DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 1, MADURAI vs. SRI RETHINAM AGENCY, MADURAI

आदेश / O R D E R PER AMITABH SHUKLA, A.M :

These two appeals are filed by the Revenue against the order bearing DIN & Order No.ITBA / NFAC / S / 250 / 2023-24 / 1054988402(1) and No.ITBA/NFAC/S/250/2023-24/1054990047(1) dated 09.08.2023 of the Learned Commissioner of Income Tax [herein after “CIT(A), National Faceless Appeal Center[NFAC], Delhi, for the assessment years 2016-17 & 2017-18. Through the aforesaid appeal the Revenue has challenged order u/s 250 dated 09.08.2023 passed by Page - 1 - of 9 NFAC, Delhi. Both the appeals having identical grounds are disposed of by this common order for the sake of convenience. 2.0 It has been noted that there is a delay of 24 days each in filing of these appeals by the Revenue. It has been pleaded that the concerned officer was overwhelmingly preoccupied with time barring assignments leading to delay in timely filing of these appeals. The Ld. Counsel for the assessee did not oppose the Revenue’s petition for condonation of delay. Upon considering the facts we are satisfied with the sufficiency of reasons and proceed to condone the delay and adjudicate this appeal. 3.0 At the outset, it is necessary to very briefly narrate the factual matrix of the case. The assessee’s firm is dealing in trading of edible oil. The Ld. AO had received information from his counterpart of Thanjavur ward, that perusal of books of accounts and documents impounded during a survey proceedings in the case of one M/s. S.R.Ravi Group had revealed that the assessee was not disclosing his purchase of edible oils from the said M/s. S.R.Ravi Group correctly as also was indulging in unaccounted cash transactions etc. Based upon a survey report received from the ITO Thanjavur ward, the Ld. AO proceeded to initiate proceedings u/s 147 and passed reassessment orders u/s 143(3). Thus the Ld.AO made additions to the returned income of Rs.3,21,58,183/- u/s. 69C for AY-2016-17 and of Rs.3,15,16,995/- u/s. 69C, Rs.20,66,59,763/- u/s 69A for AY-2017-18. Page - 2 - of 9 4.0 The first issue raised by the Revenue is the decision of the Ld.CIT(A) to hold that the reopening done by the Ld.AO was based upon a case of borrowed satisfaction. The Ld. DR had argued that no case of borrowed satisfaction had been made out as the enquiries done, inter and intra department, do not fall in the realm of borrowed satisfaction. On the contrary the Ld. Counsel for the assessee argued that the assessing officer had merely relied upon the enquiries done by the ITO Thanjavur and drew his conclusions accordingly. It was argued that no independent enquiries were done by the Ld.AO to support his arguments. Thus it was argued that the Ld.CIT(A) had rightly concluded that the case of borrowed satisfaction was made out in the case and accordingly had concluded so. 5.0 We have heard rival submissions in the light of material available on records. The issue of borrowed satisfaction has been a subject matter of exhaustive examination by the Hon’ble Courts on several occasions. It has been held therein that wherever, pursuant to receipt of information from a third party, the reopening has been done by the Ld.AO after applying his own mind, supplemented by his / her own independent enquiries and investigations, a presumption of borrowed satisfaction would not lie. It is an undisputed fact of the present case that the Ld. AO had not conducted any enquiry or investigations and had merely relied upon the conclusions drawn by the ITO Thanjavur both at the stage of reopening as well as the final assessment proceedings. In fact, the Ld. Page - 3 - of 9 AO was actually not in a position to conduct any such enquiries for the simple reason that as admitted, by the Revenue, both the initiation of reopening proceedings as well as the conclusion of reassessment proceedings was done by the Ld.AO without being in the possession of impounded documents. It is a clear fact borne from records that the Ld.AO had merely relied upon the reports submitted by the ITO Thanjavur. Thus, in a situation when no impounded documents were admittedly available with the Ld. AO at the time of reopening, a case of borrowed satisfaction is definitely made out. We have noted the Ld. CIT(A) has comprehensively dealt with this aspect in paras 19 to 24 of his order for the AY 2016-17. Accordingly, we are of the opinion that no case is made out for any intervention at this stage. We therefore confirm the findings of the Ld.CIT(A) on this issue of borrowed satisfaction and dismiss the grounds of raised by the Revenue. 6.0 The next connected issue raised by the Revenue is regarding the stand of the Revenue that the assessment was made on the basis of material collected by the department and not on any guess work as wrongly held by the Ld. CIT(A). The Ld. DR relying upon the order of the Ld.AO, argued that the Ld. CIT(A) has wrongly held that the Ld.AO’s order is based upon conjectures and surmises since the assessment was made on the basis of material collected by the department. The Ld. Counsel for the assessee argued that the argument of the Ld. DR cannot Page - 4 - of 9 be accepted, for when there was, admittedly, no impounded material available with the Ld.AO and no independent enquiries done, there can only be the case a guess work. 7.0 We have heard rival submissions in the light of material available on records. We have noted that the conclusion drawn by the Ld. CIT(A) qua guess work by the Ld. AO are emanating from the principle fact of non-availability of impounded documents with the Ld. AO as well as total lack of any independent enquiry and investigation conducted by him. The order of the Ld. CIT(A) on the issue has been found to be adequately comprehensive and therefore we are of the view that no case of any interference has made out at this stage. We have noted that apart from relying upon the survey report submitted by the ITO, Thanjavur the Ld.AO did not conduct any enquiry to verify the allegations made therein. No enquiries with any bank were conducted nor were any investigations done qua third party transactions. Accordingly, we are of the opinion that no case is made out for any intervention at this stage. We therefore confirm the findings of the Ld.CIT(A) on this issue of guess work based assessment and therefore dismiss the grounds of raised by the Revenue. 8.0 The next issues raised by the Revenue is regarding the addition made on account of unaccounted cash purchases of Rs.3,21,58,183/- for AY-2016-17 and Rs.3,15,16,995/- for AY-2017-18 and of Page - 5 - of 9 Rs.20,66,59,763/- on account of unexplained money u/s. 69A for AY- 2017-18. The Ld. DR vehemently argued in favour of the order of the Ld.AO. The Ld. Counsel for the assessee submitted that the order of Ld.CIT(A) is based upon correct understanding and appreciation of the facts of the case, evidences on record and therefore does not calls for any intervention. 9.0 We have heard rival submissions in the light of material available on records. We have noted that as regards the matter concerning unaccounted purchases, the Ld. CIT(A) has dealt the issue comprehensively in his order for AY-2016-17 (from page 42 to 46 ) and for AY-2017-18 (from page 56 to 59). Similarly as regards the issue of addition of Rs.20,66,59,763/- the same has also been dealt by the Ld.CIT(A) extensively in his orders for AY-2017-18 (from page 56 to 59). 9.1 The Ld. DR made vehement request to restore the matter back to the Ld.AO for readjudication on the premise of adequate opportunities not being available with him. Upon consideration of the same we have noted that no merit lies in Revenue’s request. Firstly the Ld. AO had ample time and opportunity with him to conduct his enquiries into the affairs of the assessee, as emanating from the survey action, by holding enquiries with the banks as well as investigating third party affairs through examination and or cross examination. We have also noted that the same was not done by the Ld. AO. We have also noted that the Page - 6 - of 9 Ld.CIT(A) had remanded the matter to the Ld.AO for a report. Even at that stage also the Ld.AO did not woke up to the occasion and just allowed the situation to slip out of his hands, for reasons better known to him. In the said background we do not found any merit in the request of the Revenue for being given another opportunity. An opportunity to conduct second round of enquiries and investigations cannot be a luxury to be enjoyed by a quasi-judicial authority at its convenience but can only be a facility available to one in situations, where a case of bona-fide difficulty is made out. In the instant case we have not found any such justified grounds available in the Revenue’s request and hence have therefore chosen not to oblige. 9.2 The Ld. CIT(A) in his impugned order has clearly brought out that the Ld. AO has not conducted any enquiries in the case and has merely placed reliance either upon the survey report or his own presumptions. He has rightly observed that it was imperative upon the Ld.AO to have conducted detailed enquiries with Banks, third parties etc to establish the veracity of averments made in the survey report. We do not find any fault in his conclusion that when the bank accounts in which alleged cash deposits, attributed to assessee and for which additions were made in assessee’s hand, are not in assessee’s name no case of addition can be made out. The Ld.CIT(A) has rightly concluded that without holding any enquiry and proving a direct connection between Page - 7 - of 9 assessee and the cash deposits in M/s. S.R.Ravi Group concern, no legally permissible additions would lie in assessee’s hands. We also do not find any defect in the conclusion drawn by the Ld.CIT(A) that the Ld.AO ought to have examined on oath persons whose names qua assessee were appearing in the impounded documents. We have also noted that the Ld.AO has made the entire addition without taking into possession the crucial incriminating documents impounded during the survey. When the entire hypothesis was built upon the incriminating documents, their availability with the Ld.AO and also providing a copy thereof to the assessee was a basic necessity of reasonable judicious exercise. 9.3 The order of the Ld. AO has therefore been found to be based upon the pure conjectures and premises without any support of any enquiry or investigation. The decision of the Ld.CIT(A) to delete the impugned additions that too by giving an opportunity to Ld.AO of submitting his comments through a remand report has been found to be a totally balanced and reasonable decision which cannot be faulted upon. We are therefore of the considered view that the order of the First Appellate Authority deserves no intervention at this stage and hence is confirmed. According all the grounds of appeal raised by the Revenue in respect of the addition made on account of unaccounted cash purchases of Rs.3,21,58,183/- for AY-2016-17 and Page - 8 - of 9. Rs.3,15,16,995/- for AY-2017-18 and of Rs.20,66,59,763/- on account of unexplained money u/s. 69A for AY-2017-18 are dismissed.