M/S ROSEMARY VINCOM LLP ,KOLKATA vs. ITO, WARD 47(5), KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH, KOLKATA (Before Sri J. Sudhakar Reddy, Accountant Member & Sri Aby T. Varkey, Judicial Member) I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP.............................................................................................Appellant [PAN: AASFR 0062 P] Vs. ITO, Ward-47(5), Kolkata............................................................................................Respondent Appearances by: Sh. S.M. Surana, Adv., appeared on behalf of the Assessee. Sh. Tushar Dhawal Singh, CIT(D/R), appeared on behalf of the Revenue. Date of concluding the hearing : May12th, 2021 Date of pronouncing the order : June23rd, 2021 ORDER Per J. Sudhakar Reddy, AM: This is an appeal filed by the assessee directed against the order of the Learned Pr. Commissioner of Income Tax-16, Kolkata [hereinafter the “Pr. CIT”], passed u/s 263 of the Income Tax Act, 1961 (hereinafter the ‘Act’), dated 24.06.2020 for the Assessment Year 2015-16. Delay of 186 days in filing of the appeal is condoned as the reason given is COVID-19 Pandemic. 2. The assessee is a company and is in the business of trading and filed its return of income for the AY 2015-16 on 11.01.2016 declaring total income of ₹2,21,638/-. The assessment was selected for limited scrutiny under CASS. The issues on which the assessment was selected for limited scrutiny are i) interest expenses, ii) investment in unlisted securities, iii) low income and high loans/advances/investment loans, iv) low income and high interest rates. The AO completed the assessment u/s 143(3) of the Act on 13.12.2017 determining total income at ₹42,48,781/-. 3. The facts of the case are brought out in the 263 order which is extracted for ready reference:

2 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. “The assessee filed return of income for the assessment year 2015-16 on 11.01.2016 declaring total income at NIL. The case was selected for scrutiny and the assessment was completed u/s 143(3) of the I T Act, 1961 on 13.12.2017 determining total income at NIL. 2. The Assessment Record of the assessee for the A.Y.2015-16 was called for and examined. On examination of the assessment record, it is found that the case was selected for limited scrutiny and following issues were identified for verification:- (i) Interest Expenses (ii)Investment in Unlisted Equities (iii)Low income and high loans/advances/investments (iv)Low income and high investments. 3. The examination of record further revealed that the assessment was completed without verifying the issues identified for verification. The Assessment Order passed u/s 143(3) dated 13.12.2017 was considered as erroneous and prejudicial to the interest of revenue and a show cause was issued to the assessee vide notice dated 04/06/2020 indicating the issues on which the AO had not made inquiries before passing his assessment order:- (i) The A.O. had not made any enquiry about the conversion of company into LLP, which took place on 03.02.2015. In this respect, a copycertificate of registration of conversion was submitted by the assessee, but no further enquiry had been made by the A.O. (ii) As a result of conversion, the erstwhile company’s asset of Rs, 12,84,16,940/- were transferred to the balance sheet of newly formed assessee LLP, No verification regarding the above asset was made by the A.O, (iii) The A O. had not verified the interest component, (iv) The A.O. had not applied his mind in the matter of comparison of investment in unlisted equities. (v) The A.O, had not applied his mind in the matter of comparison of high loans/advances/investments, (vi) The A.O. had examined the reason for low income with high investments. (vii) The Assessing Officer has passed order in haste and without carrying out adequate enquiries/verifications. (viii) For proper verification on the above mentioned issues the A.O. should have taken proper approval from PCIT for converting limited scrutiny to complete scrutiny in accordance with the CBDT Instruction No. 5/2016 dated 14.07.2016.” 4. The assessee did not furnish any reply. As there is failure in reply, the Pr. CIT at para-3.1 to 3.3 held as follows:

“3.1. It is seen from the records that the assessee converted itself into an LLP from a Pvt. Ltd. Company in F.Y. 14-15 relevant to AY 15-16 Upon the said conversion, a substantial amount of assets of the erstwhile company was transferred to the assessee in its newly formed avatar of LLP The AO being an investigator as well as an adjudicator was duty bound to examine the antecedents and genuineness of funds/assets transferred to the assessee in its LLP avatar. The A.O. however did not make any proper and adequate enquiry about the conversion of company into LLP, which took place on 03.02.2015. The AO was merely satisfied with the copy of certificate of registration of conversion submitted by the assessee. The AO did not make any inquiry or verification of the fact that as a result of conversion, the erstwhile company’s asset of

3 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. Rs. 12,84,16,940/- were transferred to the balance sheet of newly formed assessee LLP. The AO did not deemed it appropriate to examine the source of introduction of the assets worth Rs. 12.84 crore in the newly born assessee. The A.O. has not even verified the reason for low income with high investments and whether the interest component credited of Rs.45.43 Lakh has any viable and cogent relationship with the Investment shown in its Balance sheet. 3.2. It is also seen that one of the issues which was flagged for verification in limited scrutiny was Investment in Unlisted Equities. The assessee has shown a reserve on account of security premium of Rs 12.14 crore in its account. The AO neither made any enquiry on the valuation of the unlisted securities nor made any verification for the source of the premium received. I find that the A.O. has not made any adequate and proper inquiry in the matter of comparison of investment in unlisted equities nor he has made any adequate examination on the issues of comparison of high loans/advances shown in the accounts of the erstwhile company and that of the present LLP. It is further seen that the assessee has claimed a loss sale of shares of Rupees 38 lakh in its account. The AO again has failed to examine the veracity of loss claimed on this account. The AO merely got satisfied by the mere submission of the assessee that all investment has been carried forward by the assessee from its erstwhile avatar of company. 3.3. I also find that the AO not only failed to make any proper examination of the issues raised for limited scrutiny, and if he felt constricted by the limitation of enquiries to be made under “Limited Scrutiny", he also failed to take steps like taking approval from PCIT for converting limited scrutiny to complete scrutiny in accordance with the CBDT Instruction No. 5/2016 dated 14.07.2016 in order to enable him to conduct in depth enquiries/verification on the above mentioned issues especially when there was large and substantial amount of funds involved and that too in newly created LLP.” 4.1. Thereafter he relied on certain case laws and at para-5 held as follows:

“5. From the examination of all the materials on record and careful appreciation of the facts and circumstances of the case, I find that the AO has passed the assessment order in an ad hoc and perfunctory manner, leaving out issues which had a material bearing on assessing the correct income of the tax payer. On the whole, the AO had not performed his job in the right spirit and has passed the assessment order in a manner which shows lack of application of mind, failure to conduct due diligence and to apply the correct provisions of law before passing the order After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order u/s 143(3) dated 13.12.2017 passed by the A.O., is erroneous in so far as it is prejudicial to the interest of revenue within the meaning of section 263(1) and its explanation 2(a) of the I.T. Act, 1961. As a result, the assessment order passed by the A.O. is set aside in respect of the issues discussed above. The A.O. is directed to initiate fresh assessment proceedings & carry out necessary enquiries/verification & provide reasonable opportunity to the assessees to produce documents & evidences which he may choose to rely upon for substantiating his own claim. Thereafter a fresh assessment order may be passed in accordance with the relevant provisions of law.” 5. Aggrieved, the assessee is in appeal before us.

6.1. On merits, he submitted that though the case of the assessee was selected for limited scrutiny on four issues, the Pr. CIT made revision invoking his powers u/s 263 of the Act on eight issues. He argued that the Pr. CIT cannot enlarge or extend the scope of enquiry, from the issues on which the case was selected for limited scrutiny. On the four

4 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. issues that were identified and selected for limited scrutiny, the ld. Counsel for the assessee filed a paper book to demonstrate that the AO has examined each of these issues. He filed a copy of the order-sheet-entry at pages 11-12 of the paper book,to demonstrate that the AO had, in fact called for the explanations on each of these issues and after considering the documents and written submissions of the assessee, he accepted the claims of the assessee. He issued notice u/s 142 of the Act on 19.09.2017 to the assessee on the various points, which specifically cover the issues on which the case was selected for limited scrutiny. He found fault with the conclusion of the Pr. CIT that the AO should have sought for permission from the Commissioner of the Income Tax for expanding the scope of the limited scrutiny and submitted that various Benches of the Tribunal have held that such an assessment cannot be a ground for making the order of the AO erroneous and prejudicial to the interest of the Revenue. He referred to the CBDT Circular on this issue. He referred to the copy of the balance sheet of Rosemary Vincom LLP on 31.03.2015 which is at page-14 to 16 of the paper book and submitted that there is no difference in the value of investments, on conversion of the company from M/s. Rosemary Vincom Pvt. Ltd. to M/s. Rosemary Vincom L.L.P. and that the difference in the value of assets was prior to conversion. He also pointed out that the case of unlisted securities, the figure prior to conversion and after conversion are the same and that there is no acquisition of new assets. 6.2. He submits that all these points are not the points for which the case was selected for limited scrutiny and hence the AO was not in error in not seeking permission from the Pr. CIT for converting the limited scrutiny of this case to complete scrutiny. He relied on the following case laws: i) Naga Dhunseri Group Ltd. vs. PCIT, ITA No. 370/Kol/2020, order dated 27.01.2021. ii) Sonali Hemant Bhavsar vs. PCIT, ITA No. 742/Kol/2019, order dated17.05.2019. 6.3. He submitted that the AO has made enquiries on all the issues and after application of mind has taken a plausible view and this cannot be termed as erroneous and prejudicial to the interest of the Revenue and hence the exercise of powers u/s 263 of the Act is bad in law. He prayed for relief.

5 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. 7. The ld. D/R on the other hand submitted that the AO is duty bound to investigate certain issues and not doing so is an error which is prejudicial to the interest of the Revenue. He emphasized that the AO is not only an investigator and also adjudicator that the AO should have taken proper approval from the Pr. CIT for converting limited scrutiny to complete scrutiny in accordance with the CBDT Instruction No. 5/16 dated 14.07.2016.He argued that the implications of the conversion of a limited company into an L.L.P. should have been examined by the AO. Having not done so as per the ld. CIT(D/R), is an error which is prejudicial to the interest of the Revenue. He referred to para-3.2 of the order passed u/s 263 of the Act by the Pr. CIT and submitted that the AO neither made any enquiry on the valuation of the unlisted securities nor made any verification of the sources of the premium received. He pointed out that the AO has failed to examine the loss and the submissions made by the assessee on all these investments were accepted by the AO, simply because these were carried forward by the assessee from its earlieravatar. He submitted that the fact is that the AO called for and just kept the replies on the record without any enquiries, which shows non- application of mind. He submitted that non-application of mind and not making enquiries or verifications is an error which is prejudicial to the interest of the Revenue and as per Explanation 2 to Section 263 of the Act, he submitted that the ld. Pr. CIT has powers to pass revisionary order u/s 263 of the Act. Under these circumstances, he prayed that this order be upheld. 8. In reply the ld. Counsel for the assessee submitted that this is not the case where a limited company was converted into an L.L.P. He submitted that this was a case of simple takeover of the limited company by the L.L.P. and all the assets and liabilities of the limited company are reflected in the L.L.P. He submitted that the Pr. CIT has not pointed out any prejudice that is caused to the Revenue on any of these issues and has simply set aside the case for verification, and enquiries, which is not permissible in law. 9. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and a perusal of the papers on record and the orders of the authorities below as well as the case laws cited, we hold as follows. 10. Admittedly the case was selected for limited scrutiny on the following points: (i) Interest Expenses

6 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. (ii) Investment in Unlisted Equities (iii) Low income and high loans/advances/investments (iv) Low income and high investments. 10.1. The record shows that the AO has called for details and all these issues by issuing notice u/s 142(1) of the Act, a copy of which is placed at page-4 to 5 of the paper book. Specific replies to these points were filed by the assessee, copies of which are at page-8 to 16 of the paper book. The AO found that no interest expense was claimed by the assessee. On the issue of investment on unlisted securities the AO found that this amount was brought forward from the company M/s. Rosemary Vincom Pvt. Ltd. which was taken over by the assessee. On the issue of low income and high loans/advances/investments, the assessee explained that the conversion took place towards the end of the year and this explanation was accepted by the AO. Low income and high investment was also explained as a fact that arose because of the takeover of the company by the L.L.P. towards the end of the year. The number of operational days were less. The AO, in our view, has applied his mind to the four issues that were the points on which the assessment of the assessee was selected for limited scrutiny. This is not the case of lack of enquiry or the case of non-application of mind. The ld. Pr. CIT has not pointed out any error which is prejudicial to the Revenue on these issues.

10.2. The Pr. CIT states that the AO should have taken prior approval from the Pr. CIT for converting the limited scrutiny of this case to the complete scrutiny.In fact, this is the basis for making the revision.

10.3. This Bench of the Tribunal in the case of Binod Kumar Mahato vs. Pr. CIT in ITA No. 2173/Kol/2018, AY 2014-15, order dated 24.02.2021 has considered the issue and held as follows:

“7. The reasons for scrutiny selection through CASS, is to examine the cash deposits in savings bank account, as these are more than the turnover. The Assessing Officer stuck to these reasons and completed the assessment u/s 143(3) of the Act. Aggrieved with this order, the assessee carried the matter in appeal before the ld. First Appellate Authority. The ld. CIT(A) considered this order and granted part relief. On these facts, the question is whether the ld. Pr. CIT is empowered to invoke his powers u/s 263 of the Act for revising the order passed u/s 143(3) of the Act dt. 25/08/2016 and direct verification, examination and determination of income as per the order of the ld. CIT(A) on the issue which is admittedly not the reason scrutiny selection through CASS. The ld. D/R admits that the issue on which the ld. Pr. CIT has invoked his powers u/s 263 of the Act is beyond the scope of reason based on which the case was selected for limited scrutiny. The Assessing Officer could not have travelled beyond these reasons without obtaining the permission of the ld. Pr. CIT as per para 4 of the CBDT Instruction No. 7/2014.

7 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. The question is whether it can be said that there is error in the order of the Assessing Officer passed u/s 143(3) of the Act, for the reason that the Assessing Officer did not seek the approval of the ld. Pr. CIT to convert the assessment from limited scrutiny to complete scrutiny. 8. In our view, if the Assessing Officer has not deemed it fit to apply to take approval from the ld. Pr. CIT/CIT, for the conversion of a limited scrutiny case into a complete scrutiny, does it result in the assessment order passed u/s 143(3) of the Act, being erroneous insofar as it is prejudicial to the interest of the revenue. This is at best, an administrative lapse. When the Assessing Officer is prohibited from examining any other issue or matter than what was the reasons for selecting the case for limited scrutiny, then the Assessing Officer cannot be accused of non-application of mind or negligence. 8.1. The ITAT Mumbai ‘G’ Bench of the Tribunal in the case of ITA No. 742/M/2019; Assessment Year 2015-16, order dt. 17/05/2019, held as follows:- “6. After hearing both the parties and perusing the materials before us, we observe from the notice issued under section 143(2) of the Act for limited scrutiny dated 19.09.2016 and find merits in the contentions of the assessee that the said limited scrutiny can not be expanded unless the AO converted it into complete scrutiny with the approval of Ld. Pr. CIT and if the AO after considering the submissions of the assessee does not come to the conclusion of potential escapement the Ld. Pr. CIT can not hold the order to be erroneous on the ground that AO ought to have reached to such conclusion. The case of the assessee is squarely covered by the decision of Kolkata Bench in the case of Sanjeev Kr. Khemka vs. Pr. CIT in ITA No.1361/Kol/2016 A.Y. 2011-12 dated 02.06.2017 wherein the co-ordinate bench of the Tribunal has held as under: "4. We have heard the rival contentions of the parties and perused the materials on record. The primary issue in the case on hand revolves whether it is a case selected under CASS for limited scrutiny or regular scrutiny. It can be seen from the grounds of appeal that the assessee wants to contend that the very initiation of proceedings Mrs. Sonali Hemant Bhavsar u/s 143(3) of the Act on the basis of regular scrutiny under the Act was bad in law. The proceedings under section 143(3) of the Act should have been limited to the extent of the information gathered through AIR. Accordingly the proceedings u/s 263 of the Act cannot be expanded beyond the issue raised in AIR. Thus the order u/s 143(3) of the Act beyond the points of AIR is invalid in law and so the same is with the order passed u/s 263 of the Act. It is the further contention of the assessee that in the items which are not subject matter of AIR cannot subject matter of scrutiny. Such matters include salary of the assessee, loans & interest on loans, payment of LIC, Commission & brokerage income etc. It is the case of the assessee that in the assessment order passed u/s 143(3) of the Act, the AO has travelled beyond the points of the AIR on the basis of which the case of scrutiny was selected under CASS module. It is the plea of the assessee that when no addition/disallowance can be made beyond the points mentioned in AIR in the assessment proceedings then same is the case with proceedings initiated u/s 263 of the Act. 4.1 The first aspect which needs to be examined is as to whether the assessee is entitled to challenge the validity of initiation expanded in the proceedings u/s 143(3) of the Act in the present appeals in which he has challenged the validity of expanded order passed u/s 263 of the Act covering the points which are not part of the AIR. The ld. Counsel for the assessee submitted before us that it is open to an assessee in an appeal against the order u/s 263 of the Act which seeks to revise an order passed u/s 143(3) of the Act, to challenge the validity of the expansion of order passed u/s.143(3) of the Act covering the points which are not part of the AIR. In this regard we find that Lucknow Bench of Hon'ble ITAT in the case of Inder Kumar Bachani (HUF) vs ITO 99 ITD 621 (Luck) and ITAT Mumbai 'G' Bench in the case of M/s. Westlife Development Ltd. Vs Principal C.I.T. in ITA NO.688/Mum/2016 have taken a view that when an Assessment order passed u/s 147 of the Act was illegal the Ld.CIT cannot invoke the jurisdiction u/s 263 of the Act against such void or non-est order. In the second decision cited the Hon'ble Mumbai bench of the Tribunal has specifically framed the following questions:- "1.Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263?

8 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. 2. Whether the impugned assessment order passed u/s 143(3) dated 24-10- 2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise the non est assessment order?" On question no. 1 and 3 which is relevant to the present case the Hon'ble Mumbai bench of the Tribunal has taken the view that when the original assessment proceedings are null and void in the eyes of law for want of proper assumption of jurisdiction then such validity can be challenged even in collateral proceedings. The Mumbai bench took the view that the proceedings u/s 147 of the Act are primary proceedings and proceedings u/s 263 of the Act are collateral proceedings and in such collateral proceedings, the validity of initiation of the original proceedings u/s Mrs. Sonali Hemant Bhavsar 147 of the Act can be challenged. The Mumbai bench of the Tribunal in this regard has placed reliance on several decisions, the principal decision being that of the Hon'ble Supreme Court in the case of Kiran Singh & Ors. V. Chaman Paswan & Ors. [1955] 1 SCR 117(SC) wherein the Hon'ble Supreme Court observed as follows :- "It is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties." Now coming to the facts of the instant case, we find that the instant case was selected on the basis of AIR Information as evident from the order of AO under section 143(3) of the Act. There is also no whisper in the order of the AO for expanding the scope of limited scrutiny after obtaining the permission from the Administrative CIT. The ld. DR has also failed to bring anything contrary to the argument of the ld. AR. Therefore in our considered view the scrutiny should have been limited only to the information emanating from the AIR. Admittedly, the assessee has claimed to have filed an appeal before Ld. CIT(A) challenging the jurisdiction exceeded by the AO while framing the assessment order u/s 143(3) of the Act. We find that the impugned issue being legal in nature and goes to the root of the matter therefore we are inclined to proceed with this issue first by holding that, from the above submission and after examining of the records, we find that the Ld. CIT in his impugned order u/s 263 of the Act has exceeded his jurisdiction while holding the order of AO as erroneous in so far prejudicial to the interest of Revenue. In view of the above we hold that the ld. CIT has in his order u/s. 263 of the Act exceeded the jurisdiction by holding the order of AO as erroneous in so far as prejudicial to the interest of Revenue on those items which are not emanating from the AIR. Thus, we are inclined to adjudicate only those matters which are emanating from the AIR as discussed above. 4.2 The assessment was framed by AO for the A.Y. 2011-12 under section 143(3) of the Act vide order dated 29.03.2014 after making certain additions/ disallowances to the total income of assessee. Subsequently, Ld. CIT u/s 263 of the Act observed certain errors in the order of AO, therefore, he was of the view tht the order passed by the AO is erroneous in so far as prejudicial to the interest of Revenue on account of no proper-enquiry before completing assessment as discussed below:- (i) The assessee has deposited in its bank account in HDFC bank Goa for ₹17.56 lakh and out of that there was a withdrawal only for ₹1.50 lakh but the AO has made the addition only to the extent of ₹4 lakh on account of unexplained cash credit. Therefore, certain unexplained cash credit of the assessee has been under assessed by the AO. ii) There was another bank account of the assessee in HDFC bank in Goa where total deposits of Rs. ₹19,31,750/- was made by the assessee but the Mrs. Sonali Hemant Bhavsar AO found credited amount of Rs. ₹5,76,056/- only. Thus, total deposits made in the bank were not brought to tax;

9 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. (iii) There was transactions of ₹3 76,225/- through credit card which was not explained and thus the entire amount was liable to be added to the total income of assessee but the AO has added only a sum of ₹2,98,225/- to the total income of assessee. Thus, there was under assessment of income by ₹78,000/-; (iv) The assessee during the year has sold property for ₹36 lakh and exemption of ₹19,74,763/- was claimed by assessee u/s. 10(38) of the Act. This fact was not verified by the AO at the time of assessment proceedings. In view of above, the Ld. CIT found the order of AO is erroneous in so far as prejudicial to the interest of Revenue and therefore show-cause notice was issued u/s. 263 of the Act vide dated 13.10.2015 for the clarification of the above transactions. In compliance thereto, the assessee submitted as under : i) The deposit in HDFC bank account No. 03151930000609 was duly reflected in his IT return. Therefore, no cause has happened to the Revenue which is prejudicial to the interest of Revenue. ii) The deposit of ₹19,73,750/- was duly reflected in the IT return and therefore there was no error which is prejudicial to the interest of Revenue. iii) Regarding the credit card payment, the addition on account of undisclosed cash deposit has already been added by the AO and therefore there is no error causing prejudice to the interest of Revenue. iv) There was no sale of the property and therefore no exemption u/s10(38) of the Act was claimed. However the Ld. CIT after considering the submission of assessee has held the order of AO is error and prejudicial to the interest of Revenue by observing as under:- "I have carefully considered the issues with specific reference to the relevant assessment records as well as written submission furnished by the A/R. The AO has not taken cognizance of the following issues, despite being apparent from record:- (1) Addition of Rs. 4 lakhs only was made against total cash deposit of Rs.17,56,000/- without taking any explanation from the assessee. (2) The balance deposits in another account with HDFC, Porvorim, Goa was not considered in assessment. (3) Interest income from all savings accounts and FDRs was not considered at the time of assessment. (4) Submission of assessee regarding explanation of credit card payment of Rs.3,76,225/- was partly accepted in assessment without proper verification. (5) Although a salaried person, the assessee's bank account reflect huge transactions/transfer entries, which required further investigation. (6) Long term capital gain of Rs.19,74,763/- was not properly verified. (7) Loan transactions and Mrs. Sonali Hemant Bhavsar interest on loans required proper verification. (8) Salary was received in cash without TDS, which should have been viewed adversely. (9) LIC premium was paid for a minor but assessee's capital account did not reflect the same. (10) Lastly, the assessee declared income from commission/brokerage in the previous two AYs but no such income was shown in this year. "An incorrect assumption of facts or an incorrect application of law will always make the order passed by the Assessing Officer erroneous. The Assessing Officer has not made proper enquiry before completing assessment regarding above issues. By not checking the above issues and by not making adequate enquiry the Assessing Officer has not assessed the proper income and the order has become erroneous and prejudicial to the interest of the revenue. In view of the above, the order dated 29/03/2014 passed by ACIT, Circle-43, Kolkata is found to be erroneous and prejudicial to the interest of revenue and hence it is set aside with the direction to pass fresh

10 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. assessment order after examining the evidences and documents in respect of the above issues raised after giving opportunity to the assessee and in accordance with law." Being aggrieved by this order of Ld. CIT assessee is in appeal before us on the following grounds:- "(1) For that the L'd Pr. Commissioner of Income Tax erred in exercising the power of revision for the purpose of directing the AO to hold another investigation when the order passed by the AO was neither erroneous nor prejudicial to the interest of revenue. (2) For that the L'd Pr.CIT erred and exceeded jurisdiction by giving direction in respect of the matters which are subject matters of appeal before the CIT(A), therefore order passed by Pr. CIT-15 is unlawful, beyond provision of law and therefore liable to be quashed. (3) For that the L'd Pr. CIT had alleged arbitrarily irrelevant matters, factual and untrue position in the show cause notice u/s. 263 and therefore order passed by Pr. CIT-15 Kolkata u/s. 263 is nullity and liable to be quashed. (4) For that L'd Pr. CIT has wrongly assumed the jurisdiction u/s. 263 by wrongly mentioning that deposits in HDFC Goa A/c & HDFC Porvorim Goa A/c were under-assessed by the AO despite these two a/cs were disclosed in the balance sheet and deposits were explained, therefore allegation so made is bad in law and void ab- initio. (5) For that on the facts & in the circumstances of the case L'd Pr. CIT was not justified in initiating proceeding u/s. 263. (6) For that your petitioner craves the right to put additional grounds and/or to alter/amend/modify the present grounds before or at the time of hearing." The ld. AR before us filed two paper books which are running from pages 1 to 27 and 28 to 31. The ld. AR before us submitted that the necessary enquiries were made by the AO at the time of assessment. Thus the order of the AO cannot be held Mrs. Sonali Hemant Bhavsar erroneous and prejudicial to the interest of Revenue on account of non enquiry whereas the ld. DR vehemently supported the order of the ld. CIT. 5. We have heard the rival contentions & perused the materials available on record. From the foregoing discussion, we find that order of AO has been treated erroneous and prejudicial to the interest of revenue on the ground that proper enquiry was not made by the AO. Therefore, Ld. CIT held that the order of AO is erroneous and prejudicial to the interest of revenue. However, after examining the order of Authorities Below and other relevant records our observations are as follows:- a) deposit of cash of ₹17.56 lakh in HDFC bank a/c No.03151930000609 From the order or AO, we find that the AO at the time of assessment proceedings has applied his mind while determining the undisclosed income from the said bank account for Rs. 4 lacs. Thus the AO after considering the bank statements of the assessee has consciously made the addition of ₹ 4 lakh as unexplained cash credit against which assessee claimed to have filed appeal before Ld. CIT(A). Therefore, in our considered view, the allegation of Ld. CIT that proper enquiry was not made by the AO is not true. b) Deposit of cash ₹19,31,750/- in HDFC bank A/c 0315100006743 From the order of AO we find that AO has already made the addition of the entire amount as unexplained cash credit. Therefore, the allegation of the ld. CIT-A that the order of AO is erroneous and prejudicial to the interest of Revenue is not true. c) Credit card payment of ₹3,76,225/- From the order of AO, we find that the AO has made the addition of ₹2,78,225/- out of total credit card payment of ₹3,76,225/-. Therefore, it is clear that AO has applied his mind while framing the assessment proceedings u/s. 143(3) of the Act. Thus, the allegation of the AO in the

11 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. impugned order or Ld. CIT u/s. 263 of the Act that there was no proper enquiry conducted by AO at the time of assessment proceedings is not true. d) Sale of property for consideration of ₹ 36 lakh. On perusal of AIR information which is placed on page 1 of the paper book, we find that no immovable property has been sold by assessee in the year under consideration. Besides the above, there is also no whisper in the assessment order for any addition on account of capital gains. Therefore, we find that the allegation of Ld. CIT that AO has not conducted sufficient enquiry in relation to sale of immovable property is not true. 5.1 In view of the above we find that Ld. CIT has passed impugned order u/s. 263 of the Act by holding the order of AO as erroneous in so far as prejudicial to the interest of revenue on account of inadequate enquiry made by AO while passing order u/s. 143(3) of the Act. However, we find that proper and sufficient enquiries were conducted by the AO at the time of assessment as evident from the order of AO. Therefore it cannot be concluded that no proper enquiry has been conducted Mrs. Sonali Hemant Bhavsar by the AO at the time of assessment proceedings. The AO has taken conscious view after considering the facts and circumstances of the case and giving proper opportunity to the assessee. Thus, the view expressed by AO in the form in his assessment order cannot be replaced with the view of Ld. CIT u/s 263 of the Act. In holding so, we find support and guidance from the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. M/s. J.L. Morrison (India) Ltd.(ITA No 168 of 2011) in GA No 1541 of 2012 dated 15.05.2014, wherein it was held as under:- "By sections 3 and 4, the Indian Income-tax Act, 1922, imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision." We also rely on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Max India Limited reported in 295 ITR 282 wherein it was held as under : "When the CIT passed the impugned order under s. 263, two views were inherently possible on the word "profits" occurring in the proviso to s.80HHC(3) and therefore, subsequent amendment of s. 80HHC made in the ITA No.1361/Kol/2016 A.Y. 2011-12 S.K. Khemka Vs. Pr. CIT-15 Kol. Page 12 year 2005, though retrospective, did not render the order of the AO erroneous and prejudicial to the interest of the Revenue, and CIT could not exercise powers under s. 263." In view of the above proposition, and respectfully following principle laid down by the Hon'ble courts and keeping in view all these discussion, as also bearing in mind entirety of the case, we deem it fit and proper to uphold the grievance of the assessee and quash the impugned revision order as devoid of jurisdiction. The assessee gets the relief, accordingly. 6. In the result, assessee's appeal stands allowed." 7. We have perused the letter dated 09.11.2016 addressed by the DDIT (Inv.), Mumbai to ITO- 29(3)(4), Mumbai wherein the details of on money in the case of Runwal Green (shops) were given and we find that on money was determined by taking the rate @ Rs.26,000/- per sqr. ft. while agreements were for lower amounts. However, in the case of the assessee we observe that the agreement value was executed @ Rs.26,000/- per sqr. ft. Thus we find merits in the contention of the assessee that there is no question of on money as the agreement value was even Mrs. Sonali Hemant Bhavsar higher than the maximum rate which was taken by the DDIT (Inv.), Mumbai to ascertain the amount of on money received by the builder. Moreover, the case of M/s. Runwal Homes Pvt. Ltd. vs. DCIT in ITA No.5621/M/2017 A.Y. 2015-16 the issue of on money has been decided in favour of the M/s. Runwal Homes Pvt. Ltd. by deleting the addition on account of on money. In view of the aforesaid facts, we are of the view that the revisionary order passed by the Ld. Pr. CIT(A) is without jurisdiction and has to be quashed on legal issue as well as on merit.

12 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. Accordingly, we quash the revisionary order passed under section 263 of the Act by Ld. Pr. CIT. 8. In the result, the appeal of the assessee is allowed.” 8.2. The Chandigarh ‘A’ Bench of the Tribunal in the case of M/s. Agarwal Promoters vs. Pr. CIT in ITA No. 1708/Chd/2017; Assessment Year:- 2012-13, order dt. 16/04/2019, at para 9, has held as follows:- “9. At the outset, Ld. Counsel for the assessee has invited our attention to the assessment order in question of the Assessing officer dated 30.12.2014 passed u/s 143(3) of the Act and has submitted that the return filed by the assessee was originally processed u/s 143(1) of the Act, however, the case was later selected for limited scrutiny under the CASS to verify the large increase in unsecured loans raised during the year. The enquiries of the Ld. Assessing officer were, therefore, limited to the aspect of the genuineness and verification of unsecured loans, the details and explanation regarding which were duly supplied to the Assessing officer and the Assessing officer being satisfied with the evidences given by the ITA Nos. 1464/Chd/2017- M/s Bhandari Knit Exports, Ludhiana assessee competed the assessment at the returned loss of ₹ 10,21,815/- That neither the Assessing officer was authorised nor there was any occasion to the Assessing officer to scrutinize and make enquiries, about the other factors of the case as it was a limited scrutiny assessment case, hence, the enquiry, if any, was restricted to the limited issue of unsecured loans which was duly done by the Assessing officer and no fault has been found by the Ld. CIT(A) in that respect. Under the circumstances, the order passed by the Assessing officer cannot be said to be erroneous.” 9. The propositions of law laid down in these case-law is that, when the Assessing Officer completed assessment u/s 143(3) of the Act, after examining the issues for which the case has been selected for limited scrutiny, then it cannot be held that there is an error in the order of the Assessing Officer, for the reason that he has not sought permissions to examine other reasons. If the Assessing Officer has not examined any other aspect, than the reasons for which the assessment was selected for scrutiny, in our view, no fault can be found with the Assessing Officer. Thus, in our view, non-seeking of permission for conversion of limited scrutiny to complete scrutiny in terms of para 4 of the CBDT Instruction No. 7/2014, does not per se render the assessment order u/s 143(3) of the Act, erroneous..” 11. Applying the propositions of law laid down in these case laws to the facts of the case we hold that, non-conversion of a limited scrutiny into a complete scrutiny by the AO cannot be considered as a ground for making a revision u/s 263 of the Act. Further the ld. Pr. CIT states that the AO should have made enquiry into the conversion certificate filed by the assessee. The nature of enquiry or the possible prejudice to the Revenue is not stated by the Pr. CIT. The assessee submits that this is not a case of conversion but a case of takeover. There is no finding or even a whisper that the certificate is not genuine. As regards, the assets of the company and investments, we find from the copy of audited balance sheet of the company and copy of the audited balance sheet of the L.L.P., that there is no variation in figures and hence in our view there is no error which causes prejudice to the interest of the Revenue. The ld. Pr. CIT has not brought out any variations. It is also not true on the part of the Pr. CIT that the order was passed in a haste for the reason that, three hearings were taken place after the proceedings was initiated on 09.09.2017 and the assessment was completed on

13 I.T.A. No. 65/Kol/2021 Assessment Year: 2015-16 M/s. Rosemary Vincom LLP. 11.12.2017. Even otherwise unless there is an error which is prejudicial to the interest of the Revenue it cannot be said that power u/s 263 of the Act can be invoked. In view of the above discussion we quash the order passed u/s 263 of the Act and allow this appeal of the assessee. 12. In the result, the appeal filed by the assessee is allowed. Kolkata, the 23rd June, 2021. Sd/- Sd/- [Aby T. Varkey] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated: 23.06.2021 Bidhan (P.S.) Copy of the order forwarded to: 1. M/s. Rosemary Vincom LLP, Village Post, Paniarah, Howrah-711 302. 2. ITO, Ward-47(5), Kolkata. 3. CIT(A)- 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. (sent through mail)