UDIT PRASAD BABU,SAMBALPUR vs. CIT, SAMBALPUR

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK श्री चन्द्र मोहन गगग, न्द्याययक सदस्य एवं श्री एऱ.ऩी.साहु, ऱेखा सदस्य के समऺ । BEFORE SHRI CHANDRA MOHAN GARG, JM AND SHRI L.P. SAHU, AM आयकर अऩीऱ सं./ITA No.239/CTK/2015 (नििाारण वषा / Assessment Year :2010-2011) Udit Prasad Babu, Vs. Pr. CIT, Sambalpur New Colony, Budharaja, Sambalpur स्थायी ऱेखा सं./ PAN No. : AAYPB 0331 K (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. यनधागररती की ओर से /Assessee by : Shri B.Panda, Senior Advocate with Shri B.R. Panda, Advocate राजस्व की ओर से /Revenue by : Shri S.M.Keshkamat, CITDR

सुनवाई की तारीख / Date of Hearing : 18/07/2019 घोषणा की तारीख/Date of Pronouncement : 31/07/2019 आदेश / O R D E R Per L.P.Sahu, AM: This is an appeal filed by the assessee against the order of the Pr. CIT, Sambalpur u/s.263 of the Income Tax Act, 1961, dated 27.2.2015 for the assessment year 2010-2011, on the following grounds of appeal: 1. For that, on analysis of the chronological events as mentioned in para-1 of the statement of facts it is crystal clear that for the impugned assessment year the appellant has been assessed twice. Once u/s 143(3) and again u/s 264 read with u/s 143(3). Yet the Id Commissioner of Income Tax, Sambalpur has invoked section 263 and directed the A.O to re do the assessment on the alleged unexplained cash deposit of Rs 38,70,000/- which is totally illegal, arbitrary and uncalled for. 2. For that, the appellant humbly challenges the order of Commissioner of Income Tax, Sambalpur invoking section 263 on the ground that assessment has been made twice i.e. once u/s 143(3) on 22-11-2012 and again on 22-09-2014 u/s

2 ITA No.239/CTK/2015 264 read with u/s 143(3). The direction of Commissioner of Income Tax, Sambalpur u/s 263 shows that the revenue is bent upon to continue the assessment proceeding in the case of appellant on some pretext or other. 3. For that, it is a fact that case of the appellant is an audited one. Audited Balance Sheet and Profit & Loss Account are being filed every year. Books of accounts are being produced at the time of assessment. Yet the revenue has disbelief the alleged source of cash deposit. a. For that apart from opening cash at the beginning of the assessment year, the appellant has submitted before the revenue the source of cash deposit in SBI Sambalpur CC A/c No-10856900967 and Oriental Bank of Commerce,, Sambalpur current A/c No-07461010001350. The appellant has been using the cash credit facilities in the course of business as and when required. Unfortunately the revenue did not accept the contention of the appellant. The Id Commissioner of Income Tax Sambalpur directed the A.O to re do the assessment after having enquiry in to the fact. The direction of the Commissioner of Income Tax Sambalpur is arbitrary, illegal, and uncalled for. 4. For that it is evident that from the copies of the Balance sheet and Profit & Loss Account of the impugned assessment year and preceding assessment year that the appellant has sufficient cash balance to deposit the cash which has been unnecessarily questioned by the revenue. 5. For that, the appellant craves leave or urging other grounds at the time of hearing. 2. The facts of the case are that the assessee derives income from execution of contract works. The return of the assessee was processed u/s.143(1) of the Act. Subsequently the case of the assessee was selected for scrutiny and the AO completed the assessment on 22.11.2012 u/s.143(3) of the Act determining the total income at Rs.36,25,354/-, inter alia, making the following additions: i) discrepancy in gross contractual receipt: Rs.7,35,609/- ii) Non-inclusion of PPF interest : Rs. 53,064/-

3 ITA No.239/CTK/2015 Later on the Commissioner of Income Tax, Sambalpur set aside the case with direction to the Assessing Officer to make a de novo computation on 1.11.2013. Consequent thereto, the Assessing Officer passed the order u/s.264 r.w.s 143(3) of the Act on 22.9.2014 determining the total income at Rs.28,80,816/- and granted refund of Rs.7,350/-. 3. The Pr. CIT on verification of assessment records found that the assessee has made cash deposits of Rs.38,70,000/- in two bank accounts viz A/c Nos.10856900967 at SBI, Main Branch, Sambalpur and 07461010001350 at Oriental Bank of Commerce, Sambalpur Branch during the financial year 2009-2010 and during the assessment proceedings, the Assessing Officer has not obtained details regarding the source of receipts of such huge cash deposits and failed to make examine/enquiry on this aspect. Therefore, in the opinion of the Pr. CIT, the assessment order is erroneous in so far as it is prejudicial to the interests of the Revenue. Hence, he in exercise of his power conferred u/s.263 of the Act initiated proceedings in this case. Notice u/s.263 of the Act was issued to the assessee on 30.1.2015. In response to notice, Shri T.R.Karir, Advocate appeared and submitted written explanation & bank statements of A/c. No.10856900967 maintained at SBI and further submitted the bank account maintained with Oriental Bank of Commerce . On examination of the above two bank accounts, the Pr. CIT found that there was cash deposit of Rs.25,80,000/- on different dates with SBI and Rs.13,90,000/- with Oriental Bank of Commerce during the financial year 2009-2010. The assessee explained the source of cash deposits with two

4 ITA No.239/CTK/2015 banks, which is reproduced at pages 3 & 4 of CIT’s order. On going through the submission/explanation of the assessee, the Pr. CIT observed that it is an afterthought arrangement to manage the affairs and no definite and concrete reply regarding the source and nature of such huge cash deposit has been explained by the ld A.R and nor any evidence was produced. It was in this backdrop that the Pr. CIT viewed that the no proper enquiries and verifications were made by the Assessing Officer with regard to cash deposits in two banks, therefore, the order passed u/s.143(3) of the Act is erroneous and prejudicial to the interests of the revenue and, accordingly, the Pr.CIT set aside the assessment order and restored the same to the file of the Assessing Officer with a direction to redo the assessment after verifying the source of receipt of cash deposit of Rs.38,70,000/- in the bank accounts of the assessee after affording reasonable opportunity of hearing to the assessee. 4. Aggrieved by the order of the Pr.CIT, the assessee has filed appeal before the Income Tax Appellate Tribunal. 5. Before us, ld A.R. submitted that the assessment was completed u/s.143(3) of the Act and the Assessing Officer called for the books of account and they have been verified and examined. The Ld A.R. filed the assessment order u/s.143(3) of the Act and submitted that the Assessing Officer made disallowance and, therefore, the PR. CIT has erred in revising the order though it is not prejudicial and erroneous to the interests of the revenue. He also submitted that the initiation u/s.263 of the Act by the Pr. CIT is time barred also. Ld. AR further submitted that

5 ITA No.239/CTK/2015 the order passed u/s.143(3) r.w.s.264 can also not be taken up by the Pr. CIT u/s.263 of the Act. It would be review of his own order. In view of this, the proceedings u/s.263 of the Act initiated by the ld. Pr. CIT is itself wrong. Ld A.R. explained that the cash deposits are being routed through other banks and duly supported with the financial statements and demonstrated the same before us. Ld A.R. relied on the following judicial decisions: i) CIT vs. Max India Ltd., 295 ITR 282 (SC) ii) Malbar Industrial Co. Ltd vs CIT, 243 ITR 83 (SC) 6. On the other hand, ld D.R. relied on the order of the Pr. CIT and explained that in the assessment proceedings, the Assessing Officer has not verified the cash deposits by the assessee in banks and its source, and, therefore, the Pr. CIT is justified in setting aside the assessment order by invoking his power conferred u/s.263 of the Act. 7. After hearing both the parties and careful perusal of the materials available on the record, we find that the sole disputed issue is with respect to setting aside the assessment order by the Pr. CIT in respect of non-verification of cash deposits made by the assessee to the extent of Rs.38,70,000/- in the bank accounts maintained with SBI and Oriental Bank of Commerce, Sambalpur and directing for fresh assessment after due verification. We find that the Pr CIT in his order has dealt on the issue of cash deposits and the explanation furnished by the assessee. Prima facie, it appears that the Pr. CIT found that the order passed u/s.143(3) of the Act is without making enquiries on this particular disputed issue, which is raised in the revision proceedings. Ld A.R.

6 ITA No.239/CTK/2015 submitted that the order of the Assessing Officer is not erroneous and prejudicial to the interests of the revenue and demonstrated before us ledger account copies. We are of the considered opinion that the explanation submitted before us alongwith ledger account copies are to be verified by the Assessing Officer and the Pr. CIT having dealt on this issue has remitted to the file of the Assessing Officer for fresh adjudication as the facts are not emanating out of assessment order. Though ld A.R. supported with judicial decisions but on perusal of records and submissions, we found that this aspect of cash deposits were not verified by the Assessing Officer nor ld A.R. could substantiate with notice that the same was examined and verified. The counsel of the assessee made wrong arguments that the initiation u/s.263 of the Act by the Pr. CIT is time barred. The initiation u/s.263 of the Act was within the time limit as per the provisions u/s.263 of the I.T. Act. We noticed that the assessment u/s.143(3) of the Act was completed on 22.11.2012, which was later on revised u/s.264 of the I. T. Act, 1961 on the petition filed by the assessee vide his application dated 22.07.2013. The Pr. CIT, Sambalpur on 01.11.2013 set aside the order to the AO with direction to make fresh assessment and the AO completed the assessment u/s.143(3)/264 of the Act on 22.09.2014. The Pr. CIT can initiate the revisions proceedings u/s.263 of the Act within two years from the end of the relevant financial year in which the assessment has been completed by the Assessing Officer i.e. the relevant financial year ending is 31.03.2013 and two years would be 31.03.2015. In the impugned case, the Pr. CIT has issued first

7 ITA No.239/CTK/2015 notice on 31.01.2015 which is well within the time. Therefore, in this regard, the arguments advanced by the ld. AR of the assessee regarding initiation of proceedings u/s.263 of the Act beyond the time limit, is rejected. 8. Another arguments of the counsel of the assessee is that the Pr. CIT cannot initiate proceedings u/s.263 of the Act after passing the order u/s.143(3) r.w.s.264 of the Act, in this regard, the Act is very clear that any order passed by the Assessing Officer may be taken up for revision u/s.263 of the Act. For the sake of completeness of our order, we would like to reproduce the provisions of Section 263 of the Act :- “Revision of orders prejudicial to revenue. 263. (1) The 13[Principal Commissioner or] Commissioner may call for and examine14 the record14 of any proceeding under this Act, and if he considers that any order15 passed therein by the 16[Assessing] Officer is erroneous15 in so far as15 it is 15prejudicial to the interests of the revenue15, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, 15pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment15 and directing a fresh assessment. 17[18[Explanation 1.]—For the removal of doubts15, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed 19[on or before or after the 1st day of June, 1988] by the Assessing Officer shall include— an order of assessment made by the Assistant Commissioner 20[or (i) Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the 21[Joint] Commissioner under section 144A; an order made by the 21[Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the 22[Principal Chief Commissioner or] Chief Commissioner or 22[Principal Director General or] Director General or 22[Principal Commissioner or] Commissioner authorised by the Board in this behalf under section 120; "record" 23[shall include and shall be deemed always to have (b) included] all records relating to any proceeding under this Act available at the time of examination by the 22[Principal Commissioner or] Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter24 of any appeal 25[filed on

8 ITA No.239/CTK/2015 or before or after the 1st day of June, 198824], the powers of the 26[Principal Commissioner or] Commissioner under this sub-section shall extend 25[and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] 27[Explanation 2.—For the purposes 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 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.] 28[(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, 29[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. It is clear from the above section that the Pr. CIT or CIT may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. In the impugned case, he has initiated the proceedings

9 ITA No.239/CTK/2015 on the assessment order framed u/s.143(3) r.w.s.264 of the Act, which has been passed by the Assessing Officer under the provisions of Income Tax Act, 1961, which is within the purview of the provisions of Section 263 of the Act as quoted supra, therefore, we do not find any weightage in the arguments advanced by the ld. AR of the assessee that the Pr. CIT cannot invoke the provisions of section 263 of the Act revising the order passed by the Assessing Officer u/s.143(3) r.w.s 264 of the Act. Accordingly, this argument of the ld. AR of the assessee is also rejected. 9. We also find from the order of the Assessing Officer and documents submitted by the assessee that the AO has not done proper enquiry which was required for completing the assessment passed by the AO. The Income-tax Officer is not only an adjudicator but also an investigator. The Pr. CIT has examined the records and found that there was lack of enquiry on the part of the AO and found that the assessment framed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. 10. We rely on various judicial pronouncements, wherein, it was held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. It is his duty to ascertain the truth of the facts stated in the return. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper enquiry. Failure to make enquiry in such circumstances would make the assessment order

10 ITA No.239/CTK/2015 erroneous. The Hon’ble Apex Court in the case of Smt. Tara Devi Aggarwal vs. CIT, 88 ITR 323 (SC), has held that the CIT may consider an order of the AO to be erroneous not only it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo typed order which simply accepts what the assessee has stated in his return and fails to make enquiries which are called for in the circumstances of the case. The Assessing Officer cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. To support our above view, we would like to place reliance upon the decision of coordinate bench of the Tribunal in case of Babulal S. Solanki Vs. ITO, [2019] 104 taxmann.com 155 (Ahmedabad-Trib), wherein the Tribunal has observed as under:- “5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position. 6. We find that the Assessing Officer, vide letter dated 9th December 2013, did state, in rather general terms, that where the stamp duty valuation (i.e. jantri value) is different from sale consideration, the assessee has to state whether the stamp duty valuation was adopted as sale consideration. There was neither a specific reference to the facts of this case or the application of Section 50. In reply to this letter, the assessee stated that "the land sold is agricultural land as clearly mentioned in the sale deed", that "index copy dated 3rd June 2011 (i.e. after the date of sale deed) clearly shows the said land as an agricultural land" and that "jantri value of said agricultural land is Rs 4,900 per sq mtr which was clearly mentioned as per letter of Superintendent of Stamps, Gandhinagar, Gujarat". It was further clarified that "the value of Rs 11,750 per square meter on which stamp duty is paid by the purchaser is for non agricultural land". The assessee thus explained that the sale consideration is less than the stamp duty valuation for the land sold, and then he pointed out the computation of conversion premium paid by the assessee was on the basis of valuation of agricultural land. This plea, however, proceeds on the assumption that the provisions of Section 50C come into play on a fair stamp duty valuation of the land or building or both, rather than the actual valuation adopted by the stamp valuation authority. Section 50 C comes into play, for substitution of actual sale consideration by the value adopted for stamp duty valuation purposes, "where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed…by any authority". What is thus clear is that, on the face of it, the actual stamp duty valuation adopted by the assessing authority rather than what would be the right, even if that be different from actual,

11 ITA No.239/CTK/2015 stamp duty valuation which ought to have been adopted by the stamp duty valuation authority. If the registration does not take place in the year of transfer and no stamp duty is actually assessed as such, then, of course, value assessable could come into play but that's not the case here. The reply of the assessee was thus less than acceptable in law and on the basis of this explanation. The correctness of claim, on this basis of this claim by the assessee, cannot be established. Of course, there can be other aspects on which the jantri value may, or may not, be applicable but that is a different issue. The claim made by the assessee was thus clearly something which should have provoked further examination or at least being dealt by way of a speaking order, but the Assessing Officer chose to remain silent on the same. As observed by Hon'ble Delhi High Court, in the case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi), "The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income- tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." Of course, if the explanation given by the assessee was of the nature as could possibly satisfy any reasonable person, even if other view was possible, the situation would have been different. The explanation given by the assessee in this case, however, was simply not a legally possible view of the matter. Even in the oft quoted case of Malabar Industrial Co. Ltd v. CIT [2000] 109 Taxman 66/243 ITR 83 (SC), Hon'ble Supreme Court has observed that "when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law" (Emphasis supplied by us now). The view canvassed by the assessee, in our considered view, was unsustainable in law. Therefore, even if the matter was examined by the Assessing Officer and it was a conscious call of the Assessing Officer to accept the plea of the assessee, such a situation would not take the matter outside the ambit of Section 263 as the view adopted by the Assessing Officer was clearly unsustainable in law. Having said that, we must add that there can be other legal reasons for grant of relief on merits, and that area is not yet explored by, or before, us. In any case, all that the learned Commissioner has directed is examination of the claim on merits and, for the above reason, we see no infirmity in that direction. In view of these discussions, as also bearing in mind entirety of the case, we uphold the impugned revision order and decline to interfere in the matter. As we do so, we make it clear that our expression of view on merits of the case is only a prima facie impression, and it must not, therefore, influence the decision of the Assessing Officer on

12 ITA No.239/CTK/2015 merits. Uninfluenced with these observations, the Assessing Officer will take a call on merits of the matter.” 11. Further, the Hon’ble Apex Court in the case of Deniel Merchants Pvt Ltd. vs ITO in Special Leave (C) No.(s) 23976 /2017 and others order dated 29.11.2017 has upheld the judgement of Hon’ble Calcutta High Court passed on 10.4.2017 in G.A. No.599/2016, dismissing the special leave petition observing that the CIT after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed enquiry. In the peculiar facts and circumstances of the case, the case laws relied on by the ld. AR of the assessee are not applicable in the present case in hand. 12. In the case at hand, the Pr.CIT has simply directed the Assessing Officer to make necessary enquiries in respect of cash deposits in two banks and make fresh assessment. We are of the opinion that by making fresh assessment, no prejudice will be caused to the assessee. Hence, respectfully following the decision of coordinate bench of the Tribunal in the case of Babulal S. Solanki (supra) and the judgment of Hon’ble Supreme Court in the case of Deniel Merchants Pvt Ltd. (supra), we do not see any good reason to interfere in the impugned order passed by the Pr. CIT u/s.263 of the Act and accordingly the same is upheld. The grounds raised by the assessee are dismissed. 13. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 31/07/2019. Sd/- Sd/- (C.M.GARG) (L.P.SAHU) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनांक Dated 31/07/2019

13 ITA No.239/CTK/2015 प्र.कु.मम/PKM, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- . 1. Udit Prasad Babu, New Colony, Budharaja, Sambalpur 2. प्रत्यथी / The Respondent- Pr. CIT, Sambalpur 3. आयकर आयुक्त(अऩीऱ) / The CIT(A), 4. आयकर आयुक्त / CIT ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 5. गार्ग पाईऱ / Guard file. 6. सत्यावऩत प्रयत //True Copy// आदेशािुसार/ BY ORDER,

(Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack