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Income Tax Appellate Tribunal, ‘B’ BENCH, PUNE
Before: SHRI S.S. GODARA, JM & SHRI G.D. PADMAHSHALI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, PUNE BEFORE SHRI S.S. GODARA, JM AND SHRI G.D. PADMAHSHALI, AM I.T.A. No. 395/PUN/2019 : A.Y. 2013-14 Mr. Sachin Ramdas Mohite A/P Khandala, Dist. Satara 415 523 PAN: AMDPM 1310 D : Appellant
Vs.
The Pr. Commissioner of Income-tax-3, Pune Respondent
Appellant by : Shri M.K. Kulkarni Respondent by: Shri Sardar Singh Meena Date of hearing : 04-10-2022 Date of pronouncement : 10-10-2022
ORDER PER SHRI S.S. GODARA, JUDICIAL MEMBER ; This assessee’s appeal for A.Y. 2013-14 arises against the Pr. CIT-3’s order No. Pn/Pr.CIT/263/MBR/2017-18/5000 dated 06-03-2018, in proceedings u/s 263 of Income-tax Act, 1961 (hereinafter referred to as “the Act”).
Heard both the parties. Case file perused.
We note at the outset that the relevant factual matrix regarding assessee’s sole substantive ground herein seeking to reverse the learned Principal C.I.T.’s section 263 revision directions terming the corresponding regular assessment dated 28-03-2016 as an erroneous one causing prejudice to interest of the revenue, are in a narrow campus.
There is no dispute that the PCIT has invoked his revisional jurisdiction for the sole reason that the Assessing Officer had come across assessee’s cash deposit of Rs. 52,48,000/- to the extent of business sales of Rs. 14,72,581/- and remaining amount of Rs. 41,76,530/- stand assessed u/s 69A of the Act. His impugned detailed directions under challenge hold that the Assessing Officer did
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not enquire into all relevant issues involving the assessee’s foregoing deposits and business turnover whilst framing the assessment and therefore, the same attract section 263 jurisdiction. This is what leaves the assessee aggrieved.
We have given our thoughtful consideration to the rival arguments and find no reason to affirm the PCIT’s following detailed discussion:-
“3. I have carefully considered facts of the case as well as reply of the assessee reproduced as above. It is undisputed that there were huge cash deposits in saving bank accounts to the extent of Rs. 52,48,000/- in aggregate on different dates. Moreover, the assessee had filed return of income declaring total sales of sRs. 14,72,581/- only. Inspite of these facts, the Assessing Officer treated all these cash deposits as slales made by the assessee and taxed profit @ 8% of total cash deposits. The Assessing Officer should have been enquired into details of genuineness of claim of the assessee that these cash deposits represents sale made by him more so when the assessee himself had shown sales of Rs.14,72,58 1 only in Profit & Loss account. Moreover, the Assessing Officer ought to have enquired enquired why these cash deposits are made in saving bank accounts instead of current account. It is known fact that for business transactions/ trading transactions current account is utilized and by natural presumption saving bank account represents net surplus or net wealth of a person. Instead of enquiring into evidences, the Assessing Officer accepted these huge cash deposits amounting to Rs.52,48,000 in saving bank accounts as sales made by the assessee and conferred undue benefit to the assessee. If it represents sales, there should be books of accounts, sale bills, purchase bills etc. which should co-relate with every cash deposit as well as expenses. The Assessing Officer did not examine whether there are corresponding expenses from the said bank account. The Assessing Officer did not examine whether there are violations of sec. 40A(3) (cash expenses) or 40(a)(ia) (TDS applicability). The Assessing Officer accepted whatever assessee stated without enquiring into glaring contradictory facts which require detailed enquiry and application of mind in correct manner having regard to statutory provisions invogue. All these facts, as a whole, clearly establish that neither there was any examination of any books of accounts nor any enquiry on essential and vital points by the Assessing Officer. It is a case of gross and grave negligence and inadequate enquiry. The Assessing Officer should have enquired into the into the root reason for which case was selected for scrutiny under CASS i.e. to say deposits in saving bank accounts. The Assessing Officer should e examined the applicability of provisions of sec.. 68 or 69 or 69A, as the case may be as well as sec. 40A(3), 40(a)(ia), sec. 37 etc. The Assessing Officer erroneously and negligently treated all cash deposits as sales made by the assessee ignoring the vital fact that the assessee himself had disclosed meager sale of Rs.14,72,581 in his Profit &% Loss account as a part and parcel of return of income filed by him. All these facts, as a whole, clearly divulge that Assessing Officer did not carry out adequate and proper enquiries for verification which should have been made. In other words, there is a serious lack of proper application of mind on the part of the Assessing Officer which makes the impugned order passed by him as erroneous and prejudicial to the interest of revenue. 4. In this regard, it would not be irrelevant to point out certain judicial pronouncements which support the action u/s 263 in given facts of the case. The Hon'ble High Court of Karnataka had held in the case of Infosys Technologies Pvt. Ltd. (17 taxmann.com 203) that every conclusion and finding by the assessing authority should be supported by reasons, however, brief it May be, and it should be clearly indicated in the order of assessing authority. In the case of Malabar Industrial Co.
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Ltd. Vs. CIT (109 taxman 66), the Hon'ble Supreme Court had held that where Assessing Officer had accepted entry in statement of accounts filed by the assessee, in absence of any supporting material, without making any inquiry, exercise of jurisdiction by Commissioner u/s 263(1) is justified. Recently, Hon'ble jurisdictional High Court of Bombay upheld action u/s 263 for lack of proper inquiry in the case of Jeevan Investments & Finance Pvt. Ltd. Vs. CIT (145 DTR 252-Bom- 2017)(Date of order 07.12.2016). For ease of reference, relevant caption note is reproduced as under : "Revision- Erroneous and prejudicial order - Lack of proper enquiry - assessee was asked to provide method of valuation of unquoted shares - assessee's response was only that the unquoted shares are valued at costs - This is begging the question - No method of valuation of the shares was submitted to the AO- AO after having asked a pertinent question of the method of valuing unlisted shares did not pursue that line of enquiry - Required information was not furnished by the assessee nor any explanation offered for not furnishing the same- It is also not a case where the AO was satisfied with regard to his query by some other explanation offered by the assessee- In fact, merely asking a question which goes to the root of the matter and not carrying it further is a case of nonenquiry, if the query is not otherwise satisfied while responding to another query- Revision by CIT was therefore sustainable." 4.1 Similarly Hon’ble High Court of Kolkata upheld the action u/s 263 of the Act in the case of CIT Vs. Maithan International (56 taxmann.com 283) holding that Assessing Officer could not accept genuineness of loan taken by the assessee from various creditors merely on the basis of their bank statements and letter of confirmation as he was required to examine creditworthiness of the said creditors as well. In the recent, Hon'ble High Court of Rajasthan in the case of CIT Vs. Bhawal Synthetics (India), Udaipur (81 taxmann.com 478) (Date of order 05.05.2007) upheld the action u/s 263 for arty inadequate inquiry by the Assessing Officer where the Assessing Officer had merely accepted the explanation furnished by the Kolkata had upheld action u/s 263 for lack of proper inquiry in the case of success Tours & Travels (P.) Ltd. Vs. ITO, Kolkata (80 taxmann.com 262) on the issue of share capital/ share premium. For ease of reference, relevant caption note is reproduced as under : "Section 68, read with section 263 of the Income-tax Act, 1961 - Cash credit (Share capital) - Assessment year 2008-09 - Assessee company with a small amount of authorized share capital, raised huge sum on account of premium - It filed its return declaring Nil income - AO made reassessment on ground that assessee had earn consultancy fees which had not been offered for tax in return Thereafter, Commissioner invoked his revisionary power on ground that requisite enquiry were not conducted regarding issue of share capital including premium received by assessee company - Assessee contended that Commissioner ought to have confined his decision only to issue on which reassessment was made Whether even though question of issue of share capital was not a factor which promoted proceeding for reassessment, it was permissible for reassessing authority to widen scope of reassessment - Held, ues - Whether since issue of share capital at premium had also been examined by AO in reassessment proceeding, revisional proceeding initiated by Commissioner was valid and limitation period for passing impugned order was to be counted from date of passing order u/s 14 7 and not from date of information issued u/s 143(1)- Held, yes." 4.2. It is worth to mention that in this case, even though the Assessing Officer had examined issue of share capital at premium by notices u/s 13 on test check basis, the Hon'ble Court upheld action u/s 263 for the reason that there was inadequate inquiry.
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4.3. Recently, Hon'ble Supreme Court had upheld the decision of Hon'ble High Court of Kolkata upholding action u / s 263 in the case of Rajmandir Estates (P.) Ltd. Vs. PCIT-3, Kolkata (77 taxmann.com 285 - SC) for lack of requisite inquiry into the increase of share capital including premium received by the assessee and non-application of mind by the AO. For ease of reference, relevant caption note of decision of Hon'ble High Court of Kolkata in the said case (70 taxmann.com 124) is reproduced as under : "Section 68, read with section 263 of the Income-tax Act, 1961 - Cash credit (Share application money) - Assessment ycar 2000-10 - During relevant year, assessee company had increased its share capital by issuing 7.93 lakh shares of Rs.10 each at a premium of Rs.390 - assessee originally filed a return showing a gross total income of Rs.24, 658 however, thereafter wrote to AO that due to inadvertence it had not disclosed receipt of a sum of Rs.61,000 on account of consultancy fees - AO completed assessment without holding requisite investigation except for calling for records - Commissioner passed order under section 263 and opined that this was or could be a case of money laundering which went undetected due to lack of requisite enquiry into increase of share capital including premium received by assessee and non-application of mind - He thus held that assessment order passed u/s 143(3)/ 147 was erroneous and prejudicial to interest of revenue and therefore, set aside same and issued directions for a thorough enquiry - Whether where assessee with an authorized share capital of Rs.1.36 crores raised nearly a sum of Rs.32 crores on account of premium and chose not to go in for increase of authorized share capital merely to avoid payment of statutory fees was an important pointer necessitating investigation - Held, yes - Whether however, AO did not hold requisite investigation except for calling for records, he also did not interrogate persons behind assessee company and persons behind subscribing companies which was essential to unearth truth - Held, yes - Whether thus Commissioner was justified in treating assessment order erroneous and prejudicial to interest of revenue- Held, yes."
4.4. As stated hereinabove, Hon'ble Supreme Court has confirmed this order of Hon'ble High Court of Kolkata in the case of Rajmandir Estates (P.) Ltd. Vs. PCIT-3, Kolkata on 09.01.2017 (77 taxmann.com 285). It would be worth to mention that in this case the Assessing Officer had issued notices u/ s 133(6) on test check basis. Inspite of these, the Hon'ble Court held that it was inadequate inquiry - Lack of requisite inquiry - and therefore action u/s 263 was valid. Recently, Hon'ble jurisdictional High Court of Bombay had upheld action u/ s 263 in the case of CIT, Nagpur Vs. Ballarpur Industries Ltd. (85 taxmann.com 10) (Date of order 31.07.2017) holding that, where AO allowed claim of deduction u/s 80HHC without examining said claim with reference to unabsorbed depreciation and investment allowance as referred to in sections 32 and 32A respectively, Commissioner was justified in invoking revision u/s 263. 4.5. Similarly, Hon'ble High Court of Allahabad had held in the case of Swarup Vegetable Products Vs. CIT (54 taxmann.com 175) that it is beyond dispute that u/ s 263, the Commissioner does have power to set aside the assessment order and send the matter for afresh assessment, if he is satisfied that further inquiry is necessary and that the order of the ITO is prejudicial to the revenue. Similar view was taken by Hon'ble High Court of Gujarat in the case of Adani Agro Pvt. Ltd. Vs. DCIT, Cir.1 (32 taxmann.com 356). As discussed in preceding Paras, the Assessing Officer did not carry out inquiry and verification on apparent issues which ought to have been made by him. 4.6. In this regard, the observation of Hon'ble High Court of Delhi in the case of Gee Vee Enterprises Vs. Addi. CIT (99 ITR 375) is reproduced as under :
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"The intention of the legislature was to give a wide power to the Commissioner. He may consider the order of the ITO as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make inquiries which are called for in the circumstance of the case. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the ITO should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the ITO is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The ITO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word 'erroneous' in section 263 emerges out of this context. It is because it is incumbent on the ITO further investigate the facts stated in the return when circumstances would make such an inquiry prudent that 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." 4.7. Few more decisions of different benches of the Hon'ble ITAT, including jurisdictional bench, are relied upon as under : (1) Rajalakshmi Mills Ltd. Vs. ITO (Special Bench, ITAT Chennai) (121 ITD 343) Section 263 of the I. T. Act, 1961 - Revision - of orders prejudicial to interests of revenue • A. Y. 1981-82 - Whether it is not necessary for Commissioner to make further enquiries before cancelling assessment order of Assessing Officer • Held, yes • Whether Commissioner can regard order as erroneous on ground that in circumstances of case Assessing Officer should have made further enquiries before accepting statement made by assessee in his return - Held, yes. (2) Ambika Agro Suppliers Vs. ITO, Jalgaon (Pune Bench) (95 ITD 326) "Acceptance of explanation of assessee without any enquiry renders assessment order erroneous as well as prejudicial to interest of revenue,
(3) Sesa Goa Ltd. Vs. CIT, Panaji (Panaji Bench) (151 ITD 679) (52 taxmann.com 176 ) Allowing claim u/s 1OB_to assessee without making an enquiry will indicate that order is erroneous and prejudicial to interest of revenue."
As discussed in Para 3, in the present case, the Assessing Officer did not enquire into all relevant issues to deduce correct taxable income and therefore, the order passed by the assessing Officer is found to be erroneous in so far as it is prejudicial to the interest of revenue. It would be fair and just
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to restore the matter to the Assessing Officer for proper inquiries on issues indicated in the show cause notice as well as para 3 of this order. Therefore, I set aside the assessment order u/s 143(3) of the I.T. Act, 1961 dated 28-03- 2016 passed by the ASSESSING OFFICER for A.Y. 2013-14. The ASSESSING OFFICER is directed to give adequate opportunity of being heard to the assessee, call for relevant evidences/details/information/explanations on various issues from the assessee and after examining the assessee’s submissions / explanation / evidences and conducting necessary enquiries, pass a fresh assessment order in accordance with applicable provisions of the law.”
Mr. Meena vehemently argued that the Assessing Officer erred in both investigator as well as adjudicator wherein he is supposed to proceed with detailed enquiry in light of Gee Vee Enterprise’s case 99 ITR 375 (Delhi). And also that the impugned assessment nowhere indicates such detailed inquiry by the Assessing Officer which renders the impugned regular assessment as erroneous as well as prejudicial one to the interest of revenue as held in the case of Malabar Industrial Co. Ltd. Vs. CIT (109 taxman 66). All these Revenue’s arguments fail to evoke our concurrence. We make it clear that the sole issue therein is assessee’s cash deposit in bank account of Rs. 52,48,000/- out of which he could only explain the recorded sales turnover of Rs. 14,72,581/-. It is in this factual backdrop that the Assessing Officer had accepted the source of foregoing cash deposit to the extent of recorded sales turnover and treated the remaining amount of Rs. 41,76,530/- as unexplained u/s 69A of the Act. Meaning thereby that the Assessing Officer had already assessed the assessee u/s 69A. And there is nothing more left to conclude that the foregoing unaccounted sum deserves to be added in any other head of income. Faced with this situation, we hold that the Assessing Officer took one of the two possible views in invoking section 69A of the Act whilst dealing with assessee’s cash deposit of Rs. 52,48,000/- which could hardly be taken as an instance of the impugned assessment as erroneous causing prejudice to interest of revenue, simultaneously, as per their lordships landmark decision in Malabar Industrial Co. (supra). We thus reverse the PCIT’s revisional directions in issue.
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Delay of 309 days in filing of the instant appeal stated to be attributable to medical issues and communication gaps at various levels as per detailed condonation affidavit dated 18-05-2021, is condoned in the larger interest of justice so as to make way for the substantial justice as per Collector, Land Acquisition Vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC).
This assessee’s appeal is allowed in above terms.
Order pronounced in the open court on 10th October 2022.
Sd/- sd/- (G.D. PADMAHSHALI) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated, this 10th day of October 2022 Ankam
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The Pr. CIT-3, Pune. 4. The D.R. ITAT ‘B’ Bench Pune. 5. Guard File BY ORDER, Sr. Private Secretary ITAT, Pune /// TRUE COPY///
8 ITA 395 of 2019 Sachin Ramdas Mohite A.Y. 2013-14 Date 1 Draft dictated on 04-10-2022 Sr.PS 2 Draft placed before author 06-10-2022 Sr.PS 3 Draft proposed and placed before the JM/AM second Member 4 Draft discussed/approved by second AM/JM Member 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on 10-10-2022 Sr.PS/PS 7 Date of uploading of order 10-10-2022 Sr.PS/PS 10-10-2022 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order