INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Validity - Assessee failed to furnish necessary details regarding the creditworthiness of the loan creditor and, AO overlooked said aspect, while framing assessment -

Assessee challenged validity of order passed under section 263 on allegation that AO had failed to carry out any enquiry to verify genuineness of unsecured loan, rent paid and professional fees paid by assessee in excess of Rs. 20,000. Assessee contended that AO already examined the issue in detail therefore, revisionary jurisdiction was wrongly assumed under section 263 by Pr. CIT. Held: Assessee failed to furnish necessary details regarding the creditworthiness of the loan creditor and, AO overlooked said aspect while completing the assessment. From the ledger copy furnished by the assessee in its book, it was observed that assessee had shown closing balance of Rs. 10,00,000 as on end of relevant year, meaning thereby that the entire loan of Rs. 10,00,000 was refunded to the loan creditor. When loan receiving and repaying was reflected in the assessee's book, the transaction between assessee and loan creditor was proved. Thus, it could not be said that AO did not enquire the matter. As regards to security deposit and professional fees towards cash payment, AO did not make proper enquiry into the matter and, therefore, Pr. CIT was justified in directing AO to revise the assessment order. Since the assessment was already set aside and AO was directed to re-frame it afresh, no interference was called for in the matter.

REFERRED : CIT Delhi-IV v. International Travel House Ltd. (2010) 344 ITR 554 (Del-HC) : 2010 TaxPub(DT) 2245 (Del-HC), Ganga Sahai Ram Swarup and Another v. ITAT & Ors. (2004) 271 ITR 512 (All-HC) : 2004 TaxPub(DT) 1788 (All-HC) and CIT v. Arvind Jewellers. (2003) 259 ITR 502 (Guj) : 2003 TaxPub(DT) 342 (Guj-HC)