CHOKSI RANCHHODLAL KISHORDAS,AHMEDABAD vs. THE PR. CIT, AHMEDABAD-1, AHMEDABAD

In this regard, he drew our attention to the submissions made to the AO during re-assessment proceedings placed before us at paper book page no.28-61, being the objection filed by the assessee to the reopening of the case, vide letter dated 13th January 2022. Ld. Counsel for the assessee drew our attention to Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 4 – para 5 & 6 of the said letter at paper book page nos. 31 & 32 pointing out therefrom that it was explained to the AO that the money received from Shri Renuka Mata Society were on account of sales made to Parishram Bullion, the assessee being in the business of retail and wholesale trading of gold and silver and trading of securities and commodities. The PAN number of Parishram Bullion had been provided to the AO. Para 5 & 6 of the said letter are reproduced hereunder:

Thereafter, our attention was drawn to para 11 of the said letter at paper book page no.35 as under:

Referring to the same, it was pointed out that the assessee had clearly pointed out that the entries in their books of accounts reflected receipts from Shri Renuka Mata Society / Parishram Bullion, clearly showing that the amounts were received by the assessee from Parishram Bullion. Ld. Counsel for the assessee further stated that it was also pointed out to the AO that all these transactions were duly recorded in the books of accounts and considered for the computation of income; the books of accounts were audited and tax audit report in Form 3CB & 3CD furnished and even VAT audit report were submitted during the course of original proceedings. Our attention was drawn to the copy of assessee’s bank statement reflecting receipts from Shri Renuka Mata Society / Parishram Bullion placed at paper book page nos. 37 to 42; to the confirmation furnished by Parishram Bullion placed at paper book page nos.43 & 44 and to the copies of bills raised by the assessee of Parishram Bullion placed at paper book page nos. 45 to 61. Thereafter, our attention was drawn to the submissions made to the Ld. PCIT in proceedings u/s.263 of the Act reiterating the facts submitted to the AO during re-assessment Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 6 – proceedings that the amount received from Shri Renuka Mata Society related to sale receipts from Parishram Bullion evidenced with copies of sales invoices, ledger confirmation from Parishram Bullion, copies of bank statement wherein the amounts received from Parishram Bullion was credited. Our attention was drawn to paper book page no.66 wherein said explanation was furnished by the Ld. PCIT.

Ld. Counsel for the assessee, thereafter, pointed out that the Ld. PCIT in his order has failed to point out the inadequacy of enquiry so demonstrated before him to have been conducted by the AO during re-assessment proceedings. He drew our attention to para 5.2 & 5.3 of the Ld. PCIT’s order pointing out therefrom that the Ld. PCIT had nowhere stated any inadequacy in the enquiry conducted by the AO but had only reiterated the information in the possession of the Department that Shri Renuka Mata Society was only a conduit for placement of unaccounted cash and based on that the Ld.PCIT had rejected the explanation of the assessee. Para 5.2 & 5.3 of the Ld.PCIT’s order are reproduced hereunder:

He, thereafter, drew our attention to para 7 of the Ld.PCIT is reproduced hereunder:

Referring to the same, he pointed out that Ld.PCIT had noted the AO had accepted the assessee’s contention of sale transactions having been executed without any supporting evidence and without Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 8 – verifying the transportation receipt. These, he contented, were incorrect findings of the Ld.PCIT. Referring to his communication to the AO during re-assessment proceedings and to the Ld.PCIT during revisionary proceeding as reproduced above, he pointed out that the assessee had submitted the copy of sale invoices to the AO and the finding of the Ld.PCIT that the sale invoices were not furnished was, therefore, incorrect. He further contended that the assessee had also furnished other documentary evidences i.e. confirmation from the said parties, copy of the bank statement clearly showing receipt from Parishram Bullion coming through its Shri Renuka Mata Society Bank account and even VAT audit report which sufficiently explained the source of amounts received from Shri Renuka Mata Society as being sale receipts from Parishram Bullion and, therefore, there was no case, he contended that the Ld. PCIT to hold that the AO had not conducted proper enquiries on the issue.

Ld. Counsel for the assessee contended that courts in a number of decisions have repeatedly held that where enquiries were conducted during assessment proceedings and the AO had taken plausible view, merely because the Commissioner had a different view on the matter it would not permit him to exercise powers u/s.263 of the Act. Our attention was drawn to the following decisions holding so; i. Siddhi Infrabuild (P.) Ltd. vs. PCIT, [2025] 172 taxmann.com 232 (Gujarat), Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 9 – ii. Commissioner of Income Tax vs. Nirma Chemicals Works (P.) Ltd. [2009] 182 Taxman 183 (Gujarat), iii. PCIT vs. Shreeji Prints (P.) Ltd. [2021] 130 taxmannn.com 294 (SC). iv. Ramotar Choudhari HUF vs. PCIT in dated 9th May, 2024.

Ld. DR, however, supported the order of the Ld. PCIT contending that he had rightly held the assessment order passed in the present case to be erroneous causing prejudice to the Revenue, since, he had found the AO to have not conducted proper enquiries on the issue of the source of amounts received from Shri Renuka Mata Society.

We have heard both the parties. The Ld. PCIT in the present case has found the assessment order passed in the case of the assessee u/s 147 of the Act to be erroneous causing prejudice to the Revenue, since the AO allegedly did not conduct proper inquiries on the issue for which the case of the assessee was reopened. The reopening was resorted to on the basis of information that the assessee had received amounts from Shree Renuka Mata co-op society, which was an entity acting as a conduit for channelizing unaccounted money of various persons.

Considering the contentions made by both the parties before us and the documents referred to before us, we agree with the Ld. Counsel for the assessee that the Ld.PCIT’s finding of inadequate Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 10 – inquiry by the AO is without any basis, least of all on the basis of records before him. And for this reason the order passed u/s 263 of the Act is not sustainable.

It not the case of the Ld.PCIT that no inquiry was conducted by the AO on the issue of reopening. And the Ld.Counsel for the assessee has suitably demonstrated before us that the assessee had suitably demonstrated with evidence the genuineness of the receipts from Renuka Mata. He has pointed out that the nature of receipts from Renuka Mata was explained as being sales consideration received from Parishram Bullion a sales debtor of the assessee. He has also pointed out that the said explanation was duly supported with evidences in the form of the bank statement of the assessee reflecting the amounts received from Shri Renuka Mata Society as relating to Parishram Bullion, filing confirmation of Parishram Bullion in this regard, filing copies of audited balance sheet and P&L account and filing copies of its VAT return also of the assessee.

The Ld.PCIT, we find, has not pointed out any deficiency /infirmity/falsity in the explanation of the assessee, requiring further inquiries to be made. His finding of inadequate inquiry is based merely on the information in the possession of the AO relating to routing of cash by Renuka Mata, but this information, which we find is only general information with nothing specific relating to the assessee. The Ld.PCIT has not pointed out how assesses transaction fitted into the modus operandi of Renuka Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 11 – Mata society, to justify his finding that the AO ought to have conducted more inquiry and had erred in accepting assesses explanation of the transaction being genuine. He has not pointed out how the explanation furnished by the assessee failed to controvert/deal with the adverse information in the possession of the AO.

The Ld.PCIT’s finding of inadequate inquiry by AO, we find, is also based on his finding that no evidences were furnished by the assessee in support of its explanation of the genuineness of the transaction. This, we find, is an incorrect finding of the Ld.PCIT, since undoubtedly the records reveal the assessee to have furnished all evidences, as noted, above by us and the Ld.PCIT has not dealt with the assesses pleadings before him to this effect while holding so. It is not his case that the assessee has wrongly stated to have substantiated his explanation to the AO.

The ITAT in the case of Ramotar Choudhari HUF (supra) has explained the provision u/s.263 of the Act as providing for, that once an explanation is sought from the assessee on the error noted by the Ld.PCIT, he is supposed to examine the contention of the assessee. That before passing an order u/s.263 of the Act, he is supposed to either himself make or cause to make such enquiry as he deems necessary. The ITAT has noted that word “conduct inquiry as he deems necessary’ in section 263 of the Act does not mean that the Ld. PCIT is left with a choice either to make or not to make an enquiry. On the contrary, it has interpreted the phrase Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 12 – to suggest that the enquiries which are necessary to form a view as to whether the AO is erroneous and prejudicial to the interest of the Revenue’ must be made. The ITAT has held that once a point- wise reply is given by the assessee, then a duty was cast upon the Ld. PCIT to examine the reply of the assessee and form a prima facie opinion as to whether the assessment order is erroneous so far as it is prejudicial to the interest of the Revenue. The opinion of the Commissioner that there is error in the assessment order ought to be based on his objective satisfactions and not a subjective satisfaction from the assessment order. The relevant findings of the ITAT in this regard are contained at para 5 of its order as under:

As per the provision of law therefore, the Ld. PCIT ought to have conducted enquiry on the submissions made by the assessee and based on the results of his enquiry only he should have arrived at a finding of error in the order of the AO. In the present case, we find that the assessee submitted his reply to the Ld.PCIT regarding the issue for which revisionary jurisdiction was exercised by the Ld.PCIT pointing out the same being examined during assessment itself. Ld. PCIT found no infirmity in the explanation of the assessee, conducted no inquiry, but simply went on to hold the assessment order to be erroneous so as to cause prejudice to the Revenue for not having conducted proper enquiries. The findings of the Ld. PCIT of the assessment order being erroneous, clearly, we hold are not in consonance with law. In fact, we find that the finding of the Ld.PCIT of the AO having conducted inadequate enquiry is without any basis.

In the light of the above, we hold that in the facts of the present case, there is no basis with the Ld.PCIT to hold the Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 14 – assessment order to be erroneous so as to cause prejudice to the Revenue.

The order of the Ld.PCIT u/s. 263 of the Act is, therefore, set aside as not sustainable in law. The grounds of appeal raised by the assessee are accordingly allowed.

In the result, appeal filed by the assessee is allowed.