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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
The present appeal has been filed by the assessee against the order of the Ld. Pr. Commissioner of Income Tax, Jalandhar-1 dated 30.03.2022 in respect of Assessment Year 2017-18.
2. The assessee has raised the following grounds of appeal:
Sukhjinder Singh v. Pr. CIT “1. That the order passed by the Principal Commissioner of Income Tax, Jalandhar-1 u/s 263 of the Income Tax Act, 1961 dated 30/03/2022 is against the facts of this case and is untenable under the law.
2. That no reasonable and proper opportunity of being heard was allowed by the Principal CIT before passing the order u/s 263 of the IT Act, 1961. As such the order passed is bad in the eyes of law and the same is liable to be cancelled.
3. That the worthy Principal CIT issued a show cause notice u/s 263 and a reply was duly filed in response thereto. A copy of the said reply is made part & parcel of grounds of appeal. The facts of the said reply have not been appreciated and considered and as such the order passed u/s 263 is bad in the eyes of law and the same may be cancelled.
4. That the Principal CIT did not appreciate that all these questions and queries have already been examined by the A.O. during the course of assessment proceedings and the Pr. CIT did not appreciate that there was enquiries which were made in response to said questionnaire.
5. That the Id. Principal CIT did not appreciate that this was not a case where the explanation or enquiry has not been made. The Pr. CIT failed to appreciate that this case does not fall within the mischief of section 263. As such the order passed by the worth) Principal CIT is not based on any facts and circumstances. As such the order passed u/s 263 may be cancelled.
6. That any other grounds of appeal which may be argued at the time of hearing of appeal.”
3. Facts are that the appellant’s case was selected for Limited Scrutiny under CASS with the reasons of “Cash deposit during demonetization period. During the course of online assessment proceeding, the assessee submitted the relevant supporting documentary evidences and other relevant information called for by the AO, as per record. The AO stated that Sukhjinder Singh v. Pr. CIT the information, and supporting documents submitted online by the assessee have been considered and issue of cash deposit arising from the return and the reason for CASS selection have been examined from the e- reply of the assessee's representative. The AO being satisfied with the reply of the assesse has accepted the return income.
4. The Ld. PCIT has invoked provisions of section 263 and held the assessment order erroneous and prejudicial to the interest of revenue by observing as under:
2. The examination of the assessment order and of the facts and materials on record showed certain discrepancies in the assessment order issued. A show- cause notice was, therefore, issued to the assessee u/s 263 of the Act, vide letter No. 1708 dated 06.10.2021 as follows:-
“……..The perusal of cash flow statement shows that you have claimed each and every withdrawal made from the banks as cash in hand. Even the petty withdrawals of Rs.2000 claimed as cash in hand which has been claimed to be deposited during the demonetization time. Further, the assessee claimed agricultural income as inflow in cash flow statement. No withdrawals on account of agricultural expenses such as on sowing of crop, fertilizer pesticides /insecticides, labour expenses. Further, no withdrawals on account of household withdrawals have been reflected as outflow in the cash flow statement No query in this regard has been raised/made by the AO during the assessment proceedings. (ii). You have maintained following bank accounts during the year under assessment:
SB A/C N0.31695362038 and (a) PNB A/e No. 3497000100442475. (b)
You frequently used your both bank accounts making withdrawals and deposits therein.
(iii). Perusal of cash flow statement shows that you claimed inflow of cash of Rs. 1,50,000/- each on 10.07.2016 and also Rs.1,50,000/- 02.11.2016 as agricultural income. Perusal of certificate issued by M/s Rana Sugars Limited shows that they have confirmed that you have supplied sugarcane valuing Rs.14,78,716/- during the year under assessment. Further, perusal of your bank account shows that you have received Rs. 15,69,206/- on various dates from M/s Rana Sugars Limited through NEFT and not in cash.
Furthermore, perusal of certificate issued by the commission agent namely M/s. Amar Nath Kashmiri Lai shows that you have received an amount of Rs.2,77,320/- only till 08.11.2016 on various dates but mode of payment has not been mentioned in the certificate. Therefore, your claim that cash deposits were made out of agricultural income remained unverified.
(iv) Perusal of cash Flow Statement shows that opening cash in hand has been claimed at Rs. 1,00,000/-. Perusal of records shows that neither the AO asked you to justify the cash in hand of Rs.1,00,000/- as on 01.04.2016 with supporting evidence nor you furnished any evidence in this regard. Therefore, in the absence of evidence your claim remained unverified.
(v) In view of the above facts, it is evident that you have failed to furnish corroboratory evidence in support of your claim. Further, the AO has accepted the cash flow statement furnished by you without making adequate enquires. Therefore, cash flow statement should not have been accepted. No inquiry has been made by the AO to verify the availability of cash with you as on 08.11.2016.
Source of cash deposits to the extent of Rs. 12,38,000/- made your bank account remained unverified which should have been treated as your income u/s 69A of the Income Tax Act, 1961.
2. Accordingly, in view of above facts and circumstances, it is apparent that the assessment has been finalized in your case by the then Assessing Officer, without carrying out the necessary verification regarding source of cash deposited in the Bank account. Accordingly, in view of provisions contained in clause (a) of Explanation 2 below sub section (1) of section 263 of the I.T. Act, 1961, I propose to hold the said order passed u/s 143(3) of the Income Tax Act,
Sukhjinder Singh v. Pr. CIT 1961 dated 30.10.2019 to be erroneous, in so far as it is prejudicial to the interests of revenue and take suitable remedial action, as per section 263 of the Income-tax Act, 1961.
The Ld. Counsel for the assesse submitted that the Ld. PCIT has not appreciated the facts discussed in the assessment order and even the reply filed by the appellant in compliance to show cause notice during the 263 proceedings. The Ld.AR argued that the PCIT has not taken cognizance of the facts that all questions and queries have already been examined by the A.O. during the course of assessment proceedings and that it was not a case where the enquiry has not been made by the AO.
Therefore, this case does not fall within the mischief of section 263 and accordingly, he pleaded that the order passed u/s 263 may be cancelled. In support, he filed a brief synopsis which reads as under:
“In response to your above said notice, it is submitted that the case of the assessee was selected under CASS Limited Scrutiny with the reasons “Cash deposit for demonetization period”. As the case was selected for limited scrutiny, the assessee has furnished each and every document through e- Assessment proceedings. All the documents were duly checked and discussed at length during hearing with my counsel by the then Assessing Officer. The point wise reply of your notice is as follows:
That your goodself as stated the assessee has considered each and every withdrawals in the cash flow statement including the petty withdrawals of Rs.2,000/-. Firstly, it is submitted that by preparing cash flow statement, each and every incoming and outgoing of cash has to be considered irrespective of the volume of amount. Secondly, the amount of Rs.12,38,000/- was deposited on 15.11.2016 and 24.11.2016 whereas the only transaction of Rs.2,000/- considered in the cash-flow statement is on 13.11.2016. That even if the credit of Rs.2,000/- is ignored still the assessee was having a sum of Rs. 12,72,791/- at his disposal out of which he has deposited a sum of Rs. 12,38,000/- which has rightly been accepted by the A.O. while completing the assessment under the limited scrutiny scheme as introduced by the Government. That except Rs. 2,000/^the A.O. as well as your goodself has accepted all the transactions of cash incoming and outgoing which have supported by the bank entries, the copy of which has already been furnished before the A.O. and now before your goodself, with the request to kindly point out any entry made wrongly which is otherwise is not a part of the cash-flow statement. In fact the A.O. has duly compared the cash-flow statement with the bank incoming and outgoing and then rightly accepted the same. Thus, the entire deposit of Rs. 12,3 8,000/- in the bank accounts of the assessee was duly explained and accepted as such by the A.O.
That your goodself has further stated that there is no withdrawal on account of agriculture expenses such as sowing of crops, fertilizer pesticides/insecticides, labour expenses and further for meeting household expenses. It is submitted that the main seed for paddy and wheat is out of the cutting of the crop itself. A part of cutting of paddy and wheat crop is kept as seed for the next crop and this process is going on year after year. Further in the case of sugar cane, crops, the roots remains intact and the upper portion is cut and the sugar cane is sold. The roots of the sugar cane grow for the next year. Moreso, the assessee has also made payments for purchases of these items such as crop seed, fertilizers, pesticides, labour expenses and self amount of Rs.29,000/- and 54,000/- on 24.05.2016 and 06.07.2016 which was also utilized for meeting household expenses. In addition to this, the assessee has huge drawings after November, 2016. All these payments are through account payee cheques and the A.O. has duly discussed with the counsel of the assessee during the assessment proceedings. Most of the payments have been mentioned in the bank passbook itself. The complete detail of which is as follows:-
1. Punjab National Bank, A/c No. 3497000100442475
Date Amount Remarks 04.04.2016 47824.00 Bhag Singh (Seed) 06.04.2016 50274.00 Aman Deep Singh (Seed) 27.04.2016 48706.00 Davinder Pal Singh (Seed) 24.05.2016 29000.00 Pankaj Arora (Cash for self) 25.05.2016 28616.00 Bhag Singh (Seed) 06.07.2016 54000.00 Sahil Kaushal (Cash for self) 21.12.2016 51490.00 Jaspreet Singh (Pesticides) 26.12.2016 50000.00 Mukesh (Khad & Pesticides) 07.01.2017 50000.00 Punjab Khad Store India 10.01.2017 20500.00 Mohammad Sarfaraj S/o Hussain (Labour) 11.01.2017 57500.00 Jarman Singh (Seed) 11.01.2017 30000.00 Mohammad Tahseen (Labour) 20.01.2017 52500.00 Jaswinder Singh 07.02.2017 25000.00 Mohammad Tahseen (Labour) 09.02.2017 52900.00 Jaspreet Singh (Pesticides) 27.02.2017 54000.00 T N Cold Store 04.03.2017 10000.00 Shiv Shankar Khad Store 06.03.2017 10000.00 Mohammad Sarfaraj S/o Hussain (Labour) 07.03.2017 15000.00 Mohammad Tahseen (Labour) Total 737310.00
2. State Bank of India A/c No. 31695362038
Date Amount Remarks 15.03.2017 87000.00 Gurbax Ram (Seed) Total 87000.00
Therefore, the assessee made payments on account of agriculture expenses such as sowing of crops, fertilizer pesticides/insecticides, labour expenses and further for meeting household expenses. The total amount withdrawn is around Rs. Seven Lacs to Eight Lacs which was spent for agriculture expenses including the cash withdrawals through employees. The complete detail in respect of particular expenses has been mentioned in the bank passbook itself. Similarly, all the cheques issued to M/s Karari is in respect of diesel expenses.
That as regard, the deposit of Rs. 1,50,000/- each on 10.07.2016 and 02.11.2016, it is submitted that the assessee has received agriculture income from M/s Amar Nath Kashmiri Lai in cash. This is clear from the certificate as neither any cheque was issued nor the same find place in the bank statements. Further assessee also used to receive cash from M/s Rama Sugar Limited. The necessary confirmation from the said party could not be collected on account of old record pertaining to more than 4-5 years old.
That as regard the opening cash in hand of Rs. One Lac on 01.04.2016 is concerned, it is submitted that this is the normal feature in every family to ' have some cash in hand to meet any emergency. The amount of Rs. One Lac is quite reasonable and genuine. Keeping in view, the gross agriculture income of around Rs. Thirty Lacs per annum. The said income has not been doubted rather accepted by the department during all the previous as well as subsequent years. Thus, the amount of Rs. One Lac is quite reasonable and the Assessing Officer has rightly accepted the same after discussion with the counsel of the assessee.
5. That as regards, your submission that the A.O. has accepted the cash flow statement without making adequate enquiries, it is submitted that the A.O. has fully satisfied himself about the cash flow statement which is based on the bank incoming and outgoing. That even your goodself has not pointed out any item which has been wrongly accepted by the A.O. As regards, the deposit of Rs. Three Lacs as agriculture income, the A.O. has rightly given the credit of the same in the cash flow statement when he is seized of the document showing gross agriculture income of Rs. Thirty Lacs and particularly the certificate from the commission agent M/s Amar Nath Kashmiri Lai confirming the payment around Rs. Three Lacs. That the assessee very humbly request your goodself to kindly accept the cash flow statement as prepared, discussed and accepted by the A.O. 6. That as regard the proposed addition of Rs. 12,38,000/- u/s 69A is concerned, it is submitted that firstly the entire amount could not be taken as an unexplained amount particularly when no defect whatsoever has been pointed out in the said statement. Thus the question of disallowance of entire amount of Rs. 12,38,000/- is against the principle of justice. It is worth mentioning that the assessee is not having any income except agriculture and part of the bank interest only. Thus there is no question of any other income except agriculture which the A.O. has rightly accepted in view of the affidavit dated 29.10.2019 furnish before the A.O. and accepted as such. The copy of the same is also uploaded for your kind consideration.
Sukhjinder Singh v. Pr. CIT 7. Therefore the provisions as contained in clause (a) of Explanation 2 below sub section (1) of Section 263 of the Income-Tax Act, 1961 is not applicable in the present case on the ground that the order is passed by the A.O. without making enquiries or verification which should have been made. So the order is not deemed to be erroneous in so far as it is prejudice to the interest of the revenue. The A.O. has made all enquiries regarding the cash flow statement from the State Bank of India as well as from the Punjab National Bank and the deposit was also confirmed from the certificate issued by M/s Amar Nath Kashmiri Lai and the status of the farmer earning Rs. Thirty Lacs per annum and similarly the payments for expenses through payee account cheques. The assessee very humbly request your goodself to kindly accept the submission and file the notice proposing to take action u/s 263 of the Income-Tax Act, 1961.”
The Ld. Dr stands by the PCIT order.
Heard rival contentions, perused the material on record, impugned order, and written submission filed. Admittedly, the appellant assesse is an agriculturist. He has maintained following bank accounts during the assessment year under consideration:
(a) SB A/C N0.31695362038 and (b) PNB A/e No. 3497000100442475.
That the Ld. PCIT has observed on perusal of appellant bank account that he has received Rs. 15,69,206/- on various dates from M/s Rana Sugars Limited through NEFT and of course not in cash. This fact categorical establishes that the appellant was an agriculturist with sufficient
Sukhjinder Singh v. Pr. CIT agriculture income being earned from sale of agricultural produce including sugarcane.
Considering the appellants claim of the gross agriculture income of around Rs. 30 Lacs per annum, the question of reasonableness of the opening cash in hand of Rs. 1.0 Lac on 01.04.2016 may not be suspected as it is the normal feature in every such agriculture family to ' have some cash in hand to meet any contingency expenditure. Over and above, the said income has not been doubted rather accepted by the department during all the previous as well as subsequent years and thus, the Assessing Officer has rightly accepted the same. The another query of the PCIT was that the A.O. has accepted the cash flow statement without making adequate enquiries, is baseless as the Ld. PCIT has not pointed out any discrepancy or error in the cash flow statement with corroborative evidence that caused loss of tax payable if any by the appellant and that he has not pointed out any item which has been wrongly accepted by the A.O.
As regards to the deposit of Rs. 3.0 Lacs as agriculture income, the A.O. has rightly given the credit in the cash flow statement as per the document presented by the appellant on its gross agriculture income of Rs. 30.00 Lacs and particularly the certificate from the commission agent M/s
Sukhjinder Singh v. Pr. CIT Amar Nath Kashmiri Lai who confirmed the said payment. Similarly, the proposed addition of Rs. 12,38,000/- u/s 69A is concerned, could not be taken as an unexplained amount particularly when no defect whatsoever has been pointed out in the said bank statement and evidences filed by the appellant in support of its claim. In our view, the decision of Ld. PCIT proposing disallowance of entire amount of Rs. 12,38,000/- is not justified.
It is pertinent to mention that the assessee is not having any income except agriculture and part of the bank interest only. Thus there is no question of any other income except agriculture which the A.O. has rightly accepted in view of the affidavit dated 29.10.2019 furnish before the A.O. The copy of the same is placed on record.
Under the facts and circumstances, the provisions as contained in clause (a) of Explanation 2 to sub section (1) of Section 263 of the Income- Tax Act, 1961 is not applicable in the present case. Since, the A.O. has made all enquiries regarding the cash flow statement from the State Bank of India as well as from the Punjab National Bank and the deposit was also confirmed from the certificate issued by M/s Amar Nath Kashmiri Lai and the status of the farmer earning Rs. 30.00 Lacs per annum and the payments for expenses thereof and hence, the assessment order cannot
Sukhjinder Singh v. Pr. CIT be deemed to be erroneous in so far as it is prejudice to the interest of the revenue.
The Hon’ble Supreme Court in case of “Malabar Industrial Co. Ltd vs. CIT”, 243 ITR 83(SC) has observed that the phrase ‘prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer and every loss of revenue as a consequence of the order of the Assessing Officer cannot be treated as prejudicial to the interest of revenue. It was further held that whereto views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, the order passed by the Assessing Officer cannot be treated as erroneous order prejudicial to the interest of the revenue. The principles laid down in the aforesaid decision were reiterated by the Supreme Court in ‘CIT Vs. Max India Ltd, 295 ITR 282 (SC) and recently in ‘Ultratech Cement Ltd vs State of Rajasthan Ors, Civil Appeal No. 2773/202 decided on 17.07.2020. Further in the case of PCIT vs. V. Dhana Reddy & Co. - [2018] 100 taxmann.com 358 (SC) it has been held that If AO had adopted a plausible view, revision u/s 263 not sustainable.
Sukhjinder Singh v. Pr. CIT 13. We have to understand that lack of enquiry/no enquiry is different from inadequate enquiry and it is only in case of no enquiry by the AO, Pr.
CIT/C1T can exercise jurisdiction u/s 263 of the Act and not in case where the AO has made enquiries as seems appropriate in the facts and circumstances of the case. In the instance case inquiry on relevant issue has been made by AO, hence no action invited u/s 263. Our view gets support from the Judgement given by the Hon’ble Delhi High Court in case of “CIT vs. Sunbeam Auto Ltd”, 332 ITR 167 (Del.) Where in it was held as under: -
“One has to keep in mind the distinction between 'lack of inquiry' and 'inadequate inquiry'. If there was any inquiry, even inadequate, that would not, by itself, give occasion to the Commissioner to pass orders under section 263 merely because he has different opinion in the matter. It is only in cases of 'lack of inquiry' that such a course of action would be open”.
On similar facts, the coordinate Bench has allowed the appeal in vide order dated 15/9/2022 in the case of ‘Leela Gupta vs PCIT-1’, Jalandhar wherein it has held that-
“During the notice u/s 142(1) the assessee submitted the relevant documents before the revenue authorities. On basis of these documents the order was passed by the Id. AO. It cannot be said that the issue was untouched and unverified by the assessing authority. Mere change of opinion an order cannot be called as erroneous. We directed that the order passed by the PCIT is unjust for, and the order is setting aside.”
Sukhjinder Singh v. Pr. CIT Thus the action of the PCIT on this account is bad and the revision order passed deserves to be cancelled.
The other issue which requires consideration of the Honorable Bench is that the assessee against the order passed by the AO had preferred an appeal before the CIT(A) challenging the addition made by the AO. During the pendency of the appeal the assessee opted for Vivad Se Viswas Scheme by filing form 1 and the PCIT after considering all the facts of the case and evidences filed issued order of full and final settlement of Tax Arrears in Form 5 on 8/1/2021 and when on the one hand the PCIT is issuing form 5 after verifying all facts on record and evidences filed then after a lapse of over two months the PCIT is issuing a show cause notice and then passing the order u/s 263 is very hard to understand as with the issuance of Form 5 the proceedings closed and there was no valid order remaining for the PCIT to resort to such action. Reference in this regard is drawn to Section 5 (3) of the Direct Tax Vivad Se Vishwas Act, 2020, wherein it has been stated that every order passed under sub section 5(1) , determining the amount payable under this Act shall be conclusive as to the matter stated therein and no matter covered by such order reopened in any proceedings under the Income -tax Act. Attention in this regard is invited to the case of Uma Corporation v. ACIT & Ors. (2006) 204 CTR 282 / 284 ITR 67 (Bom.) (HC) the Court held that Income disclosed under VDIS for which certificate is issued by the authority. Reassessment proceeding in respect of such disclosed income is not valid. And also to the case of Killick Nixon Ltd. v. Dy. CIT (2002) 258 ITR 627/178 CTR 387(SC) wherein the Honourable Apex Court held that once declaration is accepted reassessment is not permissible. Accordingly, after issue of certificate in respect of tax in dispute revision u/s 263 is not permissible. Thus on this account also the action of the PCIT u/s 263 is bad and deserves to be cancelled.
In the above view, we hold that the impugned order passed by the PCIT is perverse to facts on record in holding assessment order erroneous and prejudice to the interest of revenue on account of lack of enquiry.
Accordingly, the order passed by the PCIT -1, Jalandhar u/s 263, is cancelled being bad in law.
Sukhjinder Singh v. Pr. CIT 16. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 20.03.2023