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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI LALIET KUMAR & SHRI S. RIFAUR RAHMAN
Appellant by : Sh. Hero Rai, AR Respondent by : Sh. Amrish Bedio, CIT-DR Date of hearing : 06/12/2021 Date of pronouncement : 08/12/2021 ORDER PER LALIET KUMAR, J.M: This appeal has been filed by assessee challenging the order passed by the Principal Commissioner of Income Tax-19, Mumbai [hereinafter referred to as ‘the PCIT(A)’] vide order dated 26.02.2021 on the ground mentioned in the present appeal. The Appellant appeals against the impugned order dated 26" February 2021 passed by pr. Commissioner of income Tax-19 under section 263 of the Income-tax Act, 1961 (The Act), on the following amongst the other grounds each of which are independent of and without prejudice to one another:
2 Mum 2021- Sanaa Ashiqali Raval 1. Based on the facts of the case and in law, the learned Pr. Commissioner of Income Tax (Pr. CIT) erred in setting aside the assessment order passed by the learned Assessing Officer u/s.143(3) read with section 147 on the ground that the order was passed without making necessary inquiry and thereby, was erroneous and prejudicial to the interests of the revenue.
2. That the Pr. CIT ought to have appreciated that appellants case was selected for tax scrutiny pursuant to notice under section 147 of the Act specifically to examine the source of cash deposit of Rs 10 lakhs. Accordingly, there was no reason for the Pr. CIT to assume that the issue of cash deposit was not examined during scrutiny proceedings and thereby invoke the provisions of section 263.
3. The Pr. CIT failed to appreciate that the AO after considering the facts of the appellants case and after referring to submissions made during scrutiny proceedings accepted the source of cash deposit.Therefore, there was no reason for the Pr. CIT to presume that the AO did not conduct proper or adequate inquiry.
That the AO did not the examine cash deposit in the manner the Pr. CIT would have done cannot be a basis to consider the order being erroneous and prejudicial to the interest of the revenue, so as to be eligible for proceedings under section 263 of the Act.
5. The position taken by the Pr. CIT to Invoke section 263 of the Act on the ground that there was lack of inquiry on the part of AO is clearly based on presumption and surmises and has completely ignored the fact that the only reason the appellants case was selected for scrutiny was to examine cash deposit of Rs 10 lakhs.
6. The Pr. CIT ought to have appreciated that during the course of scrutiny proceedings as well as during 263 proceedings the appellant had explained that the source of the cash deposit was from the appellants father who is a well-known Surgeon (Hon. Urologist) and has earned income of more than Rs 50 lakhs during the year under review as well as in earlier years.
7. That the Pr.CIT failed to appreciate that the appellant herself is a dental surgeon and has earned stipend in cash which has been offered to tax.
The Appellant prays your honor’s attention that the said order u/s 263 has resulted in the tax department being permitted to revisit the same issue again which was examined during reopening proceedings.
The order under section 263 of the Act Is passed merely on the presumption that there was lack of enquiry without giving any specific finding as to how the order passed under section 143(3) r.w.s. 147 is erroneous & prejudicial to the interest of the revenue, thereby rendering the order passed by Pr. CIT as invalid and bad in law.
3 Mum 2021- Sanaa Ashiqali Raval Relief Sought: 10. your appellant prays that the order of the learned Commissioner of income Tax u/s 263 of the Act, setting aside the assessment u/s 143(3) read with section.147 of the Act, be held to be invalid and be annulled.
The ld. AR for the assessee has drawn our attention to the order passed by the PCIT more particularly para-2 wherein the PCIT has mentioned “ That during the assessment Proceedings, the source of cash deposit of Rs. 10,00,000/- with documentary evidence was sought for from the assessee. The assessee vide letter dated 06.12.2017 stated that the source of cash deposit is gift received from father. The Assessing Officer accepted the explanation without documentary evidences of availability of cash in the hands of donor. The assessee has not furnished the documentary evidences to establish the availability of cash on hand on various dates on the day of the gift in the hands of donor and thus the genuineness of transaction not verified by the Assessing Officer.”
The ld. AR had submitted that after recording the above-said fact, the ld. PCIT has reproduced the show-cause notice which was issued to the assessee for invoking the jurisdiction under section 263 of the Income Tax Act, 1961 (for short ‘the Act’). 3.1 It was submitted by the ld. AR that the assessee had received the notice under section 148 of the Act on 31.03.2017 and in the reasons to re-open the assessment, it was mentioned as under: “In view of the above facts and circumstances of the case and after due application of my mind, I have reason to believe that income of the assessee, chargeable to tax for the assessment year 2010-11 amounting to at least Rs. 10,00,000/- has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessar4y for his assessment for the assessment in this case in terms of provisions of section 147 of the I.T. Act, 1961”
4 Mum 2021- Sanaa Ashiqali Raval 4. The ld. AR has also drawn our attention to page-12 of the Paper Book (PB) whereby the Assessing Officer (AO) had issued the notice under section 142(1) of the Act and at serial no. 3, it was mentioned that “ as per information it is seen that you have deposited Rs.10 Lacs in jab & Maharashtra during the year. Please explain as to why the amount of Rs.10,00,000/-should not be added to your total income as unexplained cash deposited in bank. Please file your reply in this matter with documentary evidence and clarify the same.”
The ld. AR had also drawn our attention to the reply given by the assessee at page no.13 wherein the assessee had explained the deposit of Rs. 10,00,000/- in our bank account. The contention of the ld. AR of the assessee in the reply was as under: “My father is assessed to income tax as a practicing surgeon for last several years and his PAN is AABPR8581J. His yearly income from professional practice is about Rupees One Crore. He has also gifted me on various auspicious occasions which also after saving, I was advised by my parents to deposit my savings into my bank account. Thus, I made the two deposits of Rs. 5,00,000/- respectively in April 2009 and October 2009. My father having been pleased on the aforesaid deposits gifted me Rs. 3,00,000/- on 18th Jan 2010 which was deposited in ICICI Bank, Peddar Road Branch.”
It was the contention of the assessee that after considering the reply given by the assessee, the AO has not made any additions in the hands of the assessee. The ld. AR has also drawn our attention to the various decisions in support of the legal propositions that if the AO takes a plausible view, then the view of the AO cannot be faulted on the premises that PCIT is taking other possible. The ld. AR has submitted that the order passed by the AO would not become erroneous merely because the AO has accepted the 5 Mum 2021- Sanaa Ashiqali Raval version of the assessee and found it to be plausible. For the above said purposes, the ld. AR relied upon the following decisions: 1. 395 ITR 1 (SC) CIT v Kwality Steel Suppliers Complex 2. 295 ITR 282 (SC) CIT v Max India Ltd. 3. 203 ITR 108 (Bom) CIT v Gabriel India Ltd. 4. 305 CTR 486 (Bom) CIT v Maharashtra Hybrid Seeds Co. Ltd. 5. 387 ITR 691 (Bom) CIT v Gera Development P Ltd. 6. 372 ITR 303 (Bom) CIT v Fine Jewellery India Ltd. 7. 301 ITR 407 (Bom) Idea Cellular Ltd. v DCIT 8. 323 ITR 206 (Bom) CIT v Development Credit Bank Ltd
The ld. AR had further submitted that the PCIT for the purposes of justifying the order under section 263 of the Act relied upon the Explanation- (2) to section 263 of the Act. The ld. AR submitted that the Explanation-(2) though was introduced w.e.f. 01.06.2015, however, is not of any use to the PCIT as the AO has made adequate enquiry before passing the assessment order. For the above-said preposition, the ld. AR relied upon the following decisions: I. 70 Taxmann.com 227 (Mum-Trib) Narayan Tatu Rane v ITO II. 51 CCH 414 (Mum-Trib) Gehna Jewellers P Ltd. v Pr. CIT III. 188 ITD 38 (Mum-Trib) Sir Dorabji Tata Trust v DCIT IV. 188 ITD 151 (Mum-Trib) Sir Ratan Tata Trust v DCIT V. 109 CCH 86 (Guj) Pr. CIT v Minal Nayan Shah VI. 111 CCH 87 (Del) Pr. CIT v Brahma Centre Development P. Ltd 8. He had also drawn our attention to para-19 of the decision in the case of Narayan Tatu Rane Vs. ITO (70 Taxmann.com 227) to the following effect:
6 Mum 2021- Sanaa Ashiqali Raval “19. The law interpreted by the High Courts makes it clear that the Ld Pr. CIT, before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the assessing officer is erroneous, the Ld Pr. CIT should have shown that the view taken by the AO is unsustainable in law. In the instant case, the Ld.Pr. CIT has failed to do so and has simply expressed the view that the assessing officer should have conducted enquiry in a particular manner as desired by him. Such a course of action of the Ld Pr. CIT is not in accordance with the mandate of the provisions of sec. 263 of the Act. The Ld Pr. CIT has taken support of the newly inserted Explanation 2(a) to sec. 263 of the Act. Even though there is a doubt as to whether the said explanation, which wa inserted by Finance Act 2015 w.e.f. 1.4.2015, would be applicable to the year under consideration, yet we are of the view that the said Explanation cannot be said to have over ridden the law interpreted by Hon’ble Delhi High Court, referred above. If that be the case, then the Ld Pr. CIT can find fault with each and every assessment order, without conducting any enquiry or verification in order to establish that the assessment order is not sustainable in law and order for revision. He can also force the AO to conduct the enquiries in the manner preferred by Ld Pr. CIT, thus prejudicing the independent application of mind of the AO. Definitely, that could not be the intention of the legislature in inserting Explanation 2 to sec. 263 of the Act, since it would lead to unending litigations and there would not be any point of finality in the legal proceedings. The Hon’ble Supreme Court has held in the case of Parashuram Pottery Works Co. Ltd Vs. ITO (1977)(106 ITR 1) that there must be a point of finality in all legal proceedings and the stale issues should not be reactivitated beyond a particular stage and the 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.”
9. On the basis of the above, it was submitted that the twin condition has laid down by the Act were not satisfied inasmuch as the order passed by the AO was not erroneous to the interest of the Revenue.
Per contra, the ld. Departmental Representative (DR) had submitted that no enquiry was made by the AO from the father of the assessee, who had gifted the sum to the assessee and therefore, the order passed by the AO was erroneous and prejudicial to the interest of the Revenue as the case in hand is the case of no enquiry by the AO.
7 Mum 2021- Sanaa Ashiqali Raval 11. We have heard the rival contentions of the parties and perused the material available on record. The twin conditions were required to be fulfilled cumulatively for the purposes of issue in the notice under section 263 of the Act namely the order should be prejudicial to the interest of the Revenue and also should be erroneous.
Admittedly, in the present case, the assessee is a Dental surgeon and had graduated in the year 2005 and before assessment year AY 2010-11, the assessee had already completed five years of her Dental practice and on that account she was earning as well as, she was getting financial assistance from her father . Out of her earning and amount received from her father, the assessee had deposited the amount in the two instalment i.e. in April 2009 and October 2009 in her bank account. The assessee had given this explanation to the AO during the re-assessment proceedings and the said explanation was duly accepted by the AO.
In our considered opinion, it is quite possible and natural for qualified dental surgeon to save a sum of Rs. 10, 00,000/- over a period of five years of her practice more particularly when her father also happened to be a dental surgeon and having tax return of more than Rs. 1 crore. In our view, the view taken by the AO was one of the possible view and the said view taken after due consideration of the reply filed by the assessee. In our considered opinion, though it is a case of the PCIT that further enquiry was required to be made from the father and the source of his withdrawal and gift to the daughter was also required to be verified. Assessee in her reply mentioned that the father of the assessee is income-tax payee having PAN: AABPR8581J and was also having professional practice of Rs. 1 crore. Sufficient information