V.NATARAJAN,RASIPURAM vs. ACIT CENTRAL CIRCLE, SALEM

By way of captioned appeals, the assessee contests validity of revisional jurisdiction u/s 263 as exercised by revisional authority for Assessment Years (AY) 2015-16 and 2016-17. The facts as well as issues are stated to be identical in both the years.

First, we take up appeal for AY 2015-16 which assails revisional order dated 30.03.2021 passed by Ld. Pr. Commissioner of Income Tax (Central), Chennai-2, (Pr. CIT) in the matter of an assessment framed by Ld. Assessing Officer (AO) u/s.143(3) r.w.s. 153A of the Act on 29.12.2018. The grounds raised

The Ld. AR advanced arguments to submit that issue as raised in revisional order has already been verified by Ld. AO during the course of regular assessment proceedings and the requisite details were furnished by the assessee in support of its claim. Another argument raised by Ld. AR is that doctrine of merger would apply since the assessment order is subject matter of challenge before first appellate authority on legal grounds as well as on merits. Therefore, the statutory provisions would debar revision of the order. The Ld. CIT-DR, on the other hand, maintained that though the documents were furnished by the assessee, however, no proper enquiry or verification was done by Ld. AO while accepting the claim of the assessee which justify revision of the order. Having heard rival submissions, our adjudication would be as under. 4.1 Upon perusal of records, it could be seen that the assessee was assessed u/s.143(3) r.w.s.153A on 29.12.2018. The assessee being Chairman of an educational trust was subjected to search action u/s.132 on 27.12.2016. Based on search findings, the assessment was framed against the assessee after making certain additions. 4.2 During the course of assessment proceedings, the assessee was asked to explain the bank transactions as done in various accounts held with Corporation Bank and Axis Bank. The assessee, vide reply dated 14.11.2018, furnished integrated receipts and payments account which has been extracted in Para-12 of the assessment order. The Ld. AO, after considering various replies and explanations, made various additions and assessed the income at Rs.278.28 Lacs. 4.3 Subsequently, Ld. Pr. CIT, upon perusal of case records, sought revision of the order on the ground that the assessee had made cash deposits of Rs.159.33 Lacs during the period from 01.04.2014 to 31.03.2015 whereas gross income amounting to Rs.132.60 Lacs was only disclosed. The same was not verified and the issue was not discussed in the assessment order. Therefore, the source of cash deposits remained unexplained and the same was to be brought to tax. Accordingly, the assessee was put to a show-cause notice. 4.4 The assessee, inter-alia, submitted that during the year, it had maintained seven bank accounts and copies of all bank accounts was furnished to Ld. AO at the time of assessment proceedings. The entire cash deposit was duly reflected in the integrated receipt and payment account covering all cash and bank transactions. The same was duly explained and verified by Ld. AO during the course of regular assessment proceedings. The assessee also furnished cash flow statement in support of its claim. 4.5 However, making adverse observations, Ld. Pr. CIT held that the assessment was completed without making proper inquiry about source of cash deposit of Rs.159.33 Lacs. Finally, invoking Explanation-2 to Sec.263, the order was held to be erroneous and prejudicial to the interest of the revenue and Ld. AO was directed to redo the assessment with a direction to verify genuineness of source of cash deposits. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 5. We are of the considered opinion that as per the provisions of Section 263, the revisional authority is vested with the supervisory powers of suo-moto revision of any order passed by Ld. AO. For the said purpose, the appropriate authority may call for and examine the record of any proceedings under the Act and may proceed to revise the same provided two conditions are satisfied-(i) the order of the assessing officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the revenue. If one of the conditions is absent i.e., if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but it is prejudicial to the revenue - recourse cannot be had to Section 263 of the Act as held by Hon’ble Supreme Court in Malabar Industrial Co. Ltd. V/s CIT [243 ITR 83 10/02/2000] & noted by Hon’ble Delhi High Court in CIT V/s Vikas Polymers [194 Taxman 57 16/08/2010]. In terms of Explanation-2, as inserted by Finance Act 2015 in Section 263 with effect from 01/06/2015, the order shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of appropriate authority-(a) the order was made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order is not in accordance with any direction or instructions etc. issued by the Board u/s 119; or (d) the order was not in accordance with binding judicial precedent. 6. At the same time, Hon’ble Delhi High Court in CIT V/s Vikas Polymers (supra), observed that as regards the scope and ambit of the expression "erroneous", Hon’ble Bombay High Court in CIT vs. Gabriel India Ltd. [1993 203 ITR 108 (Bombay)], held with reference to Black's Law that an "erroneous judgment" means "one rendered according to course and practice of Court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles" and thus it is clear that an order cannot be termed as "erroneous" unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as "erroneous" by the Commissioner simply because, according to him, the order should have been written differently or more elaborately. The Section does not visualize the substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is not in accordance with law. 7. Further, any and every erroneous order cannot be the subject matter of revision because the second requirement also must be fulfilled. There must be material on record to show that tax which was lawfully leviable has not been imposed as held in Gabriel India Ltd.(supra). However, the expression "prejudicial to the interest of the revenue", as held by the Supreme Court in the Malabar Industrial Co. Ltd. case, is not an expression of art and is not defined in the Act and, therefore, must be understood in its ordinary meaning. It is of wide import and is not confined to the loss of tax as held in various judicial pronouncements. At the same time, the words "prejudicial to the interest of the revenue", as observed in Dawjee Dadabhoy and Co. vs. S.P. Jain, (1957) 311 ITR 872 (Calcutta), can only mean that "the orders of assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized." Thus, the Commissioner's exercise of revisional jurisdiction under the provisions of Section 263 cannot be based on whims or caprice. It is trite law that it is a quasi-judicial power hedged in with limitation and not an unbridled and unchartered arbitrary power. The exercise of the power is limited to cases where the Commissioner on examining the records comes to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interest of the revenue and that fresh determination of the case is warranted. There must be material to justify the Commissioner's finding that the order of the assessment was erroneous insofar as it was prejudicial to the interest of the revenue. 8. The Hon’ble Delhi Court, in the cited decision, further observed that there is a fine though subtle distinction between "lack of inquiry" and "inadequate inquiry". It is only in cases of "lack of inquiry" that the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and passing orders thereon. In Gabriel India Ltd. (supra), it was expressly observed: - "The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all stage and that lapse of time must induce repose in and set at rest judicial and quasi- judicial controversies as it must in other spheres of human activity [Parashuram Pottery Works Co. Ltd. vs. ITO, (1977) 106 ITR 1 (SC)].

Applying the aforesaid principles to instant case and after going through assessment order, we find that requisite queries were raised by Ld. AO during the course of regular assessment proceedings. The assessee had furnished bank statements of all the accounts along with integrated receipts and payments account which contain not only cash transactions but all the bank transactions also. The Ld. AO, after considering the same, examined each of the aspect and chose to make certain additions disregarding the explanations filed by the assessee. In fact, the assessment was pursuant to search action u/s 132 and all the issues arising therefrom were duly considered by Ld. AO. Merely because each of the aspect was not mentioned in the assessment order, the assessment order could not be branded as a case of lack of enquiry. Another aspect to be noted that in the assessment order, Ld. AO has made certain additions on account of cash receipts by the assessee and the assessment order is already under challenge before learned first appellate authority. This being the case, the pendency of the issues before learned first appellate authority, which are connected with the issues flagged in the revisionary order, would debar the jurisdiction of revisional authority u/s 263. Therefore, the revision of the order could not be sustained in the eyes of law and is liable to be quashed. We order so.

It is admitted position that the facts as well as issues in AY 2016-17 are quite identical. The assessee has been assessed u/s 143(3) r.w.s. 153A on 29.12.2018. The revisional authority alleged that the source of cash deposits of Rs.62.83 Lacs was not verified and directed Ld. AO to redo the assessment on similar lines. Aggrieved, the assessee is in further appeal before us. Facts as well as issues being pari-materia the same, our adjudication as for AY 2015-16 would, mutatis-mutandis, apply to this year also. In other words, the revisionary order stands quashed. 11. Both the appeals stand allowed in terms of our above order. Order pronounced on 30th November, 2022. (V. DURGA RAO) (MANOJ KUMAR AGGARWAL) "ाियक सद2 /JUDICIAL MEMBER लेखा सद2 /ACCOUNTANT MEMBER चे3ई/ Chennai; िदनांक/ Dated : 30-11-2022 DS आदेशकीUितिलिपअ7ेिषत/Copy of the Order forwarded to : अपीलाथ"/Appellant2. !थ"/Respondent आयकरआयु< (अपील)/CIT(A)4. 1. 3. आयकरआयु</CIT 5. िवभागीय ितिनिध/DR6. गाडAफाईल/GF