RAMABEN MAGANLAL ZALARIA,RAJKOT vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX-1, RAJKOT

Shri Vimal Desai, Learned Counsel for the assessee, argued that assessing officer has reopened the assessee's case based on the information received from the Department and in reasons recorded, the assessing officer mentioned that assessee had received cheque, however the Id. PCIT in his order stated that the assessee had received the cash, therefore, there is no certainty in the reasons recorded by the assessing officer, as well as issue raised by the learned PCIT in his revision order. The learned PCIT believed that assessee had received cash, however, assessing officer believed that assessee had received cheque. Hence, issue raised by the learned PCIT to revise the assessment order under section 263 of the Act is not certain. The Id. Counsel further clarified that in the reasons recorded, there is mentioned, that the assessee received the cheque. However, the ld. PCIT has invoked the jurisdiction stating that assessee has received the cash, therefore there is contradiction in the allegation made by the assessing officer, in the assessment order, that is, in the re-assessment proceedings and the allegation made by the ld.PCIT in his revision order, therefore, in this conflicting situations, the ld. PCIT should not have revised the order of the assessing officer, without being ascertained, whether in the impugned transaction, the cheque amount is involved or cash amount is involved, hance order of learned PCIT may be quashed on this score only.

Learned Counsel also submitted that during the assessment proceedings, assessing officer has conducted sufficient enquiry about the issue raised by the learned PCIT. During the assessment proceedings, the A.O. issued notice u/s. 142(1) of the Act, which is placed at paper book page no. 26 and in response to the said notice, the assessee submitted its reply on 5th March, 2022, which is placed at to 276/Rjt/2024 A.Y. 2013-14 to 2015-16 Ramaven Maganlal Zalaria paper book page no.

Therefore, during the assessment proceedings by issuing the notice u/s 142(1) of the Act, the assessing officer has conducted enough inquiry and assessee submitted the reply before the assessing officer, on the same issue which was raised by the Id. PCIT. The Id. Counsel also submitted that before the Id. PCIT, the assessee had submitted required documents and evidences which is noted by the Id. PCIT, in para 4.1 to 4.3 of his order, hence, there is no lack of inquiry in the assessee's case. In the assessee's case, enough inquiry was conducted by the assessing officer, therefore, order passed by the assessing officer is neither erroneous nor prejudicial to the interest of the Revenue.

The Id. Counsel for the assessee also argued that reasons recorded by the assessing officer is not in accordance with the provisions of the Act and since the reasons recorded are bad in law therefore consequential revision proceedings by the Id. PCIT u/s. 263 of the Act is also not valid. For that, the Id. Counsel for the assessee, took us through the paper book page no. 30 wherein reasons recorded by the assessing officer are stated, vide para 3 of the reasons recorded, wherein the A.O. mentioned that the assessee got the cheque in lieu of cash deposit of Rs. 64,42,090/-. The relevant para of the reasons recorded are reproduced below:

In rejoinder, the Id. Counsel for the assessee submitted that the faceless A.O. has not failed to conduct the inquiry. In faceless proceedings, there are units of faceless where several assessing officers sit and they adjudicate the issue, therefore, in the assessee's case under consideration only faceless A.O. was involved and assessee is concerned about only one assessing officer and therefore the ld. Counsel also submitted that the basic information was not available before the assessing officer. The ld. Counsel also submitted that it is the internal matter of the Department whether the assessee's case was handled by two assessing to 276/Rjt/2024 A.Y. 2013-14 to 2015-16 Ramaven Maganlal Zalaria officers or by one assessing officer, the assessee knows only one assessing officer. which is faceless assessing officer, therefore the faceless assessing officer did not have any information with him/ or proper information to re-open the case of the assessee.

We have carefully considered the facts of the case, the submission of the Learned Counsel for the assessee and Id DR for the Revenue and evidences on record. We note that assessee has denied to have carried out any transaction with M/s Yash Enterprise (Prop. Chetan Bhalodiya) during the year under consideration and to prove this fact the assessee had provided a copy of bank statements wherein neither the name of any Chetan Bhalodiya or M/s Yash Enterprise was appearing nor any amount of Rs. 64,42,090/- was reflected in the bank statement. We also find merit in the submissions of learned Counsel for the assessee to the effect that there should be certainty in the allegation made in the assessment order and the allegation made by the learned PCIT. The Id. PCIT has invoked the jurisdiction stating that assessee has received the cash, however, assessing officer stated that she received cash, therefore there is contradiction in the allegation made by the assessing officer, and the allegation made by the ld.PCIT in his revision order, therefore, in this conflicting situations, the Id. PCIT should not have revised the order of the assessing officer, without being ascertained, whether in the impugned transaction, the cheque amount is involved or cash amount is involved, hance order of learned PCIT may be quashed on this score only.

We also note that other allegation of the Id. PCIT was that during the assessment proceedings, the assessing officer has not conducted sufficient inquiry. Therefore, first of all, we should examine that what kind of inquiries were conducted by the assessing officer. We note that the assessing officer, in order to to 276/Rjt/2024 A.Y. 2013-14 to 2015-16 Ramaven Maganlal Zalaria conduct thorough inquiry, issued the notice u/s 142(1) of the Act, dated 17th December, 2021, wherein the pertinent question asked by the assessing officer is reproduced below: “5. As per the information available with the Department, it is seen that Shri Chetan Bhalodiya proprietor of Mix. Yash Enterprise used to receive cash from outstations on behalf of the beneficiaries of various parts of Rajkot and transfer the same cash to the beneficiaries by way of cheques/DDs. Please explain the issue with documentary evidences......”

During the assessment proceedings, the assessing officer has also issued further notice to the assessee to conduct the inquiry. We also note that as pointed out by the Id. Counsel for the assessee, that assessing officer did not have any information regarding the assessee under consideration with the jurisdictional A.O. and jurisdictional A.O. has passed the order in hurry without verifying the facts of the assessee's case. Therefore, the Id. Counsel for the assessee took us through the paper book page no. 33 and stated that the observations of the A.O. clearly states that the jurisdictional A.O. did not have information to reopen the assessee's case. The notings of the order sheet are reproduced below:

Therefore, we note that vide assessee's submission dated 05.03.2022, in response to the notice of the Faceless assessing officer dated 17.12.2021, the assessee denied that he had not carried out any transaction with M/s Yash Enterprise (Prop Chetan Bhalodiya) during the year under consideration. In support of denial, the assessee had provided a copy of bank statements, wherein neither the name of any Chetan Bhalodiya or M/s Yash Enterprise was appearing nor any amount of Rs. 64,42,090/-was reflected. Thus, assessee had discharged his onus. Thereafter, the Faceless assessing officer initiated steps to gather the relevant incriminating material on records, however, he could not bring any adverse material on records about the assessee. From the copy of order sheet, it is clear that the Faceless assessing officer made correspondence with the Jurisdictional assessing officer since there was no any information regarding the investigation against M/s. Yash Enterprise (Prop of Chetan Bhalodiya) available on ITBA Assessment Portal, 360 Portal, Insight Portal and E-filing Portal. After all the efforts, taken by the Faceless AO, he found that the specific documentary evidences have neither available on insight portal nor available with the jurisdictional assessing officer. Finally, the Faceless assessing officer passed the assessment order accepting returned income of the assessee, as he did not have any incriminating material on his records which he can provide to assessee. Therefore, it is not correct to state that the Faceless assessing officer has not made any inquiries. Besides, it is clearly evident from the order sheet that the Faceless assessing officer himself has observed during the course of the assessment proceedings that specific documentary evidences are neither available on the insight portal nor available with the jurisdictional assessing officer. Thus, the proposal of revision u/s 263 in assessee's case results in circumvention/bypassing of the time limit provided u/s 153 of the Act. The same is not permissible in law.

Let us take the guidance of judicial precedents laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the PCIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue" to 276/Rjt/2024 A.Y. 2013-14 to 2015-16 Ramaven Maganlal Zalaria has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has possible and the resulted in loss to the revenue, or where two views are Assessing Officer has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue "unless the view taken by the Assessing Officer is unsustainable in law".

We note that the Ld. Pr. C.I.T. by invoking his jurisdiction u/s. 263 of the Act is giving another opportunity to the Ld. A.O., which is not permissible. Hon'ble Bombay High Court in the case of Ranka Jewellers vs. Addl. CIT (328 ITR 148) relying on the decisions of Hon'ble Supreme Court in the cases of Malabar Industrial Co. Ltd. vs. CIT (supra) and CIT vs. Max India Ltd. [(2007) 295 ITR 282 (SC)], has held that once the issue was considered by the A.O., the remedy of the revenue could not lie in invoking of the jurisdiction u/s. 263 of the Act. Therefore, the order of the Ld. C.I.T. was definitely outside the purview of section 263 of the Act. As noted above, the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi- judicial functions vis-a-vis passing the assessment order u/s.143(3) of the Act. Therefore, certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. However, what is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the Assessing Officer, and even if Ld. Pr. Commissioner does not agree with the results of such enquiries, the resultant to 276/Rjt/2024 A.Y. 2013-14 to 2015-16 Ramaven Maganlal Zalaria order cannot be subjected to revision proceedings. For that we rely on the decision of the Coordinate Bench of I.T.A.T., Kolkata in the case of Smt. Juthika Kar vs. ITO [Ι.Τ.Α. No.1128/Kol/ 2009, dated 16.5.2012 ]. wherein it has been held as under (relevant portion) :- "....... However, what is opinion formed as a result of these enquiries is something which is in exclusive domain of the Assessing Officer, and even if Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceedings. The conclusions arrived at as a result of enquiries cannot be tinkered with in the revision proceedings. The conclusions being drawn up as a result of enquiry is a highly subjective exercise and as to what is appropriate conclusion is something on which perceptions vary from person to persons. These variations in the perceptions of the Assessing Officer vis-a-vis that of the Commissioner, cannot render an order erroneous and prejudicial to the interest of the revenue.”

The aforesaid position gets further strength from the decision of Hon'ble High Court in the case of CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (Cal), the relevant finding of which is applicable to the facts of the present assessee is quoted below : "85. Whether the assessment order dated March 28, 2008, was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order-sheets go to show that heard from time to time. In deciding the question the court has to bear in mind the presumption in law laid down in Section 114 clause (e) of the Evidence Act: "that judicial and official acts have been regularly performed. 86. Therefore, the court has to start with the presumption that the assessment order dated March 28, 2008, was regularly passed. There is evidence to show that the Assessing Officer had required the assessee to answer 17 questions and to file documents in regard thereto. If the Assessing Officer cannot be shown to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind." [Emphasis given]"

Further, according to the decision of Coordinate Bench of I.T.A.T., Hyderabad in the case of Manisha Agri Biotech P. Ltd. vs. CIT (2014) 36 ITR (Trib.) 42 -, wherein it was held as follows: "The respondent had no different or new material to take a different view from the one taken by the Assessing Officer and the reasons given by him to reopen the assessment and sustain the revision are totally unacceptable. The respondent is not vested with any power under section 263 to initiate proceedings for revision in every case and start re- examination and fresh enquiries in matters which have already been concluded under the law.”

In the combined result, these three appeals filed by the assessee (in 275 and 276/RJT/2024), are allowed.