M/S KIRTI DIAM ,MUMBAI vs. PR COMMISSIONER OF INCOME TAX MUMBAI-27 , MUMBAI

This appeal by the assessee is directed against revision order dated 21/03/2022 passed by the Ld. Principal Commissioner of Income-tax, Mumbai-27 [in short ‘the Ld. PCIT’] for assessment year 2017-18, wherein he has held the assessment order dated 27/12/2019 passed by the Assessing Officer as erroneous insofar as prejudicial to the interest of the revenue. The grounds raised by as prejudicial to the interest of the revenue. The grounds raised by as prejudicial to the interest of the revenue. The grounds raised by the assessee are reproduced as under: the assessee are reproduced as under:

“On the facts and in the circumstances of the case as well as On the facts and in the circumstances of the case as well as On the facts and in the circumstances of the case as well as in law, the learned PCIT: in law, the learned PCIT: Violation of the principles of natural justice Violation of the principles of natural justice 1. erred in passing the order us. 263 of the Act, without erred in passing the order us. 263 of the Act, without erred in passing the order us. 263 of the Act, without giving a fair and reasonable opportunity hearing to the giving a fair and reasonable opportunity hearing to the giving a fair and reasonable opportunity hearing to the Appellant and thereby violating the principles of natural Appellant and thereby violating the principles of natural Appellant and thereby violating the principles of natural justice; justice; 2. erred in exercising jurisdictio erred in exercising jurisdiction under section 263 on the n under section 263 on the basis of issues/reasons which was not referred in the basis of issues/reasons which was not referred in the basis of issues/reasons which was not referred in the show cause notice issued by the PCIT to the Appellant show cause notice issued by the PCIT to the Appellant show cause notice issued by the PCIT to the Appellant and without giving the Appellant the opportunity to and without giving the Appellant the opportunity to and without giving the Appellant the opportunity to controvert the same, therefore the order passed by the controvert the same, therefore the order passed by the controvert the same, therefore the order passed by the PCIT u/s. 263 PCIT u/s. 263 shall be held as bad in law; No evidence brought on record to show how the No evidence brought on record to show how the No evidence brought on record to show how the assessment order passed is erroneous in law as well as assessment order passed is erroneous in law as well as assessment order passed is erroneous in law as well as prejudicial to the interests of the revenue prejudicial to the interests of the revenue 3. erred in holding that the order passed by the AO is erred in holding that the order passed by the AO is erred in holding that the order passed by the AO is erroneous and prejudicial to t erroneous and prejudicial to the interest of the revenue he interest of the revenue and therefore such order should be quashed; and therefore such order should be quashed; and therefore such order should be quashed; 4. erred in initiating the revision proceedings u/s 263 of erred in initiating the revision proceedings u/s 263 of erred in initiating the revision proceedings u/s 263 of the Act without appreciating that section 263 can be the Act without appreciating that section 263 can be the Act without appreciating that section 263 can be invoked invoked invoked only only only if if if the the the conjunctive conjunctive conjunctive conditions conditions conditions that that that assessment order passed is e assessment order passed is erroneous in law as well as rroneous in law as well as prejudicial to the interests of the revenue, are satisfied, prejudicial to the interests of the revenue, are satisfied, prejudicial to the interests of the revenue, are satisfied, therefore the initiation of revisionary assessment therefore the initiation of revisionary assessment therefore the initiation of revisionary assessment proceedings, without satisfaction of such conditions is proceedings, without satisfaction of such conditions is proceedings, without satisfaction of such conditions is bad in law; bad in law; 5. failed to appreciate that the assessment order was failed to appreciate that the assessment order was failed to appreciate that the assessment order was passed after making through enquiries and after filing passed after making through enquiries and after filing passed after making through enquiries and after filing the necessary information as desired and required from the necessary information as desired and required from the necessary information as desired and required from time to time. It is pertinent to point out that this was a time to time. It is pertinent to point out that this was a time to time. It is pertinent to point out that this was a cases of tax audit. The case of the Appellant was taken cases of tax audit. The case of the Appellant was taken cases of tax audit. The case of the Appellant was taken up several time and queries we up several time and queries were raised and were duly re raised and were duly complied. As such the reopening by invoking the complied. As such the reopening by invoking the complied. As such the reopening by invoking the provisions of section 263 is not all justified and as such provisions of section 263 is not all justified and as such provisions of section 263 is not all justified and as such the order by the PCIT is liable to be cancelled; the order by the PCIT is liable to be cancelled; the order by the PCIT is liable to be cancelled; Proceedings u/s 263 of the Act initiated only to make Proceedings u/s 263 of the Act initiated only to make Proceedings u/s 263 of the Act initiated only to make roving enquiries on th roving enquiries on the issues which are already e issues which are already enquired by the AO in detailed manner enquired by the AO in detailed manner 6. erred in law and in fact by initiating the proceedings erred in law and in fact by initiating the proceedings erred in law and in fact by initiating the proceedings under section 263 of the Act, without appreciating the under section 263 of the Act, without appreciating the under section 263 of the Act, without appreciating the fact that the AO has already applied his mind on the fact that the AO has already applied his mind on the fact that the AO has already applied his mind on the same issue and made adequate same issue and made adequate inquires, undertaken inquires, undertaken necessary necessary necessary verification/ verification/ verification/ investigation investigation investigation basis basis basis the the the details/documents sought from the Appellant and even details/documents sought from the Appellant and even details/documents sought from the Appellant and even from suppliers and customers of the Appellant under from suppliers and customers of the Appellant under from suppliers and customers of the Appellant under section 133 and 133 (6) of the Act, verified the stock section 133 and 133 (6) of the Act, verified the stock section 133 and 133 (6) of the Act, verified the stock during the course of asses during the course of assessment proceedings. As AO sment proceedings. As AO has passed the order post inquiries and verification of has passed the order post inquiries and verification of has passed the order post inquiries and verification of fact relating to only issue which is subject matter of the fact relating to only issue which is subject matter of the fact relating to only issue which is subject matter of the order Wis. 263, the order is neither erroneous nor it can order Wis. 263, the order is neither erroneous nor it can order Wis. 263, the order is neither erroneous nor it can be be be deemed deemed deemed to to to be be be erroneous erroneous erroneous and and and therefore therefore therefore the the the proceedings un proceedings under section 263 is not called for; der section 263 is not called for; 7. erred in making a difference of opinion as a basis for erred in making a difference of opinion as a basis for erred in making a difference of opinion as a basis for invoking the provisions of section 263; invoking the provisions of section 263; 8. erred in assuming jurisdiction u/s. 263 for making erred in assuming jurisdiction u/s. 263 for making erred in assuming jurisdiction u/s. 263 for making fishing/roving enquiry on the issues which are already fishing/roving enquiry on the issues which are already fishing/roving enquiry on the issues which are already enquired by the Ass enquired by the Assessing Officer (A0') passing the essing Officer (A0') passing the order dated 27 December 2019; order dated 27 December 2019; 9. erred in not appreciating the fact that the learned AO erred in not appreciating the fact that the learned AO erred in not appreciating the fact that the learned AO had passed the assessment order u/s. 143(3) of the had passed the assessment order u/s. 143(3) of the had passed the assessment order u/s. 143(3) of the Act, after verifying, examining and critically & legally Act, after verifying, examining and critically & legally Act, after verifying, examining and critically & legally analyzing the facts of the App analyzing the facts of the Appellant's case and the ellant's case and the written submissions filed by the Appellant along with written submissions filed by the Appellant along with written submissions filed by the Appellant along with documentary evidences in support thereof. Thus, the act documentary evidences in support thereof. Thus, the act documentary evidences in support thereof. Thus, the act of the learned PIT of considering the assessment order of the learned PIT of considering the assessment order of the learned PIT of considering the assessment order as erroneous and prejudicial to the interest of the as erroneous and prejudicial to the interest of the as erroneous and prejudicial to the interest of the revenue is nothin revenue is nothing but the change in opinion on the g but the change in opinion on the same set of facts leading to unlawful revision of a same set of facts leading to unlawful revision of a same set of facts leading to unlawful revision of a lawfully concluded assessment u/s. 143(3) of the Act. lawfully concluded assessment u/s. 143(3) of the Act. lawfully concluded assessment u/s. 143(3) of the Act. Because the PCIT takes a different view should not be Because the PCIT takes a different view should not be Because the PCIT takes a different view should not be made the basis for invoking the provisions of section made the basis for invoking the provisions of section made the basis for invoking the provisions of section 263. As 263. As such the CIT was not justified in invoking the such the CIT was not justified in invoking the provisions of section 263. provisions of section 263.

2. The assessee also raise assessee also raised additional ground of the appeal, additional ground of the appeal, which is reproduced as under: which is reproduced as under:

4.1 Subsequently, on the proposal sent by the Assessing Officer, on the proposal sent by the Assessing Officer, on the proposal sent by the Assessing Officer, the Ld. PCIT called for the records and after examination, he was of called for the records and after examination, he was of called for the records and after examination, he was of the view that assessment order passed by the Assessing Officer was the view that assessment order passed by the Assessing Officer was the view that assessment order passed by the Assessing Officer was erroneous insofar as prejudicial to the interest of the revenue, erroneous insofar as prejudicial to the interest of the rev erroneous insofar as prejudicial to the interest of the rev therefore, he issued a notice under section 26 issued a notice under section 263 of the Income 3 of the Income-tax Act, 1961 (in short ‘ ‘the Act’) vide letter dated 02/03/2022. In the ide letter dated 02/03/2022. In the said letter the Ld. PCIT observed that the Assessing Officer had not PCIT observed that the Assessing Officer had not PCIT observed that the Assessing Officer had not examined the issue of cash deposits properly examined the issue of cash deposits properly and the d the order passed was without proper verification of the records. The assessee filed a was without proper verification of the records. The assessee file was without proper verification of the records. The assessee file detailed submission and submitted that the Assessing Officer had detailed submission and submitted that the Assessing Officer detailed submission and submitted that the Assessing Officer issued numerous notices which issued numerous notices which were duly responded duly responded by the assessee and filed all details including month assessee and filed all details including monthly cash sales and cash ly cash sales and cash deposits for financial years 2015 deposits for financial years 2015-16 and 16-17, VAT returns, 17, VAT returns, parties with details of cash sales, stock registers, parties from details of cash sales, stock registers, parties from details of cash sales, stock registers, parties from purchases were made in the month of October and December 2016, purchases were made in the month of October and December 2016, purchases were made in the month of October and December 2016, details of parties from from whom purchases were made etc. made etc. the Ld. PCIT noted that notices were issued by the Assessing Officer, however were issued by the Assessing Officer, however were issued by the Assessing Officer, however according to him the Assessing Officer has not examined the issue according to him the Assessing Officer has not examined the issue according to him the Assessing Officer has not examined the issue in proper perspective perspective. According to him following issues are not . According to him following issues are not been examined by the Assessing Offic been examined by the Assessing Officer:

“4.6 It can be seen from the above that there was huge 4.6 It can be seen from the above that there was huge 4.6 It can be seen from the above that there was huge cash deposits by the assessee during the demonetization cash deposits by the assessee during the demonetization cash deposits by the assessee during the demonetization period. The assessee explained that cash deposited period. The assessee explained that cash deposited period. The assessee explained that cash deposited during the demonetization period was out of self during the demonetization period was out of self during the demonetization period was out of self- proceeds of Rs. 2,61.95,330/ proceeds of Rs. 2,61.95,330/- of sales made in cash made in cash during the month of October 2016 and the entire cash of during the month of October 2016 and the entire cash of during the month of October 2016 and the entire cash of the cash sales made in October 2016 was lying with the the cash sales made in October 2016 was lying with the the cash sales made in October 2016 was lying with the assessee as on 08.11.2016. From the details submitted assessee as on 08.11.2016. From the details submitted assessee as on 08.11.2016. From the details submitted by the assessee, it can be seen that cash sales made by the assessee, it can be seen that cash sales made by the assessee, it can be seen that cash sales made during the month of Octob during the month of October 2015 was only of Rs. er 2015 was only of Rs. 9,00,702/-, In other words, according to the assessee the , In other words, according to the assessee the , In other words, according to the assessee the cash sales in the month of Oc cash sales in the month of October 2016 was 2908% of ber 2016 was 2908% of the cash sales made during the corresponding period of the cash sales made during the corresponding period of the cash sales made during the corresponding period of 2015~ There cannot be any justification for this extra 2015~ There cannot be any justification for this extra 2015~ There cannot be any justification for this extra ordinary and abnormal increase in the cash sales in the d abnormal increase in the cash sales in the d abnormal increase in the cash sales in the month of October 2016. Festival seasons etc., comes month of October 2016. Festival seasons etc., comes month of October 2016. Festival seasons etc., comes every year (prior to or after F.Y. 2016 every year (prior to or after F.Y. 2016-17) but the cash 17) but the cash sales reported in the month of October 2016 is sales reported in the month of October 2016 is sales reported in the month of October 2016 is abnormally high compared to the cash sales reported in abnormally high compared to the cash sales reported in abnormally high compared to the cash sales reported in the preceding or succeeding year of F.Y. 2016 the preceding or succeeding year of F.Y. 2016-17. The 17. The Assessing Officer has ignored this aspect while accepting Assessing Officer has ignored this aspect while accepting Assessing Officer has ignored this aspect while accepting the explanation of the assessee that cash deposited the explanation of the assessee that cash deposited the explanation of the assessee that cash deposited during the demonetization period was out of the cash during the demonetization period was out of the cash during the demonetization period was out of the cash sales made during the month of October sales made during the month of October 2016. 4.7 It is seen that the Assessing Officer instead of 4.7 It is seen that the Assessing Officer instead of 4.7 It is seen that the Assessing Officer instead of verifying the claim of the assessee with regard to cash verifying the claim of the assessee with regard to cash verifying the claim of the assessee with regard to cash sales claimed to have been made during the month of sales claimed to have been made during the month of sales claimed to have been made during the month of October 2016, has examined the purchases made by the October 2016, has examined the purchases made by the October 2016, has examined the purchases made by the assessee. Whereas to examine the assessee. Whereas to examine the nature and source of nature and source of the cash deposited during the demonetization period, the the cash deposited during the demonetization period, the the cash deposited during the demonetization period, the AO should have examined the genuineness of the cash AO should have examined the genuineness of the cash AO should have examined the genuineness of the cash sales claimed to have been made by the assessee. Even sales claimed to have been made by the assessee. Even sales claimed to have been made by the assessee. Even in respect of purchases claimed to have been made by in respect of purchases claimed to have been made by in respect of purchases claimed to have been made by the assessee in the the assessee in the month of October 2016, it is seen that month of October 2016, it is seen that the purchases were made in credit and the payments to the purchases were made in credit and the payments to the purchases were made in credit and the payments to the parties from whom the purchases were claimed to the parties from whom the purchases were claimed to the parties from whom the purchases were claimed to have been made, was shown to have been made only in have been made, was shown to have been made only in have been made, was shown to have been made only in the month of February 2017 i.e., out of the cash the month of February 2017 i.e., out of the cash the month of February 2017 i.e., out of the cash deposited during the demonetization period, which was during the demonetization period, which was during the demonetization period, which was not the trend in the books of the assessee in the period not the trend in the books of the assessee in the period not the trend in the books of the assessee in the period prior to October 2016. The purchases were also claimed prior to October 2016. The purchases were also claimed prior to October 2016. The purchases were also claimed to have been made of cut and polished diamonds, to have been made of cut and polished diamonds, to have been made of cut and polished diamonds, whereas the sales is claimed to have been made in r whereas the sales is claimed to have been made in r whereas the sales is claimed to have been made in retail of small amount to ordinary customers, complete name of small amount to ordinary customers, complete name of small amount to ordinary customers, complete name and addresses of whom are available with the assessee. and addresses of whom are available with the assessee. and addresses of whom are available with the assessee. An ordinary person does not purchase cut and polished An ordinary person does not purchase cut and polished An ordinary person does not purchase cut and polished diamond, that too in such a large number in a particular diamond, that too in such a large number in a particular diamond, that too in such a large number in a particular month. The ordinary men general month. The ordinary men generally purchases jewellery ly purchases jewellery either made of gold or diamond jewellery but not cut and either made of gold or diamond jewellery but not cut and either made of gold or diamond jewellery but not cut and polished diamond in such a large number. polished diamond in such a large number.” 4.2 In view of no proper enquiry or verification carried out by the view of no proper enquiry or verification carried out by the view of no proper enquiry or verification carried out by the invoked section 263 of the Act and Assessing Officer, the Assessing Officer, the Ld. PCIT invoked section 263 of the set aside the assessment order with the direction to make a fresh set aside the assessment order with the direction to make a fresh set aside the assessment order with the direction to make a fresh assessment as under: assessment as under:

6. In view of the facts discussed in para 4.1 to 4.8, I In view of the facts discussed in para 4.1 to 4.8, I In view of the facts discussed in para 4.1 to 4.8, I am of the considered view that the assessment order am of the considered view that the assessment order am of the considered view that the assessment order dated 27.12.2019 passed by the AO has been passed dated 27.12.2019 passed by the AO has been passed dated 27.12.2019 passed by the AO has been passed without making enquiry and verification which should aking enquiry and verification which should aking enquiry and verification which should have been made by him. Hence, the assessment order have been made by him. Hence, the assessment order have been made by him. Hence, the assessment order dated 27.12.2019 passed u/s 143(3) is erroneous in so far dated 27.12.2019 passed u/s 143(3) is erroneous in so far dated 27.12.2019 passed u/s 143(3) is erroneous in so far as it is prejudicial to the interest of revenue. Therefore, the as it is prejudicial to the interest of revenue. Therefore, the as it is prejudicial to the interest of revenue. Therefore, the assessment order dated 27.12.2019 passe assessment order dated 27.12.2019 passed by the AO us d by the AO us 143(3) is set aside to the AO with a direction to make a 143(3) is set aside to the AO with a direction to make a 143(3) is set aside to the AO with a direction to make a fresh assessment. While completing the fresh assessment fresh assessment. While completing the fresh assessment fresh assessment. While completing the fresh assessment the AO shall examine and verily the issue discussed in the AO shall examine and verily the issue discussed in the AO shall examine and verily the issue discussed in para 4.1 to 4.8. The nature and source of cash deposited para 4.1 to 4.8. The nature and source of cash deposited para 4.1 to 4.8. The nature and source of cash deposited during the demon during the demonetization period shall be examined etization period shall be examined keeping in view the facts discussed in para 4.1 to 4.8, keeping in view the facts discussed in para 4.1 to 4.8, keeping in view the facts discussed in para 4.1 to 4.8, particularly the extraordinary and abnormally high cash particularly the extraordinary and abnormally high cash particularly the extraordinary and abnormally high cash sales reported by the assessee in the month of October sales reported by the assessee in the month of October sales reported by the assessee in the month of October 2016 and upto 8th November 2016 and upto 8th November 2016. The claim of the 2016. The claim of the assessee with regard to cash sales may be accepted by ssee with regard to cash sales may be accepted by ssee with regard to cash sales may be accepted by estimating the reasonable amount of cash sales, the estimating the reasonable amount of cash sales, the estimating the reasonable amount of cash sales, the assessee could have made in the month of October 2016 assessee could have made in the month of October 2016 assessee could have made in the month of October 2016 and upto 8th November 2016, considering the cash sales and upto 8th November 2016, considering the cash sales and upto 8th November 2016, considering the cash sales made during the same period during the year 2 made during the same period during the year 2 made during the same period during the year 2015. The amount of cash deposits remaining unexplained shall be amount of cash deposits remaining unexplained shall be amount of cash deposits remaining unexplained shall be taxed as unexplained money us. 69A and charged to tax taxed as unexplained money us. 69A and charged to tax taxed as unexplained money us. 69A and charged to tax at the rates given in section 115BBE. Initiation of penalty at the rates given in section 115BBE. Initiation of penalty at the rates given in section 115BBE. Initiation of penalty proceedings under appropriate sections may also be proceedings under appropriate sections may also be proceedings under appropriate sections may also be considered by the AO while considered by the AO while making the fresh assessment. making the fresh assessment. Before Before Before completing completing completing the the the assessment assessment assessment a a a reasonable reasonable reasonable opportunity of being heard shail be allowed to the opportunity of being heard shail be allowed to the opportunity of being heard shail be allowed to the assessee by the assessee by the AO.

5. Aggrieved, the assessee is before the , the assessee is before the Tribunal by way of raising by way of raising grounds as reproduced above. s reproduced above.

6.1 Regarding the grounds raised, the Regarding the grounds raised, the Ld. counsel Ld. counsel of the assessee submitted that during assessment proceeding on the issue of the submitted that during assessment proceeding on the issue of the submitted that during assessment proceeding on the issue of the cash deposits during the monetization period cash deposits during the monetization period, total five notices have otal five notices have been issued by the Assessing Officer and been issued by the Assessing Officer and in response response, the assessee filed nine submissions including three filed nine submissions including three detailed submissions again detailed submissions against shows notices. He submitted the assessee had filed audited shows notices. He submitted the assessee had filed audited shows notices. He submitted the assessee had filed audited financials, tax audit report, sale bills financials, tax audit report, sale bills complete details of sales and details of sales and purchases, quantitative stock register as confirmed by the auditor, purchases, quantitative stock register as confirmed by the auditor, purchases, quantitative stock register as confirmed by the auditor, cash book showing sufficient cash book showing sufficient cash balance, corresponding purchase cash balance, corresponding purchase bills, labour bills for preparing jewelry, VAT returns, marketing and bills, labour bills for preparing jewelry, VAT returns, marketing and bills, labour bills for preparing jewelry, VAT returns, marketing and exhibition expenses et exhibition expenses etc. It was the contention of the assessee that it . It was the contention of the assessee that it had sufficient opening sto had sufficient opening stock as on 01/04/2016 to cover most of the as on 01/04/2016 to cover most of the cash sales made in October 2016 and those sales have already been made in October 2016 and those sales have already been made in October 2016 and those sales have already been offered to tax and hence again cannot be su offered to tax and hence again cannot be subjected to tax under bjected to tax under section 69A of the Act Act. He submitted that cash sales were cross . He submitted that cash sales were cross verified by the Ld. Assessing Officer by issuing notices to the Assessing Officer by issuing notices to the Assessing Officer by issuing notices to the parties directly under section 133(6) of the directly under section 133(6) of the Act and those and those parties have confirmed to have made purchases from the assessee. Few such to have made purchases from the assessee. Few such to have made purchases from the assessee. Few such notices issued and reply filed are available on reply filed are available on page 73 to 94 of the paperbook. The Ld. counsel Ld. counsel of the assessee further submitted t of the assessee further submitted that corresponding purchases purchases have also been verified by issuing notice have also been verified by issuing notice under section 133(6) of the under section 133(6) of the Act and also calling the partie and also calling the parties and recording their statement for confirming to have made sales by the recording their statement for confirming to have made sales by recording their statement for confirming to have made sales by assessee. Further submitted that Assessing Officer in the order she assessee. Further submitted that Assessing Officer in assessee. Further submitted that Assessing Officer in dated 27/12/2019 has duly a dated 27/12/2019 has duly acknowledged that the issue of cash that the issue of cash deposits was thoroughly examined and view was taken following the deposits was thoroughly examined and view was taken following the deposits was thoroughly examined and view was taken following the various judicial precedents after analyz judicial precedents after analyzing the evidence ing the evidence as available on record, therefore the order of the on record, therefore the order of the Ld. Assessing Officer cannot be sessing Officer cannot be said to be erroneous erroneous insofar as prejudicial to the interest of the insofar as prejudicial to the interest of the revenue.

7.1 The Ld. counsel Ld. counsel submitted that Explanation-2 to section 263 2 to section 263 of the Act also cannot be invoked also cannot be invoked as sufficient inquiries on the issue sufficient inquiries on the issue in dispute have been carried out by the Assessing Of been carried out by the Assessing Of been carried out by the Assessing Officer in the instant case. The inadequate enquiry could only be shown if the instant case. The inadequate enquiry could only be shown if the instant case. The inadequate enquiry could only be shown if the Assessing Officer does not make relevant and meaningful inquiries Assessing Officer does not make relevant and meaningful inquiries Assessing Officer does not make relevant and meaningful inquiries or there is gross negligence in making inquiries. But in the present or there is gross negligence in making inquiries. But in the present or there is gross negligence in making inquiries. But in the present case the Assessing Officer has made all inqu case the Assessing Officer has made all inquiries, which could have iries, which could have been possibly made by any person of the reasonable prudence, been possibly made by any person of the reasonable prudence, been possibly made by any person of the reasonable prudence, hence the assessment order cannot be held to be erroneous and hence the assessment order cannot be held to be erroneous hence the assessment order cannot be held to be erroneous prejudicial to the interest of the prejudicial to the interest of the Revenue.

7.2 In view of the above facts, the In view of the above facts, the Ld. counsel of the assessee submitted that Ld. PCIT has concluded the 263 proceedings on 263 proceedings on incorrect facts and therefore same cannot be sustained. incorrect facts and therefore same cannot be sustained. incorrect facts and therefore same cannot be sustained.

7.3 The Ld. counsel Ld. counsel also supported the additional additional ground and submitted that proceedings have been initiated at the behest of the submitted that proceedings have been initiated at the behest of the submitted that proceedings have been initiated at the behest of the proposal sent by the proposal sent by the Ld. Assessing Officer and there was no Assessing Officer and there was no independent application of the mind independent application of the mind by the PCIT, therefore also the therefore also the proceedings are liable to be invalidated. proceedings are liable to be invalidated.

9.1 Before us, the Before us, the Ld. Counsel of the assessee has has filed a chart showing queries raised by the assessee for making enquiry or showing queries raised by the assessee for making enquiry or showing queries raised by the assessee for making enquiry or verification and submission by the assessee along with evidence verification and submission by the assessee along with evidence verification and submission by the assessee along with evidence filed during the proceeding under section 143(3) of the Act on the filed during the proceeding under section 143(3) of the filed during the proceeding under section 143(3) of the issue of cash deposit. For issue of cash deposit. For ready reference said chart is reproduced chart is reproduced as under:

“Chart “Chart “Chart showing showing showing queries queries queries raised raised raised by by by Id. Id. Id. A0 A0 A0 and and and submissions submissions submissions and and and evidences evidences evidences fled fled fled by by by appellant appellant appellant in in in assessment proceedings concluded u/s 143(3) of the Act. assessment proceedings concluded u/s 143(3) of the Act. assessment proceedings concluded u/s 143(3) of the Act.

Sr. Details of various notices issues and Details of various notices issues and Details of reply filed by the Details of reply filed by the No. relevant queries raised by Ld. AO in queries raised by Ld. AO in appellant during the appellant during the assessment proceedings assessment proceedings assessment proceedings assessment proceedings Notice dated 23.05.2019 Notice dated 23.05.2019 Submission dated 19.11.2019 Submission dated 19.11.2019 1. wherein the various details as wherein the various details as called for are filed before the Ld. called for are filed before the Ld. AO [pg. 41-42 of PB] 42 of PB] 1. Pt. 1 – Tax audit report and Financial Tax audit report and Financial  Pt. 4 of the submission Pt. 4 of the submission statement of the appellant statement of the appellant dated 19.11.2019 [Pg. 41-42 dated 19.11.2019 [Pg. 41 of PB]  Evidence filed at Pg. 2-28 of Evidence filed at Pg. 2 PB.

2. Pt. 5 – Details of bank account and Details of bank account and  Pt. 5-6 of the 6 of the submission bank account statements bank account statements dated 19.11.2019 [Pg. 41-42 dated 19.11.2019 [Pg. 41 of PB]  Evidences filed at Pg. 287- Evidences filed at Pg. 287 301 of PB 301 of PB Notice dated 26.08.2019 asking for various Notice dated 26.08.2019 Submission dated 19.11.2019 mission dated 19.11.2019 2. details failing which the books may be details failing which and 04.12.2019 wherein and 04.12.2019 wherein the the rejected and cash deposits may be taxed u/s rejected and cash deposits may be taxed u/s various details as called for are various details as called for are 68/69A and taxed u/s 115BBE. 68/69A and taxed u/s 115BBE. filed before the Ld. AO [Pg. 41-42 filed before the Ld. AO [Pg. 41 [Pg 31-40] and Pg. 43 of PB] and Pg. 43 of PB] 1. Pt. 7 - Details of Online response filed Details of Online response filed  Pt. 7 of submission dated Pt. 7 of submission dated w.r.t. w.r.t. cash cash deposited deposited during during 19.11.2019 [Pg. 41 of PB] 19.11.2019 [Pg. 41 of PB] demonetization period. demonetization period.  Evidence filed at Pg 302-304 Evidence filed at Pg 302 of PB.

4. Pt. 10 - Details of persons from whom Details of persons from whom  Pt. 1 of submission dated Pt. 1 of submission dated cash has been received cash has been received 04.12.2019 [Pg. 43 of PB] 04.12.2019 [Pg. 43 of PB]  Evidenced filed at Pg 99-104 Evidenced filed at Pg 99 of PB 5. Pt. 19 - Monthwise Monthwise details of sales and  Pt. 19 of submission dated Pt. 19 of submission dated purchases of current year and preceding purchases of current year and preceding 19,11.2019. [Pg. 42 of PB]. 19,11.2019. [Pg. 42 of PB]. year and reason for sharp variation, if year and reason for sharp variation, if  Evidences filed at Pg 95 of Evidences filed at Pg 95 of any of figures of current year with any of figures of current year with PB. Preceding year  6. Pt. 20 - Monthw Monthwise details of cash sales Pt. 20 of submission dated Pt. 20 of submission dated and deposits of F.Y. 2015 and deposits of F.Y. 2015-16 19.11.2019. [Pg. 42 of PB]. 19.11.2019. [Pg. 42 of PB].  Evidences filed at Pg 97 of Evidences filed at Pg 97 of PB.  7. Pt. 21 - Monthwise details of cash sales Monthwise details of cash sales Pt. 21 of submission dated Pt. 21 of submission dated and cash deposits for F.Y. 2016 and cash deposits for F.Y. 2016-17. 19.11.2019. [Pg. 42 of PB]. 19.11.2019. [Pg. 42 of PB].  Evidences filed at Pg 96 of Evidences filed at Pg 96 of PB. 8. Pt. 22 - Details of top parties to whom Details of top parties to whom  Pt. 3 of submission dated Pt. 3 of submission dated sales are made including cash sales. sales are made including cash sales. 04.12.2019. [Pg. 43 of PB]. 04.12.2019. [Pg. 43 of PB].  Evidences filed at Pg 117- Evidences filed at Pg 117 118 of PB. 118 of PB. 9. Pt. 23 - Details of top Details of top parties from whom  Pt. 2 of submission dated Pt. 2 of submission dated purchases are made purchases are made 04.12.2019. [Pg. 43 of PB]. 04.12.2019. [Pg. 43 of PB].  Evidences filed at Pg 115- Evidences filed at Pg 115 116 of PB. 116 of PB. 10. Pt. 24 - Monthwise stock details along Monthwise stock details along  Pt. 4 of submission dated Pt. 4 of submission dated with stock register/stock statement with stock register/stock statement 04.12.2019. [Pg. 43 of PB]. 04.12.2019. [Pg. 43 of  Evidences filed at Pg 127- Evidences filed at Pg 127 152 of PB. 152 of PB. 11. Pt. 25 - VAT returns VAT returns  Pt. 25 of submission dated Pt. 25 of submission dated 19.11.2019. [Pg. 42 of PB]. 19.11.2019. [Pg. 42 of PB].  Evidences filed at Pg 274- Evidences filed at Pg 274 280 of PB. 280 of PB. 3. Notice dated 22.11.2019. [Pg 44-45 of PB] Notice dated 22.11.2019. [Pg 44 Submission dated 28.11.2019 Submission dated 28. 1. Pt. 1 - Bifurcation of purchase and sales Bifurcation of purchase and sales and and 6) 6) 04.12.2019 04.12.2019 and and (ii) (i along with GP/NP ratio for A.Y. 2015 GP/NP ratio for A.Y. 2015-16 04.12.2019 Wherein the various 04.12.2019 Wherein the various to A.Y. 2017-18 details as called for are filed details as called for are filed before the Ld. AO. [Pg. 43, 46 before the Ld. AO. [Pg. 43, 46 and 47 of PB] and 47 of PB]  Pt. 1 of submission dated Pt. 1 of submission dated 28.11.2010. [Pg. 46 of PB]. 28.11.2010. [Pg. 46 of  Evidences filed at Pg 22-28 of Evidences filed at Pg 22 PB.  Pt. 1 and 7 of submission Pt. 1 and 7 of submission dated 04.12.2019. [Pg. 47 of dated 04.12.2019. [Pg. 47 of PB].  Evidences filed at Pg 98 of Evidences filed at Pg 98 of PB.

2. Pt 6. - Monthwise quantitative itemwise Monthwise quantitative itemwise  Pt. 4 of submission dated Pt. 4 of submission dated details of gold, silver etc. details of gold, silver etc. 04.12.2019. [Pg. 43 of PB]. 04.12.2019. [Pg. 43 of  Evidences filed at Pg 127-152 Evidences filed at Pg 127 of PB.

7. Pt. 12 - Day to day cash book Day to day cash book  Pt. 9 of submission dated Pt. 9 of submission dated 19.11.2019. [Pg. 41 of PB]. 19.11.2019. [Pg. 41 of PB].  Evidences filed at Pg 153-162 Evidences filed at Pg 153 of PB.

4. Notice dated 05.12.2019. [Pg 48-49 of PB] Notice dated 05.12.2019. [ Submission dated 09.12.2019 Submission dated 09.12.2019 1. Pt. 1 - Address of parties from whom Address of parties from whom and 13.12.2019 wherein various and 13.12.2019 wherein various purchases purchases made made in in October October and and details as called for are filed details as called for are filed December'2016. December'2016. before the Ld. AO. [Pg. 50-51 of before the Ld. AO. [Pg. 50 PB]  Pt. 1 of submission dated Pt. 1 of submission dated 09.12.2019 [Pg. 50 of PB]. 09.12.2019 [Pg. 50 of PB]. and  Pt. 1 of submission dated Pt. 1 of submission dated 13.12.2019 [Pg. 51 of PB] 13.12.2019 [Pg. 51 of PB]  Evidences filed at Pg 115-116 Evidences filed at Pg 115 of PB.  Pt. 2 – Address of parties from whom sale Address of parties from whom sale Pt. 2 of submission [Pg. 50 of Pt. 2 of submission [Pg. 50 of made in October and December’ 2016 made in October and December’ 2016 PB].  Evidences filed at Pg 105-114 Evidences filed at Pg of PB. Show cause notice dated 18.12.2019 Submission Show cause notice dated 18.12.2019 5. Submission filed filed by by the the asking to show cause why cash deposits of asking to show cause why cash deposits of appellant appellant dated dated 23.12.2019 23.12.2019 Rs.2,65,44,000/- shall note be treated as shall note be treated as justifying the nature and source justifying the nature and source unexplained cash credit and higher tax rate unexplained cash credit and higher tax rate of cash deposits made during of cash deposits made during u/s 115 BBE of the Act be not applied. u/s 115 BBE of the Act be not applied. demonetization period and why demonetization period and why [Pg 52-53 of PB] no addition shall be made in the no addition shall be made in the present case. [Pg. 54-57 of PB] present case. [Pg. 54  Evidences in the nature of Evidences in the nature of purchase and sale bills of purchase and sale bil A.Y.2017- -18 filed [Pg. 163- 205 of PB] 205 of PB]  Evidences in the nature of Evidences in the nature of purchase purchase bills, bills, bank bank statements for earlier year statements for earlier year and subsequent year filed Pg. and subsequent year filed Pg. 206-258 of PB 258 of PB] Show cause notice dated 23.12.2019 Show cause notice dated 23.12.2019 6. 2. submissions filed by the submissions filed by the asking to explain why large number of sale asking to explain why large number of sale appellant, appellant, each each dated dated transactions are shown in October'2016 and ons are shown in October'2016 and 24.12.2019 justifying the nature 24.12.2019 justifying the nature why the same may be treated as genuine. [Pg why the same may be treated as genuine. [Pg and source of cash deposits and source of cash deposits 58 of PB] made made during during demonetization demonetization period and why no addition shall period and why no addition sha be made in the present case. be made in the present case. [Pg. 59-66 and 67 66 and 67-72 of PB] 7. Notice us 133(6) of the Act issued by Ld. AO Reply filed by various customers Notice us 133(6) of the Act issued by Ld. AO Reply filed by various customers to Sale parties. directly to the Ld. AO confirming directly to the Ld. AO confirming [Pg. 73-87 of PB] sales made by the appellant to sales made by the appellant to them along with evidences with evidences [Pg. 73-87 of PB] 87 of PB] 8. Notice us 133(6) of the Act issued to Reply filed by purchase party Notice us 133(6) of the Act issued to Reply filed by purchase party purchase party. directly to the Ld. AO confirming directly to the Ld. AO confirming [Pg. 88 of PB] purchases made by the appellant purchases made by the appellant from them. [Pg. 89-94 of PB] 94 of PB] 9.2 Further, the assess Further, the assessee has also rebutted the grounds, which also rebutted the grounds, which formed basis for conclusion for conclusion by the learned PCIT, that inquiries or , that inquiries or verification which ought to have been done, had not carried out by verification which ought to have been done, had not carried out by verification which ought to have been done, had not carried out by the Ld. Assessing Officer. The Assessing Officer. The Ld. counsel submitted that submitted that observation of the Ld. Ld. PCIT are based on incorrect fact due to are based on incorrect fact due to following reasons:

a. the Ld. PCIT has stated that the Assessing Officer ignored PCIT has stated that the Assessing Officer ignored PCIT has stated that the Assessing Officer ignored the fact of high cash sales in the month of October 2016. In the fact of high cash sales in the month of October 2016. In the fact of high cash sales in the month of October 2016. In this regard, it was submitted that Assessing Officer has this regard, it was submitted that Assessing Officer has this regard, it was submitted that Assessing Officer has issued specific show cause notice dated 23/12/2019, which issued specific show cause notice dated 23/12/2019, which issued specific show cause notice dated 23/12/2019, which is available on page 58 of t is available on page 58 of the paperbook, wherein the he paperbook, wherein the assessee was asked to substantiate the genuineness of the assessee was asked to substantiate the genuineness of the assessee was asked to substantiate the genuineness of the high cash sales made in the month of October 2016. In high cash sales made in the month of October 2016. In high cash sales made in the month of October 2016. In response thereto, the assessee filed submissions on response thereto, the assessee filed submissions on response thereto, the assessee filed submissions on 24/12/2019, which are available on paperbook page 59 to 24/12/2019, which are available on paperbook page 59 to 24/12/2019, which are available on paperbook page 59 to 66 and 67 to 72. The other notices issued and information to 72. The other notices issued and information to 72. The other notices issued and information called under section 133(6) of the called under section 133(6) of the Act are also in relation to also in relation to high cash sales. I high cash sales. In such circumstances, it cannot be said it cannot be said that Assessing Officer ignored the fact of the cash sales. that Assessing Officer ignored the fact of the cash sales. that Assessing Officer ignored the fact of the cash sales. b. The Ld. PCIT stated that th PCIT stated that the Assessing Officer has only e Assessing Officer has only verified purchase instead of sales. The verified purchase instead of sales. The verified purchase instead of sales. The Ld. counsel submitted that the Assessing Officer submitted that the Assessing Officer has primarily verified primarily verified sales and thereafter also verified corresponding sales and thereafter also verified corresponding sales and thereafter also verified corresponding purchases, stock, books of accounts etc books of accounts etc. The evidences like sale b . The evidences like sale bills, sale registers, stock register, partywise cash sales, have sale registers, stock register, partywise cash sales, have sale registers, stock register, partywise cash sales, have been been been filed filed filed during during during assessment assessment assessment proceeding, proceeding, proceeding, which which which demonstrates that not only purchases, but sales were also demonstrates that not only purchases, but sales were also demonstrates that not only purchases, but sales were also duly verified by the Assessing Officer. duly verified by the Assessing Officer. c. The Ld. PCIT has stated that in respect of pu PCIT has stated that in respect of pu PCIT has stated that in respect of purchases made in October 2016, payments were made in February 2017 in October 2016, payments were made in February 2017 in October 2016, payments were made in February 2017 after recycling the cash and the books of accounts. The after recycling the cash and the books of accounts. The after recycling the cash and the books of accounts. The Ld. counsel submitted that this statement is factually incorrect submitted that this statement is factually incorrect submitted that this statement is factually incorrect and payment towards purchases were made immediately and payment towards purchases were made immediately and payment towards purchases were made immediately except for one sm except for one small amount which was paid in Feb. 2017. all amount which was paid in Feb. 2017. The Ld. counsel Ld. counsel submitted that assessee had filed a chart submitted that assessee had filed a chart showing showing showing details details details of of of purchases purchases purchases and and and payments payments payments made made made immediately along with evidences in the form of immediately along with evidences in the form of immediately along with evidences in the form of ledger accounts, invoices and bank statement, which have been accounts, invoices and bank statement, which have been accounts, invoices and bank statement, which have been made part of the paperbook. ade part of the paperbook. d. The Ld. PCIT stated that assessee has purchas PCIT stated that assessee has purchas PCIT stated that assessee has purchased diamonds and sold diamonds to small customers, which is not diamonds to small customers, which is not diamonds to small customers, which is not practical as a small retail customers don’t buy loose practical as a small retail customers don’t buy loose practical as a small retail customers don’t buy loose diamonds. In this regard, the assessee submitted that it has diamonds. In this regard, the assessee submitted that it has diamonds. In this regard, the assessee submitted that it has not sold loose diamonds to customers, but loose diamonds old loose diamonds to customers, but loose diamonds old loose diamonds to customers, but loose diamonds are purchased and after engaging labourers are purchased and after engaging labourers are purchased and after engaging labourers, jewelry was made, which was then sold. The sales are only in respect of made, which was then sold. The sales are only in respect of made, which was then sold. The sales are only in respect of the jewelry during October 2016 and the jewelry during October 2016 and which includes which includes bangles, pendants, rings, earings et bangles, pendants, rings, earings etc, which is evident from , which is evident from the copy of the bills, the copy of the bills, ledger accounts, labour bills etc. ledger accounts, labour bills etc. detailed filed in the paperbook. detailed filed in the paperbook.

9.3 Before us the Before us the Ld. DR could not controvert above factual DR could not controvert above factual statement of the Ld. counsel Ld. counsel of the assessee. In the circumstances, assessee. In the circumstances, the finding of the Ld. Ld. PCIT that enquiry or verification which ought PCIT that enquiry or verification which ought to have been done, had not been done had not been done, is devoid of merit and not is devoid of merit and not justified. The Explanation Explanation -2 to section 263 of the 2 to section 263 of the Act cannot be invoked in such circumstances. The order of the circumstances. The order of the Ld. PCIT is circumstances. The order of the accordingly set aside. The grounds of the appeal of the assessee gly set aside. The grounds of the appeal of the assessee are gly set aside. The grounds of the appeal of the assessee accordingly allowed.

9.4 Since the ground Since the grounds of the appeal have already been adjudicated already been adjudicated in favour of the assessee, the in favour of the assessee, the additional ground is rendered merely ground is rendered merely academic, and therefore we a academic, and therefore we are not adjudicating upon the same upon the same, hence dismissed as infructuous. hence dismissed as infructuous.