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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM :
These appeals preferred by the same assessee emanates from the respective orders of the Ld. Pr.CIT-(Central), Pune u/s 263 of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) all dated 18.03.2019 for the assessment years 2009-10 to 2015-16 as per the grounds of appeal on record.
The crux of the grievance of the assessee in all the years under appeal is the assumption of revisionary jurisdiction u/s 263 of the Act by the Ld. Pr.CIT.
Both the parties agreed that the facts and circumstances are similar in respect of each of the assessment years. These cases were therefore, heard together and are disposed off vide this consolidated order.
At the very outset, the Ld. AR of the assessee submitted that ITA No759/PUN/2019 for A.Y. 2015-16 can be taken as the lead case to decide the issue regarding all these appeals. That as a matter of completeness, we take ITA No.759/PUN/2019 as the lead case for A.Y. 2015-16 wherein the principal facts are that search and seizure operation was conducted u/s 132 of the Act on 26.11.2014 in the Chandukaka Group of cases. Consequent to
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the search, the case was centralized with the Central Circle-1(1), Pune vide Pr.CIT-III, Pune‟s order number 2895, dated 13.02.2015. During the course of search and post search it was detected that the assessee had booked huge bogus purchases in form of purchases from Unregistered Dealers (in short „URD). The Assessing Officer at para 6.1 of his order had issued summons u/s 131 of the Act to Principal Officers of Chandukaka Saraf & Company to attend and provide the details such as name, address, PAN, quanity and amount for gold purchased from the Unregistered Dealers. The Authorized representative of the assessee attended and submitted the URD purchase details. The names given by the assessee were searched on ITD system and it was found that number of persons don‟t even have PAN. The Assessing Officer in order to verify the genuineness of URD purchases issued summons u/s 131 of the Act to 43 persons. That out of those 43 persons, summons issued were duly served on 19 persons and that is coming out from the assessment order at para 6.2, where the complete details have been given. That further out of those 19 persons on whose addresses the summons were served 4 persons attended and deposed their submissions before the Assessing Officer. That the Assessing Officer in the course of assessment proceedings had issued several questionnaires to the assessee time and again asking for details regarding URD purchases and the assessee has constantly replied to those queries asked by the Assessing Officer. However, not being satisfied with the entire genuineness of URD purchases, the Assessing Officer made disallowance of 2% of the total URD purchases in cash and added back the amount to the income of assessee. Thereafter, the Pr.CIT had issued show cause notice u/s 263 of the Act, dated 14.01.2019 to the assessee observing that the decision of Assessing Officer disallowing only 2% of gold purchases from Unregistered Dealers in cash is erroneous and prejudicial to
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the interest of the Revenue. The assessee filed written submissions with regard to the show cause notice. However, the Ld. Pr.CIT went on to pass 263 order on 18.03.2019 specifically on the ground that there has been a complete lack of application of mind and incorrect assumption of facts by the Assessing Officer and that 2% disallowed out of total URD purchases in cash were therefore, an order which was erroneous and prejudicial to the interest of the Revenue.
At the time of hearing, the Ld. AR of the assessee vehemently argued that it is definitely not a case of in-application of mind or incorrect assumption of facts by the Assessing Officer, since the Assessing Officer had made detailed specific enquiries and issued show cause notice to the assessee. The chronology of events and the supporting documents filed before us in Paper Book are as follows:
Sr No Date of Notice and Paper Book Remarks dated of Reply Page No submitted by the appellant A Enquiry before the Deputy Director of Income Tax (Investigation) Unit II(1), Pune 1 15th January 2015 Page No 42 to Response to the summon issued by 43 of Paper The Deputy Director of Income Tax Book for AY (Investigation) Unit II (1), Pune 2015-16 asking the details on various issues including details of URD purchases B Enquiries before the learned Assessing Officer 2 29th May 2016 Page No 01 to Notice issued by the learned AO 06 of Paper asking the details of URD Book for AY Purchases and Expenses debited to 2015-16 Profit and loss account 3 11th August 2016 Page No 07 to The learned AO issued further 08 of Paper notice asking the details of gold Book for AY purchases made from Unregistered 2015-16 Dealers (URD) in the specified format 4 26th September 2016 Page No 09 to Reply submitted by the appellant 13 of Paper giving complete details of URD Book for AY purchases made from AY 2009-10 2015-16 to AY 2015-16 5 07th November 2016 Page No 14 to Letter issued by the learned AO 15 of Paper informing that summons were
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Book for AY issued to the parties from whom the 2015-16 appellant has made URD purchases and asked the appellant to explain status of the summons. 6 15th December 2016 Page No 16 to Letter issued by the learned AO 17 of Paper asking the appellant that the person Book for AY to whom summons were issued 2015-16 either were unserved or did not attend. Out of 43 summons 19 were served and 4 persons attended the summons 7 21st December 2016 Page No 18 to Reply submitted by the appellant 29 (Page No 27 for verification of URD purchases to 28) of Paper giving the details of month wise Book for AY URD purchases made (in grams) 2015-16 along with the Annexure from Tax Audit Report showing Opening Stock, Purchases made, Sales made and Closing Stock in Quantity. 8 21st December 2016 Page No 18 to Reply submitted by the appellant 29 (Page No 27 providing detailed chart showing to 28) of Paper the name, address, date of Book for AY purchase, weight, amount paid, 2015-16 purchase and selling rates and the details of purchases against the sale of gold. 9 23rd December 2016 Page No 39 to Notice issued by the learned AO 39 of Paper asking further details of URD Book for AY purchases to be bifurcated between 2015-16 Purchases made by Cheque and Cash 10 27th December 2016 Page No 40 to Reply submitted by the appellant 41 of Paper giving bifurcation of URD purchase Book for AY in cash and cheque. 2015-16
The Ld. AR of the assessee further submitted that after completion of these detailed enquiries the Assessing Officer had disallowed 2% of URD purchases. The Ld. AR of the assessee apprised the Bench that on absolutely similar set of facts in the case of Chandukaka Saraf and Sons Pvt. Ltd. in ITA Nos.684 to 690/PUN/2019 for A.Ys. 2009-10 to 2015-16, there also the Assessing Officer had disallowed 2% of URD purchases made in cash for which Pr. CIT assumed the jurisdiction u/s 263 of the Act. In this case, the Tribunal observed at para 11 that there were several enquiries made by the Assessing Officer with regard to asking for details regarding URD purchases, for which the assessee had also given replies. The Tribunal observed that the
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core issue of URD purchases was repeatedly examined over a period of months / years and issued number of letters / notices after examining three sets of Paper Book containing 1000 and above pages. The Tribunal at para 14(A) observed regarding assumption of inaccurate particulars / facts and held that the allegation of Ld.Pr.CIT is unspecific and vague, in view of those enquiries in detailed manner conducted already by the Assessing Officer on that very issue on which 263 order was passed. Similarly, at para 14(B), the Tribunal observed that with regard to Explanation 2 of section 263 of the Act inserted by the Finance Act, 2015 w.e.f. 01.06.2015, the key words are (i) without making enquiries or (ii) verification which should have been made and (iii) allowing any relief without enquiring into the claim. On examination of each of these expressions, the Tribunal noted as per the facts on record of the case that a detailed verification regarding URD purchases have been conducted by the Assessing Officer and thereafter, he has decided to disallow 2% of those purchases. The Assessing Officer has passed the assessment order after conducting reasonable enquiries and therefore, in that case the Tribunal has held that the Ld. Pr.CIT has exceeded his jurisdiction in invoking revisional powers. The Ld. AR of the assessee further contended that it is not case that the entire relief has been granted by the Assessing Officer to the assessee rather he has disallowed 2% of URD purchases. Therefore, the newly inserted Explanation 2 to clause (b) of section 263 of the Act is not applicable to the case of assessee. More, so because this Explanation 2 was inserted w.e.f. 01.06.2015 i.e. A.Y. 2016-17, whereas in the present set of appeals of the assessee it is from A.Y. 2009-10 to 2015-16. The Ld. AR of the assessee placed reliance on the decision of the Hon‟ble Bombay High Court in the case of CIT Vs. Fine Jewellery (India) Ltd. in ITA No.296 of 2013 reported in (2015) 372 ITR 303 (Bom), wherein the Hon‟ble
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High Court had observed and opined that the Tribunal recorded the fact that specific enquiries were made during assessment proceedings with regard to the details of expenditure claimed under the head “Miscellaneous Expenses” aggregating to Rs.2.94 crores. The assessee had responded to the same and on consideration of response of the assessee, the Assessing Officer held that the amount of Rs.17.98 lakhs incurred on account of repairs & maintenance out of Rs.2.94 crores was capital expenditure. This itself would be indication of application of mind by the Assessing Officer while passing the impugned order. The case of Idea Cellular Ltd. Vs. DCIT & Ors. (2008) 301 ITR 407 (Bom) was also referred to, wherein it was held that if enquiries raised during assessment proceedings and responded to by the assessee, it cannot be then lead to a conclusion that no mind had been applied to it. Further reliance was placed by the Ld. AR of the assessee in another decision of the Hon‟ble Bombay High Court in the case of CIT Vs. Nirav Modi in Income Tax Appeal No.117 & 119 of 2014 reported in (2017) 390 ITR 292 (Bom) in which case it was held by the Hon‟ble High Court that on observing the order of Pr. CIT passed u/s 263 of the Act, it is clear that enquiries were made by the Assessing Officer, therefore, it is not case of no enquiry probably it is case of inadequate enquiry by the Assessing Officer according to the decision of Pr.CIT. But in such scenario, provisions of 263 of the Act cannot be resorted to and the Hon‟ble High court categorically held that the power of revision u/s 263 of the Act would normally be exercised in case of no enquiry and not in cases of inadequate enquiries.
Per contra, the Ld. DR placed strong reliance on the 263 order passed by the Pr.CIT.
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We have perused the case records and heard the rival contentions. We have also analyzed the facts and circumstances of the case. In this case, show cause notice u/s 263 of the Act and thereafter, order passed u/s 263 of the Act by the Ld. Pr.CIT is with regard to the core issue of URD purchases made by the assessee and according to the observations of Ld. Pr.CIT, there has been complete lack of application of mind and incorrect assumption of facts by the Assessing Officer. In this case, as demonstrated by the Ld. AR of the assessee and facts on record that with regard to the very issue of URD purchases detailed enquiry was conducted by the Assessing Officer and the entire trail of events find place in the Paper Book filed before us and has made part of the order in tabular form as appearing hereinabove or as appearing in the preceding paragraphs. The facts also reveals that 43 summons were issued by the Assessing Officer of which 19 summons were duly served to the concerned persons and out of those 19, 4 persons attended the hearing. The Assessing Officer after conducting these specific enquiries into the matter had disallowed 2% of such URD purchases. Therefore, these trail of events are complete evidence of the fact that it is not case of in- application of mind by the Assessing Officer nor also there is incorrect assumption of facts by the Assessing Officer. That on similar facts and circumstances, Pune Tribunal in ITA Nos.684 to 690/PUN/2019 (supra) had observed that the assumption of revisionary jurisdiction u/s 263 of the Act by the Pr.CIT is not warranted as per law in the case of the assessee. We further observed that Explanation 2 to section 263 of the Act has been effective from 01.06.2015 relating to A.Y. 2016-17, whereas the assessee‟s case is for A.Ys. 2009-10 to 2015-16. That further clause (b) of such Explanation talks of entire relief or full relief, whereas in this case of assessee it is not case of full
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relief but 2% has been disallowed on URD purchases. There is also no retrospective application to this insertion of provision as observed by the Tribunal at para 7 in ITA No.1056/PUN/2016 for A.Y. 2010-11 in the case of Smt. Shruti Rahul Mane Vs. Pr.CIT. The binding decisions of the Hon‟ble jurisdictional High Court brings forth the legal rationale that the revisionary jurisdiction u/s 263 of the Act can be assumed by the Pr.CIT only in case where there is no enquiry conducted by the Assessing Officer, whereas in this present case it is already demonstrated before us that there has been adequate enquiry on the core issue of URD purchases by the Assessing Officer. This fact also accepted by the Ld. DR and moreover the Ld. DR could not bring on record any other decision or evidences contradicting these existing facts on record. That also, regarding the binding judgments referred to by the Ld. AR of the assessee, the Ld. DR could not bring on board any other contrary view of other High Court or the Apex Court. In view of the matter and on examination of facts on record and the binding principles enshrined from the judicial pronouncements referred hereinabove, we are of the considered view that the Ld. Pr.CIT was not correct in resorting to revisionary jurisdiction u/s 263 of the Act and therefore, we quash the order passed u/s 263 of the Act.
In the result, appeal of the assessee in ITA No.759/PUN/2019 for A.Y. 2015-16 is allowed.
Both the parties at the very outset have agreed that the facts and circumstances for all the captioned assessment years are similar and therefore, our decision rendered in ITA No.759/PUN/2019 for A.Y. 2015-16 shall apply mutatis mutandis to other assessment years i.e. 2009-10 to 2014-
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Therefore, the respective orders passed u/s 263 of the Act for A.Ys. 2009- 10 to 2014-15 are also quashed.
In the result, all the appeals of assessee are allowed.
Order pronounced on 19th day of December, 2019.
Sd/- Sd/- ANIL CHATURVEDI PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 19th December, 2019. GCVSR आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. , आयकर अऩीऱीय अधधकरण, “ए” बेंच, 3. ववभागीय प्रतततनधध ऩुणे / DR, ITAT, “A” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 4. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy//
वररष्ठ तनजी सधचव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे/ ITAT, Pune