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Income Tax Appellate Tribunal, MUMBAI ‘A’ BENCH, MUMBAI.
Before: SHRI B.R. BASAKARAN & MS. KAVITHA RAJAGOPAL
O R D E R Per Shri B.R. Baskaran, A.M. : The assessee has filed this appeal challenging the order dated 30-03-2022 passed by Ld PCIT-4, Mumbai and it relates to the assessment year 2017-18. The assessee is challenging the validity of revision order passed by Ld PCIT.
The facts relating to the case are stated in brief. The assessment of the year under consideration was completed in the hands of the assessee by the assessing officer u/s 143(3) of the Act on 12-06-2019. On examination of assessment records, the Ld PCIT noticed that the assessee has deposited cash of Rs.66,00,000/- into its bank account during demonetisation period. The Ld PCIT took the view that the assessing officer has not properly examined this issue and the same has rendered the assessment order erroneous and prejudicial to the interests of revenue. Accordingly, he initiated revision proceedings u/s 263 of the Act.
The assessee objected to initiation revision proceedings, submitting that the assessing officer has verified each and every aspect of the matter and the assessee also visited the AO’s office four or five times and submitted all the details relating to the cash deposit. It was submitted that the cash deposits were made out of cash balance available in the books of accounts, which was accumulated out of cash sales effected during festival and marriage season. Accordingly, it was prayed that the initiation of revision proceedings be dropped. However, rejecting objections raised by the assessee, the Ld PCIT passed the impugned revision order holding that the assessment order passed by the Assessing Officer is rendered erroneous in so far as it is prejudicial to the interests of Revenue. Accordingly, he set aside the assessment order dated 12.06.2019 passed by the Assessing Officer and directed him to examine the sources of cash deposits made during demonetization period and redo the assessment.
Aggrieved by the order so passed by PCIT, the assessee has filed this appeal before the Tribunal.
The Learned AR submitted that the Assessing Officer has made extensive enquiry in respect of cash deposits made by the assessee into its bank account during demonitisation period. The Ld A.R narrated the details of enquiries made by the AO as under:-
(a) Vide notice u/s 142(1) dated 17.05.2019, the AO asked explanations from the assessee with regard to Abnormal increase in cash deposits during demonitisation period and specifically called for following details:-
(i) Amount of cash deposited in demonitisation period. (ii) Amount of cash deposited for the same period in previous year (iii) Bank statements for concerned period (iv) Reasons for such high cash deposit
(v) Cash book
(b) The assessee furnished all the above said details, vide its letter dated 22.05.2019. (c) The assessee, vide its letter dated 28-05-2019, filed the details of party wise sales for cash sales during the period. The Ld A.R submitted that the assessing officer has passed the assessement order after making due enquiries and was satisfied with the explanations and information furnished by the assessee. Accordingly, he submitted that the AO has taken a possible view and hence impugned revision order is required to be quashed.
On the contrary, the learned DR submitted that the Assessing Officer has accepted the submissions made by the assessee with regard to the source of cash deposits made during demonetization period without application of mind. Hence, learned PCIT has come to the conclusion that the Assessing Officer has not conducted adequate inquiry as required. He submitted that the Assessing Officer has merely sought information from the assessee with regard to cash deposits and it is not discernible from the assessment order that the Assessing Officer has actually applied his mind before accepting the claim of the assessee. The Ld D.R submitted that the abnormal increase in cash sales should have triggered further enquiry by the AO. Similarly, there was substantial increase in the cash deposits made into the bank account. All these aspects would show that the assessing officer has not properly applied his mind on the issue of cash deposits made into the bank account. Accordingly, the Ld D.R submitted that the order passed by the Assessing Officer without application of mind is susceptible to revision proceedings under section 263 of the Act. In support of this proposition, learned DR placed reliance on the following case laws :
a) Gee Vee Enterprises vs. Addl CIT (1975)(99 ITR 375)(Del) b) Jeevan Investment & Finance (P) Ltd. (2017) 88 taxmann.com 552 c) CIT vs. Toyoto Moror Corpn. (2008)(174 Taxman 395)(Del) d) CIT vs. Ballarpur Industries Ltd (2017)(85 taxmann.com 10)(Bom) e) Malabar Industrial Co Ltd vs. CIT (2000)(109 Taxman 66)(SC) f) CIT vs. Namdari Seeds (2011)(16 taxmann.com 9)(Kar)
In the rejoinder, the Ld A.R further submitted that the quantity details of sales of gold were given in the tax audit report. He submitted that the AO has accepted the purchases and sales. The cash deposits have been made out of cash sales. Accordingly, he submitted that the AO has conducted proper enquiries in respect of cash deposits and has accepted the same. Hence, the action of the AO cannot be found fault with. In any case, the view taken by the AO was a possible view and merely because the Ld PCIT has got different view of the matter, the same would not give him jurisdiction to revise the assessment order u/s 263 of the Act.
We have heard rival contentions and perused the record. The scope of revision proceedings initiated under section 263 of the Act was examined by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below:
Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be “erroneous in so far as it is prejudicial to the interests of the Revenue”. This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision “cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer” and “it is only when an order is erroneous that the section will be attracted”. The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression “prejudicial to the interests of the Revenue”, the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) : “The phrase ‘prejudicial to the interests of the Revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law.” The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC) has been followed and explained in a subsequent judgment of the Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282.”
The principles laid down by the courts are that the Learned CIT cannot invoke his powers of revision under section 263 if the Assessing Officer has conducted enquiries and applied his mind and has taken a possible view of the matter. If there was any enquiry and a possible view is taken, it would not give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded.
We notice that the Ld PCIT has taken support of clause (a) of Explanation given under sec. 263 of the Act to come to the conclusion that, according to him, the AO has not conducted enquiries, which should have been made. In our view, clause (a) of Explanation shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases. Hence Explanation (a) cannot be invoked in a casual manner by Ld PCIT, i.e., he has to show that the enquiries or verification conducted by the AO was below the standard of a reasonable and prudent officer. The Hon’ble Gujarat Court, in the case of Shreeji Prints (P) Ltd (2021)(130 taxmann.com 293)(Guj) has expressed the view that the clause (a) of Explanation 2 would cover cases of very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of the AO.
In the instant case, we have noticed that the AO, during the course of assessment proceedings, has called for various details with regard to cash deposits and the assessee has furnished all the details. Hence, in our view, the AO has duly examined the issue of cash deposits and it cannot be considered to be inadequate or not up to the required standard. Accordingly, we are of the view that the clause (a) to Explanation-2 to sec. 263 shall not apply to the facts of the present case.
There is no dispute with regard to the fact that the impugned cash deposits have been made out of cash balance available in the books of accounts. The said cash balance has been accumulated out of past cash balance and sales made by the assessee. The quantity details of purchases and sales have been accepted and hence sales made by the assessee cannot be doubted with. We also notice that the said books of accounts have not been rejected. Under these set of facts, the sources of cash deposits would get stand explained by the books of accounts itself. Hence the AO has taken the view that no addition in respect of cash deposits is warranted in the facts and circumstances of the case. Hence the view so taken by the AO is a possible view in this matter.
We noticed that the Ld PCIT has expressed the view that the AO has neither made any addition nor has applied his mind, meaning thereby, it appears to be the view of the Ld PCIT that the AO should have made addition to the total income in respect of cash deposits. In our opinion, the view so entertained by ld PCIT cannot be the basis for initiating revision proceedings. At the cost of repetition, we may extract below the view expressed by Hon’ble Supreme Court in the case of Malabar Industrial Co (supra) with regard to the scope of revision proceedings:-
“…..for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law”.
In the facts and circumstances of the case, the view taken by the AO is one of the possible views and it cannot be said that his view is no sustainable in law.
We have gone through the various decisions relied upon by Ld D.R. All those decisions deal with the nature of enquiries and application of mind by the assessing officer. There cannot be any dispute with regard to those legal propositions. However, in view of the foregoing discussions, in the instant case, we are of the view that the AO has conducted proper enquiries and there was proper application of mind on the part of the AO in respect of cash deposits and he has taken a possible view in respect of the same.
Accordingly, we are of the view that the impugned revision order passed by Ld PCIT is not sustainable in law on both the issues. Accordingly we quash the impugned revision order passed by Ld PCIT.
In the result, the appeal filed by the assessee is allowed.