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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
ORDER PER GAGAN GOYAL, A.M: This appeal by the assessee is directed against the order of Ld. Principal Commissioner of Income Tax-19, Mumbai [hereinafter referred to as (‘Ld. Pr.CIT) dated 22.03.2021 for the Assessment Year (AY) 2011-12. The assessee has raised the following grounds of appeal:
“1. The order passed by the ld. Pr. Commissioner of Income Tax-19, Mumbai (the ld. PCIT") u/s 263 of the Income Tax Act, 1961 ("the Act") is invalid and bad in law without providing the appellant a reasonable opportunity of being heard.
2. The ld. PCIT has erred in law and in facts in not appreciating that the order passed by the of Income Tax Officer-19(1)(1) u/s.144 r.w.s. 147 of the Cat dated 12.12.2018 was neither erroneous nor prejudicial to the interest of the revenue and that the provision of section 253 of the Act have been involved without complying with the conditions mentioned in the said section 3. The ld. PCIT erred in law and facts in not appreciating the fact that the Id. Assessing Officer had passed the assessment order u/s. 144 r.w.s 147 of the Act after making appropriate enquires, verifications and considering the materials available on records and that the view taken by the ld. Assessing Officer was one of the possible views.
4. All the grounds are independent and without prejudice to each other."
Brief facts of the case are that the assessee has not filed any return of income for the A.Y. 2011-12. Information has been received from the ITO 21(1)(1), Mumbai dated 20.03.2018 that the assessee has deposited cash amounting to Rs. 77,10,000/- in Bank of Maharashtra during the F.Y. 2010-11 relevant to A.Y. 2011- 12. Further, on verification of the ITS details on ITD system & ITBA/360 degree, it is found that the assessee has made cash deposits amounting to Rs. 77,10,000/- in the savings bank account with Bank of Maharashtra on various dates in the F.Y. 2010-11 relevant to AY. 2011-12.The source of this cash deposit has not been explained by the assessee. Since the assessee has not furnished any explanation in support of the cash deposit of Rs. 77,10,000/-, the same remained unexplained and needs to be taxed as per the provisions of the I.T. Act, 1961.
Further, ITO 21(1)(1), Mumbai has also forwarded the information as received from the Dy. DIT(Inv.), Unit-7(1), Mumbai regarding the amount credited of Rs. 2.21 Cr. and amount debited of Rs. 2.15 Cr. in the assessee's bank account with the Akola Urban Co-op Bank Ltd. during the F.Y. 2010-11 relevant to AY 2011-12.
The source of the huge credit of Rs. 2.21 Crore has also not been explained by the assessee by filing return of income or furnishing any explanation in support of the amount credited in the bank account, the same remained unexplained and needs to be taxed as per the provisions of the I.T. Act, 1961.
In view of the above, the case was re-opened u/s. 147 of the Act by issue of notices u/s. 148 dated: 26.03.2018 after recording the reasons and sent to the assessee which was duly served on the assessee.
Notices u/s 142(1) was issued on 17.07.2018 & 28.09.2018 and reminders to notice u/s. 142(1) were issued to the assessee on 18.10.2018 & 01.11.2018. In response to the said notices neither assessee nor authorized representative of the assessee attended and furnished any details.
As assessee neither attended any proceeding nor filed any explanation, AO added back cash deposit of Rs. 77,10,000/- + Rs. 11,05,000/- (2.5% of cash credit of Rs. 2.21 Cr. + cash debit of Rs. 2.21 Cr.). Actually the figure of cash debit was Rs. 2.15 Cr. As per record available on the appeal file, we have not observed any appeal assessee had filed against this order of AO passed under section 144 read with section 147 of the I.T. Act.
It is also observed that neither assessee nor AO had given any logic/explanation about calculation of Rs. 11, 05,000/- instead of considering the whole amount of Rs. 2.21 Cr. cash deposited in Akola Urban Co-op. Bank Ltd. Non enquiry/investigation by the AO against this cash deposit of Rs. 2.21 Cr., made Pr.CIT to rethink and proceed under section 263(1) of the I.T. Act.
A notice under section 263(1) of the I.T. Act dated 16.03.2020 was issued to the assessee to provide it an opportunity to be heard. But again assessee has not responded to the said notice. Ground no.1 raised by assessee does not hold water as observed (supra) that neither during the assessment proceedings nor during proceedings under section 263(1) of the I.T. Act assessee complied. Assessee did not even bother to file return under section 148 of the I.T. Act and there is no evidence or submission by the assessee before this Bench also about filing of appeal against the assessment order.
This confirms that assessee was comfortable with the order of AO and intentionally was non-participating before the AO and Ld. Pr.CIT. Hence, ground no.1 raised by the assessee is dismissed. 10. Ground No.2 & 3 raised by the assessee are interlinked in terms of implications and facts, hence, disposed of by a common finding through the discussions in coming paras. 11. We have gone through the order of the AO passed under section 144 read with section 147 of the I.T. Act, order of Pr.CIT passed under section 263(1) of the I.T. Act and record available before us. Nowhere, we found any enquiry by AO, any submission by the assessee and logic to reach the figure of Rs. 11, 05,000/-. 12. We do not found any force in the argument of the assessee that the view taken by the AO was one of the possible views; hence, Pr.CIT cannot exercise his powers under section 263(1) of the I.T. Act. This argument holds well where a proper verification, enquiry, justification were there in the order of the AO along with evidences and proper submission from the side of assessee. As in this case assessment was framed under section 144 of the I.T. Act and assessee had not even filed return of income under section 148 of the I.T. Act, there is no possibility of proper verification, enquiry, justification in the order of the AO along with evidences and proper submission from the side of assessee. For sake of clarity and better analysis, we are reproducing herein-below the provisions of section 263 of the I.T. Act:
“Revision of orders prejudicial to revenue. 263. (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or] Commissioner 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 [or the Transfer Pricing Officer, as the case may be,] 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,— (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. [Explanation 1.]—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988] by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall include— (i) an order of assessment made by the Assistant Commissioner [or Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the [Joint] Commissioner under section 144A; (ii) an order made by the [Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer [or the Transfer Pricing Officer, as the case may be,] conferred on, or assigned to, him under the orders or directions issued by the Board or by the [Principal Chief Commissioner or] Chief Commissioner or [Principal Director General or] Director General or [Principal Commissioner or] Commissioner authorised by the Board in this behalf under section 120; [(iii) an order under section 92CA by the Transfer Pricing Officer;] (b) "record" [shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the [Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or] Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] [Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] 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 [Chief Commissioner or Chief Commissioner or 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.] [Explanation 3.—For the purposes of this section, "Transfer Pricing Officer" shall have the same meaning as assigned to it in the Explanation to section 92CA.] [(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.”
To further elaborate the legal position applicable to the case, we are also relying on following judicial pronouncements as having been relied upon by the Pr.CIT in his order as under: “In the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (50) has been , held that the pre-requisite to the exercise of jurisdiction by the Commissioner under section 263 is that the order of the Assessing Officer is erroneous in so far as t is prejudicial to the interests of the revenue. An incorrect assumption of facts or an incorrect application of taw will satisfy the requirement of the order being erroneous In the same category tall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. In Bismillah Trading Co. v. Intelligence Officer [2001] 248 ITR 292 (Ker.), as also in the case of Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 (Mad.) it was held that there must be grievous error in the order passed by the ITO which might set a bad trend or pattern for similar assessments which, on a broad reckoning, the Commissioner might think to be prejudicial to the revenue administration. The prejudice must be prejudice to the Revenue administration.
In the case of Smt. Tara Devi Aggarwal v. Commissioner of Income-tax [1973] 88 ITR 323 (SC) it has been held that the Commissioner has ample jurisdiction under section 263 to cancel the assessment and may initiate proceedings for assessment under the provisions of the Act against some other assessee who according to the income-tax authorities is liable for the income thereof. In Thalibai F. Jain ITO (1975) 101 ITR 1 (Kar), it was held that assessments made in undue haste and without an enquiry whether the income offered was that of the assessee or someone else, are prejudicial to the interests of the revenue, and what is prejudicial to the interests of the revenue must be held to be erroneous though the converse may not always be true. Also, in CIT v. Pushpa Devi [1987] 164 ITR 639 (Pat), it has been held that enquiry into the source of the initial capital is crucial for the ITO. If that is not done, the assessment is bound to be erroneous and hence prejudicial to the revenue and if the procedure adopted by the ITO brings in lesser revenue than some other procedure, the order passed by the ITO would obviously be prejudicial to the revenue, and would give jurisdiction to the Commissioner under section 263. In a recent decision of the Apex Court in the case of CIT v Amitabh Bachchan (384 ITR 200), the Supreme Court held that Section 263 does not require any specific show cause notice detailing specific grounds on which revision of assessment order is tentatively being proposed affecting initiation of exercise in absence thereof or to require commissioner to confine himself to terms of notice and foreclosing consideration of any other issue or question of fact Commissioner is free to exercise his jurisdiction on consideration of all relevant facts, provided an opportunity of hearing is afforded to assessee to contest facts on basis of which he had exercised revisional jurisdiction The failure on the part of the AD to conduct the necessary enquires in the circumstances of the case makes the order erroneous and prejudicial to the interest of revenue as held in the cases of Rampayari Devi Saraogi Vs. CIT 67 ITR 54 (SC) and Tara Devi Agarwal Vs. CIT 88 ITR 323 (SC) The failure of the AD to make further enquires before accepting the submissions of the assessee makes this assessment order erroneous and prejudicial because unlike the Civil Court which is neutral to give decision on the basis of evidence produced before it, an AO is not only an adjudicator but is also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. The word "erroneous in this section includes cases where there has been a failure to make the necessary inquiries [Gee Vee Enterprises v. Addl. CIT, (1975) 99 ITR 375, 386 (Del)). It is incumbent on the Officer to investigate the facts stated in the return, when circumstances would make such an enquiry prudent and 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 [Duggal & Co. v. CIT. (1996) 220 ITR 456, 459 (Del)]. CIT v. Pushpa Devi, (1987) 164 ITR 639 (Pat): CIT v. Smt. Rambha Devi, (1987) 164 ITR 858 (Pat). The above stated decisions postulate that when the Officer is expected to make an inquiry of a particular item of income and if he does not make an inquiry as expected, that would be a ground for the Commissioner to interfere with the order passed by the Officer since such an order passed by the Officer is erroneous and prejudicial to the interests of the Revenue [ K.A. Ramaswamy Chettiar v. CIT, (1996) 220 ITR 657, 665 (Mad)]. The above referred judgments are now explicit in the section itself and the judgments which state that once inquiry is made, the order is insulated from provision of s. 263 will no longer be applicable by virtue of Explanation 2 to Section 263 inserted w.e.f. 01-06-2015.”
Considering the facts of the case, the law discussed above, we are not inclined to interfere in the order of Ld. Pr.CIT. In our opinion, the order of Ld. Pr.CIT (directing AO to re-verify the entries of cash deposit after giving assessee a proper opportunity of being heard) is of two fold, i.e. on the one hand it directs the AO to re-verify the matter to protect the interest of Revenue with proper justification and on the other hand it’s an opportunity to the assessee also to substantiate his claim about the source of the cash deposit and its consequences thereafter.
We found order of Ld. Pr.CIT legally and factually valid one, hence, required no interference from this Bench. In the result, ground no. 2 & 3 raised by the assessee are also dismissed.