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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 25.03.2021 in respect of Assessment Year 2012-13.
2. The assessee has raised the following grounds of appeal:
1. That the impugned order, mechanically passed to save limitation, by neither allowing sufficient opportunity, nor even by examining the reply
Kuldeep Singh v. Pr. CIT filed against shows cause notice, is wholly illegal and unsustainable in law.
2. That the reassessment order dated 20.12.2018, being invalid for wrongful assumption of jurisdiction u/s 147/148, was not capable of revision u/s 263.
3. That the ld. ITO having taken his view in reassessment, to accept cash deposited in bank as trading transactions to assess net profit thereon, the ld. PCIT erred in setting aside the order simply for making roving enquiries.
That the order under appeal is wholly against law and facts of the case.”
3. The assessment order passed by the AO is extracted here under:
“After recording reasons and approval of the competent authority notice u/s 148 of the Income Tax Act was issued on 28.03.2018 and served upon the assessee.
In response to notice u/s 148 of the Income Tax Act assessee filed his return of income on 20.12.2018 declaring income of Rs.2,40,520/-.
Notice u/s 143(2) issued in this case fixing the case for 20.12.2018. In response to notices present Sh. Sandeep Singh, brother of the assessee, filed information as called for, the case was discussed with him.
After discussion, returned income is accepted at Rs.2,40,520/-. Assessed. Issue requisite documents along with a copy of this order to the assessee.”
4. The Ld. PCIT held the assessment order erroneous and prejudicial to the interest of revenue by observing as under:
The perusal of assessment record in the above mentioned case for the assessment year 2012-13 shows that the assessment order had been framed on 20.12.2018 under section 143(3) r.w.s.147 of the Income Tax Act, 1961 (hereinafter refer to as The Act’). The examination of the assessment order and the facts on record, show certain discrepancies in the assessment order issued A show cause notice was therefore issued to the assessee under section 263 of the Act, vide letter No.2725 dated 22.02.2021 as follows:-
Please refer to the Assessment order in your case framed u/s 143(3) r.w.s. 147 of the Income Tax Act on 20.12.2018 at an income of Rs. 2,40,520. The perusal of the assessment order and on examination of record for the asstt. year 2012- 13, the following points have been noticed:-
“The proceedings u/s 147 of the Income Tax Act, 1961 for the Asstt.Year: 2012- 13 were initiated in your case as you did not file any information with respect to the source of cash deposited by you at Rs. 38,51,400/- in your savings bank account during the relevant period. In response to the notice u s 148 of the Act, you filed your income tax return on 20.12.2018 declaring your taxable income at Rs. 2,40,520/-. Assessment in your case was framed on 20.12.2018 u/s 143(3) of the Income Tax Act and returned income was accepted. The perusal of the asstt. records reveals that the source of cash deposits of Rs.38,51,400/- has remained unverified/ unexplained. Further it has been noticed from the assessment records that in your income tax return, you had claimed that your turnover from your business was Rs.30,06,500/- but it has not been explained as to what type of business was being done by you nor this query was raised by the Assessing Officer."
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, 1961 dated 20.12.2018 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. For sake of natural justice you are given an opportunity to file your reply/objections, if any, to the proposed action before the undersigned by 01.03.2021 on which date your case stands fixed for hearing at 11.30 A.M. in the office of the undersigned at Aayakar Bhawan, Rishi Nagar, Ludhiana. The reply alongwith supporting documentary evidence, if any, may kindly be sent
Kuldeep Singh v. Pr. CIT online or email which shall be duly considered before taking final decision in (he matter.”
The above show cause notice was issued through Speed Post as well as through ITBA System on 23.02.2021. In response to the show cause notice, Sh. P.K. Tuli Advocate filed request for adjournment through email on 01.03.2021. Accordingly, in the interest of natural justice, an opportunity letter was issued to the assessee on 02.03.2021 fixing the case for hearing on 16.03.2021. This notice was also sent through Speed post as well as through ITBA system. In response to this notice, the assessee filed reply online. The reply and details filed by the assessee needs further verifications. The case is, therefore, set aside to the file of the A.O. for fresh assessment on the above mentioned issue.
In view of the above facts and discussions, I am satisfied that the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue. Therefore, the said order passed is set aside to this extent to the file of the assessing officer to pass fresh order after making necessary enquiries/investigations in the light of the discussions made above and after giving due opportunity to the assessee of being heard.”
The Ld. AR submitted that the AO having taken independent view with due application of mind in reassessment proceedings, while accepting cash deposited in bank as trading transactions to assess net profit thereon, and therefore the ld. PCIT erred in setting aside the order simply proposing roving enquiries in mechanical manner ignoring the reply filed against shows cause notice. He pleaded that this order is wholly illegal and unsustainable in law.
The Ld. CIT (DR) stands by the impugned order. She submitted that the AO has passed an order in a cryptic manner and accepted the return
Kuldeep Singh v. Pr. CIT income without conducting requisite inquiries and verifications. She relied on “Malabar Industrial Co. Ltd. v. CIT”, [2000] 109 Taxman 66/243 ITR 86 (SC) where the Hon'ble Supreme Court has held that the CIT can pass an order under section 263 of the IT Act even on debatable issues. Similarly, it is clear where the assessment was completed without proper inquiries which circumstances necessitated, it is competent for the CIT to invoke the revisional jurisdiction and direct fresh assessment, after verifying and examining all relevant facts, as well as legal position as may be involved.
Having heard both the sides and perused the material on record.
Admitted the Ld. PCIT has issue show cause notice dated 04.01.2023 to the appellant assesse. The relevant part para 2, of the show cause notice is reproduced as under:
“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, 1961 dated 20.12.2018 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. For sake of natural justice you are given an opportunity to file your reply/objections, if any, to the proposed action before the undersigned by 01.03.2021 on which date your case stands fixed for hearing at 11.30 A.M. in the office of the undersigned at Aayakar Bhawan, Rishi Nagar, Ludhiana. The reply alongwith supporting documentary evidence, if any, may kindly be sent online or email which shall be duly considered before taking final decision in the matter.”
Kuldeep Singh v. Pr. CIT 8. The PCIT, in exercising its revisional jurisdiction, has satisfied the twin requirements as prescribed in Section 263 of the ITAT Act. There was material before the PCIT to at least prima facie infer that there was no examination of cash deposits and that this aspect, the very basis for reopening the assessment was not considered by the AO in making his assessment order. The CIT, in exercising its revisional jurisdiction, has not shut out any of the defenses open to the Assessee, but has directed the AO to pass a fresh assessment order after verifying and examining all the relevant facts of the case, legal position and giving adequate opportunity of being heard to the Assessee.
In case of “Malabar Industrial Co. Ltd. v. CIT’, (Supra) the Hon'ble Supreme Court has held that the CIT can pass an order under section 263 of the IT Act even on debatable issues. Similarly, it is clear where the assessment was completed without proper inquiries which circumstances necessitated, it is competent for the CIT to invoke the revisional jurisdiction and direct fresh assessment, after verifying and examining all relevant facts, as well as legal position as may be involved as in the instant case, the issue of reopening was cash deposit in bank account which were accepted without proper inquiries which necessitated, the CIT to invoke the Kuldeep Singh v. Pr. CIT revisional jurisdiction and direct fresh assessment, after verifying and examining all relevant facts in that regard. The Ld. AR has not filed any judgement of Apex Court of subsequent date except old judgement of Hona’ble Haryana High Court.
It is seen that after hearing assessee's objections, revisional order was passed setting aside assessment order and Assessing Officer was directed to pass fresh assessment order. The Ld. AR objection that since only direction was issued for passing fresh assessment, issues raised by assessee could always be gone into by Assessing Officer after granting full opportunity to assessee.
Since, assessment was completed without proper inquiries, it was competent for Commissioner to invoke revisional jurisdiction and direct fresh assessment in view of provisions as per clause of (a) to Explanation 2 to sub-section (1) of section 263 of the Act. Similar view was taken by the Hon’ble Bombay High Court in its recent judgement dated 27/11/2020 “Vedanta Ltd. vs. Commissioner of Income Tax”, [2021] 124 taxmann.com 435 (Bombay) having considered “Malabar Industrial Co. Ltd. v. CIT’, (Supra)(SC).
Kuldeep Singh v. Pr. CIT 12. Without prejudice to above, we made it clear that adequate opportunity of being heard is required to be extended to the Assessee in the fresh assessment proceedings to be undertaken by the AO. Therefore, no liberty or clarification is necessary. In any case, it is clarified that the Assessee will be entitled to rely upon all legally permissible material. and there is no doubt that the AO, in undertaking the fresh assessment, will take into account all such contentions of the Assessee and make a fresh order in accordance with law, on its own merits.
In the above view, we hold that since the assessment was completed without proper inquiries, Principal Commissioner of Income Tax was competent to invoke revisional jurisdiction and direct Assessing Officer for fresh assessment. Accordingly, the impugned order passed u/s 263 of the Act by the PCIT is upheld.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 17.02.2023