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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against order dated 30/03/2022 passed by Ld.Pr.CIT-2, Bangalore u/s. 263 of the Act relating to A.Y. 2017-18 on following grounds of appeal. Tax effect relating to Grounds of Appeal each Ground of appeal The order of the Learned Principal Commissioner of Income-tax, Bengaluru
2. ("Pr. CIT") dated 30-Mar-2022, passed under I. section 263 of the Income-tax Act,1961 ("the Act") N.A insofar it is against the Appellant, is opposed to the law, weight of evidence, facts, and circumstances of the Appellant's case.
The impugned order under section 263 of the Act passed by the Learned Pr. CIT is in grave violation of principles of natural justice since the Appellant was not given a II. N.A reasonable opportunity of being heard and consequently, the impugned order is bad in law on the facts and circumstances of the case. The hearing notice dated 26-Mar-2022 and the order passed by the Learned Pr. CIT under section 263 of the Act dated 30-Mar- III. N.A 2022 are not signed, as a consequence of which, the revisionary order is invalid as per the law. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in ignoring the fact that the IV. proceeding under Section 263 cannot be used for substituting the opinion of the Learned Assessing Officer by that of the Learned Pr. CIT. On the facts and circumstances of the case, the order passed by the Learned Pr. CIT under section 263 of the Act is V. unsustainable as the power to revise can be invoked only in the case of lack of inquiry and not in the case of inadequate inquiry. The Learned Pr. CIT erred in not understanding the fact that scrutiny assessment has already been completed VI. under section 143(3) of the Act examining the issues raised in the order under section 263 of the Act. The Learned Pr.CIT erred in not appreciating the fact the Learned Assessing Officer issued second notice under section 143(2) of the Act during the VII. scrutiny assessment proceedings vide which he extended the limited scrutiny to cover verification of "cash deposits during the demonetization period" and verified all the details furnished before him by the appellant. The Learned Pr.CIT erred in applying the provisions of section 68 of the Act, without appreciating the fact that the appellant has VIII. furnished all the bank statements and sources of the cash deposits along with the KYC information. The Learned Pr.CIT erred in applying the case laws about the genuineness of the IX. transactions even though the Appellant has furnished the information regarding the source of such deposits. The Learned Pr.CIT erred in directing a fresh assessment on the opinion that the claim of X. deduction of an amount of Rs. 99,93,759/- under section 80P(2)(d) of the Act should be disallowed based on the facts and circumstances of the Page 3 of case. The Learned Pr. CIT erred in not appreciating the fact that during the scrutiny assessment proceedings, the Learned Assessing Officer had XI. verified the claim of deduction under Chapter VI- A of the Act and had verified the claim of the Appellant. Without prejudice to the above, the Learned Pr.CIT, while considering the contention that the interest income of the Appellant is XII. chargeable to tax under the head "income from other sources", ought to have also allowed the deduction of the cost of funds in accordance with section 57 of the Act. The Learned Pr.CIT erred in treating the original assessment order as "erroneous and prejudicial to the interests of revenue" XIV merely on the ground that his view is different from that of the Learned Assessing Officer. The aforesaid grounds of appeal are without prejudice to each other. The Appellant XV craves leave to add, alter, substitute, and delete any or all the grounds of appeal urged above. For the above and other grounds to be urged during the hearing of the appeal, XVI the Appellant prays that the appeal be allowed in the interest of equity and justice. Total tax effect
2. Brief facts of the case are as under: 2.1 The assessee is a cooperative credit society engaged in providing credit facilities to its members, filed its return of income for the assessment year under consideration on 21/10/2017 declaring income of Rs.13,00,450/- after claiming Chapter VIA deduction u/s 80P(2)(a)(i) of the Act of Rs.99,93,959/-. The Ld.AO accepted the details furnished by the assessee and completed the assessment after accepting the returned income for the year under consideration. 2.2 Subsequently, the Ld.PCIT initiated 263 proceedings by issuing notice dated 26/03/2022. For the sake of convenience, the same is reproduced as under:
2.3 No response was filed by the assessee in lieu of the notice and therefore the Ld.PCIT passed order on 30/03/2022 wherein following observations were made. “18. As discussed above, the assessee has failed to furnish a satisfactory explanation regarding the source of cash deposited in the bank accounts and the SBNs received. It has failed to explain the source of cash deposits and the SBNs received, not only during assessment proceedings, but even in response to the notice u/s 263. The amount of unexplained cash deposits and the SBNs received should have been added to the assessee's income, but the Assessing Officer has not made any such addition. When the case was selected for scrutiny specifically for examining the cash deposited, it was necessary for the Assessing Officer to examine the source of cash deposited and the SBNs received, and carry out necessary inquiries in accordance with law and CBDT guidelines. As discussed above, interest income should have been taxed u/s 56 and deduction u/s 80P(2)(a)(i) and u/s 80P(2)(d) was not allowable. The AO should have disallowed the entire deduction claimed u/s 80P(2)(d). The Assessing Officer has not examined this issue at all and has not conducted necessary enquiries. In view of these facts, the Assessing Officer has not conducted necessary inquiries and has not made the additions required as per law. Considering these facts, the assessment order is Page 6 of Revenue in terms of section 263. 19. This view is supported by the following judicial decisions:
1.
Malabar Industrial Co. Ltd [2000] 243 ITR 83 (SC) 2. Daniel Merchants P. Ltd. 2017- TIOL-455-SC-IT 3. Sreelekha Banerjee (196 49 ITR 112 (SC) 4. Rajmandir Estates P Ltd. (2017) 245 Taxman 127 (SC) 5. Ashok Logani (2012) 347 ITR 22 (Delhi) 6. Gee Vee Enterprises (1975) 99 ITR 375 (Delhi) 7. Vedanta Ltd. (2021) 279 Taxman 358 (Born) 8. V. K. Bharathi (2019) 102 taxmann.com 255 (Kar) 9. Rajalakshmi Mills Ltd. v. ITO (200 121 ITD 343 (Chennai)(SB) 10. Lokesh M. (2021) 187 ITD 342 (Bang) 20. In view of the above discussion, the aforesaid assessment order is erroneous and prejudicial to the interests of Revenue in terms of section 263. The assessment order is accordingly, set aside for this purpose and the AO is directed under section 263, to make a fresh assessment in accordance with law. after considering the above. The AO shall examine the cash deposits and the transaction in SBNs during the demonetisation period, the claim for deduction u/s 80P and other issues discussed above, and conduct necessary inquiries in accordance with law and CBDT guidelines. He shall give the assessee an opportunity to furnish necessary evidence to establish his claim and explain why the proposed additions be not made to income. The AO shall consider the facts. and the results of any enquiries made, as well as the explanation furnished by the assessee. and make a fresh assessment in accordance with law.” 2.4 Aggrieved by the impugned order, the assessee is in appeal before this Tribunal.
3. The primary contention of the Ld.AR is that no sufficient opportunity was granted to assessee and that assessee could not immediately respond to the show cause notice issued by the Ld.PCIT.
4. On the merits of the case, the Ld.AR submitted that assessing officer during the original assessment proceedings has issued notice u/s. 143(2) wherein details regarding the limited scrutiny Page 7 of issues were filed based on which the assessment order has been passed. He submitted that the revisionary proceedings is mere change of opinion and therefore is bad in law.
On the contrary, the Ld.DR submitted that the issues that were considered by the Ld.AO in the limited scrutiny proceedings were as under: 1) Deduction under Chapter VIA 2) Expenses incurred for earning exempt income 6. It is the submission of the Ld.AR that assessee being a co- operative society had accepted cash deposits during the demonetisation period into its bank accounts in specified bank notes which were not verified by the Ld.AO in accordance with the CBDT Circular wherein an instruction has been issued on 21/02/2017, 03/03/2017, 15/11/2017 and 09/08/2019. He submitted that as the verification of the cash deposits is not in accordance with the directions of the CBDT, there is inadequate enquiry in respect of the cash deposited during demonetisation. He thus supported the view taken by the Ld.PCIT. We have perused the submissions advanced by both sides in the light of records placed before us.
The legal argument raised by the assessee challenging the validity of the notice issued cannot be appreciated for the simple reason that in the notice issued u/s. 263, there is a reference to ITBA No. and DIN No. Further, the notice also carries the name of the PCIT who has issued the alleged document and therefore Page 8 of merely because there is no digital signature will not vishiate the validity of such notice.
We note that even the 263 order passed by the Ld.PCIT as well as the 263 order passed by the Ld.PCIT and the notice issued u/s. 143(2) during the original assessment proceedings by the Ld.AO are on similar lines which has not been under challenge by the assessee.
We therefore reject this argument by the Ld.AR. Now coming to the merits of the case, we are of the opinion that there is a violation of natural justice in respect of not granting sufficient time to the assessee for representing its case before the Ld.PCIT. However, considering the fact that in any event, the issue would have to be remanded to the Ld.AO in order to verify the cash deposit of Rs. 3,00,07,129/- in specified bank notes during the demonetisation period in its bank account in accordance with various instructions referred to by the Ld.DR hereinabove.
Admittedly, the assessee had accepted the SBNs which were no longer a legal tender and were to be explained in accordance with the relevant circular mentioned hereinabove. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases.
In 1 of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between Page 9 of these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. 11.1 The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not. 11.2 The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to Page 10 of establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. The Ld.AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim. Accordingly the appeal filed by assessee stands allowed for statistical purposes. In the result, the appeal filed by assessee stands allowed for statistical purposes. Order pronounced in the open court on 26th September, 2022.