DR. VINOD BHANDARI,INDORE vs. THE DCIT CIR. 2(1), INDORE

आयकर अपील�य अ�धकरण, इंदौर �यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA No.350/Ind/2017 Assessment Year: 2012-13 Shri Vinod Bhandari, Pr. CIT(1), Indore 21- GF, Bhandari House, Talkies, Scheme No.54, Vs. Vijay Nagar, Indore (Appellant) (Revenue ) PAN No.ABNPB6240M ITA No.66/Ind/2017 Assessment Year: 2012-13

Shri Vinod Bhandari, ACIT-2(1), Indore 21- GF, Bhandari House, Talkies, Scheme No.54, Vs. Vijay Nagar, Indore (Appellant) (Revenue ) PAN No.ABNPB6240M ITA No.57/Ind/2019 Assessment Year: 2012-13

Shri Vinod Bhandari, DCIT-2(1), Indore 21- GF, Bhandari House, Talkies, Scheme No.54, Vs. Vijay Nagar, Indore (Appellant) (Revenue ) PAN No.ABNPB6240M

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Appellant by S/Shri Sumit Nema, Gagan Tiwari & Ayush Gupta, ARs Revenue by Shri S.S.Mantri, CIT- DR Date of Hearing 07.01.2020 Date of Pronouncement 20.03.2020

O R D E R PER MANISH BORAD, AM.

The above captioned appeals are filed at the instance of

assessee pertaining to the Assessment Year 2012-13. ITA

No.350/Ind/2017 is directed against the order of Ld. Pr.

Commissioner of Income Tax-1 dated 30.03.2017 passed u/s 263 of

the Act. ITA No.57/Ind/2017 is directed against the order of Ld.

Commissioner of Income Tax-1, Indore dated 22.11.2018 which is

arising out of the order u/s 143(3) r.w.s. 263 of the Act dated

27.12.2017 framed by DCIT-2(1), Indore. ITA No.66/Ind/2017 is

directed against the order of Ld. Commissioner of Income Tax-III,

Indore dated 23.11.2016 which is arising out of the order u/s

143(3) of the Act dated 24.03.2015 framed by ACIT-2(1), Indore.

to same assessee these were heard together and are being disposed

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

off by way of this consolidated order for sake of convenience and

brevity.

is a Doctor by profession and earns income from Remuneration,

House property, Share of profit and income from other sources.

Survey proceedings u/s 133A of the Act was carried out at the

premises of M/s Bhandari Hospital & Research Centre (In short

BHRC) on 24.09.2011. During the course of survey proceedings

certain discrepancies were noticed. Incriminating material in the

form of Hundis were found and impounded. The assessee in his

individual capacity admitted the discrepancies of un secured loan

given to various persons and surrendered additional income of Rs.7

crores for Financial Year 2011-12 relevant to Assessment Year

2012-13. Subsequently assessee e-filed return of income for

Assessment Year 2012-13 on 28.03.2013 declaring income of

Rs.7,01,74,054/- which was further revised on 18.07.2013

declaring income of Rs.7,41,07,850/- The case was selected for

scrutiny and notices u/s 143(2) and 142(1) of the Act were duly

served upon the assessee.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

that the original return is a belated return as provided u/s 139(4) of

the Act and thus cannot be revised. Ld. A.O therefore treated the

revised return filed on 18.07.2013 as invalid return and assessment

proceedings were carried out taking the basis of original return filed

on 28.03.2013. In the original return filed the assessee claimed

deduction of interest expenditure u/s 57 at Rs. 93,56,983/- and in

the revised return it was claimed at Rs.54,23,189/-. Since the Ld.

A.O treated the revised return as invalid the alleged difference of

interest expenditure of Rs. 39,33,844/- (Rs.93,56,983/- (-)

Rs.54,23,189/-) was disallowed. Ld. A.O also observed that there

were huge cash deposits in the bank account of the assessee during

the month of February and March. Assessee claimed that the

surrendered income of Rs.7 crores which was invested in the form

of hundi matured during the year and the money so received

(Principal and Interest) was deposited in the bank account and the

same were duly recorded in regular books. However Ld. A.O in view

of Vyapam scam which involved the allegation of bribe of illegal

money for admission in medical colleges in Madhya Pradesh, took a

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

view that the assessee being unable to explain the source of cash

deposited in bank account by not providing the information about

the persons named in the hundi found during the course of survey,

did not accept the source of cash explained by the assessee thus

the alleged cash deposit of Rs.7,34,79,097/- was treated as

unaccounted income earned from Vyapam scam and made addition

thereof. Accordingly income assessed at Rs.14,75,87,000/-.

Against the addition made by the Ld. A.O assessee filed appeal

before Ld. CIT(A) who did not give any relief to the assessee against

which the assessee is in appeal before the Tribunal vide ITA

No.66/Ind/2017 which will be dealt by us in the subsequent paras.

2012-13 framed u/s 143(3) of the Act on 24.03.2015, Ld. Pr. CIT-1

assuming jurisdiction u/s 263 of the Act issued show cause notice

after being satisfied that the assessment framed u/s 143(3) of the

Act dated 24.03.2015 is erroneous and prejudicial to the interest of

revenue. Ld. PCIT-1 after considering the submission made by the

assessee directed the Ld. A.O to pass a fresh assessment after

making proper enquiries and investigation as directed in the order

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

u/s 263 of the Act. Against the order u/s 263 assessee is in appeal

before the Tribunal by way of filing ITA No.350/Ind/2017.

assessment order u/s 143(3) r.w.s. 263 of the Act wherein the Ld.

A.O did not made any new addition and same income of

Rs.14,75,87,000/- assessed as was assessed u/s 143(3) of the Act.

Against this order also assessee went before Ld. CIT(A) but could

not succeed and now the assessee is in appeal before the Tribunal

vide ITA No.57/Ind/2017. The fate of this appeal will depend on the

outcome of our decision to be taken in the case of ITA

No.350/Ind/2017.

assessee has raised various grounds but the substantial issue is

challenging the order issued u/s 263 of the Act passed by Ld. PCIT-

1 contending that Ld. PCIT exceeded his jurisdiction by wrongly

invoking the provisions of 263 of the Act and the impugned order is

bad in law and void initio. Following grounds of appeal have been

raised:-

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

THE ORDER U/S 263 DATED 30.3.2017 IS ILLEGAL, VOID AND WITHOUT JURISDICTION:

1.1 That on the facts and circumstances of the case and in law, the order dated 30.3.2017 passed by the Commissioner of Income-tax (CIT), u/s 263 of the Income-tax Act, 1961 ('the Act') setting aside the assessment framed u/s 143(3) of the Act as erroneous and prejudicial to the interest of the revenue is without jurisdiction, bad in law and void ab-initio.

1.2 That the AO having already added the surrendered income of 7 crore there cannot be any prejudice attributed u/s 263 and thus the order of assessment dated 24.3.2015 cannot be regarded as prejudicial to the interest of revenue merely because ld. CIT held that the AO should have acted as a police officer and not as a taxing authority and should have tried to probe the source of already taxed income.

1.3 That ld. CIT also failed to appreciate that, u/ s 263 of the Act, an order of assessment cannot be set-aside to AO to simply to make further enquiries on already taxed income and thereafter pass fresh order of assessment. Therefore, and as such, impugned order and directions issued u/s 263 are untenable, contrary to law unsustainable.

2.NO JUSTIFICATION EITHER IN LAW OR ON FACTS FOR THE CIT TO INVOKE HIS POWERS U/S 263 ON THE ALREADY TAXED INCOME.

2.1 The powers under section 263 cannot be invoked to ask the AO to tarnish the image of the assessee and thus the following directions made by the CIT in his order deserve to be quashed i)The AO has accepted surrender of Rs. 7 crore as income from other sources without examining the real source of such income. No conclusive inquiry regarding the source of such income was made. ii) The AO was required to examine the impounded material properly to assess the correct income of the assessee but the AO has not done the same. iii) The AO has not examined the source of Rs. 7 crore surrendered with the Vypam case as to whether this is income generated by contravening the established law.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

iv) The AO should have asked the involved agencies such as Police, ED etc the information to establish the correct source of income.

3.NO JUSTIFICATION FOR THE CIT TO ATTRIBUTE NON-INITIATION OF ( PENALTY ON Rs. 39,33,844 AS AN ERROR.

3.1 That the assessment order clearly points out the fact that the disallowance of Rs. 39,33,844 was intimated by the assessee himself and was not discovered by the AO thus the Ld. CIT failed to appreciate that there was no occasion for the AO to initiate penalty.

4.NO JUSTIFICATION EITHER IN LAW OR IN FACTS IN EXERCISING JURISIDCTION U/S 263 IN RESPECT OF THE FOLLOWING ITEMS SINCE THERE WAS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER AND THE ORDER IN RESPECT OF THESE ITEMS WAS PASSED AFTER DUE AND SUFFICIENT ENQUIRY AND THE SAME WAS ALREDAY TAXED :-

4.1 No justification to regard increase in income of Rs. 41,07,848 shown in the return as causing any prejudice to the Income-tax department.

4.2 No justification to ask the AO to make independent verification of certificate of done uls80G(S)(vi) and LIC receipt as these were duly and sufficiently verified by the AO and even the CIT could not point out any error in the documents filed.

4.3 No justification to ask the AO to make enquiry regarding year-wise investment made in movable and immovable properties which was already done by the AO.

THAT EXTENSIVE INFORMATION WAS SOUGHT BY THE AO AND WHICH WAS DULY PRODUCED AND EXAMINED BY THE AO WHICH COVER ALL ASPECTS WHICH HAVE NOW BEEN AGAIN SET-ASIDE FOR REEXAMINATION BY THE CIT UIS 263. THUS THE PRESENT ORDER UIS 263 IS ONLY AN ATTEMPT TO MAKE FISHING AND ROVING ENQUIRIES INTO ALL ASPECTS WHICH HAVE ALL BEEN PREVIOUSLY EXAMINED BY THE AO. THE ORDER U/S 263 IS THEREFORE ILLEGAL, VOID AND WITHOUT

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

JURISDICTION.

assessment order framed u/s 143(3) dated 24.03.2015 invoked the

provisions of Section 263 of the Act which is meant for revision of

orders which are considered as erroneous and prejudicial to the

revenue. Following show cause notice was issued to the assessee on

15.3.2017.

"A. The AO has added interest. income of Rs. 39,33,844/-- based on its acceptance of the assessee in the non-est return. However no penalty u/s 271(1)(C) for inaccurate particulars of income filed in original income was initiated.

B. The AO, has not obtained the break-up of income of Rs. 41,07,848/- (excluding 7 Crores surrendered), while in earlier Year income was only Rs. 6,37,300/- .The AO has also accepted surrender of Rs.7 crores represented by Hundis as 'income from other sources' without examining the real sources of said income. The AO herself has mentioned in page 5 that assessee is involved in Vyapam case and sources of these funds should have been examined.

C. The AO has mentioned that impounded material l was verified on test check basis which is not proper as it has be complete check in respect of impounded material. The AO has not mentioned as to' from which books of account said verification was carried out.

D. The AO, has not examined the link of Sources of Rs. 7 Crores surrendered with the Vyapam case as per which money Was illegally 9

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Obtained for admissions etc in the medical college controlled by assessee. In that case it will be income generated by the assessee by contravening the established law.

E. The AO has not collected information from various agencies involved in investigation of Vyapam case i.e. Police Enforcement Directorate and other law enforcement agencies to determine correct income of the assessee.

F. In respect of claim of deduction under chapter VIA, no. LlC receipt of Rs. 49,062/- is on record and for claim of 8OG of Rs.26 Lakhs as donation to SAIMS and SAIMST, the certificate given by the competent authority is only up to 31.03.2011. Proper investigation was not made before allowing the said deduction and claim allowed contrary to law.

G. The enquiry regarding year wise investment made in movable and immovable property and accretion in wealth was not made”. 9. On receiving the show cause notice assessee made detailed

written submissions which read as follows:-

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

466 observed: " The fundamental rule is that no statute shall be construed to have a retrospective operation unless such a construction appears very dearly in the terms of the Act, or arises by necessary and distinct implication'. It has been consistently held that a provision must be read subject to the rule that in the absence of an express provision or clear implication, the Legislature does not intend to attribute to the amending provision, a greater retrospectivity than is expressly mentioned'. It is settled law that a taxing provision imposing liability is governed by the normal presumption that it is not retrospective as held in 5.5. Gadgil v. Lal And Co. (1964) 531TR 231 (SC).

Assessee had already paid the applicable taxes on the above before filing the revised return. Therefore it cannot also be said that there was anything prejudicial to the interest of the Revenue.

Further mere non initiation of penalty u/s 271(1)(c) cannot be considered a good ground for invoking section 263 Master Vijay Oswal ITO [2003] 87 ITO 95 (Rajkot)(Trib).

a. Copies of return of income with detailed computation of income b. Capltal account, Statement of affairs with (submission dt.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

27/08/2013)

c. Revised return of income "with complete breakup of Rs.7,41,07,848/- (Submission dated 08/08/2014)

a. Details of sources of income

b. Details of expenses above Rs.5,OOO/-

c. Details of declared incomes during survey

d. Evidences of Deductions claimed under chapter VI-A

a. Copy of Housing loan certificate (Which means she had verified income from house property)

b. Certificate of approval u/s 80G of the institutions to whom donations were made, which- means she had verified the deductions claimed.-

c. Details of disallowance of excess interest u/s 57

d. Details of amounts appearing in 26AS Statement

From all the above it is clear that the A.D had obtained the details of all the heads of the assessment proceedings. It may kindly be noted that the amount of 41,07,848/- was higher than previous year and tax has already been paid on the above.

5.There was nothing in the impound material related to the assessee other than the documents on the basis of which surrender of Rs.7.00 cores was made. So mere 12

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

mention of test check by the AD. that impounded material does not render the order as erroneous and prejudicial to the interest of the revenue since the AO had already made unjust and high pitched order in the favour of revenue by adding the same income twice.

The AO has verified the transactions from the following books

a.Cash book and other books of the assessee submitted for verification on 16/03/2015 b.Capital account and Statement of affairs of the assessee

c. Copies of the computation of incomes, Capital accounts of the firms where the assessee is partner.

Therefore it is dear that from the books of account the AO means the books of the assessee only. From the above it is clear that both the reasons in clause C are not correct. Nothing has been brought which can prove that the order was erroneous and prejudicial to the interest of revenue without bringing anything tangible evidence.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

from various agencies involved in the investigation since she was aware that nothing had been proved against the assessee in court of law and not even charge sheet was filed against the assessee till the date of passing the order by her. Assessee was mere suspect and nothing had been proved in the court of law against the assessee till the date of order.

Regarding Dr. Bhandari's linkage with Vyapam case the following are the related facts of the case as per FIR's/ Challans filed before the relevant authorities.

•That Dr. Vinod Bhandari was named as an accused in case no.12/13.and case no.14/13. The case no. 12/13 is with respect to PMT 2012 and case no.14/13 is with respect to PPG 2012 both of which happened in the financial year 2012-13, whereas the assessment of the assesse which is the subject matter here is for the financial-year 2011-12 (Copy of FIR of both the cases enclosed as page No. _). •Dr. Bhandari is accused in the matter of 6 students in case no.14/13 and for 8 students in case no.12/13. He has not been named as an accused in any other cases of this Matter. •The total amount involved in the above cases was Rs.50.00 Lacs and Rs.142.00 Lacs in case no.12/13 and 14/13 respectively which has already been fully seized from Shree Pradeep Raghuvanshi's house at Indore by the Police authorities as is brought out in the FIR statement enclosed as page No. _.

Consequently, there is no cash specific to the above cases which is presently not found or not seized by Police authorities. Further and more importantly the matter referred in which Dr. Vinod Bhandari is accused is with reference to the F.Y. 2012-13 whereas our assessment orders which are subject matter of show cause notice u/s 263 are with respect to FY 2011-12 Le. A.Y. 2012-13.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Despite of above, and without bringing any evidence to the contrary and only based on pure conjecture, the A.D. has double added surrendered income as income from unknown sources alleging his involvement in Vyapam case.

Copies of L1C were submitted along with submission dated 26/08/2013 and. also above fact was mentioned in letter dated 24/02/2014 Point no. 8.

The certificate of 80G approval was given up to 31/03/2011 however as per CIRCULAR NO. 7/2010 [F. NO. 197/21/2010ITAI], DATED 27102010 (Copy enclosed) it is clarified by CBDT that any approval is in force as on 01/10/2009 and approvals granted thereafter shall remain in force unless approval is withdrawn. Therefore the AO had required and assessee had submitted declaration from the said institutes that there approval was not withdrawn at any time in its submission dt, 16/03/2015.

1.The fact that AO has not recorded the inquiry and its satisfaction is not an evidence or does not leads to the proposition that he did not make any enquiry on this matter which would trigger 263 on the specific issue. Manish Kumar vs CIT (2012) 134 ITD 27 (Indore Trib), 15

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

and also 323 ITR 632 and Maithan International vs ACIT 134 ITD 393). 2. Merely because from a perfectionist point of view, it is felt that some more enquiries and verifications could have been made by the Assessing Officer while making assessment/assessment order cannot be declared to be erroneous and prejudicial to the interest of revenue. (Salora Cloth v. ACIT [2006J 991TD 300 (Chennai) (Trib.)

PCIT was not convinced and observed that the Ld. A.O did not

obtain break up of income of Rs. 41,07,848/-, A.O has not

examined the real source of the surrendered income of Rs.7 crores

allegedly represented by the assessee having earned unaccounted

professional receipts which were invested in short term advances in

the form of ‘Hundis’ which matured during the year. Ld. PCIT also

brushed aside the submissions made by the assessee explaining

that all the issues raised in the show cause notices have already

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

been examined by Ld. A.O and additions have also been made. Ld.

PCIT directed the Ld. A.O to pass fresh assessment order after

making proper enquiries of investments thereby treating the

assessment order issued u/s 143(3) dated 24.3.2015 as erroneous

and prejudicial to the interest of revenue. Relevant extract is

reproduced below:-

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

modifying the assessment or cancelling the assessment and directing a fresh assessment.

"For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner

(a) The order is passed without making enquiries or verification which should have been made.

(b) The order is passed allowing any relief without inquiring the claim;

(c) The order has not been made in accordance with any order, direction of instruction issued by the Board under section 119;

The above explanation is clarificatory in nature. Even before it the orders made without proper enquiry were were liable to be revised u/s 263 of I.T.Act. Further this explanation exists on the date on which proceedings u/s 263 have been undertaken and is existing law as on date. So it will be applicable in present proceedings. It is immaterial that order was passed u/s 143(3) earlier to 01.06.2015

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

prejudicial to the interest of revenue and is therefore hereby set aside u/s 263 of the Income tax Act,,1961 accordingly. The Assessing Officer is directed to pass the fresh assessment order after making proper enquiries and investigation as discussed on aforesaid issues and opportunities to the assessee of being heard. 11. Now the assessee is in appeal against the order issued u/s

263 of the Act by ITA No.350/Ind/2017 pertaining to Assessment

Year 2012-13.

submissions made before Ld. A.O during the course of assessment

proceedings and before Ld. PCIT during the course of proceedings

u/s 263 of the Act further argued that the order u/s 143(3) of the

Act is passed by Ld. A.O after making inquiries and verification

which should have been made. The AO, exercising its quasi-judicial

power, had issued a detailed questionnaire u/s 142(1) which was

duly answered by way of various details, explanations and letters.

Complete books of account supported with documentary evidences

were produced and examined by the AO during the assessment

proceedings. The appellant had appeared before the AO and filed

replies, however, the ld. PCIT has completely ignored the detailed

enquiry conducted by the AO and has, therefore, erred in exercising

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

jurisdiction u/s 263 of the Act in respect of the issues which were

already examined by the AO.

Industrial Co. Ltd. V. CIT [(2000) 243 ITR 83], it is submitted that

the power of CIT u/s 263 of the Act can only be exercised by the ld.

PCIT when the twin conditions of the order being erroneous as well

as prejudicial to the interest of revenue, are satisfied and the same

cannot be exercised to substitute its own finding in place of the AO

and therefore, the ld. PCIT cannot re-examine the issues already

inquired into by the AO. Reliance is also placed on the Bombay

High Court's decision in the case of CIT v. Gabriel India Ltd. [(1993)

203 ITR 108] wherein it is held that the power u/s 263 of the Act is

to be exercised in the case of "no inquiry" and not in the case of

"inadequate inquiry" or "lack of inquiry" whereas the case of the

assessee is not even a case of lack of inquiry.

the Ld. PCIT has initiated revision proceedings in order to carry out

fishing and roving enquiries in the matters which are already

concluded by the AO and therefore the exercise of jurisdiction u/s 20

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

263 of the Act is bad in law. The Ld. PCIT has erred in exercising

jurisdiction u/s 263 of the Act when the issues raised therein were

already enquired into by the AO during the assessment

proceedings. The AO had passed the assessment order only after

conducting detailed enquiry on various issues appearing in the

show cause notice issued u/s 263 of the Act. The assessment order

is passed after due application of mind, therefore, the impugned

notice and order u/s 263 of the Act alleging that proper and

adequate enquiry was not made, rendering the Assessment Order

erroneous and prejudicial to the interest of revenue, is arbitrary

based on conjecture and surmises.

manner the order of the AO on the various issues noted in its order

u/s 263 of the Act was erroneous and prejudicial to the interest of

the Revenue. The ld. PCIT has not made any enquiry on his own

but simply directed the AO to make further verification and

examination therefore, the order of the ld. CIT u/s 263 of the Act

deserves to be set aside. Recently, the Hon'ble Delhi High Court in

the case of Ld. PCIT v. Delhi Airport Metro Express Pvt. Ltd. [ITA

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

No. 705/2017] has categorically held that for the purpose of

exercising jurisdiction u/s 263 of the Act and reaching a conclusion

that the order is erroneous and prejudicial to the interest of

revenue, the ld. PCIT has to undertake some minimal inquiry and

in fact where the ld. PCIT is of the view that AO had not undertaken

any inquiry, it becomes incumbent on the Ld. PCIT to conduct such

enquiry. Further in the case of PCIT v. Modicare Limited [ITA No.

759/2017] Hon'ble Delhi High Court has followed its decision

in Income Tax Officer v. DG Housing Projects Limited [343 ITR

329], DIT v. Jyoti Foundation [357 ITR 388] and Ld. PCIT v. Delhi

Airport Metro Express Pvt. Ltd. (supra) to hold that the exercise of

jurisdiction u/s 263 of the Act cannot be outsourced by the PCIT to

the AO and therefore, the PCIT cannot direct the AO to provide

details of the facts on the basis of which the proceedings u/s 263 of

the Act could have been initiated.

conducted by the AO during the assessment proceedings and

submissions made by the assessee in response to notice u/s 263 of

the Act, has merely observed that the assessment order was passed

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

without making proper enquiries and it is a matter of record that

Ld. PCIT has himself not undertaken any enquiry to reach a

conclusion that the order is erroneous and prejudicial to the

interest of revenue. Therefore, in the absence of any justification

for exercise of jurisdiction u/s 263 of the Act, the order of ld. PCIT

passed u/s 263 of the Act is liable to be set aside.

enquiry'. It is for the AO to decide the extent of enquiry to be made

as it is his satisfaction as what is required under law. Reliance is

placed on the decision of CIT v. Sunbeam Auto Ltd. [(2010) 332 ITR

167], wherein Hon'ble Delhi High Court has held that if there was

any inquiry, even inadequate, that would not by itself, give occasion

to the Ld. PCIT to pass order u/s 263 of the Act, merely because the

Ld. PCIT has a different opinion in the matter and that only in cases

where there is no enquiry, the power u/s 263 of the Act can be

exercised. The ld. PCIT cannot pass the order u/s 263 of the Act on

the ground that further/thorough enquiry should have been made

by AO.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

there has been an amendment in the provisions of section 263 of

the Act by which Explanation 2 is inserted, w.e.f. 01.06.2015 but

the same does not give unfettered powers to the Commissioner to

assume jurisdiction u/s 263 of the Act to revise every order of the

AO to re-examine the issues already examined during the course of

assessment proceedings. The Hon'ble Mumbai ITAT has dealt with

Explanation 2 as inserted by the Finance Act, 2015 in the case of

Narayan Tatu Rane v. Income Tax Officer [(2016) 70 taxmann.com

227] to hold that the said Explanation cannot be said to have

overridden the law as interpreted by the Hon'ble Delhi High Court,

according to which the Ld. PCIT has to conduct an enquiry and

verification to establish and show that the assessment order is

unsustainable in law. The Tribunal has further held that the

intention of the legislature could not have been to enable the ld.

PCIT to find fault with each and every assessment order, without

conducting any enquiry or verification in order to establish that the

assessment order is not sustainable in law, since such an

interpretation will lead to unending litigation and there would not

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

be any point of finality in the legal proceedings. The opinion of

the Ld. PCIT referred to in section 263 of the Act has to be

understood as legal and judicious opinion and not arbitrary

opinion.

interest income of Rs.39,33,844/- was duly shown in the

computation of income and due taxes paid therein. The

surrendered income of Rs.7 crores is the unaccounted income from

profession/ business income which were invested in hundis as

short term advances for earning interest and the details of such

hundis which were impounded during the course of survey were

available with the Ld. A.O. As regards the alleged involvement of

assessee in Vyapam case it was submitted that the assessee is

accused in Case No.12/13 and 14/13 with respect to PMT 2012

and PPG 2012 which happened during the financial year 2012-13

whereas the assessment of the assessee which is the subject matter

of the appeal is for financial year 2011-12. He also submitted that

assessee has not been named as accused in any other cases of this

matter and the amount involved in the alleged case No.12/13& 14/13

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

referred above have already been seized from Shri Pradeep

Raghuvanshi’s house at Indore by the police authorities.

Vyapam scam during financial year 2011-12, the Ld. A.O during the

course of assessment proceedings u/s 143(3) of the Act did not

accept the submissions of assessee and made addition of cash

deposit at Rs.7,34,79,097/- which itself proves that the order

passed by the Ld. A.O is neither erroneous nor prejudicial to the

revenue. In support of the above contention reliance was placed on

the following decisions;

(i) Cadila Pharmaceuticals Ltd (ITAT Ahmedabad Bench) (ii) Madhusudan Industries Ltd (ITAT Ahmedabad Bench) (iii) Pr. Commissioner of Income Tax Vs Narayan Balmukund Dubey (2017) 30 ITJ 335 (M.P) (iv) Director of Income Tax V Jyoti Foundation (2013) 357 ITR 388 (Delhi) (v) Commissioner of Income Tax V/s Ratlam Coal Ash. Co (1988) 171 ITR 141 (MP) (vi) Commissioner of Income Tax V/s Mehrotra Brothers (2004) 270 ITR 157 M.P (vii) Commissioner of Income Tax, Delhi v/s International Travel House Ltd (2012) ITR 554 (Delhi) 26

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

(viii) Income Tax Officer V/s D.G Housing Projects Ltd (2002) 343 ITR 329 Delhi (ix) M/s Amira Pure Foods Pvt. Ltd (ITAT Bench Delhi) (x) M/s Narayan Tatu Rane (ITAT Mumbai Delhi) 21. Reliance is also placed on the following decisions :- a. CIT v/s. Software Consultants 341 ITR 240 (Del.) b. CIT v/s. Anil Corporation 213 Taxmann 19 c. CIT v/s. Sunbeam Auto Ltd. 332 ITR 167 (Del.) d. CIT v/s. Makal Suta Cotton Co. P. Ltd. 275 ITR 54(M.P) e. CIT v/s R.K. Construction Co., 313 ITR 65 (Guj.) f. CIT v/s Max India, 295 ITR 282 (SC) g. CIT v/s Ratlam Coal Ash Co., 171 ITR 141 (M.P) h. CIT v/s Arvind Jewellers, 259 ITR 502 (Guj.) i. CIT v/s Vodafone Essar South Ltd, 212 Taxmann 184 (Del.) j. CIT v/s Mehrotra Brothers, 270 ITR 157 (M.P) k. CIT v/s Shri Govindram Seksariya Cahrity Trust, 166 ITR 580 (M.P) l. Hari Iron Trading Co. v/s CIT, 263 ITR 437 (P&H) m. CIT v/s HARI Singh & Associates, 267 CTR 442 (Raj.) n. 335 ITR 83, CIT vs. Anil Kumar Sharma (Delhi), o. 341 ITR 537 (Delhi), CIT vs. Vikas Polymers p. 343 ITR 342, CIT vs. Hero Auto Ltd. (Delhi H.C.), q. 344 ITR 554, CIT vs. International Travel House Ltd. (Delhi H.C.),

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

r. 343 ITR 329, CIT vs. D.G. Housing Projects Ltd. (Delhi H.C.), s. 111 ITR 326, J.P. Srivastava & Sons Vs. CIT, (Allhd. H.C) t. 320 ITR 674, CIT vs. Ashish Rajpal (Delhi H.C.). At u. 323 ITR 632, CIT vs. Design and Automation Engineers (Bombay) P. Ltd. (Bombay H.C.), of v. 323 ITR 206, CIT vs. Development Credit Bank Ltd. w. 243 ITR 83, Malabar Industrial Co. Ltd. Vs. CIT(SC) x. 203 ITR 108 CIT Vs. Gabriel India Ltd., (Bombay H.C.) y. Mukesh Sharma v. CIT 25 ITJ 341 (Indore ITAT) 22. Per contra Ld. Departmental Representative strongly

supported the order u/s 263 of the Act passed by Ld. PCIT and

further submitted that assessee was required to furnish complete

details of the persons named in the hundis so as to prove that they

were genuine advances and the cash was received on maturity of

such hundis. Since no such explanation was provided by the

assessee during the course of assessment proceedings and the Ld.

A.O has also not examined the link of source of Rs.7 crores

surrendered and also about the mismatch in the deduction under

Chapter VI-A, Ld. PCIT has rightly set aside the order of the Ld. A.O

issued u/s 143(3) of the Act dated 23.3.2015 for passing a fresh

assessment order after making proper enquiries and investments.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

placed before us and carefully gone through the judgments and

decisions relied by the assessee. Sole issue raised in this appeal is

challenging the validity of order u/s 263 of the Act by Ld. PCIT and

wrongly assuming jurisdiction u/s 263 of the Act.

and during the course of survey proceedings he admitted the

discrepancies of unsecured loans given to various persons and

offered Rs.7 crores as undisclosed unaccounted income for tax for

Assessment Year 2011-12. During the course of survey revenue

authorities impounded various incriminating material including

hundis which were claimed by the assessee to have been issued in

lieu of advances given out of the unaccounted income from

undisclosed professional income and other sources. The assessee

has disclosed the surrendered income in the return of income and

offered it to tax. As regards cash deposited in the bank account

during the financial year 2011-12 at Rs. 7,34,79,097/- the assessee

claimed that he received amount on maturity of hundis during the

year along with interest the details of which are also available with

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

the Ld. A.O and the principal amount and interest received there on

was sufficient enough to explain the cash deposited in the bank

account. The Ld. A.O was not satisfied with this submission. Even

though the details of hundis with specific interest amount were

available on record but Ld. A.O rather than linking the source of

cash deposited from hundis treated it as unaccounted income from

“Vyapam scam” allegedly linking with the assessee and treated it as

receipt of illegal money as bribe for admission in medical colleges in

M.P and accordingly made the addition of Rs. 7,34,79,097/-. In

this way as against the return of income at Rs.7,01,74,054/-, Ld.

A.O assessed income at Rs.14,75,87,000/- and the additions

included the addition made for alleged income from Vyapam scam.

Ld. PCIT after assuming the jurisdiction u/s 263 of the Act has

observed that the order of the Ld. A.O is erroneous in so far as it is

prejudicial to the interest of the revenue and needs to be assessed

afresh after making proper enquiries and investigations.

Before proceeding to examine the facts of the case we will first go through the provisions of Section 263 and various judgments and

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

decisions rendered with regard to Section 263 of the Act. Section 263 of

the Act reads as under:-

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

(a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.—In computing the period of limitation for the purposes of sub- section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 25. From perusal of the aforesaid section, it is apparent that there

are mainly four features of the power for revision to be exercised

u/s 263 of the Act by the Pr. CIT.

i. The Pr. CIT may call for and examine the records of any

proceedings under the Act and for this purpose he/she

need not to show any reason or record any reason to

belief as it is required u/s 147 or 143(2) of the Act.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

ii. He/She may consider any order passed by the Assessing

Officer as erroneous as well as prejudicial to the interest

of the Revenue. This is exercised by calling for and

examining the record available at this stage.

iii. If after calling for and examining the records the

Commissioner considers that the order of the Assessing

Officer is erroneous is so far it is prejudicial to the

interest of the Revenue, he is bound to give an

opportunity to the assessee of being heard and after that

as he/she may deem fit, pass such order thereon as the

circumstances of the case may justify including an order

enhancing or modifying the assessment or cancelling

assessment and directing a fresh assessment or make

such enquiries as he deems necessary.

iv. Under the provisions of section 263 of the Act Pr.

CIT/CIT can enhance or modify the assessment as a

result of inquiry conducted and hearing of the assessee.

263 of the Act both the conditions that the order must be erroneous 33

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

and prejudicial to the interest of revenue needs to be satisfied. This

ratio stands laid down by various Hon'ble Courts.

case of H.H. Maharaja Raja Power Dewas (1983) 15 Taxman 363 in

para 10 of this order held that “However, the first

argument, viz., that an assessment order without compliance with

the procedure laid down in section 144B is erroneous but not

prejudicial to the interests of the revenue conferring revisional

jurisdiction on the Commissioner under section 263(1), has force.

Under section 263(1) two pre-requisites must be present before the

Commissioner can exercise the revisional jurisdiction conferred on

him. First is that the order passed by the ITO must be erroneous.

Second is that the error must be such that it is prejudicial to the

interests of the revenue. If the order is erroneous but it is not

prejudicial to the interests of the revenue, the Commissioner can not

exercise the revisional jurisdiction under section 263(1)

………………..There cannot be any prejudice to the revenue on

account of the ITO's failure to follow the procedure prescribed under

section 144B, and unless the prejudice to the interests of the revenue

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

is shown, the jurisdiction under section 263(1) cannot be exercised by

the Commissioner, even though the order is erroneous. The argument

that such an order may possibly be challenged in appeal by the

assessee, and for this reason it is prejudicial to the interests of the

revenue, has no merit. Section 263(1) clearly contemplates that the

order of assessment itself Should be prejudicial to the interests of the

revenue and this prejudice has to be proved by reference to the

assessment order only. It cannot be argued that there is some

possibility of the assessment order being challenged or revised in

appeal and, therefore, on account of this contingency, the order

becomes prejudicial to the interests of the revenue.” [emphasis

supplied]

[2000] 243 ITR 83 – order pronounced on 10.02.2000 – HEAD NOTE –

"Section 263 of the Income-tax Act, 1961 - Revision - Of orders

prejudicial to interests of revenue - Assessment year 1983-84 -

Whether in order to invoke section 263 Assessing Officer's order

must be erroneous and also prejudicial to revenue and if one of them

is absent, i.e., if order of Income-tax Officer is erroneous but is not

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

prejudicial to revenue or if it is not erroneous but is prejudicial to

revenue, recourse cannot be had to section 263(1) - Held, yes -

Whether if due to an erroneous order of ITO, revenue is losing tax

lawfully payable by a person, it will certainly be prejudicial to

interests of revenue - Held, yes - Assessee-company entered into

agreement for sale of estate of rubber plantation - As purchaser could

not pay installments as scheduled in agreement, extension of time

for payment of installments was given on condition of vendee paying

damages for loss of agricultural income and assessee passed

resolution to that effect - Assessee showed this receipt as agricultural

income - Resolution passed by assessee was not placed before

Assessing Officer - Assessing Officer accepted entry in statement of

account filed by assessee and accepted same - Commissioner under

section 263 held that said amount was not connected with

agricultural activities and was liable to be taxed under head 'Income

from other sources' - Whether, where Assessing Officer had accepted

entry in statement of account filed by assessee, in absence of any

supporting material without making any enquiry, exercise of

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

jurisdiction by Commissioner under section 263(1) was justified -

Held, yes

Parikh – [1995] 215 ITR 81 – order pronounced on 17.10.1994 –

Para 12 – “From the aforesaid, it can well be said that the well-

settled principle in considering the question as to whether an order

is prejudicial to the interests of the revenue or not is to address

oneself to the question whether the legitimate revenue due to the

exchequer has been realised or not or can be realised or not if his

orders under consideration are allowed to stand. For arriving at this

conclusion, it becomes necessary and relevant to consider whether

the income in respect of which tax is to be realised, has been

subjected to tax or not or if it is subjected to tax, whether it has been

subjected to tax at a rate at which it could yield the maximum

revenue in accordance with law or not. If income in question has been

taxed and legitimate revenue due in respect of that income had been

realised, though as a result of erroneous order having been made in

that respect, in our opinion, the Commissioner cannot exercise

powers for revising the order under section 263 merely on the basis

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

that the order under consideration is erroneous. If the material in

that regard is available on the record of the assessee concerned, the

Commissioner cannot exercise his powers by ignoring that material

which links the income concerned with the tax realization made

thereon. The two questions are inter-linked and the authority

exercising powers under section 263 is under an obligation to

consider the entire material about the existence of income and the tax

which is realizable in accordance with law and further what tax has

in fact been realised under the alleged assessment orders.[emphasis

supplied]

Krishnamurthy – [1985] 20 Taxman 65 – order pronounced on

19.03.1984 – Para 10 – “Section 263 can be invoked by the

Commissioner only when he prima facie finds that the order made by

the ITO was erroneous and was prejudicial to the interests of the

revenue. Both these factors must simultaneously exist. An order that

is erroneous must also have resulted in loss of revenue or prejudicial

to the interests of the revenue. Unless both these factors co-exist or

exist simultaneously, the Commissioner cannot invoke or resort to

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

section 263. It cannot be exercised to correct every conceivable error

committed by an ITO. Before the suomoto power of revision can be

exercised, the Commissioner must at least prima facie find both the

requirements of section 263, namely, that the order sought to be

revised is prima facie erroneous and prejudicial to the interests of the

revenue. If one of the other factor was absent, the Commissioner

cannot exercise the suomoto power of revision under section 263.”

[emphasis supplied]

135 (Delhi) the Hon’ble Delhi High Court has elucidated and

explained the scope of provision of Section 263 of the Act and the

same has been extracted by the Hon’ble Delhi High Court in the

case of CIT V/s Goetze (India) Ltd 361 ITR 505 as under :-

“Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of Income tax cannot remand the matter to the 39

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unsusstainable in law. In some cases possibly though rarely, the Commissioner of Income tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner of Income tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question….” Similar view has been expressed by Hon’ble Madras High Court in the case of CIT Vs. Amalgamations Ltd (238 ITR 963)

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Ld. PCIT before holding the order of the Ld. A.O as erroneous in so

far as prejudicial to the interest of revenue should have to conduct

necessary enquiries or verification in order to show that the findings

given by Ld. A.O is unsustainable in law. Similar view was taken by

the Hon’ble Delhi High Court in the case of Income Tax Officer v/s

D.G. Housing Projects Ltd (2012) 343 ITR 329 (Delhi) wherein the

Hon’ble Court after referring to judgments of Hon’ble High Court in

the case of Addl. CIT V/s Gee Vee Enterprise (1975) 99 ITR 375

(Delhi), CIT V/s Sunbean Auto Ltd (2011) 332 ITR 167(Delhi),

Malabar Industries 243 ITR 83(SC) held in favour of the assessee

confirming the order of the Tribunal observing as follows:-

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

and finding that the Assessing Officer had examined the said aspect and accepted the respondent’s computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. The CIT is patently wrong in mentioning and stating that Schedule III to the Wealth Tax Act, 1957 was not applicable but, the Assessing Officer should have adopted the said formula/method. The aforesaid reasoning cannot be accepted and does not show or establish that the assessment order was erroneous. In view of 42

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

the aforesaid reasoning, the question of law is answered in favour of respondent assessee and against the Revenue and the appeal is accordingly dismissed. No costs.

so as to find that whether the assessment order passed u/s 143(3)

is erroneous in so far as it is prejudicial to the interest of revenue.

Ld. PCIT in the show cause notice dated 15.3.2017 has raised

following issues referring to the assessment proceedings carried u/s

143(3) of the Act.

(a) Penalty u/s 271(1)(c) of the Act not initiating action for

furnishing inaccurate particulars of income for claiming

against interest expenditure of Rs.39,83,844/-.

(b) Break up of income of Rs.41,07,848/- not obtained.

(c) Not mentioning the link source of Rs. 7 crores

surrendered with the Vyapam case.

(d) Not calling information from various agencies involved in

investigation of Vyapam case.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

(e) No proper investigation on claim of deduction under

Chapter VIA.

(f) No enquiry made about the year wise investment made in

moveable and immoveable property. The first thing we

need to treat is that what type of details were asked by

the Ld. A.O during the assessment proceedings and

replies made there to by the assessee and details filed

along there with.

fixing the date of hearing on 26.8.2013. Correspondence between

the Learned Assessing office and the Assessee can be summarized

in following chart which along with enclosures were filed before the

Learned PCIT.

Sr. Corresponde- Submissions Page no’s No. nce Date of enclosure 1. 14/08/2013 Notice u/s 143(2) from DCIT 2(1) 1

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

on 26.8.13, 24.2.14, 10.3.14, 20.8.14 and 23.9.15. The

submissions made on the above referred dates are mentioned

below:-

Copy of letter dated 26.8.2013.

With reference to above, we are submitting the following documents as required by you vide above cited notice:- I. Letter of Authority 2.Copy of acknowledgement of Income Tax return along with Computation of income 3.Evidences in support of payment of taxes a.TDS certificates b.Self assessment Challan 4. Evidence in respect of deduction claimed under chapter VIA of the Act a. Copy of Donation receipts to certain funds for deduction U/s 80-G Copy of letter dated 24.2.2014.

We are submitting the following documents as required by you vide above cited notice:- 1.Please specify the source of your income and Address of Head office and branches of the business carried by you. Assessee is a Doctor practicing in as partner into firms as under. Share in Firms:- a) Bhandari Hospital and Research Centre: Firm is running a hospital at Scheme No. 54, Opp. Meghdoot Garden, Indore b) Indore Institute of Medical Sciences: IIMS is running

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

paramedical college physiotherapy and Nursing courses, with its office at 21-22,GF, Sch. No.54, Opp. Meghdoot Garden, Vijay Nagar, Indore.

2.Please give The details of your family. Specify occupation of all the family members, their Pan, amount withdrawn by them for household expenses and justify the amount withdrawn by you in along with them in view of the expenses of the family.

Details of the family members and amount withdrawn by them during the A.Y. 2012-13

AMOUNT

WITHDRAWAL FOR S.NO NAME OF FAMILY RELATION HOUSE HOLD MEMBERS OCCUPATION PAN EXPENSES

1 Dr. Manjushree Wife Practicing ABNPB6251C Bhandari Doctor 401302 2 Dr. Mohit Bhandari Son Practicing AFAPB0534R Doctor 209332 3 Dr. Mahak Bhandari Son Student AHLPB9367P 211372 4 Smt. Usha Mother Pensioner AEUPB0914J Bhandari 60000 5 Dr. Vinod Bhandari Self Working ABNPB6240M Partner 359776 TOTAL 1241782

9.Please produce the original copies of the TDS certificates, Advance Tax and Self Assessment tax Challan

Copies of TDS certificates, Self Assessment tax Challan already submitted on 2ih Aug 2013, enclosed again now. Further the tax is already appearing in the form 26as of the assessee so same can be verified from there. (Copy enclosed)

10.Please provide the copies of the Chalan of Bonus, Vat Tax, C.S.T paid in Head Office and Professional Tax, Bonus and Service Taxes paid by branch office.

There was payment towards VAT, Service Tax or Bonus on Proprietorship firm. Copy of Professional Tax paid for Dr. Vinod Bhandari to be provided in next submission please.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Registered Purchase deeds of the land purchased during the F. Y. 2011- 12 by the assessee is enclosed herewith. ADDITION DURING THE PARTICULARS YEAR Land at Bhawrasala No. 5/2 7424500.00 Land at Bhawrasala No.6/2/1 11315565.00 Land at Bhawrasala 15260420.00 No.6/2/2/1 & 7/3/1/1 Land at Bhawrasala No.7/2 19052080.00 TOTAL 53052565.00

In view of Section 14A, Assessee has already not disallowed by not claiming deduction of interest paid on Term Loan to Bank of Maharashtra Rs. 33,47,429/which has been debited to the capital account. Apart from above there is no other disallowable expenditure U/s 14A of the Income tax Act, 1961.

NA - no business carried by' the assessee se no becks of accounts are required to be maintained by the assessee.

Copy of letter dated 10.3.2014

With reference to above, and further to our hearing held on 6th Aug 2014 we are submitting the following pending documents for your kind perusal:-

1 Details of AIR entries (Page 2)

Details of AIR - enclosed herewith

2 Copy of Housing Loan Certificate. (Page 3-4)

Copy of Housing Loan Account statement enclosed where total interest paid is reflected.

3.Furnish Copy of Capital account in partnership Firms Bhandari 48

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Hospital and Research Centre and Indore Institute of Medical Sciences. (page 5-19)

Copy of Capital account in partnership Firms Bhandari Hospital and Research Centre and Indore Institute of Medical Sciences enclosed herewith

3 Certificate for approval U/s 80G Donations given during the year. (Page 20-21) Copy of Order U/s 80G(5)(vi) of the LT. Act 1961 enclosed herewith for

i. Sri Aurobindo Institute of Medical Sciences

ii. Sri Aurobindo Institute of Management Sciences & Technology

4 Copy of Statement recorded during Survey Proceedings enclosed (Page 22-29)

5 Copy of Wealth Tax Return for AY 2012-13 enclosed (Page30-34)

6 Disallowance of Excess interest claimed u/s 57 in the Return of Income (Page 35-38)

Sir, the assessee had in original return claimed full interest by error which was already rectified by revised return filed by the assessee where interest claimed U/s 57 has been restricted to interest earned during the year. A copy of revised return is enclosed herewith.

Copy of letter dated 20.8.2014

With reference to above, and further to our hearing held on 8th Aug 2014 we are submitting the following pending documents for your kind perusal:-

1 Details of Income Declared as to how it is incorporated in the Capital account

Undisclosed income of Rs. 7.00 Crores represents various cash loans granted by the assessee. The Loans were recorded in the books on 24/09/2011 and amount later realized with interest in cash and deposited in bank.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

2 Details of Donations given and corresponding bank statements where the above are reflected. Also justify that the SAIMS Indore is branch of SAIMS Bhopal by documentary evidence. Details of Donations are enclosed. Copy of Receipts are already furnished

to you. Amount Particulars Mode Remark 31/05/2011 300000 SAIMST Cash Receipt already 16/06/2011 200000 SAIMST Cash furnished 15/11/2011 100000 SAIMST Cash 06/03/2012 2000000 SAIMS Cheque Bank statement 12/03/2012 2600000 SAIMS Cheque enclosed

A certificate from the said institute in support of our claim that SAIMS Bhopal is same as SAIMS Indore is enclosed herewith for your kind perusal.

3 Whether the assessee is a Director of that institute or how otherwise interested to whom donations were granted.

Assessee is chairman of the above Institutes.

Copy of letter dated 23.9.2014

With reference to above, we are submitting the following documents as required by you vide above cited notice:- 1.Letter of Authority 2.Copy of acknowledgement of Income Tax return 3.Computation of income 4.Balance Sheet, Profit & Loss Accounts, Capital Account for the A.Y. 2012-13.

However it may kindly be noted that Assessment Year 2012-13 is already under assessment proceedings u/s 143(2) and is still pending for order. So all the required documents are already under proceedings.

18.3.15 specifically calling about the details of the surrendered

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

income, details of hundis. The copy of show cause notice is

reproduced below:-

Name Amount in Rs. Date of deposit Due date Bhavarlal Mahendra 50,00,000 + (150410 23.10.2011 23.07.2011 Kumar Interest amount) Vijay Dhakad 25,00,000 +(113425 19.02.2012 19.09.2011 Interest amount) Surendra Kothari 30,00,000 + (136110 20.02.2012 20.09.2011 interest amount) Hukumchand Lodhi 50,00,000+ (2,26,850 23.02.2012 23.09.2011 interest amount) Vijay Dhakad 40,00,000 +(179510 05.03.2012 05.10.2011 interest amount) Kishan Singh Pawar 40,00,000 +(189510 06.03.2012 06.10.2011 interest amount) Ramesh Agrawal 25,00,000+(112195 08.03.2012 08.10.2011 interest amount) Manoj Shrivas 50,00,000+(2,62,605 12.03.2012 13.08.2011 interest amount) Ramesh Chand Jain 50,00,000 +262605 13.03.2012 13.09.2011 interest amount) Suresh & Sons 50,00,000+(337810 19.03.2012 19.07.2011 interest amount) Mangilal Motwani 40,00,000 +(2,40,658 24.03.2012 24.08.2011 interest amount) Vijay Vargi Rathore 45,00,000 +(2,36,350 27.03.2012 27.09.2011 interest amount) Ram Singh 2500000 +(114045 27.03.2012 27.10.2011 interest amount) Narendra Kumawat 35,00,000 +(183822 28.03.2012 28.09.2011 interest amount) Vallabh Chandra 50,00,000 +(2,29,315 28.03.2012 28.10.2011 51

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Mundra interest amount) Suraj Kulkarni 50,00,000 +(2,29,315 28.03.2012 28.11.2011 interest amount) Rajmohan Shah 45,00,000 + (2,36,345 29.03.2012 29.09.2011 interest amount)

Now you have not given addresses and persons in reply on 16.03.2015, therefore it is not verifiable that aforesaid cash were deposited by same persons as claimed by you in order to justify the cash deposits in bank. You are required to produce these persons for justification of your claim with their id proof and addresses else to show cause that why amount of Rs. 7,34,79,097/- should not be added as unexplained cash credit under section of Income Tax Act in absence of justification of identity and genuineness of the source of these cash deposits?

dated 16.3.15 giving complete details about the information called

for in the show cause notice and the same is extracted below:-

With reference to above, and further to our hearing held on 09/03/2015 we are submitting the following pending documents for your kind perusal:-

Asseseee has duly maintained his books of account. All the credit entries in bank account are duly entered by the name of person from whom amount was received. As regards to the Cash deposited in the bank account which was deposited out of the cash balance available at the hand of the assessee at particular point of time during the year. We have enclosed the explanations of all the credit entries in all the bank accounts and also cash book of the assessee for the relevant year. [Page 1 to 22]

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Dr. Vinod Bhandari i.e. assessee is renowned doctor of the City and is in medical professional for last three decades. He is very good general surgeon. He has also established its own hospital under the partnership firm in Indore City and worked as a working partner in the Firm. He has done a number of surgeries, made visits and provided OPO and IPO consultations as a Doctor to the patients during his practice. Income surrendered by him at the time of survey proceedings was earned by him from his medical profession only as no other business is being carried out by him.

The Amount which was invested in Hundis which was seized during search proceedings was the amount which Dr. Bhandari realized during the FY 2011-12 , but part of which was against surgeries medical counselling land generally medical services rendered by him to number of patients at different points in time over several years, maybe realised in the current previous year or otherwise, which due to personal relations or local family constraints were not clarified/ascertainable/ computable/realized / demanded in earlier years.

Dr. Bhandari realised the amount in the FY 2011-12 due to his plans for construction of his own new house near SAIMS which was to be commenced in the said year and consequently the surplus liquidity was temporarily parked in HUNDIS and which was declared as Income during survey proceedings. From a source perspective they are from profession and from a year perspective they have crystallised in the current/previous year only.

Loans given out of the undisclosed income were duly recovered within the year under consideration. Loans were repaid in cash by the parties and thereafter deposited by the assessee in his Bank account. Copy of Cash Book and Credit entries Bank Book are enclosed in hard copy and all books in soft copy also. Receipts from such loans are highlighted in cash book. 4. Also furnish the name and address of person to whom loans were given (related to undisclosed income) and if after getting back the amount is advanced to any other persons the names and addresses of such persons Out of the undisclosed income loans were given to the following parties -:

S.NO. PAYEE NAME AMOUNT Bhavarlal Mahendra Kumar 1 5000000 53

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Hukam Chand Lodhi 2 5000000 Kishan Singh Pawar 3 4000000 Mangilal Motwani 4 4000000 Manoj Shrivas 5 5000000 Narendra Kumavat 6 3500000 Rajmohan Shah 7 4500000 8 Ram Singh 2500000 9 Ramesh Agrawal 2500000 Ramesh Chand Jain 10 5000000 Suraj Kulkarni 11 5000000 Surendra Kothari 12 3000000 Suresh And Sons 13 5000000 Vallabh Chand Mundra 14 5000000 Viiav Dhakad 15 2500000 Viiav Dhakad 16 4000000 Viiav Varqiva Rathore 17 4500000 TOTAL 70000000

Addresses or other details of the above parties are not available with the assessee. Assessee has already paid taxes on this undisclosed income. After getting back the amount from above parties it has not been further given on loan to any other person.

Other Books of accounts enclosed in CD. 6. To confirm that approval u/s 80G is not cancelled in case of the institutes to whom donations were given during the year.

Letters given by the Sri Aurobindo Institute of Medical Sciences, Indore and Sri Aurobindo Institute of Management Science and Technology, Indore to effect that its approval u/s 80G is still in effect and has not been cancelled at any point of time are enclosed. [Page 22 to 24]

the Ld. A.O and with regard to the Vyapam case the Ld. A.O has

specifically mentioned in the assessment order about his

observation on this issue before making the addition of unexplained

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

cash of Rs.7,34,79,097/- observing as follows:-

“It is well known that assessee is accused of being involved in Vypam scam related to bribing illegal money for admission in Medical Colleges in state of Madhya Pradesh. Now it becomes more important to prove that the cash deposited in accounts of assessee is by persons from whom it is claiming so and not by other means. Further enquiring about the cash deposits in account of assessee especially in month of February and March becomes utmost importance keeping the fact in mind, that months of February to May are the period when admissions in these colleges take place. Although it is immaterial for taxation, as once an income is proved as unexplained in the hands of assessee, it is to be taxed, irrespective of the fact what the source is, but it requires some discussions in purview of background of assessee. But when assessee was asked to prove his claim by producing these persons or to provide their addresses, assessee was unable to prove the identity and genuineness of source of cash deposits Therefore the source of these deposits is not established and knowing the background of assessee’s activities accepting his argument only on the basis of entries in books becomes difficult.

It is to be emphasized that assessee was asked to justify and prove the claim that the cash deposits in his bank account were deposited by the persons from whom it is claiming so. As assessee has failed in discharging his onus hence the amount is to be treated his unexplained income. The source of which is unexplained to the department, drawing conjectures whether its source and nature is related to illegal admissions in colleges or any other unexplained income is neither required for taxation purpose nor is possible at this stage, but it is equally important looking to the background of the case, that such entries in his books

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

must have supporting proofs.

As the assessee has failed to explain the source of deposit of cash, the amount of Rs. 7,34,79,097/- is being added to total income of assessee as unexplained cash deposits. I am satisfied that assessee has concealed particulars of his income and has furnished in accurate particulars, hence penalty under section 271(1)(c) is initiated.

find that the same have been duly considered by the Ld. A.O before

finalizing the assessment making addition of Rs.7,74,12,941/- to

the returned income of Rs.7,01,74,054/-.

cause notice so as to see that whether enquiry was conducted by

the Ld. A.O and whether the decision so taken on deciding the issue

was erroneous or prejudicial to the interest of revenue.

(a) As regards not initiating the penalty u/s 271(1)(c) of the Act

for the interest income of Rs.7,39,73,844/-, we observe that

the assessee filed the original return on 28.3.2013 and revised

return on 18.3.2015. In the revised return the correct claim of

interest expenditure was made. Though the original return

was belated but still in the given case where the assessee has

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

revised the return before the case of the assessee being

selected for scrutiny proceedings thereby furnishing the

correct particulars of income and even otherwise during the

course of assessment proceedings itself if the assessee

furnishes the correct particulars then the assessee should not

be visited by penalty u/s 271(1)(c) of the Act for not furnishing

the inaccurate particulars of income. Hon’ble Apex Court in

the case of T. Ashok Pai vs. CIT 292 ITR 0011, (2007) held that The word ‘concealment’ inherently carried with it the

element of mens rea. Therefore, the mere fact that some figure

or some particulars have been disclosed by itself, even if it

takes out the case from the purview of non-disclosure, it cannot

by itself, take out the case from the purview of furnishing

inaccurate particulars. Mere omission from the return of an item

of receipt does neither amount to concealment nor deliberate

furnishing of inaccurate particulars of income unless and until

there is some evidence to show or some circumstances found

from which it can be gathered that the omission was

attributable to an intention or desire on the part of

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

the assessee to hide or conceal the income so as to avoid the

imposition of tax thereon. In order that a penalty under s.

271(1)(iii) may be imposed, it has to be proved that

the assessee has consciously made the concealment or

furnished inaccurate particulars of his income."

Therefore in the case of assessee the Ld. A.O was justified in

not initiating the penalty u/s 271(1)(c) of the Act.

(b) As regards the break up of income of Rs. 41,07,848/-, complete

details were filed before the Ld. A.O with the computation of

income. In the show cause notice issued by Ld. A.O he himself

has referred to the interest income received by the assessee on

the hundis which form part of show cause notice dated

18.3.2015. Therefore the issue raised in Clause B of the show

cause notice issued u/s 263 of the Act also do not stand for.

(c) As regards type of books of accounts verified during the course

of assessment proceedings it has been specifically mentioned

in the assessment order that representatives of the assessee

namely CA Manish Mittal and CA Sanjay Mehta appeared from

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

time to time. He also mentioned that books of accounts along

with bills and vouchers which were checked on random basis.

This is a general method adopted by the Assessing Officers

during the course of assessment proceedings and there seems

no logic in naming the type of books and amount verified

because books of accounts itself cover up the financial details

maintained by the assessee for the concerned year. Clause-C

of show cause notice u/s 263 of the Act also do not stand for.

(d) As regards Clause-D wherein Ld. PCIT has alleged that Ld.

A.O has not examined the link of source of Rs.7 crores

surrendered with the vyapam case, we observe that the

assessee has surrendered Rs.7 crores as his unaccounted

undisclosed income for financial year 2011-12. The assessee

is a medical practitioner and partner of BHRC which is

engaged in providing medical services. The surrendered

income was linked by the assessee to the unsecured loans

given by him in the form of hundis which were found and

impounded during the course of survey. In other words when

the hundis were impounded the assessee surrendered

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

unaccounted income invested in the hundis. These hundis

are for short period normally given as loans for few months.

Complete details of hundis with respect to name, amount,

interest and due date of receiving the interest are mentioned

which also forms part of the assessment order itself. On the

hundis amounting to Rs.7 crores, the interest received thereon

is shown as 34,79,097/- and the due date of receipt of

principal and interest is between 9.7.2007 to 28.11.2011. The

claim of the assessee is that the original hundis impounded by

the Income Tax Department were released in November 2011

&December 2011 thereafter assessee got the maturity amount.

The amount so received on maturity of hundies subsequently

deposited in the bank account. This submission of the

assessee was not accepted by the Ld. A.O and he after

specifically mentioning about the Vyapam scam though

without bringing any material evidence on record to make a

firm link still treated the cash deposit in the bank as

unaccounted income earned from receiving alleged bribe for

admission in medical colleges. In the given facts it is clearly

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

discernable that the Ld. A.O has made adequate enquiry with

the motive of linking the source of Rs.7 crores surrendered

during the survey to the Vyapam case and even when there

was no material evidence on record to establish bribe, he still

“in the interest of revenue” made the addition of Rs.

7,34,79,097/-. We are surprised to note that even when the

Ld. A.O has made the addition of Rs.7,34,79,097/- for

unexplained cash deposit how could Ld.PCIT can treat the

assessment order as erroneous and prejudicial to the interest

of revenue. In our considered view the issue raised in Clause-

D of the show cause notice also did not stand for so as to be

taken as a basis to invoke the provisions of section 263 of the Act.

(e) As regards Clause-E of the show cause notice where Ld. PCIT

alleged that the Ld. A.O has not collected the information from

various agencies involved in investigation of Vyapam case, we

find that the Ld. A.O has to complete the assessment u/s

143(3) of the Act i.e. within the frame work of provision

provided under Income Tax Act. The Ld. A.O is an officer

working under the Income Tax Department. His duties are

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

casted upon him under the Income Tax Act. He cannot exceed

his jurisdiction and work in the manner provided for other

departments which in this case are Police, Enforcement

Department and other law enforcing agencies. Under the

Income Tax Act if the assessee do not credit any income in the

books of accounts maintained by it or has not recorded

investments in the books or is found to be the owner of

money, bullion, jewellery or other valuable articles or any

other unexplained expenditure and is unable to provide

explanation about the nature and source of such income then

Section 68 to 69C of the Act comes into play. For better

understanding of proper provisions of Section 68 to 69C of the

Act reads as follows:-

Section 68 (Cash Credits)

Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— 62

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and

(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.

Section 69 (Unexplained investment) Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. Section 69A (Unexplained money etc.)

Where in any financial year the assessee is found to be the owner of any money, bullion, jewelry or other valuable article and such money, bullion, jewelry or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewelry or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewelry or other valuable article may be deemed to be the income of the assessee for such financial year. Section 69B (Amount of investment etc not fully disclosed in books of accounts) Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewelry or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewelry or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, 63

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. Section 69C (Unexplained expenditure) Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income. It is clear from the above referred provisions that if any income

for which the assessee is unable to provide any explanation

about the nature and its source then the same could be

offered to tax as unexplained income which can be either

unexplained cash credit (Section 68), unexplained investment

(Section 69) unexplained money etc (Section 69A) amount of

investment which fully not disclosed (Section 69B) and

unexplained expenditure (Section 69C). In the instant case

the assessee has claimed to have earned income from

unexplained source which in this case can be treated as

unexplained professional receipts since the assessee is a

medical practitioner. The unexplained unrecorded income of

Rs.7 crores was claimed to be invested in hundies i.e. short

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

term advances and interest earned thereon and the maturity

proceeds were claimed to have been deposited in bank

account.

The alleged ”Vyapam scam” referred by Ld. PCIT was not

applicable for the year under appeal since the case No. 12/13

and 14/13 with respect of PMT 2012 and PPG 2012 relates

financial year 2012-13. Even the amount involved in these two

cases was fully seized from the house of Mr. Pradeep Raghuvanshi

by the appellate authorities and the taxation of such seized

amount may have been taken in the hands of the concerned in the

proceedings carried out for financial year 2012-13 (A.Y. 2013-14)

in due course but certainly it cannot affect the assessment

proceedings of financial year 2011-12 i.e. assessment year 2012-

the details which were relevant to subsequent year, even then

Ld. A.O has issued show cause notice giving details of the

hundis found asking the basis of linking the same with the cash

deposit in the bank in the year under appeal during February

and March,2012. Though the assessee gave the details of linking

the maturity of hundis to the cash deposited in the bank but Ld.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

A.O acted extremely in the interest of revenue and made the

addition for the unexplained cash deposited. In our view the Ld.

A.O conducted necessary enquiry about the issue of source of

surrendered income and after discussing about the “Vyapam scam”

in the body of the assessment order made the additions of

Rs.7,34,79,097/-. The Clause-E of the show cause notice u/s 263

of the Act therefore did not stand for as a basis for invoking of

provisions of Section 263 o f the Act. Even otherwise in the

assessment proceedings carried in pursuance to the order of

Section 263 of the Act which were completed on 27.12.2017, same

income as was assessed u/s 143(3) of the Act stands assessed in

the assessment proceedings carried u/s 143(3) r.w.s. 263 of the

Act. In the assessment order dated 27.12.2017 u/s 143(3) r.w.s.

263 of the Act the Ld. A.O has considered the fact that on

23.11.2017 the Central Bureau of Investigation has filed the

charge sheet in the registered case No.12/13 but as stated by Ld.

Senior Counsel for the assessee neither the name of the assessee

nor any official of the institution or medical college having

connection with the assessee have been named as accused in

the said charge sheet. Even before us Revenue failed to bring any

evidence on record to rebut the contention of Ld. Senior

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

Counsel for the assessee. In the back ground of these facts the

issue raised by Ld. PCIT in Clause-E of the show cause notice u/s

263 of the Act do not stand for as a basis for invoking provisions

u/s 263 of the Act.

(f&g) As regards Clause F & G pertaining to claim of deduction

under Chapter VIA and year wise investment in moveable and

immoveable property, we find that the assessee had paid LIC

premium of Rs.10,26,737/- but claimed the deduction for

Rs.49,062/-. Copies of LIC were submitted along with

submissions dated 26.8.2013 and 24.2.2014. As regards the

certificate for 80G approval which was valid up to 31.3.2011,

the Central Board of Direct Taxes has clarified vide its circular

No.7/10 dated 27.10.2010 that any approval in force as on

1.10.2009 and approval granted thereafter shall remain in force

unless approval is withdrawn. Thus Clause F & G of the show

cause notice u/s 263 of the Act do not stand for as a basis for

invoking provisions u/s 263 of the Act.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

number of queries regarding the issues now sought to be revised by

the CIT which were replied by the assessee through detailed

submissions supported by relevant documents and other evidence

coupled with legal propositions and decisions. It is also pertinent to

note that the AO has passed a detailed order / note sheet entry

while dealing and adjudicating the issues. There must be some

prima facie material on the record to show that the order is

unsustainable in law and the tax which was legally eligible has not

been imposed. The present case is neither a case of “no enquiry”

nor is a case where the AO, failed to make necessary enquiry and

the assessment order was passed after making detailed inquiry and

application of mind.

(2013) 350 ITR 555 (Delhi) laid down the ratio that it is not mere

prejudice to the Revenue or a mere erroneous view which can be

revised u/s 263 of the Act but also there should be the element of

“unsustainability” in the order of the assessing officer, which

empowers the commissioner to issue notice and to proceed to pass

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

an appropriate order. That Hon’ble High Court has held as under

(at page 562) :

“In this case, the record reveals that the Assessing Officer

had issued notice, and held proceedings on several dates

(of hearing) before proceeding to frame the assessment. He

added nearly Rs. 2 crores to the income at that time. The

Commissioner took the view that the assessment order

disclosed an error, in that the deduction under section14 A

had not been made. Now, while the statutory direction to

the Assessing Officer to calculate, proportionately, the

expenditure which an assessee may incur to obtain the

dividend income, for purposes of disallowance, cannot be

lost sight of, equally, such a requirement has to be viewed

in the context and circumstances of each given case. In the

present case, it was repeatedly emphasized that the

assessee’s dividend income was confined to what it

received from investment made in a sister concern, and

that only one dividend warrant was received. These facts,

in the opinion of this court, were material, and had been

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

given weightage by the Tribunal in its impugned order.

There is no dispute that the investment to the sister

concern, was not questioned; even the Commissioner has

not sought to undermine this aspect. Equally, there is no

material to say that apart from that single dividend

warrant, any other dividend income was received.

Furthermore, there is nothing on record to say that the

assessee had to expend effort, or specially allocate

resources to keep track of its investments, especially

dividend yielding ones. In these circumstances, it can be

said that whether the deduction under section 14A was

warranted, was a debatable fact. In any event, even if it

were not debatable, the error by the Assessing Officer is

not “unsustainable”. Possibly he could have taken another

view; yet, that he did not do so, would not render his

opinion an unsustainable one, warranting exercise of

section 263.”

(259 ITR 502) held that:

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

“Held, that the finding of fact by the Tribunal was that the

assessee had produced relevant material and offered

explanations in pursuance of the notices issued under

section 142(1) as well as section 143(2) of the act and

after considering the material and explanations, the

Income-tax Officer had come to a definite conclusion. Since

the material was there on record and the said material

was considered by the Income-tax Officer and a particular

view was taken, the mere fact that different view can be

taken should not be the basis for an action under section

High Court is that, when the assessee had produced relevant

material and offered explanation in pursuance of notices u/s 143(2)

and 142(1) of the Act and after considering the material and

explanations, the AO had come to a definite conclusion. Their

Lordship further held that in this situation, since the material was

there on record and the said material was considered by the AO and

a particular view was taken, the mere fact that a different view can

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

be taken should not be the basis for a valid action u/s 263 of the

Act and therefore, dismissing the appeal of the revenue the Hon’ble

High Court held that the order u/s 263 of the Act was not justified

and valid.

instant case and perusal of the assessment order, paper book and

the note-sheet of the assessment proceedings show that the AO

has raised several queries by way of note sheet entries and notices.

The assessee submitted various relevant documents. It is also

pertinent to note that the AO adjudicated the issue of queries and

replies in regard to said claim by passing a detailed order. Further

the note sheet entries clearly shows the deliberations between the

AO and the assessee company on all the issues and adjudication by

the AO which was further guided by order u/s 144A. Therefore in

view of the above facts and circumstances, details submitted before

Ld. A.O, enquiries conducted by the Ld. A.O, issuing various

notices, conducting enquiry about the linkage of the surrendered

income of Rs.7 crores, considering all the details of hundis found

during the course of survey, alleged additions made by linking the

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

cash deposited with the unexplained income from Vyapam scam

even though the assessee is having sufficient cash in hand in the

books of accounts, we in view of judgment in the case of Malabar

Industrial Co. (supra) as per which before invoking the provisions of

Section 263 of the Act Ld. PCIT should have satisfied the twin

conditions, namely order of the Ld. A.O stated to be erroneous and

secondly it is prejudicial to the interest of revenue. But in the

instant case wherein we have examined each and every issue raised

by Ld. PCIT in the light of the reply filed by the assessee,

information called by the Ld. A.O and the finding in the assessment

order, we are of the considered view that under the given facts and

in law the view taken by the AO in the order passed u.s143(3) of the

Act dated 24.3.2015 seems to be reasonable and plausible which

cannot be held as legally unsustainable and not in accordance with

law. In our view it is passed with complete application of mind and

thus it can neither be held as erroneous nor prejudicial to the

interest of revenue. Therefore Ld. PCIT under the given facts and

circumstances of the case erred in assuming jurisdiction u/s.263 of

the Act since the Ld. A.O has made sufficient enquiry by way of

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

questionnaire to which detailed reply have been filed from time to

time and the Ld. A.O in the interest of revenue have also made

addition of Rs.7,74,12,941/- to the income disclosed by the

assessee. It clearly appears that the Ld. A.O has applied his mind

and therefore the assessment order is not vitiated on the ground

that the order is erroneous and prejudicial to the interest of revenue

because no enquiry were undertaken. Accordingly we find merit in

the contention of the learned senior counsel for the assessee and

are of the considered view that Ld. PCIT grossly erred in invoking

the provisions of Section 263 of the Act on the basis of issues raised

in the show cause notice. Thus the order of Ld. PCIT of setting

aside the assessment order u/s 143(3) of the Act under

consideration are beyond the scope of Section 263 of the Act and

hence not valid and we accordingly quash the relevant order passed

by Ld. PCIT u/s 263 of the Act dated 30.3.2017 and restore the

assessment order u/s 143(3) dated 24.3.2015.

No.350/Ind/2017 are allowed.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

of the order of Ld. PCIT dated 29.11.2018 which is framed against

the order of Ld. A.O dated 22.12.2017 framed u/s 143(3) r.w.s. 263

of the Act. The assessment so carried on the directions of Ld. PCIT-

1 vide its order u/s 263 dated 30.3.2017 to frame fresh assessment

order.

That on the facts and circumstances of the case, ld. Commissioner of Income-tax (Appeals) was not justified in making an ex-parte order and the same is bad in law, arbitrary and in breach of principle of justice. That ld. Commissioner of Income-tax (Appeals) erred in passing ex- parte order and the same is illegal and arbitrary and the appeal has been disposed off on mechanical basis without proper adjudication of various grounds on merits. The LD AO erred in adding the unexplained cash deposit of Rs 7,34,79,097 u/s 68 of the Act and not accepting the assesee’s explanation that these cash deposits were out of hundi loans already surrendered as income in return. The ld. Assessing Officer erred in initiating the penalty under section 271(1)(c) of in respect to excess interest although the same was voluntarily rectified by filing revised return computation during the assessment proceedings That the assessment order dated 27/12/2017 passed u/s 143(3) r/w 263 is without jurisdiction, illegal and bad in law as the order is passed in pursuant to order passed u/s 263 which is subject matter of Appeal before this tribunal. The Appellant humbly craves leave to add, alter , and or supplement any ground or grounds, if necessary, at any time during the Appellant proceeding

the proceedings u/s 263 of the Act carried out by the Ld. PCIT

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

holding that Ld. PCIT wrongly assumed jurisdiction u/s 263 of the

Act. We have restored the assessment order u/s 143(3) dated

28.3.2015. The instant appeal No.57/Ind/2017 will become

infructuous since the very basis of assessment i.e. order u/s 263 of

the Act have been quashed therefore the proceedings carried

thereafter are void. Accordingly ITA No.57/Ind/2017 is dismissed

as infructuous.

has raised following grounds of appeal:-

“1. The Ld. CIT(A) has erred in law and on facts in upholding the order passed by the assessing officer u/s 143(3) of the Income Tax Act, 1961. 2. The Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs.7,34,79,097/- made by the assessing officer u/s 68 of the Act. 3. The appellant craves leave to add to, amend, alter or delete all or any of the forgoing grounds of appeal.

7,34,79,097/- was made by the Ld. A.O u/s 68 of the Act. At the

cost of repetition brief facts are that the assessee surrendered

income of Rs. 7 crores in his personal capacity for financial year

2011-12 during the course of survey proceedings u/s 133A of the

Act on 24.09.2011. The surrender was made on account of various 76

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

hundis found and impounded from the possession of the assessee

evidencing that unaccounted income given as loan for short term

by way of issue of hundis. In the books of accounts during the

financial year 2011-12 assessee entered the surrendered income by

debiting the party account and crediting the income from

undisclosed sources. The hundis were for short period of time

maturing between 19.7.11 and 28.11.11. The cash was received on

maturity i.e. principal and interest was accounted for in the cash

book and available cash balance was used to deposit the amount in

bank during February, 2012 and March,2012. There was a gap of

2-3 months between the last date of receiving the amount and

maturity of hundi and the amount deposited in the bank. The Ld.

A.O. during the course of assessment proceedings u/s 143(3) of the

Act directed the assessee to furnish the complete details of the

persons named in the hundis. The assessee failed to provide the

details except the name, amount, date of making the hundi and due

date of payment. In absence of ID proof and address, Ld. A.O

added Rs. 7,34,79,097/- as unexplained cash credit u/s 68 of the

Act thereby not allowing assessee’s claim of giving telescoping

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

benefit of the amount surrendered to the amount deposited in the

bank account. Aggrieved assessee filed appeal before Ld. CIT(A) but

failed to succeed who confirmed the addition observing as follows:-

5.1 I have gone through the appellant’s contentions, the verbal submissions made during the appellate proceedings and the assessment order. The appellant had submitted during the assessment proceedings that the cash deposits made in the bank were out of the repayment of the Hundis which were impounded during the survey action on account of which income of Rs.7,00,00,000/- had been disclosed. The survey was conducted in Sep 2011 and most of the Hundis were to mature in 2-3 months. As most of the cash deposits were in the month of February and March 2012 the Assessing Officer asked the appellant to furnish the name and addresses of the persons from whom repayment of hundis was being claimed. As the appellant failed to furnish the said information the Assessing Officer held that the onus of proving the identity and genuineness of source of cash deposits had not been discharged and treated the said amount as unexplained cash credits.

5.2 The appellant has challenged the addition of Rs.7,34,79,097/- u/s 68. It is submitted that as per section 68 any sum should have been “credited: in the books of the assessee and which should be unexplained. If sum is not credited in the books even though it is unexplained it is not taxable under section 68 of the IT Act. The details of the entries passed in the books of accounts to offer unexplained amount of Rs.7,00,00,000/- surrendered during the survey have been submitted as can be seen in the appellant’s submissions reproduced above. It is seen that income account has been credited with Rs.7,00,00,000/- and cash amount debited at the time of recovering the amount from the borrowers. The appellant’s

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

contention is that the cash deposit in the bank account came from cash available in hand, as per the books of account which was received from the recovery of loans already offered as income u/s 69 during the survey proceedings. Therefore, there was no credit to an account which was not accepted by the Department or which was unexplained and no addition can be made u/s 68. This contention of the appellant is devoid of merit. From the details of the hundis and the cash deposited in the bank account as given in the assessment order it is seen that the due date of the following deposits was made before the date of survey. Name Amount in Rs. Date of deposit Due date Bhavarlal 50,00,000 23.10.2011 23.07.2011 Mahendra Kumar Vijay Dhakad 25,00,000 19.02.2012 19.09.2011 Surendra Kothan 30,00,000 12.02.2012 20.09.2011 Manoj Shrivas 50,00,000 13.03.2012 13.09.2011 Suresh &Sons 50,00,000 19.03.2012 19.07.2011 Mangilal Motwani 40,00,000 24.03.2012 24.08.2011 Total 2,95,00,000

No explanation has been given as to why the amounts were not received on the due date. In all except the first hundi the deposits in the bank account are in the month of February and March 2012.

5.3 The due dates for the remaining hundis are as under Name Amount in Rs. Date of deposit Due date Hukum Chand Lodhi 50,00,000 23.02.2012 23.09.2011 Vijay Dhakad 40,00,000 05.03.2012 05.10.2011 Kishan Singh Pawar 40,00,000 06.03.2012 06.10.2011 Ramesh Agrawal 25,00,000 08.03.2012 08.10.2011 Vijay Vargi Rathore 45,00,000 27.03.2012 27.09.2011 Ram Singh 25,00,000 27.03.2012 27.09.2011 Narendra Kumawat 35,00,000 28.03.2012 28.09.2011 Vallabh Chandra 50,00,000 28.03.2012 28.10.2011 Mundra Suraj Kulkarni 50,00,000 28.03.2012 28.11.2011 Rajmohan Shah 45,00,000 29.03.2012 29.09.2011 Total 4,05,00,000

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

As can be seen from the above table the due dates for the hundis were in September and October, 2011 but here also the repayments are shown in February and March, 2012 and no explanation has been offered to explain the delay in repayment. Under the circumstances the Assessing Officer was justified in asking the appellant to furnish the name and addresses of the persons from whom he was claiming repayment of loan in cash. A show cause notice was issued on 18/03/2015 in response to which it was simply submitted that there should not be double taxation of the same amount. By simply passing entries in the books of accounts the appellant has not discharged his onus of justifying and providing the claim made. The bunching of all the cash deposits in the month of February and March makes it dubious considering the background of the appellant.

5.4 Various decisions have been cited to claim the benefit of telescoping. The benefit of telescoping is allowable but it had to be shown to the satisfaction of the Assessing Officer that the money surrendered during the survey is received back all repayment of the hundis. The onus was on the appellant to furnish the details of the persons from whom he was claiming the repayment of loan in cash in February and March 2012. Reliance is placed on the decision of Hon'ble I.T.A.T., Agra in the case of Poonam Gupta dated 17.07.2013 where in benefit telescoping was not allowed as the assessee had failed to furnish the reconciliation required for the purpose. It was held as under:-

The CIT(A) deleted the addition on merit without considering the crux of the aspect and without appreciating the facts merely mentioned that M/s Deepak Security is registered with SEBI and others that only proves the identity and not the nature of transaction as has been pointed out by the A.O. The Hon'ble Madras High Court in the case of CIT vs. Krishnaveni Ammal 158 ITR 826 (Mad) has held that the law of evidence mandates that if the best evidence is not placed before the Court, an adverse inference can be drawn against the persons who ought to have produced it. In that case, there were 80

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

crossed cheques but they were not produced. Similarly, in the case under consideration , we asked the assessee to furnish copies of Bank accounts but the same were not produced. In the light of the facts of the case and failure on the part of the assessee, the addition made by the A.O while making assessment under section 153A is correct and in accordance with law. 5.5 The appellant has also pointed out that in the case of the firm BHRC it has been accepted that the deposits in the bank account came out of the cash in hand as per the books of account of BHRC in the scrutiny proceedings u/s 143(3) for A.Y. 2012-13. The cash in hand was built up on account of recovery of amount advanced as hundi loans against which income was surrendered during survey action by BHRC in the same F.Y. 2012-13. However, it is not submitted whether repayments of hundi loans in the case of BHRC were on the due dates or bunched in the months February and March, 2012 like in the case of the appellant. Further, as pointed out by the Assessing Officer the background of the appellant also has to be taken into consideration. Therefore, from the details on record it cannot be held that the case of appellant is identical to that of BHRC. The decision of Hon'ble Punjab and Haryana High Court relied upon by the appellant is not applicable to the facts of the case.

5.6 In view of the above the addition of Rs.7,34,79,097/- made as unexplained cash credit u/s 68 is confirmed. Ground no.2 is dismissed”

made before Ld. CIT(A) and also mentioned that there was a direct

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

nexus of the cash deposit in the bank account to the maturity

proceeds of the hundis found during the course of survey

proceedings. The unaccounted receipts in cash were used to

provide short term loans and advances for earning interest income

and for this purpose hundis were issued and the same were found

during the survey proceedings. The maturity date of hundis were

mentioned there on. The Ld. A.O has himself noted the details in

the show cause notice. The surrendered income which was

invested in hundis were received back in cash during the year

under appeal on various dates as mentioned on the hundis. The

cash receipt were duly accounted in the books of accounts. No

other unaccounted source of income has been unearthed by the

survey team or Ld. A.O. The cash deposit in the bank has a direct

nexus with the surrendered income. Plethora of judgments are

there supporting the assessee that telescoping benefit should be

given.

findings of both the lower authorities.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

placed before us. The sole grievance of the assessee is against the

action of Ld. A.O confirming the addition of Rs.7,34,79,097/- as

unexplained credit u/s 68 of the Act. This unexplained cash credit

is the amount of cash deposited in the bank account held in the

name of the assessee during February, 2012 and March, 2012. Ld.

A.O refused to accept the contention of the assessee that source of

cash deposited is the maturity proceeds of the hundis i.e. short

term advances for which investment was made from unaccounted

income surrendered during the course of survey and offered to tax

in the return of income. Ld. A.O made the addition for unexplained

cash deposit merely in order to prove that since the assessee is

accused in “Vyapam case” cash so deposited should have been from

the income earned from alleged bribe received for admission in

medical colleges. In the preceding paras we have observed that the

proceeding initiated against the assessee under the Vyapam case

fall in financial year 2012-13 i.e. subsequent year whereas cash

was deposited during Financial Year 2011-12. There is no evidence

on the record to substantiate this fact that assessee received any

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

unaccounted income in the form of bribe for admission in medical

college during financial year 2011-12. It seems that Ld. A.O merely

on the basis of surmises and conjectures have taken this view. He

ignored the fact that the assessee has surrendered Rs.7 crores as

unaccounted income during the year. This unaccounted income in

cash was used in earning interest income by way of giving short

term advance on hundis. Such hundis are normally issued through

brokers. Only the name of person receiving the money, his

signature, amount given as advance, rate of interest, date of

entering into the hundi agreement and the maturity date of

receiving the money are provided. When the assessee shows the

original hundi he receives the principal and interest. The assessee

had surrendered his income from other source as unexplained

money which was not recorded in the books of accounts and the

assessee failed to offer any explanation about the nature and

source of acquisition of these unexplained money/income. The

hundis were impounded during the course of survey which itself is

sufficient evidence that unaccounted income has been invested.

The unaccounted income has been offered to tax which is not in dispute.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

hundi loans in the F.Y. 2011-12 but with a delay from their due

dates, on account of original receipts being in possession of the

Department. Interest on the delayed period was also recovered. The

total sum against loans advanced and interest thereon was

recovered in cash and deposited in Bank accounts of the Appellant.

The appellant duly informed the Income tax department vide its

letter filed on09/04/2012 of hundi loans having been recovered

and deposited in his bank account. This unaccounted income was

given as short term advance through hundis which were found

during the course of survey. Necessary entries in the books of

accounts were made on the date of survey by debiting parties

account and crediting the income from undisclosed source offered

to tax. The party account were made on the basis of names

mentioned on the hundis. The original hundis impounded by the

Income Tax Department were released and given to assessee in

November, 2011 and December, 2011. The amounts were

recovered from Hundis on following dates:-

DR.VINOD BHANDARI 85

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

DETAILS OF LOAN GIVEN TO HUNDI

INTEREST RECEIVED AMOUNT RECD. ON TOTAL DATE OF GIVEN ON HUNDI AMOUNT DUE DATE HUNDI S. NO. PAYEE NAME HUNDI AMOUNT RECEIVED OF HUNDI AMOUNT 1 BHAVARLAL MAHENDRA KUMAR 5000000 150410 5150410 23-Jul-11 23-Oct-11 2 HUKAM CHAND LODHI 5000000 226850 5226850 23-Sep-11 23-Feb-12 3 KISHAN SINGH PAWAR 4000000 189510 4189510 06-Oct-11 06-Mar-12 4 MANGILAL MOTWANI 4000000 240658 4240658 24-Aug-11 24-Mar-12 5 MANOJ SHRIVAS 5000000 300822 5300822 13-Aug-11 12-Mar-12 6 NARENDRA KUMAVAT 3500000 183822 3683822 28-Sep-11 28-Mar-12 7 RAJMOHAN SHAH 4500000 236345 4736345 29-Sep-11 29-Mar-12 8 RAM SINGH 2500000 114045 2614045 27-Oct-11 27-Mar-12 9 RAMESH AGRAWAL 2500000 112195 2612195 08-Oct-11 08-Mar-12 10 RAMESH CHAND JAIN 5000000 262605 5262605 13-Sep-11 13-Mar-12 11 SURAJ KULKARNI 5000000 229315 5229315 28-Nov-11 28-Mar-12 12 SURENDRA KOTHARI 3000000 136110 3136110 20-Sep-11 20-Feb-12 13 SURESH AND SONS 5000000 337810 5337810 19-Jul-11 19-Mar-12 14 VALLABH CHAND MUNDRA 5000000 229315 5229315 28-Oct-11 28-Mar-12 15 VIJAY DHAKAD 2500000 113425 2613425 19-Sep-11 19-Feb-12 16 VIJAY DHAKAD 4000000 179510 4179510 05-Oct-11 05-Mar-12 17 VIJAY VARGIYA RATHORE 4500000 236345 4736345 27-Sep-11 27-Mar-12 TOTAL 70000000 3479092 73479092

the maturity dates mentioned in the show cause notice issued by

Ld. A.O which included principal and interest, they were entered in

the books and the cash in hand kept on increasing. Total of

principal amount is Rs.7 crores and Rs. 34,79,097/- being the

interest received on various dates and the assessee had this

amount as cash in hand which was deposited in the bank on

various dates in February 2012 and March, 2012. Apparently there

is a direct nexus of the cash so received on maturity of hundis with

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

the cash deposited in the bank account. Whether the assessee is

entitled to the telescoping benefit of the surrendered income with

the cash deposited in the bank account needs to be analysed in

light of following judicial pronouncements :-

a. In Veerasinhaiah & co vs CIT (1980) 123 ITR 457 (SC), the Supreme court has clearly held that Secret profit/ Undisclosed income of an Appellant earned may constitute a fund, even thouqh concealed from which the Appellant may draw subsequently...

In CIT V.s. K.S.M. Guruswamy Nadar & Sons (1984) 149 ITR b. 127 (Madras) it was held that "In this case, in addition to the Bogus cash credit there is an addition towards the Suppression of profit, 171 such a case as this When there are two additions it is always open to the Assessee to explain that the suppressed profit during the year has been brought in as cash credits and therefore one has to be telescoped into the other and there can be only one addition".

c. In Addl CIT Vs. Dharamdas Agrawal (l983) 144 ITR 143, the Madhya Pradesh High court based on the Veerasinhaiah & Co’s decision in Supreme court upheld the Assessee's contention of undisclosed Income of the Assessee earned in earlier asst. years being the source of Subsequent expenditure and or debits in Assessee's accounts.

d. In Arun Kala Vs. Asstt. CIT [2005} 98 TTJ (Jp.) 1046 the tribunal ruled that "By considering the totality of the facts and

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

circumstances of the case, we are of the view that benefit of telescoping or set, Off Of secret profits or undisclosed income of the assessee may constitute a fund from which the assessee draw subsequently for meeting' the expenditure or making investments. The AO may also allow benefit of telescoping/ setting off of income against expenditure/investment, even during the current year) after into the fact that unexplained looking expenditure/investment could be reasonably attributed to the pre-existing fund of concealed income or they were reasonably explained by reference to the concealed income earned in the relevant year. Reliance is placed on the case of Anantharam Veersinghaiah & Co, (supra).

Jaqadnmba Construction CO. VS. ITO [2004] 3 SOT 670 (Jodh.) e. (c) Radhey Shyam Tanwar Vs. Asst. CIT /20C2] 77 TTJ (Jodh. 505.)

if there are two funds one which is already taxed and other has not

and there was remittances during the accounting year for certain

sum, the source of which is not indicated then the presumption is

that the remittances should have been from the fund which has

already suffered tax. It is noteworthy that the Ld. A.O has not

rejected the books of accounts and its extracts produced before

him. In such situation as held in the case of Tolaram Daga V/s CIT

59 ITR 632 such unchallenged account books are prima facie proof

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

of the correctness of the entries made therein. It is also brought to

our notice that during the survey proceedings hundis of Rs.23.65

crores were found out of which hundis of Rs.7 crores were in the

name of the assessee and hundis of Rs.16.65 crores in the name of

BHRC. Ld. Senior Counsel for the assessee stated that in the

scrutiny proceedings u/s 143(3) of the Act carried out in the case

of BHRC for Assessment Year 2012-13 the Ld. A.O has accepted the

assessee’s contention that the deposit in bank account of BHRC are

out of the cash in hand as per the books of accounts of BHRC

which in turn was built up on account of recovery of amount

advanced as hundi loans against which income was surrendered

during survey action. Hon’ble High Court of Punjab & Haryana in

the case of Jaswant Rai (1977) 107 ITR 477 has held that “it was

not open to department to adopt different yard sticks in the case of

different assesses where the issue of addition to wealth pertained to

the same common asset”. Accordingly here also the hundi which

were seized in one common survey account of one common parties

office location i.e. in the case of assessee as well as BHRC of which

the assessee is the partner the department should not have taken a

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

different view. We, therefore respectfully following above decisions

are of the confirmed view that assessee is entitled for the

telescoping benefit of the income surrendered during the year to the

cash deposited in the bank account and thus find merit in the

contention of the Ld. Senior Counsel for the assessee that the

source of cash deposits of Rs.7,34,79,097/- is the maturity

proceeds of hundis during the year which were made out of the

unaccounted surrendered income offered to tax in the return of

income for Assessment Year 2012-13. We therefore set aside the

finding of Ld. CIT(A) and find no justification in the action of the Ld.

A.O making addition u/s 68 of the Act for unexplained cash credit

of Rs.7,34,79,097/-. We accordingly delete the addition and allow

the sole ground No.2 raised by the assessee.

adjudication. In the result appeal of the assessee is allowed.

ITA Nos.350 & 66/Ind/2017 & ITANo.57/Ind/2019 Vinod Bhandari

are allowed and ITA No.57/Ind/17 is dismissed as infructuous.

The order pronounced in the open Court on 20.03.2020.

Sd/- Sd/-

( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 20th March, 2020 /Dev Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file.

By Order, Asstt.Registrar, I.T.A.T., Indore