SHRI JAGPAL SINGH,FATEHBAD vs. PR.CIT, ROHTAK

आदेश/Order

Per Sudhanshu Srivastava, Judicial Member:

These two appeals by the captioned assessees are against

separate orders passed u/s 263 of the Income Tax Act, 1961 [in

short 'the Act'] by the Ld. Principal Commissioner of Income Tax

(Ld. PCIT), Rohtak as per the following details:-

Sr.No. ITA No. AY Order of the PCIT dated 1 ITA No. 202/Chd/2021 2011-12 24.03.2021

2 ITA No. 201/Chd/2021 2011-12 16.03.2021

1.1 Since, identical issues were involved in both the appeals,

they were heard together and are being disposed off by this

common order for the sake of convenience.

2.0 In ITA No. 201/Chd/2021, the brief facts of the case are

that the assessment proceedings were initiated in terms of

section 147 of the Act as the assessee had allegedly advanced

cash amount of Rs. 50,00,000/- jointly with his cousin Shri

Jagpal Singh, the assessee in ITA 202/Chd/2021, to one Shri

3 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh Satyapaul Jain for purchase of land. During the course of such

assessment proceedings, the assessee was asked to furnish

Income Tax Return as well as explain the source of the advance

payment made. The assessee filed return declaring income at Rs.

Nil and Agricultural Income of Rs. 4,50,000/-. It was the

assessee’s submission before the AO that the assessee was

involved in agriculture and the assessee owned approximately

117 acres of land jointly with his family out of which 15 acres of

land were in his own name as share in ancestral agricultural

land. The assessee also filed cash flow chart, copy of the bank

statement, Form ‘J’ as well as Jamabandi Fard. After perusing

the documents, the AO noted that the source of advance payment

amounting to Rs. 15,00,000/- was above board and that the

returned income of the assessee was accepted.

2.1 Similarly, in the case of the other assessee Shri Jagpal

Singh (ITA No. 202/Chd/2021), the assessee’s case also was

reopened and the AO required the assessee to explain the source

of advance money paid to Shri Satyapaul Jain to the tune of Rs.

35,00,000/-. In response to the notice issued u/s 148 of the Act,

the assessee filed return of income declaring taxable income of

1,35,570/- and agricultural income of Rs. 5,00,000/-. The

assessee also submitted before the AO that the assessee was an

4 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh agriculturist and the assessee had himself approximately 22

acres of land in his name as share received in the ancestral

agricultural land apart from jointly owning 117 acres of land with

his family members. The assessee also filed Cash Flow Chart,

copy of the Bank statement, Form ‘J’ as well as Jamabandi Fard

to support his contention regarding agricultural income and

availability of cash. After the examination of these documents,

the AO noted that the source of advance payment amounting to

Rs. 35,00,000/- was above board. The AO completed the

assessment at the returned income. Subsequently, in both the

cases, show cause notices were issued by the Ld. PCIT, Rohtak,

wherein it was alleged that the AO had completed the assessment

without carrying out necessary and proper inquiries which he

ought to have carried out and, therefore, the orders passed u/s

143(3) of the Act r.w.s. 147 of the Act were erroneous and

prejudicial to the interest of the Revenue. As per the Ld. PCIT,

there was instances of failure on the part of the AO in as much as

the assessees had mentioned that they had received large

amount of cash from the relatives on different dates but no cross-

verification had been made by the AO in the case of the relatives

to verify such cash receipts. As per the Ld. PCIT, the AO had not

carried out proper investigation and inquiry to unearth the facts

5 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh involved. Thereafter, after considering the replies filed by the

assessees, the Ld. PCIT concluded that in case of both the

assessees, the AO had passed the assessment orders in a very

casual manner without due diligence and without conducting any

worthwhile inquiries thereby rendering the assessment orders as

erroneous so far as being prejudicial to the interest of the

Revenue in terms of provisions of section 263 of the Act including

Explanation 2. The Ld. PCIT cancelled the assessment orders

and directed the AO to pass fresh orders keeping in view the

observations of the Ld. PCIT.

2.3 Aggrieved, the assessee has now approached this Tribunal

challenging the impugned orders by raising the following grounds

of appeal:-

201/Chd/2021

1 BECAUSE the impugned order dated 16.03.2021 is without jurisdiction as the very initiation of re-opening u/s 147/148 of the Act was bad in law and no power of revision could have been exercised u/s 263 of an illegal re-opening.

6 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh new fact or material before the Pr. CIT to assume jurisdiction u/s 263. The assumption of jurisdiction tantamount to change of opinion which is not permissible under law. Reliance in this regard is placed on the judgment of the Hon'ble Punjab and Haryana High Court in Commissioner of Income Tax, Jalandhar-I Vs. Max India Limited. [2016] 388 ITR81 (P&H). 4. BECAUSE the impugned order passed by the Pr. CIT u/s 263 of the Act is bad in law as the same has been passed without affording proper opportunity of being heard to the Appellant.

7 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh Panchkula (ITA No. 22/Chd/2021) and the decision of the Hon'ble Delhi Bench of the Income Tax Appellate Tribunal in Supersonic Technologies Private Limited & Others Vs. The Pr. Commissioner of Income Tax-8 (ITA No. 2269/Del/2017 - 2019 (69) ITR(Trib) 585 (Delhi)). 8. BECAUSE no notice u/s 143(2) of the Act was ever issued to the Appellant before framing the assessment u/s 143(3) r.w.s. 147 of the Act and in absence thereof the Assessing Officer does not have the jurisdiction to make the assessment. Thus, the assumption of jurisdiction to frame the assessment was invalid. Reliance in this regard is placed on the decision of the Hon'ble Delhi Bench of the Income Tax Appellate Tribunal in New Okhla Industrial Development Authority Vs. Assistant Commissioner of Income Tax (ITA No. 5879/Del/2014), decision of the Hon'ble Kolkata Bench of the Income Tax Appellate Tribunal in Khushi Commotrade Private Limited Vs. Principal Commissioner of Income Tax-2, Kolkata (ITA No. 462/Kol/2020). the decision of the Hon'ble Supreme Court in Assistant Commissioner of Income Tax & Another Vs. Hotel Blue Moon ((2010) 3 SCC 259) and the decision of the Hon'ble Lucknow Bench of the Income Tax Appellate Tribunal in Shri Ravindra Khemka Vs. DCIT, Central Circle II, Kanpur (IT(SS)A No. 391/LKW/2017).

ITA No. 202/Chd/021

8 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh 3. BECAUSE the Assessing Officer after considering the material produced before it recorded its satisfaction and accepted the returned income and there was no new fact or material before the Pr. CIT to assume jurisdiction u/s 263. The assumption of jurisdiction tantamount to change of opinion which is not permissible under law. Reliance in this regard is placed on the judgment of the Hon'ble Punjab and Haryana High Court in Commissioner of Income Tax, Jalandhar-I Vs. Max India Limited, [2016] 388 ITR 81 (P&H). 4. BECAUSE the impugned order passed by the Pr. CIT u/s 263 of the Act is bad in law as the same has been passed without affording proper opportunity of being heard to the Appellant.

9 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh 7. BECAUSE the Assessing Officer in the reassessment proceedings has not made any addition despite the fact that he had reasons to believe that income chargeable to tax had escaped assessment. Hence, the very basis of reasons recorded by the Assessing Officer was ultimately not added in the reassessment proceedings. The primary reason to believe that income had escaped assessment fails and such assessment cannot be treated as a valid order in the eye of law and is liable to be declared as void-ab-initio. The collateral proceedings u/s 263 are thus not sustainable. 8. BECAUSE the invalid and illegal order cannot be subject matter of proceedings u/s 263 of the Act. Reliance in this regard is placed on the decision of the decision of the Hon'ble Mumbai' Bench of the Income Tax Appellate Tribunal in Aishwarva Rai Bachchan Vs. Pr. Commissioner of Income Tax (ITA No. 754/Mum/2021). the decision of the Hon'ble Chandigarh Bench of the Income Tax Appellate Tribunal in Parveen Kumar Mittal Vs. The Pr. C.I.T., Panchkula (ITA No. 22/Chd/2021) and the decision of the Hon'ble Delhi Bench of the Income Tax Appellate Tribunal in Supersonic Technologies Private Limited & Others Vs. The Pr. Commissioner of Income Tax-8 (ITA No. 2269/Del/2017 - 2019 (69) ITR(Trib) 585 (Delhi)).

10 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh 5879/Del/2014). decision of the Hon'ble Kolkata Bench of the Income Tax Appellate Tribunal in Khushi Commotrade Private Limited Vs. Principal Commissioner of Income Tax-2. Kolkata (ITA No. 462/Kol/2020), the decision of the Hon'ble Supreme Court in Assistant Commissioner of Income Tax & Another Vs. Hotel Blue Moon ((2010) 3 SCC 259) and the decision of the Hon'ble Lucknow Bench of the Income Tax Appellate Tribunal in Shri Ravindra Khemka Vs. DCIT, Central Circle II. Kanpur (IT(SS)A No. 391/LKW/2017).

4.0 At the outset, the Ld. Sr. Advocate submitted that

there had been a delay in filing these appeals before the

Tribunal and drawing our attention to the applications

praying for the condonation of delay, the Ld. AR

submitted that the impugned orders were passed and

communicated to the assesses on 16.03.2021 and the

appeals had to be filed within 60 days from the said date

but the same could not be done within the prescribed

time limit due to country vide lock-down imposed in view

of the Covid-19 Pandemic. It was further submitted that

the appeal could be filed after a delay of 101 days in the

case of Shri Jagtar Singh and 93 days in the case of Shri

Jagpal Singh but the said delay was neither deliberate

nor intentional but due to the impossibility of filing the

11 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh appeals in view of the Covid-19 Pandemic which was

entirely beyond the control of respective assessees. The

Ld. Sr. Advocate also referred to the order of the Hon'ble

Apex Court in Miscellaneous Application Number

665/2021 in SMW(C) No. 3/2020 dated 27.04.2021

wherein, by the said order, the limitation period had

been directed to be kept in abeyance. It was submitted

that in view of the order of the Hon'ble Apex Court, the

delays should be condoned and the appeals be admitted

for hearing on merits.

5.0 The Ld. CIT DR could not refute these contentions of

the Sr. Advocate.

6.0 Having considered the facts on record as well as the

contents of the affidavits and the delay condonation

Applications along with the binding nature of the order

of the Hon'ble Apex Court (supra) directing the relaxation

in limitation, we condone the delays and admit both the

appeals for the purpose of hearing.

7.0 The Ld. Sr. Advocate submitted that the allegation of

the Ld. PCIT that the AO had not made inquiries vis-à-vis

12 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh the claim of the assessees having advanced Rs.

50,00,000/- to one Shri Satyapaul Jain and further the

AO had also not inquired into the source of cash

advances made by the relatives of the assessee was

factually incorrect. The Ld. Sr. Advocate submitted that

the assessee had filed voluminous documents before the

AO which included a family chart depicting the Family

Tree as well as copies of ‘J’ Forms, Jamabandi Fard and

bank statements to demonstrate that the assessees had

sufficient funds to have made the impugned advances. It

was further submitted that both the assessees had also

filed cash flow statements from which it was clearly

discernible that the assessee had sufficient funds with

them to give the impugned advances. The Ld. Sr.

Advocate drew our attention to the various documents

filed by the assessee in this regard, the copies of which

were placed in the paper book, and submitted that, thus,

the Ld. PCIT had made an incorrect allegation that no

worthwhile inquiry had been conducted by the AO. It

was submitted that the AO had duly required the

assessees to submit documentary evidences with respect

to the cash advances made and both the assessees had

13 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh duly complied with the queries raised by the AO and had

submitted various documents in support of sufficiency of

funds. The Ld. Sr. Advocate submitted that, therefore, it

was very much apparent from the facts on record that

the AO had been diligent enough the make the requisite

inquires and it was only after due application of mind by

the AO that he had proceeded to accept the returned

income in case of both the assessees. It was further

submitted by the Ld. Sr. Advocate that although, the AO

might not have elaborated in the assessment orders as to

what sought of inquiries he had made, all the same, the

documents on record would establish that the AO had

examined the issue before him at length and it was only

after him being satisfied about the sufficiency of cash

available with the assessees that the assessments were

completed without making any additions. The Ld. Sr.

Advocate also placed reliance on numerous judicial

precedents to support the contention that the impugned

orders had been wrongly passed by the Ld. PCIT without

appreciation of the facts and documents on record.

7.1 The Ld. Sr. Advocate also took an alernative

14 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh argument that the assessees were also challenging the

reopening at this juncture and it was pointed out that

even initially the assessees had challenged the re-

assessment proceedings as being bad in law by taking

the ground that the statutory notices u/s 143(2) of the

Act had not been served on the assessees. The Ld. Sr.

Advocate argued at length on the alternate contention

and drew or attention to the numerous judicial

precedents wherein it had been held that if the re-

assessment proceedings are itself bad in law, the

subsequent proceedings u/s 263 of the Act would also

not have any feet to stand on and would be liable to be

quashed.

8.0 In response to the vairous arguments of the Ld. Sr.

Advocate, the Ld. CIT DR submitted that a plain reading

of the assessment orders would show that the AO had

not even bothered to make simplest of inquiries

regarding the assessees’ claims of having sufficient cash

to make the impugned advances. It was submitted that

if one was to consider the date of submission of replies

before the AO and the date of the assessment orders, it

15 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh would be seen that both had the same date which would

again lead to an inference that the AO had simply taken

the documents on record but had not applied his mind to

the same thereby making the entire assessment

proceedings as erroneous and being prejudicial to the

interest of Revenue. The Ld. CIT DR also submitted that

there was no inquiry by the AO vis-a-vis the

creditworthiness of the various persons from whom the

assessees had claimed to have received cash.

8.1 The Ld. CIT DR vehemently argued that the

impugned orders passed u/s 263 of the Act deserved to

be upheld.

9.0 We have heard the rival submissions and have also

perused the material on record. We have also perused the

various documents filed by the assessees during the

course of the assessment proceedings and it remains

undisputed that the assessees had submitted these

documents with a view to justify their claims of having

sufficient cash for the purpose of making the advance.

That the assessees had share in Joint Family Land as

well as had agricultural lands in their own names is also

16 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh not under dispute. The assessees have also filed cash

flow statements to justify the availability of cash and we

have gone through them and we find no reason to take a

view different from the view taken by the AO in this

regard. Thus, from records, it is evident that the AO

had an opportunity to consider these very voluminous

documents that which were before him to consider and it

was only after having examined these documents, he

reached a conclusion that the returned income of both

the assessee’s was to be accepted. Of course, the AO

might not have given an elaborate description of the

inquires he had conducted during the course of

assessment proceedings, all the same, we do not agree

with the view taken by the Ld. PCIT that the AO had not

carried out any inquiries. The documents on record very

well prove that the AO had duly required the assessees to

file the relevant details and the assessees also had filed

the same and it was only after due consideration and

examination of these documents before him that the AO

had reached the conclusion that the assessments had to

be completed without making any addition. Thus, in our

considered view, the AO had exercised due diligence and

17 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh had duly applied his mind to the facts of the cases before

him and, therefore, the observation of the Ld. PCIT that

since there was lack of inquiry on the part of the AO, the

same had rendered the assessment proceedings as being

erroneous and prejudicial to the interest of Revenue does

not hold good.

9.1 At this juncture, it will be appropriate to refer to the

judgment of the Hon'ble Apex Court in the case of

Malabar Industries vs. CIT (2000) 243 ITR 83 (SC)

wherein the Hon'ble Apex Court has held as under:

“A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to

18 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh correct each and every type of mistake or error committed by the Assessing Officer, if is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income- tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the

19 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law."

9.2 In our considered view, the AO took one of the

possible views that the assesses had sufficient funds to

make the impugned advance and the action of the AO

cannot be faulted with by the Ld. PCIT only because he

might have had a different view.

9.3 The Hon'ble Delhi High Court in the case of ITO Vs.

DG Housing Projects Ltd [2012] 343 ITR 329 (Del went

on to observe that in case where there is in-adequate

inquiry but no lack of inquiry, the CIT must give and

record a finding that the order/enquiry made is

erroneous and that this can happen only if an inquiry

and verification is conducted by the CIT. The Hon'ble

Delhi High Court in the case of ITO Vs. DG Housing

Projects Ltd (supra) also held that in most cases of

alleged ‘inadequate inquires’ it will be difficult to hold

that the order of the Assessing officer, who had

conducted enquiries and had acted as a Investigator, is

20 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh erroneous, without the CIT conducting verification

/inquiry himself.

9.4 In the present appeals, the Ld. PCIT has not carried

out any enquiry himself, therefore, respectfully following

the above said judicial precedents, we have no hesitation

in holding that the Ld. PCIT had wrongly invoked the

revisionary powers u/s 263 of the Act in the case of both

the assessees and further the cancellation of the

assessment orders in both the cases was also bad in law.

We set aside the order of the Ld. PCIT and restore the

assessment orders in case of both the assessees.

9.5 In so far as the alternate arguments of the Ld. Sr.

Advocate regarding the re-assessments being bad in law

are concerned, since we have already held the proceeding

u/s 263 of the Act to be bad in law and have set aside

the impugned orders, we do not feel any requirement to

adjudicate on this issue at the present moment as this

issue has become of academic importance only.

10.0 In the result, both the appeals of the assessee

stand allowed.

21 SA 1-Chd-2022 ITA No 202-Chd-2019,(A.Y. 2011-12) – S/Shri Jagtar Singh and Jagpal Singh 11.0 Since we have heard and allowed the assessees appeal bearing ITA No. 202/Chd/2021, the Stay Application bearing S.A. No.1/Chd/2022 has become in infructuous and is dismissed as such.

12.0 In the final result, both the appeals of the assessees stand allowed whereas the Stay Application is dismissed as having become infructuous. Order pronounced on 22.08.2022

Sd/- Sd/- ( N. K. SAINI) (SUDHANSHU SRIVASTAVA) Judicial Member Vice President Dated : 22 .08.2022 “आर.के.” आदेशक���त+ल,पअ-े,षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु.त/ CIT 4. आयकरआयु.त (अपील)/ The CIT(A) 5. ,वभागीय��त�न1ध, आयकरअपील$यआ1धकरण, च3डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File

आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar