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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
The aforesaid appeal has been filed by the assessee against impugned order dated 27.12.2016, passed by Pr. Commissioner of Income Tax, Muzaffarnagar u/s 263 for the assessment year 2009-10. In the grounds of appeal assessee has challenged the action of the Ld. PCIT in setting aside the assessment order passed by the AO u/s 147/143 (3) for passing a fresh assessment on the ground that AO has not inquired about the cash deposits in the bank account.
The facts in brief as culled out from the impugned order are that assessee is engaged in the business of retail trading of cloth. An information was received from AIR that assessee has deposited cash aggregating to Rs. 67,72,375/- in his saving bank account. Based on this information assessee’s case was reopened u/s 147 after recording the following ‘reasons’: -
“As per AIR information received from the CIT CIB through Ld. CIT Muzaffarnagar, on the basis of AIR information a query letter was issued in the matter of above named person on 5.1.20102. Date fixed for compliance was 14.2.2012.
In this case assessee has deposited cash of Rs. 67,72,375/- in his saving bank account during the F.Y. 2008-09 relevant to Assessment Year 2009-10. In this case assessee has not filed reply in compliance to query letter issued by this office, neither filed any application for adjournment. On the basis of non compliance of query letter it s assumed that the assessee has nothing to say in this matter.
In view of the above, I have reason to believe that income of Rs. 67,72,375/- has escaped assessment for assessment year 2010-11 within the meaning of section 147 of the I.T. Act, 1961.”
In pursuance of such proceedings initiated vide notice u/s 148 dated 15.5.2013, the AO required the assessee to submit all the bank account in his name and in the name of his family members. A proper narration of debit and credit entries of amount of Rs. 50,000/- and above was asked from the assessee. In response, the assessee had submitted that he has only one bank account and the said bank account was produced alongwith the cash flow statement. This fact is evident from reply filed before the AO vide letter dated 19.3.2014. Assessee has also explained that he is into business of retail trade of cloth and income has been declared u/s 44AF. In so far as the specific query with regard to the cash deposit the assessee before the AO in response to the show cause notice has given following reply: -
“In connection with the above, as desired by your goodself pointwise information/details are as under:-
Regarding the matter of cash deposit in Bank account of Rs. 6772375/-. The applicant has stated that all the deposits are business transaction. Most of the recoveries were made by Debtors. At that time assess is going to close his business therefore he has doing only cash sales and main attention on recoveries of debtors.
As per accounts total recoveries of debtors are Rs.4513766/- and cash sale of Rs. 3972840/- total cash receipt comes to Rs. 8486606/- in which the amount of Rs. 7171858/- by Bank transaction which should verified by Bank & seen to be correct. .
I have shifted my business from Saharanpur therefore we have wiped up all the creditors and debtors.
I am enclosing herewith last three years ITRV, computation of Income statement of affairs for verification and correctness.
I am also producing purchase and sales bills to compare with bank statement all the sales and recoveries.”
Assessee also filed computation of income and the income from trading business not only for this year but also for the earlier years and from there it was pointed out before the AO that the amount receivable from the ‘debtors’ in the assessment year 2008-09 was Rs. 46,70,172/- which is in this year has been reduced to Rs. 2,56,416/-, which means that assessee has received more than Rs. 44 lacs from the debtors which was deposited in the bank account of the assessee. Ld. AO based on the information provided by the assessee accepted the cash deposit and has made addition of Rs. 60,000/- on account of low house hold withdrawals vide his order dated 2.6.2014.
Thereafter, Pr. CIT in his revisionary jurisdiction u/s 263 issued a notice alleging that there is no document on record to show that the cash deposits are from realisation of debtors and once the total sales during the year is Rs. 21,69,480/- whereas the debtors have been shown at Rs. 46,70,172/- in the earlier year. Further, bank statement for the relevant period has not been obtained by the AO. In response the assessee filed detailed submissions which have been reproduced at pages 2 and 3 of the impugned order. It was pointed out to the Ld. PCIT that the information with regard to debtors were duly furnished and since this information relates to assessment year 2008-09, therefore, no adverse inference could have been drawn. Apart from that bank statement was also filed. However, the Ld. Pr. CIT held that AO has failed to obtain documents regarding realisation of debtors and also whether this information pertaining to earlier years has been examined by the AO or not is not clear. He further noted that the bank statement from 1.4.2008 to 31.3.2013 was filed by the assessee but AO did not raise any further query in this regard. Thus, he held that such an assessment order is erroneous and prejudicial to the interest of the revenue. Relevant observation of the Ld. PCIT in this regard reads as under: -
“5. Thus, by accepting the unsubstantiated, varying and disjointed claims of the assessee, failing to conduct detailed an legitimate inquiries, the AO utterly failed to conduct meaningfull investigations essential to determine the total income of the assessee. Hence, when the AO has failed to take notice of all the relevant facts and has failed to examine the correctness or otherwise of the claims and assertions by the assessee, it is evident that he has failed to apply his mind and discharge his duty as an assessing officer during the scrutiny proceedings u/s 147/143(3) of the Income Tax Act, 1961. Consequently, the assessment order, passed by the AO on 2.6.2014, is rendered erroneous in so far as it is prejudicial to the interest of the revenue.”
Before us the Ld. Counsel for the assessee pointed out that once the case was reopened u/s 148 based on AIR information and AO has raised queries from time to time, on which assessee has filed the entire details before the AO, then it cannot be held that either the details of cash deposits or the bank statements have not been furnished or AO has not applied his mind on such details. He also pointed out that certain observations of the Ld. Pr. CIT are not correct as these pertain to earlier years which has been wrongly inferred for this year. In fact, AO had issued notice u/s 133(6) to the bank seeking the details which were duly obtained and thereafter AO has raised the various queries to which assessee has filed satisfactory replies and hence it cannot be held that AO has failed to carry out any inquiry. He also drew our attention to copy of the order sheet entries of the assessment proceedings which have been placed in the paper book at pages 20 and 21 and from there he pointed out that AO has examined the month wise sales and purchase, cash sales and purchase bills along with the bank statement with narration of each and every debit and credit entries which have been test checked by him. Thus, assessment order passed by the AO accepting the cash deposit is correct in law and facts and therefore, setting aside such an assessment order by Pr. CIT is not correct in law and on facts.
On the other hand, Ld. CIT(DR) submitted that the assessee did not file any return of income earlier and has made huge cash deposit of Rs. 67 lacs. In the assessment order there is no whisper about whether the bank account of the assessee has been examined or not and no inquiry whatsoever has been made by the AO. It is also not clear whether the information called by the AO has been properly examined or not. In any case the Ld. Pr.CIT has merely sent back the matter to the AO to examine fresh the deposits of cash in bank account and therefore no prejudice should be caused to the assessee.
We have heard the rival submissions and also perused the relevant finding given in the impugned order as well as material referred to before us. As discussed above, the assessee’s case was reopened u/s 148 precisely to examine the cash deposits made in the bank account of the assessee. In the proceedings ensued thereafter, AO has raised various queries and has also called for the bank statement from the bank directly u/s 133(6) and also asked the assessee to give detailed information on each and every debit and credit entries. Apart from that, he has also called for sale and purchase bills and also the details of entire cash deposits. In response the assessee has furnished all these details which are evident from the copies of the reply and the annexures therein filed before the AO.
From the perusal of the order sheet entries, it is seen that AO has noted following proceedings: -
12/13 issue letter for information u/s 133(6) of I.T. Act 1961 Bank statement for the period 1.4.2002 to 31.3.2009.
2/14 issue notice u/s 142(1) for 11/3/2014 13/14 issue notice u/s 142(1) & 143(2) alongwith questionaaiar for 13.3.2014 1/14 Issue notice u/s 142(1) for 25.4.2014
1/14 Shri Arvind Agarwal FCA attended with Tushar Agarwal Advocate filed written submissions of questionnaire. He is required to file monthwise sale purchase & produce purchases & sale bills justifying the sale shown u/s 44AF and also narration of each debit & credit entries appearing in bank account for verification case adjourned to 11.5.2014 5/14 Shri Arvidn Agarwal CA with Tushar Agarwal attended requested for adjournment case adjourned to 30.5.2014 5/14 Shri Arvind Agarwal CA attended filed written submission produces cash sales & purchase bills alongwith bank statement after narrating each debit and credit entries which were test checked. Case discussed.”
From the above it is seen that AO has sought information from the bank u/s 133(6) and has also asked the assessee to file submissions on various questionnaires raised by him with regard to month wise sale and purchases and also required the assessee to produce purchase and sale bills to justify the sale shown u/s 44AF and to give narration of each and every debit and credit entries appearing in the bank account for verification. Such details were filed before the AO by the assessee, which has been scrutinised. Once all these details have been asked and filed by the assessee and same has been duly examined by the AO then to say that AO has failed to examine the entries of the cash deposits would not be correct. From the record it is seen that assessee has explained the source of cash deposits from the realisation of the debtors who in the earlier years stood at Rs. 46,70,172/- which has been reduced to around 2 lakhs. Thus, sum of Rs. 44 lacs have been realised from the debtors and during the year assessee has shown sale of Rs. 39,72,840/- for which entire sale bills were produced.
Thus, when all these details were available before the AO whence he has verified from purchase and sale bills and has accepted the source of the cash deposits which were found from the trading business of the assessee, then there remains no further enquiry to be done. Ld. PCIT has noted the figures of debtors and the sales from the assessment year 2008-09 which is not correct, because the assessment which was the subject matter of revision before him pertains to the assessment year 2009-10. This shows that Ld. PCIT has misinterpreted the entire assessment records. He has also not pointed out what further enquiry should have done by the AO and as a revisionary authority, before setting aside the assessment order he should have himself carried out some enquiry to reach to a conclusion that AO was not correct in accepting the assessee’s explanation. Thus, on these facts as discussed above we do not find that such an assessment order is either erroneous or prejudicial to the interest of revenue and accordingly the impugned order is set aside and order u/s 263 passed by Ld. Pr. CIT is quashed.
In the result appeal of the assessee is allowed.