member and Accountant Member, the President, ITAT has referred the matter under Section 255(4) of the Act for my opinion, as Third Member, on the following points:
ITA NOS. 266, 267 & 68/IND/02
a) As to where the dropping of the proceedings under Section 148 dt.07-02-2000 served on the assessee on 08-03-2002 is invalid and barred by time limitation in absence of service within statutory period?
b) If answer to Question No. 1 is in affirmative then as to whether the re visional order Under Section 263 becomes invalid in consequence ?
c) As to whether under the facts and circumstances of the case, the order passed Under Section 263 is bad in law on merits of the case ?
ITA NO. 269/IND/02
a) As to whether order passed Under Section 263 related to allowing the claim of the payment of interest to the (sic) by dropping of the reassessment proceedings by the A.O. is invalid under the facts and circumstances of the case ?
2. Brief facts of the case are – assessment for the first three years viz A.Y. 1991-92, 1992-93 and 1993-94 were completed respective only 20-7-1993 20-10-1993 and 31-10-1995. The assessment for A.Y.1997-98 was completed on 7-2-2000.
3. The office note in the assessment order for the A.Y.1991-91, – interalla, states as under:
This assessment has been made under DCIT, Ujjain Range, Ujjain monitoring and after getting approval vide his letter No. DC/UJJN/DCIT/NMon/92-93/1535 dtd.15-12-1992.
Cash Credit confirmations have been obtained and scrutinized on the lines indicated in the DCIT’s letter noted above.
4. Thereafter, notices were issued under Section 148 for first two years on 3-6-1997 and for the third year on 12-5-1997. The reasons recorded for issue of notice under Section 148 for the these years are as under:
(i) For the Asstt.Year 1991-92:
During the course of assessment proceedings for A.Y.1994-95, while verifying the genuineness of credits introduced in various names, enquiries were conducted through ADI, Ahmedabad and AD,
Indore and as per their report the following unsecured loans were bogus:
Amount Date
1) M/s. Sejal Enterprises, Ahmedabad. 60,000 18.3.91
40,000 23.3.91
2) Tarachand Agrawal, Ahmedabad 50,000 18.3.91
3) Anju Parashanka, Ahmedabad 60,000 23.3.91
60,000 -do-
4) Sanjay Agrawal, Ahmedabad 50,000 18.3.91
5) Swaroop Chand Jain, Indore 50,000 14.3.01
6) Arun Sangar, Indore 25,000 15.3.91
7) Asok Jain, Indore 50,000 14.3.91
(ii) For the Asstt.Year 1992-93:
During the course of the assessment proceedings for A.Y. 1994-95, while verifying the genuineness of creditors introduced in various names, enquiries were conducted through ADI. Ahmedabad and ADI, Indore and as per their reports the following unsecured loans were bogus:
Amount Date
1) Tarachand Agrawal, 4,50,000
2) Sejal Enterprises, Ahmedabad 10,000
40,000 8-5-91
3) K.K. Agrawal, Ahmedabad 20,000 10.5.91
4) Sanjay Agrawal/Ahmedabad 60,000 5.4.91
(iii) For the Asstt.Year 1993-94:
During the course of assessment proceedings for A.Yr.1994-05 inquiries were conducted through, ADI, Ahmedabad to verify the genuineness as credit introduced in the various names. As per ADI’s report the Joan of Rs. 185,348/- in the name of Shri __Gulabwala, Ahmedabad was not genuine as per the statement of this person recorded before ADI).
5. It seems that the proceedings initiated under Section 147/148 were dropped by the AO by the order dated 7-2-2000 by observing as under:
(i) For the Asstt.Year 1991-92- “Proceedings filed after verification & considering reply of the assesses.”
(ii) For the Asstt.Year – 1992-93 – “Keeping in view the reply of the assessee & the verification proceeding filed. ”
(iii) For the Asstt.Year – 1993-94 – “Proceedings filed after discussion of the case with the Addl.CIT. ”
6. It is further seen mat these orders were served on the assessee only on 8-2-2002 and entries made in the DCR by mentioning ‘proceedings’ were shown to the assessee.
7. The CIT in exercise of his power under Section 263 issued a notice to the assessee on 8-2-2002 for revising the order. On being made aware that the assessment sought to be revised under the said notice were made much prior to the limitation within which the CIT could rectify, these notices were dropped. Fresh notices were issued on 27-2-2002 for exercising the jurisdiction under Section 263 against the orders dropping proceedings under Section 147. Grounds on which the jurisdiction under Section 263 is being exercised ate certain cash credits in the names of five persons are as under:
For the Asstt.Year 1991-92 Sr.No. Parties Amount Intt. 1. Sejal Enterprises Rs. 1,00,000/- - 2. Sanjay Agrawal Rs. 50,000/- - 3. Tarachand Agrawal Rs. 50,000/- - 4. Anju Parasmka Rs. 1,20,000/- - For the Asstt.Year 1992-93 Sr.No. Parties Amount Intt. 1. Anju Parasmka - Rs. 18,000 1. Sejal Enterprises Rs. 80,000/- Rs. 5,803 2. Sanjay Agrawal Rs. 60,000/- Rs. 16,401 3. Tarachand Agrawal Rs. 1,00,000/- Rs. 22,336 4. Kamal Kumar Agrawal Rs. 20,000/- Rs. - For the Asstt.Year 1993-94 Sr.No. Parties. Amount Intt. 1. Anju Parasmka Rs.- Rs. 18,000 1. Sejal Enterprises Rs.- Rs. 27,000 2. Tarachand Agrawal Rs.- Rs. 22,500 3. Sanjay Agrawal Rs.- Rs. 16,5000 4. Kamal Kumar Agrawal Rs.- Rs. 3,000
8. In the forth year viz. A.Y. 1997-98, the dispute is only with regard to disallowance of interest pertaining to the aforesaid cash credit.
9. The assesses raised objection before the CIT that the impugned order dated 7-2-2000 dropping proceeding under Section 148 which are sought to be revised, has been communicated to the assessee on 8-3-2002, which was barred by limitation as prescribed by the Sub-Section 2 of Section 153, i.e. made before two years from the end of financial year in which notice under Section 148 was issued and the notice having been issued on 3-6-1997, the limits expired on 31-3-2000 and since they were communicated to the assessee on 8-3-2002, they have no valid existence in the eyes of law, in view of Supreme Court decision in the case State of West Bengal v. M.R. Manda, 2001 AIR (SC) 3471. Reference was also made in the decision of Madras High Court in the case of Carbovandum Universal Ltd 240 ITR 99 and in the case of CIT v. Sree Narayana Chandrika Trust, 212 ITR 456 (Ker.)
10. The CIT, however, rejected the contention of the. assessee by observing as under:
“I have considered submissions of the counsel. Madras High Court in the case of CIT v. Palayakar Co. Ltd. Ltd. 74 SIR 642 has held that 263 is applicable in any proceedings under the Act. It is not continued to an order of assessment only and it extends to all orders passed by the AO, 120 ITR 627 (Calcutta). It has been held by Calcutta High Court in this case that dropping the proceedings after obtaining the approval of the Inspecting Assistant Commissioner is also an order which can be revised Under Section 263 of the IT Act. As regards the submissions that the order has not been communicated, it is stated that before passing of order Under Section 263 of the I.T. Act, oven this compliance has been made and orders sheet entries vide which proceedings were dropped Under Section 148 -were communicated on 8.3.2000 and thereafter, the matter was discussed with the assessee’s counsel before passing this order Under Section 263. The order dropping the proceedings has thereby been served before invoking Section 263.”
11. The assessee’s contention that the order of the AO was neither erroneous nor prejudicial to the interest of the Revenue was also rejected by the CIT by observing that before dropping proceedings under Section 147, the AO has not conducted proper inquiry and has not brought on record sufficient material to justify droppings of the proceedings in the glaring adverse facts. According to him, this was case of inquiry under Section 133A through Investigation Directorate at Ahmedabad and by AO which revealed that, bogus creditors were introduced in the books of accounts which necessitated reopening of assessment and on examination again through Investigation Directorate at Ahmedabad and the AO in which it transpired that the lenders were given money which was flown, back to the assessee in the form of cash creditors. Similarly for interest also, only accommodation entries were taken and in some assessment years, when interest disallowance relating to bogus cash credits were disallowed in the course of assessment proceedings, the Tribunal held that the AO should first reopen the assessment, examine the genuineness of cash credits and thereafter proceed to disallow interest. According to CIT, the AO did not carry out proper investigation and enquiries to look into the genuineness of the cash credits the genuineness of transactions, credit-worthiness of the lender and identify of the persons. He therefore, set aside the order of the AO dropping the proceedings under Section 147 with a direction to the AO to frame proper assessment after considering the submissions of the assessee.
12. In the appeal filed before the Tribunal the assessee submitted that there was no valid and effective order of the AO for dropping the proceedings under Section 147, and therefore, revision under Section 263 is not valid. And on merits also the assessee’s contentions is that the claim of She assessee relating to the creditors was properly examined by the AO during the reassessment proceedings and the view taken by the CIT in the revisional order that explanation furnished by the assessee was not sufficient to drop the reassessment proceedings, was thus, nothing but a change of opinion, which can not allowed to be made a basis for invocation of revisional provision under Section 263 of the Act.
13. The Revenue’s contention; on the other hand, is that issue before the Tribunal is not the validity of order passed for dropping of proceedings Under Section 147, but whether the CIT has powers to revise that order. The order of dropping was made on 7-2-2000 and the reversionary order has been passed on 22-3-2002 i.e. within two years from the end of financial year of the droppings the proceedings Under Section 147. It was, therefore, a valid order. On merits, he submitted that some investigations were conducted at Ahmedabad in which it is found that loans raised by the assessee were not genuine. Interest on these unsecured loans was disallowed by AO in subsequent year and assessee had come before the Tribunal and while adjudicating that issue, the Tribunal observed that the AO should first reopen the assessment and determine the (SIC) of loan. Only after that the proceedings under Section 147/148 were taken in this back ground and even if this was not a direction to the AO to reopen the assessment and the time was available for reopening of assessment proceedings and therefore, action was validly initiated. The reasons for reopening were given, which was not challenged by the assessee and when it was reopened specifically for the purpose of examining the genuineness of loans, the AO was duty bound to make proper inquiries and consider all the relevant material on record and determine the genuineness of loans. The AO did not bother to make proper inquiry in the tight of report of the investigation authority before him stating the parties were indulging in only entry transactions or Hawala transactions. According to him, the reassessment proceedings were dropped merely on the basis of simple reply which clearly shows-that there was no proper application of mind, and therefore, CIT was _ justified in setting aside the assessment with a direction to re-make the same after proper inquiries.
14. The rival contentions of the parties are considered. In so far as the question of validity of order dropping re-assessment proceedings is concerned, in my opinion, the same cannot be said to be invalid merely because it was’ communicated late. What the provisions governing time limit Under Section 153 say is that it” prohibits passing of an order after a stipulated period. In case of an order Under Section 147 the time limit is prescribed Under Section 153(2) as under :
153(2)- No order of assessment, reassessment or re-computation shall be made under Section 147 after the expiry of [one year] from the end of the financial year in which the notice, under Section 148 was served:
[Provided that where the notice under Section 148 was served on or after the 1st day of April, 1999 but before the 1st day of April, 2000, such, assessment, reassessment o re-computation may be made at any time up to the 31st day of March, 2002.]
15. A bare reading of this provision one can say that the prohibition to make an order Under Section 147 after the expiry of 2 years from the end of financial year in which the notice Under Section 148 was saved. This section does not prohibit the serving of the order any time limitation. The notice Under Section 148 for the three years was issued in the FY 1997-98 on 3-6-97 in first two years and on 12-5-97 in third year. Therefore the time limit within which the order Under Section 147 could be made was 31-3-2000 being 2 years from the end of FY 1997-98 ending on 31-3-98. Apparently therefore the orders made by the AO on 7-3-2000 are not barred by limitation. The ld counsel however submitted that an order though made within time limit provided Under Section 153(2) would be barred by limit if they are not communicated within such period. The orders which were, served on 8-3-2002 are therefore not valid order. I do not find any merit in this contention of the assessee. No such provision is there in IT Act to provide that order must, also be communicated within such time limit prescribed for making the order. Making of an order and communication of such order are two separate actions and law provides a time limit for the first and not for the second. An order passed within the prescribed limit, in my opinion, can be communicated subsequently and for that there, is no barrier of any time limit It is true that an order to be effective must be served on the aggrieved party or against whom it is passed / made as to seek redressal the assessee have to take appropriate measures for appeal, revision or rectification within a particular time.The assesses has no such redressal to seek as the dropping the proceedings Under Section 148 was in its favour by which he was not aggrieved. In any case, the Legislature has taken care of such a position and the time limit, for further action or remedial action is provided from the receipt of the order so that s parson does not loose right to challenge the action / order of an authority on account of the fact that service of the order was made after the expiry of the period within which the appropriate remedy could be sought by an assessee. See in this connection. the provisions of first appeal — Section 246 provides an appeal against an order Under Section 147 by virtue of Clause (b) of Section 246(1) read with Clause (b) of Section 246(1A) and time limit to file an appeal there against is prescribed Under Section 249(2) as 30 days from the date of receipt of order or the date on which intimation of the order sought to be appealed is served. Here the service is made the stalling point for limitation and not the date of order. A petition for rectification of an order by virtue of Section 154(7) is to be made within four years from the date of the order passed. Here the Courts have invariably taken the date of passing the order as date of service and the logic is that unless it is served he can not anticipate of filing an application for rectification. Again Section 263 dealing with revision prescribes time limit of two years from the end of financial year in which the order was sought to be revised was passed but Under Section 264 dealing with revision of assessee’s Application prescribes a time limit of one year from the date on which the order- in question was communicated to him or the date on which he otherwise came to know about it, whichever is earlier. Provision of limitation for taking an action within a specified time also provides for exclusion of the period taken in obtaining the copy of an order appealed against or sought to be revised / rectified. As aforesaid the two actions of an authority for making / passing an order and communicating the impugned order are different actions and not synonymous and are differently understood in the fiscal and other statutes. When therefore time limit is prescribed for first action and no time limit is prescribed for the second, one need not have to read such limitation for both the actions.
16. The assessee relied-upon the decision in the case of M R Mardia (supra). In that case the order was not communicated at all and therefore that was held to be not valid Order. In the present case the order was communicated to the assesses on 8-3-2002 before the exercise of jurisdiction Under Section 263 and therefore the decision of the Supreme Court in the aforesaid case would be of no help to the assessee.
17. In the case of Sree Narayana Chandrika Trust (supra), the Kerala High Court noted the question but declined to answer the same. In this case a reference was made to earlier decision of the Kerala High Court in the case of Government Wood Workshop v. State of Kerala wherein the High ‘Court observed as under:
“The order of any authority cannot be said to be passed unless it is in some way pronounced or published of the party affected has the means of knowing it. It is not enough if the order is made signed, and kept in the file, because such order may be liable to change at the hands of the authority who may modify it, or even destroy it, before, it is made known, based on subsequent information, thinking or change- of opinion. To make the order complete and effective, it should be issued, so as to be beyond the control of the authority concerned, for any possible change or modification therein. This should be done within the prescribed period, though the actual service of the order may be beyond that period”
18. It is not known that what were the provisions of the particular State Act. In IT Act, the provisions are clear and the time limit is provided only for making an order and not for communicating the sa(sic). This case also therefore is of no help to the assesses.
19. Similar is the position with regard to the cases referred to by the learned counsel of the assessee. The first and second questions are therefore decided against the assesses. Consequently the order Under Section 263 would be a valid order.
20. As regards the third question of difference on merits, I find the following appear from the record in connection with the cash credits :-
i) ITO’s letter’ dated 6-12-91 to M/s Dewas Silk Mills, whereby the AO required the assessee to furnish certain information, the relevant item i.e. Querry No. 25 is reproduced below with reply:
“25 Please give the list of creditors of above Rs. 10,000/-. The mode of receipt and mode of payment of the amount i.e. in cash, cross/bearer cheques/Demand Draft etc.”
ii) Reply of the assessee vide a letter on the issue reads as under:
“The list of creditors is already attached with the audited accounts. Confirmation of new loan creditors giving their complete address, GIR No/P A No are enclosed.”
iii) Vide assessee’s letter dated 4-8-1992 addressed to the AO, Dewas, the assessee has stated in para-6 as under:
“6 List-of new cash credits giving the GIR No Wards etc. of the remaining creditors is enclosed along with their confirmations.”
iv) The AO vide letter dated 5-10-1992 required the assessee to make further compliance on the lines indicated below:
(I)
(II)
(III) I have gone though the confirmation letters filed by you in support of the following cash creditors.
1 M/s Sarup Jain Rs. 50,000
2 M/s Anju M Parasramka Rs.1,20,000
3 M/s Ashok K Jain Rs. 50,000
4 M/s Madanlal Holani Rs.1,00,000
5 M/s Vasundra Leasing Ltd. Rs.2,00,000
6 M/s Sanjay Kumar Agrawal Rs. 50,000
7 M/s Tarachand Rs. 50,000
8 M/s Seegal Enterprises Rs.1,00,000
9 Miss Manju Sharma Rs. 50,000
10 M/s Madanlal Sharma Rs. 50,000
11 M/s Mohit Leasing & Hire Rs. 50,000
Purchase (P) Ltd.
12. M/s Akhil Leasing & Hire Rs.1,50,000
Purchase (p) Ltd.
13. M/s Munnu Credit & Leasing Rs.1,00,000
You are requested to please file supporting evidence in respect of the above credits with a view to establishing their credit worthiness. Also please arrange to produce the creditors indicated at Sr No. 2,4, 5,8,12 & 13″
v) In Assessee’s letter dated 6-11-92 addressed to the AO, the assessee vide para-3 has stated as under :-
“3 The cash creditors listed in above sheet are duly supported with respective confirmations. All of them are assessee and their complete addresses and GIR No / PA No stand submitted. As most of them are from Bombay, Ahmedabad, Delhi and other distant places. Further, confirmations, if necessary, may please be had from their respective ward of assessments.”
vi) In Assessment Order for AY 1991-92 dated 20-07-1993 the following office note is incorporated :-
“2- Cash credits confirmations have been obtained & furnished .
vii) The assessment for A.Y.1992-93 was completed Under Section 143(3) on 22-10-93 without making any disallowance of interest an these cash credits.
viii) The ACIT, Circle-1, Ujjain vide his letter dated 20-6-97 addressed to the assessee, in A.Y.1991-92 has stated the reasons for re-opening the assessment as under:
“During the course of assessment proceedings for AY 1994-95 while verifying the genuineness of credits introduced in various names, enquiries were conducted through Adl, Ahmedabad and AO, Indore and as per their report the following unsecured loans were bogus:
1 M/s Sejal Enterprises, Ahmedabad 60,000 18-3-91
40,000 23-3-91
2 Tarachand Agrawal, Ahmedabad 50,000 15-3-91
3 Anju Parashanka, Ahmedabad 60,000 23-3-91
60,000 -do-
4 Sanjay Agrawal, Ahmedabad 50,000 18-3-91
5 Swaroop Agrawal, Ahmedabad 50,000 14-3-91
6 Arun Sengar, Indore 25,000 15-3-91
7 Ashok Jain, Indore 50,000 14-3-91
You are directed to submit your return in response to the said notice."
ix) Similarly for A.Y.1992-93, the ACIT, Circle-I, Ujjain vide his letter dated 20-6-97 addressed to the assesses has stated the reasons as under :-
“During the course of assessment proceedings for AY 1994-95 while verifying the genuineness of credits introduced in various names, enquiries were conducted through Adl, Ahmedabad and AO, Indore and as per their report the following unsecured loans were bogus:
1 Tarachand Agrawal 1,00,000
2 Sejal Enterprises, Ahmedabad 40,000
3 KK Agrawal, Ahmedabad 40,000 8-5-91
20,000 10-5-91
4 Sanjay Agrawal, Ahmedabad 60,000 5-4-91
You are again directed to submit your return in response to the said notice."
x) The ACIT, Circle-I, Ujjain vide his letter dated 20-6-97 addressed to the assessee has stated similar reasons for A.Y.I 993-94 as under:
“During the course of assessment proceedings for AY 1994-95 while verifying the genuineness of credits introduced in various names, enquiries were conducted through Adl, Ahmedabad to verify the genuineness of credits introduced in the various names. As per ADI’s report the loan of Rs. 185348/- in the name of Shri P Gulabwala, Ahmedabad was not genuine, (as per the statement of this person recorded before ADI).”
You are once again directed to submit your return in response to the said notice.”
xi) The ACIT, Circle-I, Ujjain made enquiries about these cash credits vide his letter dated 6-4-98 addressed to the assessee has stated as under [for AY 91-192]:-
“You are requested to please submit the following details / information in connection with your assessment:
1 Copy of account of all such parties where new unsecured loan has been introduced. Kindly mention the cheque / D D No. name of bank, branch, date etc. Also give their present postal address. This information is essential ascertain the genuineness of the cash credits introduced. Kindly note that the onus of proving their genuineness lies on you. Failure in this regard would constrain the department in treating these as unexplained cash credit Under Section 68 of the Act.”
xii) Assessee vide his letter dated 25-5-1998 submitted information to the ACIT for A.Y. 1991-92, which are as under:
With reference to your query No. 1, we wish to inform you that the assessment was completed Under Section 148(3) under the, D.C. monitoring and according the order war also passed after the approval of D.C.I T. During the assessment- proceedings the conformation, postal addresses, GIR number, statement of income and copy of return of the parties from, whom loans are taken during the year were submitted vide our letters dtd 24.3.93/15.5.93 which are already on record
1) With reference to you letter dr. 20.6.97 stating that the loans of the following persons are bogus as per the report of ADI, Ahmedabad due to the statement of Shri Sunil Agrawal given to him.
1) Tarachand Agrawal 2) Sejal Enterprises 3) Anju Parasramka 4) Sanjay Agrawal
In this connection, please find herewith the copy of affidavit of Shri Sunil Agrawal dtd 4.11.97 (i. e. alter his statement before ADI, Ahmedabad) duly notarized on stamp paper. In this affidavit he has clearly mentioned that the loans given by him and his family members are genuine and the statement given by him was under pressure and duress We are also enclosing herewith, the confirmation, GIR number and copy of return submitted to department in support of genuineness of loans introduced Hence, the above cash credits should not be added to our income u./s. 68 of the I.T. Act.
2) This is brought to your notice that again considering the considered issue amount to change of opinion which is not permissible in law and is merely to harass the assess which could be avoided. In case statement of Shri Sunil Agrawal before A.D.I. is to be considered, kindly allow us cross-examinations as per ruling of Hon’ble Supreme Court in case of Kerla Glue Factory v. Sales tax Tribunal 167 ITR 498 SC and U.M. Shah v. CIT, 90 ITR 296 Bombay.
With reference to the loan of Shri Swaroop Jain, Arun Sngara and Ashok Jain, we wish to clarify that we had given the address of these parties as per the address mentioned by them on their confirmations and return submitted to the I.T. Department.
However, we are also enclosing herewith letter of Shri Swaroop and Ashok Jain dt. 24.7.97 with their confirmation of loan and their new addresses. Hence the all cash credits are genuine and should not be added to our income Under Section 68 of the I.T. Act.
xiii) Almost similar reply was given by the assessee for the A.Y. 1992-93 stating as under:
With reference to your query about new loans introduced during the year under review, we would like to bring to your kind notice that the case was selected for scrutiny Under Section 143(3) of I.T. Act. Details of all loan introduced with their confirmations, GIR number, statement of income and I.T. return are already on record, vide our letter dtd 24-3-93. We have already proved the genuineness of parties during the course of proceeding for Asstt.Year 1992-93.
1) With reference to your letter dr. 20.6.97 stating that the loans of the following persons:-
1) Tarachand Agrawal 2) Sejal Enterprises 3) Anju Parasramka 4) Sanjay Agrawal
are bogus as per the report of ADI, Ahmedabad due to the statement of Shri Sunil Agrawal given to him, we submit here the affidavit of Shri Sunil Agrawal dtd. 4.11.97 (i.e. after his statement before A.D.I) duly notarized on stamp paper. In this affidavit he has clearly mentioned that statement given by him was under pressure and duress. We are also enclosing herewith the confirmation, GIR number and copy of return submitted to department in support of genu(sic)ness of loans introduced. Hence, the above cash credits should not be added to our income Under Section 68 of the I.T. Act.
xiv) Again for Asstt.Year 1991-92, the assesses vide letter dated 20-6-1998 enclosed present addresses (available with the assessee on the date). All these persons, from -whom new loans were introduced, during the year under review. The letter reads as under:
“We are enclosing herewith the present address (available with us as on the data) of the persons, from whom new loans were introduced during the year under review.
The information given by this letter is as under:
Sr. Name & Address loan Reed DD Bank GIR/Ward
No. F.Y. 1996-91 No/Ch.No.
dtd.
1. Sejal Enterprises 60,000 400940 State Bank 31 110 PT
16/03/91 of India 3679 ABD
WARD 5(6)
40,000 401278
22/03/91
2. Anu M. 60,000 401277 SBI, Indore A1120
Parasramka 22/08/91
60,000 401279
22/03/91
3. Shri Sanjay Kumar 50,000 400492 SBI, Indore 31 110 PN
Agrawal 16/08/91 4212 Ward
5(2)
3. Smt. Premlata 50,000 400941 State Bank 31 110 PO
Agrawal W/o 16/08/91 of Indore 4281 Ward-
Tarachand 6(4)
xv) ACIT, Ujjain vide his letter dated 17-11-999 required the assessee with regard Ahmedabad loans, in paragraph-4, (a) Smt. Anju M. Parasramka, it is found that she has- no capacity to advance loan and (b) amount deposited by Shri Tarachand Agrawal not supported by the documents. The case was fixed on 6-12-1999. The assessee reply vide letter dated 20-12-1999 as under.
a) With reference to the loan of Rs. 1,20,000/- given by Smt. Anju M. Parasramka, we would like, to clarify that Ajnu M. Pamsramaka is a regular Income tax assessee and her PAN is 30-043-PV-5754. The loan way by her out of-her capital from her bank account. Interest was paid to her on regular basis. In support to this we are enclosing herewith photo copy of pass book of Smt Anju M. Parasramaka, copy of her Income Tax return filed with the department, her confirmation for giving loan and computation of her total income for the assessment year 1995-96. From above it is very clear that loan was given by her out of her capital from her bank account.
b) With reference to the loan given by Shri Tarachand Agrawal, we would like to clarify here that a loan of Rs. 1,50,000/- was given by,- Shri Tarachand Agrawal to the Firmout of his capital. He was a regular Income Tax assesses. Later on he died and on request of his wife Smt. Premlata Agrawal loan was transferred to her account and interest paid to her on regular basis. As documentary evidence, of this we are enclosing herewith confirmation letter given by Shri Tarachandji Agrawal, confirmations given by Smt.Premlata Agrawal, her copy of income tax return and her Balance Sheet for various years.
xvi) Again vide letter dated 21-12-98, the assessee submitted information as under:
1) The copy of bank statement of (i) Sh. Tarachand Agarwal (ii) Sejal Enterprises (iii) Sanjay Agarwal & (iv) Anju M.Parasram are attached. The detail copy of account of the NUTAN SYNTRHTICS & & DEVAS SILK MILL are also attached herewith since 1990-91.
2) Detail of interest received from M/S. DEVAS SILK MILLS & NUTAN SYNTHETICS are as under:
[1] SHRI TARACHAND AGARWAL
M/S DEVAS SILK NUTAN SYNTEHTICS
——————————————————-
ACCT. YEAR INT. RS. INT. RS. ------------------------------------------------------- 1990-1991 308 NIL 1991-1992 22336 5635 1992-1993 22500 7500 1993-1994 22500 7500 1994-1995 22500 7500 1995-1996 22500 7500 1996-1997 22500 7500 1997-1998 22500 7500 ---------------------------------------------------------
The above mentioned interest received were deposited in the General Co- op. Bank ltd. Branch, Lal Darwaja. The copies of bank statement is attacked herewith
[II] SRJAL ENTERPRISES
M/S. DEVAS SILK MILLS NUTAN SYNTEHTICS
——————————————————-
ACCT. YEAR INT. RS. INT. RS. ------------------------------------------------------- 1990-1991 518 NIL 1991-1992 22803 12398 1992-1993 27000 16500 1993-1994 27000 16500 1994-1995 27000 16500 1995-1996 27000 16500 1996-1997 27000 16500 1997-1998 27000 16500 ---------------------------------------------------------
The above mentioned interest received were deposited in the General Coop. Bank ltd. Branch, Lal Darwaja and Madhupura Mer. Bank Ltd Br. Shahibaug. The copies of bank statement is attached herewith.
[III] SHRI SANJAY AGGARWAL
M/S. DEVASSLLKMLLSNUTANSWTEHTICS
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ACCT. YEAR INT. RS. INT. RS. ------------------------------------------------------- 1990-1991 308 NIL 1991-1992 16402 5635 1992-1993 16500 7500 1993-1994 16500 7500 1994-1995 16500 7500 1995-1996 16500 7500 1996-1997 16500 7500 1997-1998 16500 7500 ---------------------------------------------------------
The above mentioned interest received were deposited in the General Coop. Bank ltd. Branch, Lal Darwaja The copies of bank statement is attached herewith.
[IV] ANJU M. PARASRAMKA
M/S DEWAS SILK MILLS NUTUN SYNTEHTICS
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ACCT. YEAR INT. RS. INT. RS. ------------------------------------------------------- 1990-1991 444 NIL 1991-1992 18000 NIL 1992-1993 18000 NIL 1993-1994 18000 NIL 1994-1995 18000 NIL 1995-1996 18000 NIL 1996-1997 18000 NIL 1997-1998 18000 NIL --------------------------------------------------------
The above mentioned interest received were deposited in the General Co-op. Bank ltd Branch, Lal Darwaja. The copies of bank statement is attached herewith.
3. Details of loan taken Sejal Enterprises is as under: Rs. 40000/- received from Mr. Manglesh J. Shah on dt. 07-05-91 Cheque No. 342469 of Bank of Baroda Rs. 40000/- received from Mrs. Kalpanadevi Agrawal on dt. 07-05-91 Cheque No. 488777 of State Bank of India.
The above referred loans taken were deposited in Sejal Enterprises. The copy of confirmation accounts are attached herewith.
Rs. 60,000/- received from Kalpanadavi Agarwal on dtd 1.7.91. Cheque No. 988778 of State Bank India.
Names and address of the depositors are as under:
1. Mr. Manglesh J. Shah 1, Dharamnath Soc.,
Shahibaug
Nr. Rajasthan Hospital,
Ahmedabad
2. Kalpanadevi Agarwal 9, Parnkunj Soc.,
Meghaninagar
Ahmedabad
4. The copy of bank statement of the person who had given a loan to the Sejal Enterprises are attached herewith.
xvii) The assessee has also filed a copy of the letter to Dy.Director of Income-tax (Investigation), Ahmedabad in response to his letter dated 3-12-1998 stating as under:
[3] Copy of statement of source of lending (Sejal enterprise and Sanjay T. Agarwal) fund to Dewas Silk Mils & Nutan Syntehtics attached attached herewith. In case of Tarachand Agarwal and Anju M. Parasramka the source of lending are as explained above.
[4] A copy of bank pass book and withdrawal (M/s. Sejal Enterprise and Sanjay T. Agarwal) are attached herewith.
xviii) Another letter was also written to the Dy.Director of Income-tax investigation) Ahmedabad by stating that –
Shri Kamal T.Agarwal has given of Rs. 60000/- by Ch.No. 004317 dtd 4/4/91 to Sanjay T. Agmwal. In our earlier submission, we submit a bank statement balance sheet etc. Shri Kamal T. Agrawal has been assessed to Income tax since long. He assessed in Calcutta prior to 1998-99. His source of income -was commission and interest-income.
Late Shri Tarachand Aggrawal deposited Rs. 50000/- on dtd 18/3/91 and Rs. 100,000/- on dt 5/4/91 to Dewas Silk Mils. He also deposited Rs. 50.000/- on dtd 3/7/91 to Nutan Synthetics. Shri Tarachand was assessed to Income Tax since 1988-89. His source of Income was salary income and interest. Further Shri Tarachand Agarwal had taken loan from S.B. Kadia B.D. Kadia, Narayan S. Mali and Vimladevi. Out of all these loans and accumulated funds from above referred income he had deposited the said sums to Dewas Silk Mils and Nutan Synthetics the confirmation of all loans submitted earlier.
Shi P.N. Doshi has deposited Rs. 50,000/- to Sanjay T. Agmwal Shri P. N. Doshi assessed to Income tax since long. His source of income was commission and interest. Now a days he resides in Surat.
Details of interest in respect of Shri Tarachand Aggrawal and Anju M. Parasramka are as under.
I hereby produce the cash book and ledger from 1990-91 to 1996-97 in case of M/s. Sejal Enterprise and Sanjay Agrawal for your honours verification.
xix) An affidavit of Shri Sunil T. Agrawal sworn on 4-11-1996 was also filed, which reads as under:
I, Sunil T. Agarwal Prop. Of Sejal Enterprise aged about 29years resident of 87, Love Kush Tenament Bungalow Area, Kubernagar, Ahmedabad hereby solemnly declare as under:
(1) That summons Under Section 131 was issued to me and in compliance with summons I remained present and my statement was recorded on oath by Income-tax officials, Shri R.P. Meena, on 22-10-1996 at 1st Floor, Aaykar Bhavan, Ahmedabad.
(2) That various many questions were asked during the course of taking my statement on oath.
(3) That after asking me three four question, the Income-tax officials gave me threatening and created a terrific and tremendous roar and tension in my mind by highlighting imprisonment and fine under I.P.C. Act. I had given statement to some of question to the best of my knowledge and information. But by reasons of mental tension, panic, atmospheric pressure and duress, certain statements were recorded under pressure which were not intended to be recorded by me.
(4) That I was under heavy pressure, mental tension and was very much afraid of such imprisonment and fine while replying to questions during the course of taking my statement.
(5) That, thereafter, the Income-tax Officials asked me as to what are the deposits given by me in (i) M/s. Dewas Silk Mill (ii) M/s Nutan Syntehtics (iii) J.M.T. Granite Exports and I replied that I have given deposits i.e. (i) Nutan Syntehtics, Dewas about Rs. 3,00,000/- (ii) Dewas Silk Mils about Rs. 5,60,000/- and (iii) J.M.T. Granite Exports about Rs. 50,000/-in the name of different members of family.
(6) That during the course of taking my statement, threatening was continued and after putting me in such a condition of heavy pressure, mental tension and great fear in mind, of imprisonment and fine, the Income-tax officials put me in duress condition and by reason of pressure and panic, I was compelled to admit to the effect that deposits, in the firms i.e. (i) Nutan Syntehtics Dewas (ii) Dewas Silk Mils and (iii) J.M.T. granite Exports are only Hawala Entries and all these entries are bogus entries, the Income-tax officials, after giving threatening, given an assurance that in case I admitted to the effect that deposits given by me in the above firms are Hawala Entries and all these entries are bogus entries, no action will be taken against me and in case I do not admit then extreme actions under Income-tax Act and I.P.C. Act will be taken against me.
(7) That I was under heavy pressure, mental tension and frightened of imprisonment and fine and in such a panic cord duress condition, I was asked to reply to one of the questions by admitting to the effect that I have not given deposits to M/s. Nutan Synthetics, Dewas Rs. 3,00,000/- M/s. Dewas Silk Mils Rs. 5,60,000/- and J.M Granites Exports Rs. 50,000/- and further compelled me to state that these are only Hawala Entries and all these entries as bogus entries and accordingly I replied in the same way which is far from truth I was also compelled to say that Interest on deposit was returned to Ashok Khandelia in cash but this is also not correct and far from truth.
(8) That I say on oath that in fact it is true that I have given deposit to (i)M/s Nutan Synthetics, Dewas Rs. 3,00,000/- (ii) M/s. Dewas Silk Mills Rs. 5,60,000/- and (iii) J.M.T. Granite Exports Rs. 50,000/- and I further affirm that these are neither Hawala Entries nor Bogus Entries.
(9) That I have purchased immovable property viz House in Kuber Nagar in 1993 from M/s. Sugam Builders, Manpasand Estate, Bapu Nagar, Ahmedabad for purchase price of Ms. 1,00,000/- and in respect of purchase price of this property, I was compelled to say that the total price of the said property is Rs. 1,50,000/- for which Rs. 1,00,000/- was paid from the bank a/c. of my wife and remaining Rs. 50,000/- was paid “On money” by cash. By reasons of pressure, mental tension and panic condition of fear of imprisonment and fine, I was compelled to admit that the payment for the said property was given by cheque of Rs. 1,00,000/- and balance of Rs. 50,000/- in cash as “On money” which is far from truth. The correct fact is that the said property was purchased at a price, of Rs. 1,00,000/- and payment of Rs. 1,00,000/- was given by cheque from Bank Account of my wife.
In view of the above stated facts, I affirm and declare that the statements recorded with Income-tax officials on 22-10-96 regarding Hawala wentries and bogus entries, payment of “On money” for immovable property purchased and interest amounts returned to Ashok kumar Khadelia in cash is hereby retracted as being recorded pressure and duress.
xx) Thereafter, the AO dropped the proceedings by order dated 7-2-2000, as extracted in paragraph-5 above of this order.
21 In. these circumstances, my opinion is that the AO has made proper inquiries and dropped the proceedings, after due consideration of the reply and details submitted by the assessee. Further, the order of the AO cannot be said to be erroneous, insofar as prejudice to the interest of the Revenue. As observed by the Supreme Court in the case of Malabar Industrial Co. v. CIT, 243 ITR 83, the commission has to satisfy twin circumstances viz, order of the AO sought to be revised is erroneous and (2) that the order is prejudicial to the interest of the Revenue. Section 263 cannot be invoked to correct each and every mistake and/or error committed by the ITO. It is only when the order is erroneous that section will attract. In this case is not the case of CIT(A) that the cash credit were bogus or not genuine. The only reason to set aside his order is the AO has not made property inquiry, that in my opinion is not correct, if one analyse the facts and circumstances in right perspective. We have narrated above the history of examination of these cash credits in the original assessment and in the reassessment proceeding both, by the AO, ACITR and DCITR, who were monitoring the assessment and after proper discussion, the proceedings for reopening were dropped. As observed by the Bombay High Court in the case of CIT v. Gabriel India Ltd., 203 ITR 108, the order cannot be termed as erroneous unless it is not in accordance with law. If the ITO acting in accordance with the law makes certain assessment, the same cannot be branded as erroneous by the “Commissioner simply because, according to him, the order should have been written more elaborately. This section does hot visualize a case of substitution of the judgment, of the Commissioner for that of the Income-tax officer, who passed the order, unless the decision is held to be erroneous. Bombay High Court visualized where the Income Tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left, to the Commissioner he would have estimated the income at a higher figure than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. This is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with the law and arrived at a conclusion and such a conclusion cannot, be termed to be erroneous simply because the commissioner does not feel satisfied with the conclusion. In that case also the ITO made inquiry with regard to the nature of expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Bombay High Court held that the claimed was allowed by the ITO on being satisfied with the explanation of the assessee. This decision of the ITO, Bombay High Court, held could not be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. In that case also the Commissioner even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter that was held to be permissible.
22. In the present case also, the AO made inquiry and the assesses replied to each and every query of the AO both in the original proceedings as well as in the re-assessment proceedings and arrived at a conclusion for re-opening proceedings and dropping the proceedings after due consideration of reply and facts submitted by the assessee. Here also the CIT has not given any finding that the cash credits were not genuine and that interest paid by them was not allowable as deduction. In the facts and circumstances, in our opinion, CIT(A) was not justified in invoking provisions of Section 263 for revising the order of dropping of re-assessment proceeding under Section 147 of the Act, of the AO, which as aforesaid, were dropped by the AO after due and proper inquiries. The order of the CIT(A) on merits, is therefore, not sustainable, and accordingly requires to be vacated.”
23. In the result, appeals of the assesses are allowed. The matters will not listed before the Division Bench for consequential order.