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Income Tax Appellate Tribunal, LUCKNOW BENCH A, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
(A) This appeal has been filed by the assessee for assessment year 2017- 2018 against impugned order dated 24/03/2022 passed by learned Principal Commissioner of Income Tax (“Pr.CIT” for short) under section 263 of the Income Tax Act, 1961 (“the Act” for short). The grounds of appeal are as under:
“1. The order passed under section 263 of the Income-tax Act, 1961 [the Act), by Ld. Pr. Commissioner of Income Tax holding that the Assessment Order passed by the Ld. AO u/s.143(3) dated 29.11.2019 of the Act is erroneous and prejudicial to the interest of the revenue is bad in law and ultra vires.
2. The Ld.Pr.CIT has erred in holding that Ld.AO has failed to make necessary enquiry and bring on record all facts without appreciating that specific query was raised in the assessment proceedings on issue under consideration of cash deposit and all relevant details in response thereof was filed.
3. The Ld. Pr.CIT has failed to appreciate that the assessment order was neither erroneous nor prejudicial to the interest of the revenue and thus order u/s 263 is bad in law and illegal.
4. The Ld. Pr. CIT has failed to appreciate the facts that source of cash deposit during demonetization along with supporting evidences was duly explained by the appellant.
5. On the facts and circumstances of the case, the learned CIT has erred, both on facts and in law, in set aside the order of the A.O., rejecting the explanation given by the assessee.”
(B) In this case, assessment order dated 29/11/2019 was passed by the Assessing Officer whereby the assessee’s total income was determined at Rs.11,96,420/- as against returned income of Rs.11,67,860/-. The aforesaid assessment order was put to revision by Principal Commissioner of Income Tax (“Pr.CIT” for short) u/s 263 of the Act. Vide impugned order dated 24/03/2022 passed u/s 263 of the Act, the learned Pr.CIT set aside the aforesaid assessment order and directed the Assessing Officer to frame de novo assessment order keeping in view the observations made in de novo assessment order. The relevant part of the order of the learned Pr.CIT is reproduced below:
(C) The present appeal has been filed by the assessee against the aforesaid impugned order dated 24/03/2022 passed u/s 263 of the Act by the learned Pr.CIT.
(D) During the appellate proceedings in Income Tax Appellate Tribunal, a paper book containing 40 pages was filed from the assessee’s side. Subsequently, vide letter dated 04/08/2025, the aforesaid paper book was withdrawn and a fresh paper book containing the following particulars was filed:
(D.1) Further written submissions were also filed from the assessee’s side, which are reproduced as under:
WRITTEN SUBMISSION in the case of M/s Guru Kripa Associates 200A, Mecnair Road, Prem Nagar, Bareilly PAN: AAHFG0261G A.Y. 2017-18 Facts of the case: 1) The appellant is a partnership firm. The return of Income for A.Y. 2017-18 was filed by the appellant on 12/10/2017declaring total income of Rs. 11,67,860/-. A copy acknowledgement dated 12.10.2017 of Income Tax Return is available on paper bookpage number 94.Subsequently the casewas selected for scrutiny and notice u/s 143(2) of the I.T.Act,1961 was issued on09/08/2018 and 25/09/2018. The copy of notice issued u/s 143(2) dated 25/09/2018 is available on paperbook page number 95 to 98and notices u/s 142(1) dated 22.01.2019 and 15.10.2019 (available on paper book page number 100 – 101 and 184 – 189 repectively) were issued to the assessee raising queries aggregate 36 in numbers. In the notice issued u/s 142(1) dated 15.10.2019 included the queries (specifically query 11 to 18) regarding cash deposited in bank by the assessee during the demonetization (09.11.2016 to 31.12.2016).
2) It is the fact that the appellant deposited Rs.2,54,00,000/- in its bank account during the period from 09.11.2016 to 31.12.2016 being demonetisation period. The appellant filed detailed submission along with the relevant necessary evidences explaining the fact that the cash deposited was the sales receipt during the ordinary course of business. Besides verbal discussions werealso made during the course of hearing and at the time of production of Books ofaccounts. It is reiterated that the enquiry included detailed enquiry of cash deposited, comparative figures and other details in terms of SOP issued by the CBDT in respect of cash deposit in bank during demonetization period. The Ld. A.O. passed the order u/s 143(3) on 29.11.2019 vide order no ITBA/AST/S/143(3)/2019- 20/1021361327(1) thereby making the addition of Rs. 28560 at total income of Rs. 11,96,420/-.The assessee deposited the tax on such addition.
3) Thereafter the Ld. Pr.CIT. exercised his power of revision proceedings u/s 263 and issued the notice(Copy of notice is available on paper book page no. 1 to 5) and fixed the date of hearing on 18.02.2022. The main allegation against the assesseeis reproduced below:-
“(v) On perusal of assessment record, it was found that the AO has not made any query on the aforesaid issues. The AO has accepted the cash sales without making requisite examination of facts and thus accepted the source of cash deposits made during the demonetization period. In view of above, the Assessing Officer has not examined /enquired into the details of facts which he was required to do.” 4) The assessee has filed detailed submission and relevant proofs before the Ld. Pr.CIT during the revisionary proceedings u/s 263 of the Act (available on paper book on page no. 6-93). However, theLd. Pr.CITdid not consider the merits of the case as explained inthe submission of the appellant and passed the u/s 263 vide order no ITNA/REV/F/REV5/2021- 22/1041422901(1) DT. 24.03.2022 with the following decision:-
Therefore, the assessment framed by AO is hereby set aside to be frameddenovo as per law by the AO, keeping in view the observations madeafter giving reasonable opportunity to the assessee of being heard.
Aggrieved by the order, the appeal is present before your honour.
Ground No 1& 3:
1. 1. The order passed under section 263 of the Income-tax Act, 1961 (the Act), by Ld. Pr. Commissioner of Income Tax holding that the Assessment Order passed by the Ld. AO u/s.143(3) dated 29.11.2019 of the Act is erroneous and prejudicial to the interest of the revenue is bad in law and ultra vires.
3. The Ld.Pr.CIT has failed to appreciate that the assessment order was neither erroneous nor prejudicial to the interest of the revenue and thus order u/s 263 is bad in law and illegal.
The Ld. Pr.CITstarted the revision proceedings u/s 263 on the basis that Ld. AO has not made any further query on the submissions of the assessee in response to the queries raised by Ld. A.O. in respect of cash deposit during demonetization. Vide Para 3 of the order, it has been clarified by Ld. Pr.CIT that he is using explanation 2(a) of section 263(1) that reads as under:-
(a) the order is passed without making enquiries or verification which should have been made:
At the outset, it is submitted that said show cause Notice is illegal, based on surmises and not substantiated in law. Section 263 of the Income Tax Act, empowers Ld. Pr. Commissioner with the power of revising any order of the assessing officer, where the order is erroneous and error has resulted in prejudice to interest of revenue. The Commissioner must come to a firm conclusion to this point only after proper application of mind. Further the conclusions on which the said order is being proposed to be made should not be based on conjectures and surmises.
On perusal of the order u/s 263, it may be seen part of the submissions made by the assessee during the course of assessment proceedings are reproduced in the order. The submissions of the assessee before Ld. A.O. are duly considered. The copies of submissions were filed to Ld. Pr.CIT in response to show cause notice u/s 263. However, Ld. Pr.CIT chosen not to consider the merits of the case. He failed to give a reasoned order. On page 1 to 5, Ld. Pr.CIT reproduced his notice. Thereafter he gave his general observations without appreciating the submissions before Ld. A.O. and in response to show cause notice u/s 263. In concluding para of the order at bottom of page 6 and first 3 lines on page 7 of the order u/s 263, Ld. Pr.CIT has made the following observation that lead to set aside the order of Ld. A.O. u/s 143(3): - “(i) AO thus failed to follow the directions given in the SOP issued by CBDT for assessment of cash deposits during demonetization period.
It is apparent from above discussion that the AO has not made any enquiry on the issue of deposit of huge cash during demonetization period by the assessee, which he was required to do during assessment proceedings.”
Thereafter, he cited the judgments that are distinguishable with the case of the assessee. Thus, he passed order that is ultra vires as the enquiries were duly made by the Ld. A.O. about cash deposit and SOP issued by CBDT was complied. In these circumstances, the order of Ld. A.O. cannot be said to subject matter of section 263 as that the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The order so passed is bad in law and ultra vires. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed. It is only an incorrect assumption of facts or incorrect application of law which will satisfy the requirement of order being erroneous. The phrase 'prejudicial to the interest of revenue', has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue, as a consequence of the order of assessing officer cannot be treated as prejudicial to interest of revenue. A. In addition to the same, if assessing officer has adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and assessing officer has taken one view which CIT does not agree, the said order cannot be treated as erroneous unless the view taken by assessing officer is unsustainable in law. In view of legal position as explained above, provisions of Section 263 of Income Tax Act are not applicable on the basis of the observations made in the said show cause Notice. B. In case of PRINCIPAL COMMISSIONER OF INCOME TAX vs. BRAHMA CENTRE DEVELOPMENT (P) LTD reported in (2021) 323 CTR(Delhi)
888:(2021)205 DTR (Del)249:(2021)437ITR285(Del) HIGH COURT OF DELHI has held that :- “The fact that the AO has not given reasons in the assessment order is not indicative, always, of whether or not he has applied his mind. Therefore, scrutiny of the record, is necessary and while scrutinising the record the Court hasto keep in mind the difference between lack of enquiry and perceived inadequacy in enquiry. Inadequacy in conduct of enquiry cannot be the reason based on which powers under s. 263 can be invoked to interdict an assessment order.—CIT vs. Sunbeam Auto Ltd. (2009) 227 CTR (Del) 133 : (2009) 31 DTR (Del) 1 : (2011) 332 ITR 167 (Del) followed.” C. In case of COMMISSIONER OF INCOME TAX vs. GREEN LAND MOTORS reported in (2018)2NYPCTR639(All) HIGH COURT OF ALLAHABAD reported in has held that “It is clear that suo moto power under s. 263 of the Act can be exercised by the Commr. if two conditions; firstly the assessment order passed is erroneous; and secondly the order is prejudicial to the interest of Revenue are satisfied. The Commr., while exercising power under s. 263 of the Act, in the present case was of the opinion that the assessee did not properly explain the transactions of Rs. 1,70,00,000 for which the partners gave cheques, butthecheques were not encashed and cheques were given by the family members to partners for amount of Rs. 1,09,00,000. However, the AO after looking into the accounts of the assessee was satisfied by the explanation offered and we do not find any illegality in accounting entries made in the books of account of the assessee in respect of these transactions. Therefore, we affirm the order passed by the Tribunal.”
Hence on considering the above pronouncements, the order passed by the Ld. Pr.CIT is bad in law and ultra vires.
Ground No 2 , 4 and 5:- 2. The Ld.Pr.CIT has erred in holding that Ld.AO has failed to make necessary enquiry and bring on record all facts without appreciating that specific query was raised in the assessment proceedings on issue under consideration of cash deposit and all relevant details in response thereof was filed.
4. The Ld.Pr. CIT has failed to appreciate the facts that source of cash deposit during demonetization along with supporting evidences was duly explained by the appellant.
5. On the facts and circumstances of the case, the learned CIT has erred, both on facts and in law, in set aside the order of the A.O., rejecting the explanation given by the assessee. 1. On merit and facts, your honour willobserve from examining the assessment record, that these assessment proceedings were taken up for hearing on 09.08.2018 which continued upto the last date of hearing on 15.10.2019 and assessment was framed on 29.11.2019. During the course of these proceedings, in depth inquiries/information as required by the assessing officer from time to time were furnished. This is to bring knowledge of your honour that there were 36 queries in aggregate which were asked from the assessee by the A.O. and after that these proceedings were concluded. 2. As regards the enquiries/verification, the notice issued by A.O. u/s 142(1) vide notice no ITBA/AST/F/142(1)/2019- 20/1018933373(1) dated 15.10.20219 (available on paper book on page no. 184-189). The response of the notice was filed by the assessee., In the notice, following queries were asked in detail:-:- “11. Please furnish the detail of cash deposit in each bank account with source in the following format:
11.1 (a) Total cash deposit in bank in F.Y.2015-16 (b)Total cash deposit in bank from 01.04.2015 to 08.11.2015 (c)Total cash deposit in bank from 09.11.2015 to 31.12.2015 (d)Total cash deposit in bank from 01.01.2016 to 31.03.2016 11.2 (a) total cash deposit in bank in F.Y. 2016-17 (b)Total cash deposit in bank from 01.04.2016 to 08.11.2016 (c)Total cash deposit in bank from 09.11.2016 to 31.12.2016 (d)Total cash deposit in bank from 01.01.2017 to 31.03.2017 11.3 (a)Percentage increase between 5.2(a) and 5.1(a)
(b) Percentage increase between 5.2(b) and 5.1(b) (c) Percentage increase between 5.2(c) and 5.1(c) (d) Percentage increase between 5.2(d) and 5.1(d)
Furnish the details of cash sales in the following format :
12.1 (a) Total cash sales in F.Y. 2015-6 (b) Total cash sales from 01.4.2015 to 08.11..2015 (c) Total cash sales from 09.11.2015 to 31.12.2015 (d) Total cash sales from 01.01.2016 to 31.03.2016 12.2 (a) Total cash sales in F.Y. 2016-17 (b) Total cash sales from 01.4.2016 to 08.11..2016 (c) Total cash sales from 09.11.2016 to 31.12.2016 (d) Total cash sales from 01.01.2017 to 31.03.2017
Analysis of monthwise cash sales and cash deposit from 01.4.2015 to 08.11.2015 in the following format:
Monthwise Opening Cash sales Cash Cash Closing cash in hand deposit in withdra cash on bank wal from hand bank
3. Analysis of monthwise cash sales and cash deposit from 01.4.2016 to 08.11.2016 in the following format:
Monthwise Opening Cash sales Cash Cash Closing cash in hand deposit in withdra cash on bank wal from hand bank
4. Analysis of monthwise cash sales and cash deposit from 09.11.2015 to 31.12.2015 in the following format:
Monthwise Opening Cash sales Cash Cash Closing cash in hand deposit in withdra cash on bank wal from hand bank
5. Analysis of monthwise cash sales and cash deposit from 09.11.2016 to 31.12.2016 in the following format:
Monthwise Opening Cash sales Cash Cash Closing cash in hand deposit in withdra cash on bank wal from hand bank
6. Analysis of monthwise cash sales and cash deposit from 01.01.2016 to 31.03.2016 in the following format:
Monthwise Opening Cash sales Cash Cash Closing cash in hand deposit in withdra cash on bank wal from hand bank
7. Analysis of monthwise cash sales and cash deposit from 01.01.2017 to 31.03.2017 in the following format:
Monthwise Opening Cash sales Cash Cash Closing cash in hand deposit in withdra cash on bank wal hand from bank
In response to the above queries, the appellant filedthe following submission before the A.O. on 01.11.2019 (available on paper book at page no. 190 to 197) and the same was submitted before Ld. Pr.CIT by reiterating thesaid submission in the reply dated 28.02.2022, filed before Pr.CIT(available on paper book at page number 6-17). The relevant text of the submission filed on 01.11.2019 is as under:- “The detail of cash deposit inallbank account, is asunder and the source of cash is cash sales made duringthatperiod:- a)Total cash depositinbankin F.Y.2015-16 45434000 (b) Totalcash depositin bankfrom01.04.2015 to 08.11.2015 29964000 (c) Totalcash depositin bankfrom09.11.2015 to 5050000 31.12.2015 (d) Totalcash depositin bankfrom01.01.2016 to 31.03.2016 10420000 a)Total cash deposit in bank in F.Y.2016-17 42013200 (b) Total cash deposit in bank from01.04.2016to08.11.2016 16613200 (c) Total cash deposit in bank from09.11.2016to31.12.2016 25400000 (d) Totalcash depositin bankfrom01.01.2017 to 31.03.2017 0 (a) Percentage increase between 5.2(a)and5.1(a) 92% (b) Percentage increase between 5.2(b)and5.1(b) 55% (c) Percentage increase between 5.2(c)and5.1(c) 503% (d) Percentage increase between 5.2(d)and5.1(d) N.A.
The Cash deposited is as per Books of accounts maintained by the firm. The cash deposit is properly supported by cash sales and sales is verifiable by VAT returns. (Copy of VAT returns is in paper book page no16 to 66) Details of cash sales is asunder:
(a) Total cash salesin F.Y.2015-16 69504692 (b) Total cash sales from 49969017 01.04.2015to08.11.2015 (c) Total cash sales from 09.11.2015to31.12.2015 12984052 (d) Total cash sales from 01.01.2016to31.03.2016 6551623 (a) Total cash sales inF.Y.2016-17 43189445 (b) Total cash sales from 01.04.2016 to08.11.2016 42451518 (c) Total cash sales from 09.11.2016 to31.12.2016 395624 (d) Total cash sales from 01.01.2017to31.03.2017 342303 Analysisofmonthwisecashsalesandcashdepositfrom01.04.2015to08 .11.2015isasunder:
Cash Summary for period 01/04/2015 to 08/11/2015 CASH CASH CASH CASH DEPOSITE WITHD SALE RECEIVED MONTH OPENING CASH PAID CLOSING D RAWN APRIL 2733.96 9210152 110565 1629148 7060000 0 634303 5066880 3600000 MAY 634302.96 905904 1195279 5561019 3454000 JUNE 1195279 2718922 583376 6750000 2500000 JULY 583375.96 3983968 849408 8432500 3550000 AUGUST 849407.96 1941415 3790493 3864780 2350000 SEPTEMBER 3790493 3805657 1499616 9475341 4850000 OCTOBER 1499616 4411000 1713957 08/NOV/20 15 1713957 1608345 518706 2600000 203596
0 TOTAL 49969017 110565 19914720 29964000 Analysis of monthwise cash sales and cash deposit from 01.04.2016to08.11.2016 is as under GURU KRIPA ASSOCIATES Cash Summary for period 01/04/2016 to 08/11/2016 CASH CASH CAS CASH CAS DEPOSIT WITHDRAW H RECEIVE H MONTH OPENING CLOSING E N SALE D PAID D APRIL 22088.96 6325265 3875931.4 1579569 6150000 1000000 3493716.36 MAY 3493716.36 4062618 736838 3834396 4153200 2250000 2555576.39 JUNE 2555576.39 376530 76880 3292565 2300000 4235000 1651421.39 1300000 JULY 1651421.39 2261826 8864 1170251 1451860.39 2805030 1600000 AUGUST 1451860.39 1791348 865542.39 865542.39 SEPTEMBER 168075 550000 200000 347467.39 7323966 500000 OCTOBER 347467.39 591052 6580381.39 08/NOV/20 16 6580381.39 19296283 16200 60000 25800464.39
7685000 TOTAL 42451518 4698513.4 12443456 16613200 Analysis of monthwise cash sales and cash deposit from 09.11.2015 to 31.12.2015 is as under : GURU KRIPA ASSOCIATES Cash Summary for period 09/11/2015 to 31/12/2015 CASH CASH CASH CASH CASH RECEIV DEPOSIT WITHDR SALE PAID MONTH OPENING CLOSING E D E D AWN 5419012 1500000 30-Nov 203595.96 2242457 1880151 7565040 3550000 DEC 1880151 3306833 2588358 1298405 TOTAL 2 0 5549290 5050000 0 Analysis of monthwise cash sales and cash deposit from 09.11.2016 to 31.12.2016 is as under :
CASH CASH CASH CASH CASH WITHDRA MONTH OPENING SALE RECEIVE PAID DEPOSITE CLOSING WN D D 35811 30-Nov 25800464.39 32363 25400000 24000 427912.39 DEC 427912.39 359813 2185 438685 0 110000 461225.39
134000 TOTAL 395624 2185 471048 25400000 Analysis of monthwise cash sales and cash deposit from 01.01.2016 to 31.03.2016 is as under : Cash Summary for period 01/01/2016 to 31/03/2016 CASH CASH CASH MONT CASH CASH RECEIV DEPOSIT WITHDRA OPENING CLOSING H SALE PAID E D E D WN 1250000 JAN 2588358 2730000 16608 2127436 1957530 1957530 FEB 1133115 70000 85000 839415 9100000 MAR 839414.96 3821623 5080076 619025 22088.96 TOTAL 85000 6551623 5096684 3879576 10420000 Analysis of monthwise cash sales and cash deposit from 01.01.2017 to 31.03.2017 is as under:
CASH CASH CASH CASH CASH MONTH OPENING SALE RECEIVE PAID DEPOSITE WITHDRAWN CLOSING D D 286302 329220 JAN 461225.39 200000 618307.39 477768 FEB 618307.39 45669 9876 700000 896084.39 72550 MAR 896084.39 10332 204324 400000 1438190.39
1300000 TOTAL 342303 214200 879538 0
21. Cash summary for AY 2015-16 is as under, and AY 16-17 ,and AY 17-18 is given above.
Cash 1-Apr-2014 to 31-Mar-2015 Cash Particulars 1-Apr-2014 to 31-Mar-2015 Transactions Closing Debit Credit Balance Opening 1890061.30 Dr Balance April 13748102.50 8588243.08 7049920.72 Dr May 6170571.25 5266723.00 7953768.97 Dr June 7673942.00 11103730.00 4523980.97 Dr July 1514973.25 1648869.00 4390085.22 Dr August 1026200.00 1452783.00 3963502.22 Dr September 2255109.00 3113063.00 3105548.22 Dr October 5426135.00 3656252.00 4875431.22 Dr November 1137923.00 1394000.00 4619354.22 Dr December 6550290.00 11103076.00 66568.22 Dr January 5483941.00 4297000.00 1253509.22 Dr February 5825810.00 4524826.00 2554493.22 Dr March 3179991.00 5731750.26 2733.96 Dr Grand 59992988.00 61880315.34 2733.96 Dr Total
4. The above facts reveal that the cash was available with the assessee as per the cash book that was subjected to audit by independent Chartered Accountant. The main source of cash deposited was sales proceeds. The sales always result into decrease in stock. The stock records are maintained by the assessee and produced before Ld. A.O. during assessment proceedings. The issue was duly examinedby the assessing officer since the case was under complete scrutiny.
5. All Books of accounts , bill book , stock registers in support of cash sales, were also produced physically, which were examined. On perusal of the order of Ld. A.O., it may be seen from the order u/s 143(3) that hearings were fixed on 24.08.2018, 10.10.2018,31.01.2019,12.08.2019, and 22.10.2019.
For the purpose of application of sec 263, the order passed by Ld AO should beerroneous and prejudicial to the interest of revenue. As the order is passed by the A.O. afterverification of cash deposited, books of accounts, VAT Returns (Sales Tax Return ToState Authorities on monthly basis.), it cannot be said as prejudicial to revenue orerroneous. Above being the facts, by any imagination it cannot be said that enquiries were not made by assessing officer. Theorderafterenquiry andassessingtheincomeatoneofthepossible outcomecannotbesaid to be without enquiry particularly when the cash deposit in the bank account during demonetization is duly enquired and explained to the satisfaction of Ld. A.O. Even before issue of notice u/s 143(2), the assessee received notice asking it to justify the deposit of cash during demonetization. The assesseealso filed its submissions on the online notice in respect of said cash deposit.
7. It would thus be seen by your honours from the assessment records that for the issue for which the said show cause notice u/s 263 has been issued to assesseewere duly dealt with by the Ld. Assessing Officer after making necessary enquiries and considering the submissions made by the assessee.It was after taking due cognizance of these replies, which forms part of body of assessment order also, and complete satisfaction thereof, the said assessment stood framed.
Assessment order in any case cannot be revised on the ground that the deeper enquiry ought to have been made or proper exercise were not done while making the assessment. Reliance is placed by us on decisions of CIT V/s Anil Kumar Sharma 335 ITR 83 (Delhi). Further no defect of whatsoever in nature has also been pointed out by the assessing officer in our books of accounts.
It is submitted that in totality of the facts, circumstances and legal position as explained above and also with reference to all detailed explanations and information furnished by us to the then assessing officer during our assessment proceedings u/s 143(3) and the assessment order dated 29.11.2019 framed by the assessing officer is correct. There isn't any doubt about the fact that the assessment has not been made without proper and detailed enquiries/verification and proper application of mind by then assessing officer. Therefore provisions of Section 263 of Income Tax Act cannot be invoked.
10. However Ld. Pr.CITexpected more enquiries by Ld. A.O. As such he exceeded his revisionary power under section 263 and set-aside the assessment order dated 29.11.2019 passed under section 143(3), on the ground that the order was prejudicial to the interests of the Revenue on account of no further enquiry conducted in the course of the assessment proceedings in respect of the issue of cash deposited during demonetization period.
This is to submit that the assessment order passed by the assessing officer for the assessment year 2017-18 was neither erroneous nor prejudicial to the interest of revenue and therefore the order of Ld.Pr.CIT was without jurisdiction.
In support of its arguments, the humble assesseealso begs to rely on the various other case authorities which will be referred to during the course of hearing.
(D.2) Further a gist of case authorities, relied by the appellant assessee, was also filed, which is reproduced below:
Sl.No. Particulars of case Para Relevant Gist Page authorities No. reference oflist of case law authoriti es 1. Judgment “4. Revisionary power under Section and 4 &5 1-12 263 of the Act is conferred by the Act on order dated the Commissioner/Director of Income 09.07.2013 passed Tax when an order passed by the lower by Hon’ble Delhi authority is erroneous and prejudicial to High Court in the the interest of the Revenue. Orders which case of DIT vs Jyoti are passed without inquiry or Foundation in ITA investigation are treated as erroneous no. 267/2013. and prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue because the revisionaryauthority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken………..”
In the present case, inquiries were certainly conducted by the Assessing Officer. It is not a case of no inquiry. The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of DG Housing Projects Limited (supra), the inquiry should have been conducted by the Commissioner or Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the said inquiry.
6. In view of the aforesaid legal position, we do not think any substantial question of law arises for consideration.” “17. This distinction must be kept in mind 2. Judgment 13-19 and 17, 19, by the CIT while exercising jurisdiction order dated 20 & under Section 263 of the Act and in the 01.03.2012 passed 21 absence of the finding that the order is by Hon’ble Delhi erroneous and prejudicial to the interest of High Court in the Revenue, exercise of jurisdiction under the case ofIncome-tax said section is not sustainable. In most cases Officer vs D.G. of alleged "inadequate investigation", it will Housing Projects be difficult to hold that the order of the reported Assessing Officer, who had conducted Ltd. in enquiries and had acted as an investigator, is [2012] 20 erroneous, without CIT conducting taxmann.com 587 verification/inquiry. The order of the (Delhi). Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT v. Shree Manjunathesware Packing & Products Camphor Works [1998] 231 ITR 53 / 98 Taxman 1 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. ********* 19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.
The CIT is patently wrong in mentioning and stating that Schedule III to the Wealth Tax Act, 1957 was not applicable but, the Assessing Officer should have adopted the said formula/method. The aforesaid reasoning cannot be accepted and does not show or establish that the assessment order was erroneous.
In view of the aforesaid reasoning, the question of law is answered in favour of respondent-assessee and against the Revenue and the appeal is accordingly dismissed. No costs.”
3. Order 3.5 & 4 “3.5…….The principles laid down by the dated 20-29 courts are that the Learned CIT cannot 20.03.2023 passed invoke his powers of revision under by Hon’ble Income- section 263 if the Assessing Officer has tax Appellate conducted enquiries and applied his mind Tribunal, Jodhpur and has taken a possible view of the Bench, Jodhpur in matter. If there was any enquiry and a the case of Shri possible view is taken, it would not give Dhanraj Chhippa occasion to the Commissioner to pass vs. The PCIT, orders under section 263 of the Act, Udiapur, in ITA merely because he has a different opinion No. 83/Jodh/2022 in the matter. Possible view shall mean a for A.Y. 2017-18 issue, which is debatable and there could be more than one possible views. The consideration of the Commissioner as to whether an order is erroneous in so far it is prejudicial to the interests of Revenue must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded. Since the AO has already examined the case and made complete enquiry wherein no infirmity appears then in that case, the Ld PCIT was not justified in passing the impugned revision order. Accordingly, we quash the same and restore the assessment order dated 15-07-2019 framed u/s 144 of the Act”
Order dated 8 “8………… We also find that the 30-39 explanation offered by the assessee that 10.05.2023 passed the sales had considerably reduced in the by Hon’ble Income- month of December, 2016 in the sum of tax Appellate Rs.12,800/- due to the fact that there was Tribunal, Delhi severe restrictions imposed by the bank in Bench ‘H’ Delhi, in making available the new currency to the the case of Arvi Lights vs. ITO, account holders. Hence, obviously, for want of cash in the new currency, the Delhi, in during that month is bound to 578/Del/2022 for reduce. Moreover, considering the A.Y. 2017-18 behavior of the assessee in regularly making cash sales on daily basis and frequently depositing such cash in the bank account on a weekly basis or a fortnightly basis, we do not find any infirmity in the assessee’s holding a cash balance of Rs.82,79,131/- as on 08.11.2016. As stated, supra, it is pertinent to note that the assessee had indeed deposited cash in the bank account from 01.04.2016 to 08.11.2016 in the sum of Rs.94,23,500/-. While it is so, there is no reason to suspect the cash deposit made during demonetization period in the sum of Rs.80,50,000/-. More so, when the same were sourced out of cash sale made by the assessee prior to the date of deposit. Yet another crucial point which becomes a clinching evidence in the instant case is as and when the sales were made, the assessee had correspondingly reduced the stock of electrical goods in its books which goes to prove that the assessee had maintained proper quantitative details of opening stock, purchases, sales and closing stock of goods. We find that in the order of ld. PCIT, nowhere the closing stock details maintained by the assessee was even sought to be doubted. Hence, there is absolutely no case on merits to re- examine the source of cash deposits made in the bank account during the demonetisation period in the sum of Rs.80,50,000/-. Even otherwise, we find that the ld. AO has made adequate enquiries in the original assessment proceedings itself as is evident from the detailed questionnaire issued by the AO and the replies filed thereon by the assessee and, more particularly, a specific para earmarked by the AO in page 4 of the assessment order by giving a factual finding that the cash deposits were made out of cash sales made by the assessee. Once an adequate enquiry has been made by the ld. AO and has taken only correct and plausible view, the same cannot be disturbed by the ld. PCIT by invoking his revisionjurisdiction u/s 263 of the Act. The law is very well settled on this issue by the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd., reported in 243 ITR 83 and CIT vs. Max India Ltd., reported in 166 Taxman 188. Hence, we have no hesitation in quashing the revision order passed by the ld.PCIT u/s 263 of the Act in the facts and circumstances of the instant case. Accordingly, grounds raised
by the assesseeare allowed.
5. Order dated 14 “14. Thus, on almost all the issues which 40-64 the Ld. PCIT has held that the enquiry 26.03.2025 passed was not conducted, the record shows that by Hon’ble Income- the enquiry was, in fact conducted. In the tax Appellate circumstances, we are of the opinion that Tribunal, Lucknow this is not a case where Explanation-2(a) Bench “B”, of Section 263 of the Act is applicable Lucknow, in the because all enquiries which in the case of O.P. opinion of the Ld PCIT ought to have Associates vs. been made, were made by the Assessing PCIT, Bareilly in Officer, albeit in not exactly the same manner as desired by the Ld. PCIT, but 2022 for A.Y. 2017- very substantially and towards verifying 18 the very same set of facts. The Ld AR has brought on record several judicial precedents, which we have referred to in paragraph 7 of this order, wherein it has been held that if matters have been inquired into, then revisionary jurisdiction cannot be exercised to order still further inquiries so as to reexamine the veracity of the results of earlier inquiries. Ld AR has also invited our attention to the orders of the Hon Delhi High Court in the case of ITO vs DG. Housing Projects Ltd 343 ITR 329 & DIT vs Jyoti Foundation ITA.
No.267/2013, wherein the Courts have held that where a Commissioner feels that the inquiry was inadequate , he must conduct further inquiry to show that the order was erroneous as a result of such inadequate inquiry and cannot simply set it aside for further inquiry by the assessing officer, to find out whether the order is erroneous or not Therefore, after considering the facts of the case and the law as laid down by the courts, we hold that the Ld. PCIT was not justified in holding that the order of the AO was erroneous and prejudicial to revenue and therefore we quash the order of the Ld. PCIT u/s 263 of the Act and restore the order of the Ld. AO passed u/s 143(3) of the Act. Accordingly, all the grounds of appeal of the assessee are allowed.”
6. Order dated 22, 23 “22. Though the Ld. AO has not 65-85 mentioned about all the aforesaid notices 23.05.2025 passed & 24 issued u/s. 142(1) of the Act, however, in by Hon’ble Income- para 1 of the assessment order there is a tax Appellate reference of notice dated 17.01.2019 u/s. Tribunal, Mumbai 142(1) of the Act and it is also not in Bench ‘E’ Mumbai, denial that the Ld. AO has also issued in the case of various other notices u/s.142(1) of the HimmatlalKanhaiy Act, such as dated 02.12.2019, alal Jain vs. PCIT, 17.01.2019 and the Assessee in response Mumbai, in ITA to the such notices, duly filed its No. submissions along with the documentary 102/Mum/2025 for evidences, as it Clearly appears from the A.Y. 2017-18 acknowledgments filed by the Assessee before us {kindly refer pages 27 to 38 of paper book}.
23. From the aforesaid analyzations, it has become clear that the Ld. AO in the original assessment proceedings, not only made the detailed enquiry but also examined various relevant documents as mentioned above and the reasons stated by the Assessee for making the high cash sale between 01.11.2016 to 08.11.2016 and thereafter only came to the conclusion in accepting the returned income of the Assessee and thus the assessment order cannot be faulted with and consequently cannot be held as erroneous in so far as, it is prejudicial to the interest of the revenue, which would render the same as invalid and/erroneous as held by the Ld. PCIT.
Thus, on the aforesaid analyzations, the impugned order is liable to be quashed, resultantly, the same is quashed.”
Judgement “10. It is evident from the above that the and 10,11& 86-95 assessee had clearly demonstrated that order dated June 9, 12 the entire cash deposited during 2023 passed by demonetization could not be treated as Hon’ble Income-tax unexplained; that its scale of business Appellate Tribunal, operations was huge and nature of Ahmedabad Bench business was such that 90% of its sales ‘A’, in the case of was done in cash, and even prior to ShankarlalThakor demonetization, the assessee had made dasNarsingani huge cash sales commensurate to the sale vs.Principal made during the demonetization period. Commissioner of All these explanations given by the Income Tax-1, assessee was rightly taken note of by the reported in [2023] AO and finding anomaly to the extent of 152 taxmann.com substantial increase in sales during the 624 (Ahmedabad – demonetization period, he considered it ITAT). fit to treat 20% of the sales as unexplained credits. The ld. Pr. CIT's view that entire cash deposits during this period is to be treated as unexplained, is contrary to the facts on record, wherein the assessee has demonstrated the factum of huge turnover prior to and post- demonetization in the preceding year, and even in the succeeding year, and also factum of majority of the sales being in cash. Therefore, there was no occasion at all for the AO to treat the entire cash deposited during the demonetization period, as unexplained credits. The facts on record could not have led to the inference that entire sales made by the assessee during the demonetization period were bogus. In fact, the inference drawn by the AO, that only a portion of it could be treated as bogus/unexplained, was not incorrect. Therefore, we hold that the ld. Pr. CIT's finding of error is based on incorrect appreciation of the facts before it, and his finding that the assessee had not been able to substantiate its explanation for cash sales completely is also not correct. In fact, as rightly found by the AO, to a great extent his explanation was substantiated that the majority of sales made by the assessee was in cash, but it was only vis-à-vis abnormal incremental sales made during the demonetization period, the AO refused to agree with the assessee Also the finding of the ld. Pr. CIT therefore that the AO completely disagreed with the assessee regarding its explanation and found the explanation of the assessee to be unsatisfactory for the entire cash deposits, is also incorrect. As noted above, the AO was dissatisfied not with the explanation of the entire cash deposits, but only partially in view of the abnormal increase in the sales shown by the assessee during that period.
11. In view of the above, the finding of the ld. Pr. CIT that the entire cash deposits during the demonetization ought to have been treated as unexplained credit under section 68 of the Act, we hold, could not have been inferred from the facts on record, and there is no error as such in the order of the AO in this regard. The order passed by the ld. Pr. CIT under section 263 of the Act holding the assessment order erroneous so as to cause prejudice to the Revenue is therefore not sustainable in law and is set aside. The grounds raised
by the assessee are allowed in above terms.
12. In the result, the appeal of the assessee is allowed.”
8. Order dated 7 & 10 “7. Now, coming to the explanation of 96-105 20.02.2023 passed the assessee regarding availability of opening cash-in-hand of Rs 24,34,429/- by Hon’ble Income- tax Appellate out of which a sum of Rs 24,00,000/- was deposited during the demonetization Tribunal, period. It has been explained that firstly, Chandigarh Bench the cash-in-hand of Rs 24,34,429/- has “A”, Chandigarh, been duly disclosed in the balance sheet of in the case of Smt. the assessee for year ended 31.03.2016 Kanta Rani vs. The and the contents of the balance sheet are Pr. CIT, Patiala in forming part of the return of income filed the assessee for the financial year 446/Chd/2022 for 2015-16 relevant to assessment year A.Y. 2017-18 2016-17. It was submitted that the return of income for the assessment year 2016-17 was filed on 12/08/2016 well before the start of the demonetization period and thus, it is evident that the assessee has duly disclosed to the Revenue the availability of cash-in-hand at the beginning of the year and well before the demonetization period. It has been further submitted that the said opening cash-in hand has been received on account of maturity proceeds from LIC and reliance policies on death of her husband, Comprise and settlement amounts received pursuant to Courts orders, sale of shares and sale of plot of land and withdrawals from the bank account. It has been further explained that the reason for keeping cash-in-hand was insecurity of the assessee and undergoing mental trauma on account of death of herhusband, divorce proceedings of her daughter and various Court cases. We find that the aforesaid explanation were furnished in the context of specific notices issued by the AO calling for the explanation in support of cash deposit and the AO has examined the said explanations and has further carried out verification from the banks and after examining earlier years tax returns, has accepted the same in support of cash availability at the beginning of the year and deposit therefrom during the demonization period. We therefore find that the matter relating to source of cash deposits during the demonization period has been duly examined by the AO and he has taken all requisite steps calling for explanation from the assessee, issuing further notices where the earlier explanation was not acceptable and calling for further information and after carrying out independent examination from past year tax returns available on department’s IT Portal and calling from the information from the bank has accepted the said explanation so furnished by the assessee. ******* 10. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, we are of the considered view that the matter has been duly examined by the AO and the assessment order so passed by him cannot be held as erroneous in so far as prejudicial to the interest of the Revenue. In the result, the impugned orderpassed by the ld PCIT u/s 263 is set-aside and that of the AO passed u/s 143(3) is sustained.”
9. Order “2. The facts relating to the case are dated 2, 13 & 106-113 stated in brief. The assessment of the year 04.01.2023 passed 14 under consideration was completed in the by Hon’ble Income- hands of the assessee by the assessing tax Appellate officer u/s 143(3) of the Act on 12-06- Tribunal, Mumbai 2019. On examination of assessment ‘A’ Bench, Mumbai, records, the Ld PCIT noticed that the in the case of M/s. assessee has deposited cash of A A Motiwala Rs.66,00,000/- into its bank account Jewellers vs.PCIT- during demonetisation period. The Ld 4, Mumbai, in ITA PCIT took the view that the assessing No. officer has not properly examined this 1363/Mum/2022 issue and the same has rendered the for A.Y. 2017-18 assessment order erroneous and prejudicial to the interests of revenue. Accordingly, he initiated revision proceedings u/s 263 of the Act. ********** 13. We have gone through the various decisions relied upon by Ld D.R. All those decisions deal with the nature of enquiries and application of mind by the assessing officer. There cannot be any dispute with regard to those legal propositions. However, in view of the foregoing discussions, in the instant case, we are of the view that the AO has conducted proper enquiries and there was proper application of mind on the part of the AO in respect of cash deposits and he has taken a possible view in respect of the same. ********** 14. Accordingly, we are of the view that the impugned revision order passed by Ld PCIT is not sustainable in law on both the issues. Accordingly, we quash the impugned revision order passed by Ld PCIT.”
Order 7. We heard the rival submissions and dated 7, 10& 114-130 perused the material on record. The 25.07.2022 passed 12 assessee during the course of assessment by Hon’ble Income- proceedings had submitted the various tax Appellate details called for by the AO including the Tribunal, ‘C’ Bench, details of cash deposits made during Bangalore, in the demonetization period. The PCIT has case of mentioned in the order u/s. 263 of the VanishreeHolabas Act that that the AO did not make uShettar vs. The necessary enquiries about the source of PCIT, Hubli in ITA cash deposited during the demonetization No. 270/Bang/2022 period. “The PCIT has also stated that for A.Y. 2017-18 the AO should have verified the cash sales specifically by obtaining cash book to verify cash balance as on 08.11.2016. It was the submission of the learned A.R. that entire books of account including sales register, cash book, etc. were submitted before the AO and that he has verified the source of cash deposits. The learned A.R.in this regard drew out attention to the cash book where the cash deposit entries are accounted (page 202, 203 & 209 of PB) substantiating the submissions made before the AO as given below:- ********** 10. Further it is factually evident that the assessee has submitted all the relevant details with regard to cash deposits and agricultural income and the AO has in fact made additions with regard to the agricultural income. Merely because the order was not passed elaborately it would not be said that the order of the AO is erroneous and prejudicial to the interests of the Revenue. ********* 12. The SLP against the above order of the Hon’ble High Court was dismissed by the Hon’ble Supreme Court, thereby the issue that the explanation (2) to Section 263 of the Act could be invoked only in a very gross case of inadequacy in enquiring or where the mandatory enquiries are not conducted has reached finality. In view of the above discussion, we are of the considered view that the PCIT is not justified in setting aside the order or the AO for examining afresh. Accordingly, the directions of the PCIT are quashed. 14&15 “14. We may now examine the facts of 11. Judgment and 131-136 the present case in the light of the powers order dated of the Commissioner set out above. The 15.04.1993 passed ITO in this case had made enquiries in by Hon’ble High regard to the nature of the expenditure Court of Bombay in incurred by the assessee. The assessee had the case of CIT vs. given detailed explanation in that regard Gabriel India Ltd., by a letter in writing. All these are part reported in (1993) of the record of the case. Evidently, the 203 ITR 108. claim was allowed by the ITO on being satisfied with the explanation of the assessee. Such decision of the ITO cannot be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re- examine the matter that, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interests of the revenue. Without doing so, he does not get the power to set aside the assessment. In the instant case, the Commissioner did so and it is for that reason that the Tribunal did not approve his action and set aside his order. We do not find any infirmity in the above conclusion of the Tribunal.
In the light of the foregoing discussion, we answer the question referred to us in the affirmative, that is, in favour of the assessee and against the revenue.” “18. Let us look into the matter from 12. Judgment and 18 & 137-147 another angel. What was the order dated 20 material/information available with the 11.09.2009 passed Assessing Officer on the basis of which by Hon’ble Delhi he allowed the expenditure as revenue? It High Court in the was disclosed to him that the assessee is a case of CIT vs. manufacturer of car parts. In the Sunbeam Auto manufacturing process, dyes are fitted in Ltd,reported in machines by which the car parts are [2010] 189 Taxman manufactured. These dyes are thus the 436 (Delhi) (2011). components of the machines. These dyes need constant replacement, as their life is not more than a year. The assessee had also explained that since these parts are manufactured for the automobile industry, which have to work on complete accuracy at high speed for a longer period, replacement of these parts at short intervals becomes imperative to retain accuracy. Because of these reasons, these tools and dyes have a very short span of life and it could produce maximum one lakh permissible shorts. Thereafter, they have to be replaced. With the replacement of such tools and dyes, which are the components of a machine, no new assets comes into existence, nor is their benefit of enduring nature. It does not even enhance the life of existing machine of which these tools and dyes are only parts. No production capacity of the existing machines is increased either. The Tribunal, in these circumstances, relied upon the judgment of Mysore Spun Concrete Pipe (P.) Ltd.'s case (supra) wherein Karnataka High Court held that the replacement of moulds was not in the nature of replacement of a capital machinery, but in the nature of replacement a part of the machinery which in turn was in the nature of maintenance of machinery installed in the factory. Such an expenditure was treated as revenue expenditure. With this position in law, it is clear that view taken by the Assessing Officer was one of the possible views and, therefore, the assessment order passed by the Assessing Officer could not be held to be prejudicial to the revenue. Such an order thus has rightly been set aside by the Tribunal. ********** 20. Likewise, whether the Commissioner should have recorded definite finding or not, may not be very relevant factor in the present case where on the facts of this case we have found that the opinion of the Assessing Officer in treating the expenditure as revenue expenditure was plausible and thus there was no material before the CIT to vary that opinion and ask for fresh inquiry. “18. We are thus of the opinion that the 13. Judgment and 18 148-155 provisions of section 263 of the Act, order dated when read as a composite whole, make it 16.08.2010 passed incumbent upon the Commissioner by Hon’ble Delhi High Court in the before exercising revisional powers to: (i) call for and examine the record, and (ii) case of CIT vs. give the assessee an opportunity of being Vikas Polymers heard and thereafter to make or cause to reported in (2012) be made such enquiry as he deems 341 ITR 537 (Del.). necessary. It is only on fulfilment of these twin conditions that the Commissioner may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the Commis-sioner may call for the records and if he prima facie considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirement of the section is manifestly for a purpose. Merely because the Commissioner considers on examination of the record that the order have been erroneously passed so as to prejudice the interest of the revenue will not suffice. The assessee must be called, his explanation sought for and examined by the Commissioner, and thereafter if the Commissioner still feels that the order is erroneous and prejudicial to the interest of the revenue, the Commissioner may pass revisional orders. If, on the other hand, the Commissioner is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. In the instant case, for example, the Commissioner has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the Commissioner that the Assessing Officer had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the Commissioner, was duly reflected in the respective assessments of the partners who were income-tax assessees and the unsecured loan taken from M/s. Stutee Chit & Finance (P.) Ltd. was duly reflected in the assessment order of the said Chit Fund which was also an assessee.”
(D.3) A copy of order sheet from assessment records was also filed from the assessee’s side, wherein it has been recorded on 29/11/2019 (the same date on which assessment order was also passed by the Assessing Officer) as under:
“Case was selected for scrutiny for the reason that "large value of cash deposits during demonetisation period.
During the course of assessment proceedings, it noticed that the assessee has deposited cash of Rs.2,54,00,000/- during demonetisation period in various bank accounts. Source of deposit submitted by the assesses that all the deposits made to the bank were out of sale proceeds from trading of stone grits and sand. Submission of the assessee found satisfactory. Hence no adverse action is taken.
(E) At the time of hearing, the learned A.R. for the assessee submitted that the Assessing Officer had conducted necessary inquiries. He drew our attention to copy of order-sheet of assessment records [referred to in foregoing paragraph (D.3) of this order] and contended that the Assessing Officer had recorded his satisfaction with assessee’s explanation that cash deposits made by the assessee in bank account were out of sale proceeds of stone grits and sand. Further, he drew our attention to the notices dated 22/01/2019 and 15/10/2019 issued u/s 142(1) of the Act whereby queries were raised by the Assessing Officer. He also drew our attention to compliances made by the assessee during assessment proceedings vide reply dated 29/07/2019 and 01/11/2019. He took us through the paper book [referred to in foregoing paragraph No (D) of this order] to highlight the queries raised by the Assessing Officer in the aforesaid notices and the compliances made from the assessee’s side. He placed further reliance on the written submissions [referred to in foregoing paragraph No. (D.1) of this order]; gist of case authorities [referred to in foregoing paragraph No. (D.2) of this order] and on the following precedents:
(i) CIT vs. Vikram Aditya and Associates 287 ITR 268 (Del) (ii) K. R. Satyanarayana vs. CIT [2021] 279 taxman 175 (Kar) (iii) Pr.CIT vs. Brahma Centre Development (P) Ltd. ]2021] 323 ITR (Del) 888] (iv) CIT vs. Green Land Motors [2018] 2 NYPCTR 639 (All) (v) Pr.CIT vs. Champ Info Software [2021] 5 NYPCTR 840 (All) (vi) CIT vs. Metro & Metro [2018] 404 ITR 304 (All) (vii)
(E.1) Moreover, he also placed reliance on the following precedents:
(E.1.1) The learned CIT (D.R.) strongly supported the impugned order dated 24/03/2022 of the learned Pr.CIT. He drew our attention to the observations made by the learned Pr.CIT in the impugned order at paragraph 4 of the order (already referred to in foregoing paragraph (B) of this order). The learned CIT (D.R.) submitted that this case was selected for complete scrutiny. He also submitted that the assessee made cash deposit of Rs.2,54,00,000/- in bank account during demonetization period; and that this aspect should have been subjected to deep scrutiny by the Assessing Officer, which was not done by the Assessing Officer.
(F) We have heard both sides. We have perused the materials on record. The provisions u/s 263 of the Act, as it prevailed at the relevant time, are reproduced below for the ease of reference:
“Revision of orders prejudicial to revenue.
(1) The 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 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 an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. 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 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 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; (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 9a[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 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 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 9a[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. (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.”
(F.1) It can be seen, from perusal of Explanation 2(a) to section 263(1) of the Act that for the purposes of revision u/s 263 of the Act, an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the Revenue if in the opinion of the Pr.CIT, the order was passed by the Assessing Officer without making inquiries or verification which should have been made. In any given case; whether the order was passed by the Assessing Officer without making inquiries or verification which should have been made, is a question of fact. The answer would depend on the facts and circumstances of the specific case. In the present appeal before us, the case was selected for complete scrutiny. The reason for selection of the case for scrutiny was “large value of cash deposits during demonetization period”. During demonetization period, the assessee deposited Rs.2,54,00,000/- in cash in the bank account maintained with Bank of Baroda. The explanation submitted by the assessee, that the aforesaid cash deposits were made out of cash sale of stone grits and sand; was accepted by the Assessing Officer on its face value without further verification. There is nothing on record to show that any attempt was made by the Assessing Officer to examine whether the books of account of the assessee were satisfactory as regards correctness or completeness of the accounts, within the meaning of section 145(3) of the Act. There is nothing on record to indicate that any effort was made by the Assessing Officer to examine whether the cash sales claimed by the assessee during demonetization period were in conformity with the inventory available with the assessee. There is nothing on record to suggest that the Assessing Officer made any effort to make inquiries with the persons from whom the assessee claimed to have purchased materials or to whom the assessee claimed to have sold materials. There is no material on record to show that any effort was made by the Assessing Officer to verify whether the assessee had recorded unusual rise in cash purchases preceding or during the period of demonetization period to account for cash sales. The Assessing Officer made no effort to ascertain whether any purchases recorded by the assessee attracted disallowance u/s 40A(3) of the Act. The observation of the learned Pr.CIT in paragraph 4 of the impugned order shows that there were unusual features in the present case which ought to have invited deeper scrutiny by the Assessing Officer; more so, because the case was selected for complete scrutiny; for the reason that in this case, there was “large value of cash deposits during demonetization period”. Yet, despite these red flags, the Assessing Officer accepted the explanation of the assessee on face value.
(F.1.1) We have given due consideration to a couple of orders of Hon'ble High Courts, to which our attention was invited. Firstly, we have considered the order of Hon'ble Delhi High Court in Pr.CIT vs. Delhi Airport Metro Express (P.) Ltd. 398 ITR 8 (Delhi)/ 99 taxmann.com 382 in which the Hon'ble High Court observed in paragraph (12) of the order: “Mr Asheesh Jain then volunteered that the Principal Commissioner of Income-tax had exercised the second option available to him under section 263(1) of the Act by sending the entire matter back to the Assessing Officer for a fresh assessment. That option, in the considered view of the court, can be exercised only after the Principal Commissioner of Income-tax undertakes an inquiry himself in the manner indicated hereinbefore. That is missing in the present case.” However, that order was specific to facts of that particular case, and has no general application. This is also obvious from the view taken in paragraph (13) of the aforesaid order of Hon'ble Delhi High Court; observing that no substantial question of law arose. Further, there is no provision u/s 263 of the Act, requiring the Pr.CIT to necessarily undertake an inquiry himself. In the aforesaid case of Pr.CIT vs. Delhi Airport Metro Express (P.) Ltd. (supra), the Hon'ble Delhi High Court found that during the year, the assessee had claimed that it had purchased (fixed) assets “from independent vendors, out of its own funds, for setting up the project”. However, in the order under section 263 of I.T. Act, the Pr.CIT took the view that (instead of depreciation) the assessee was eligible (only) for amortization over the period of BOT arrangement, in accordance with CBDT Circular No. 9 of 2014 (dated 23/04/2014). It is in this context that the Hon'ble Delhi High Court took the view that it was incumbent upon the Pr.CIT to undertake an inquiry as regards which of the assets were purchased and installed by the assessee out of its own funds and which were those assets that were handed over to the assessee by DMRC under BOT arrangement. The order of Hon'ble Delhi High Court was specific to that case. The facts and the issue in the present case being entirely different and distinguishable; the aforesaid order of Hon'ble Delhi High Court has no application in the case before us. In the present case, the issue is whether the Assessing Officer passed the assessment order without making inquiries or verification which should have been made in facts and circumstances of the case. In any case, with utmost regard and deep respect for Hon'ble Delhi High Court; this case before us falls under the jurisdiction of Hon'ble Allahabad High Court; and an order of Hon'ble Delhi High Court is not a binding precedent.
(F.2) Secondly, we have also considered the order of Hon'ble Gujarat High Court in the case of Pr.CIT vs. Shreeji Paints (P.) Ltd. [2021] 130 taxmann.com 293 (Guj) in which ITAT had observed that the Pr.CIT had not mentioned in the show cause notice (expressing intention) to invoke Explanation 2 of section 263 of the Act. The Hon'ble Gujarat High Court dismissed Revenue’s appeal, taking into cognizance the finding of facts that the Assessing Officer had made inquiries in detail and after applying mind, accepted the genuineness of loans received by the assessee. Hon'ble Gujarat High Court has not held it to be a mandatory requirement that in the show cause notice, the Pr.CIT must express intention to invoke Explanation 2 of section 263 of the Act. In fact, Hon'ble Gujarat High Court has expressed no opinion on this. Moreover, the order of Hon'ble Gujarat High Court is applicable to specific facts of that case, and has no application to the present case before us. Hon'ble Gujarat High Court has made it abundantly clear in paragraph 7 of the aforesaid order of Pr.CIT vs. Shreeji Paints (P.) Ltd. (supra) that in view of the finding of facts arrieved by the Tribunal, there was no question of law decided by Hon'ble High Court. When an order is passed on facts specific to that case; and does not decide a question of law; the order has no application for cases in which there are different and distinguishable issues and facts. It is well settled that an order on a question of fact passed in the context specific facts of that case is not a precedent and has no application for cases in which issues and facts are different and distinguishable. The facts and the issue in the present case being entirely different and distinguishable; the aforesaid order of Hon'ble Gujarat High Court has no application in the case before us. In the present case, the issue is whether the Assessing Officer passed the assessment order without making inquiries or verification which should have been made in facts and circumstances of the case. In any case, with utmost regard and deep respect for Hon'ble Gujarat High Court; this case before us falls under the jurisdiction of Hon'ble Allahabad High Court; and an order of Hon'ble Gujarat High Court is not a binding precedent.
(F.2.1) Similarly, the other case authorities on which the learned A.R. for the assessee placed reliance and/or which have been brought on record during appellate proceedings in Income Tax Appellate Tribunal are specific to facts of those cases and have no application to the present case before us. We have already held in foregoing paragraph (F.1) of this order that in any given case, whether the order was passed by the Assessing Officer without making inquiries or verification, which should have been made, is question of fact; and that the answer would depend on the facts and circumstances of the specific case. In view of the facts and circumstances discussed in detail in foregoing paragraph (F.1) of this order, and having due regard to the case authorities relied upon by learned Pr.CIT in his impugned order, the impugned order passed by learned Pr.CIT is held to be in accordance with law in the facts and circumstances of the present case, specially considering Explanation 2(a) to section 263(1) of the Act. In the facts and circumstances of this case, as discussed earlier; we are of the view that the aforesaid assessment order dated 29/11/2019 was passed by the Assessing Officer without making inquiries and verifications which should have been made. We agree with the finding in paragraph (6) of impugned order dated 24/03/2022 passed u/s 263 of the I.T. Act, that the assessment order dated 29/11/2019 is erroneous in so far as it is prejudicial to the interest of Revenue. Therefore, the impugned order of learned Pr.CIT is upheld. Grounds of appeal are dismissed accordingly.
(G) In the result, the appeal of the assessee stands dismissed.