RISHAB JHUNJHUNWALA,DELHI vs. AO WARD-1(1), DELHI

That the order u/s 263 of IT Act is bad in law as the same was passed without providing reasonable and sufficient opportunity to the assessee defying principles of natural justice. The above grounds of appeal are independent of, and without prejudice to each other.

The representative of both the sides were heard at length and perused the records. We have considered the documentary evidence brought on record in the form of Paper Book in the light of Rule 18(6) of the ITAT Rules.

The brief fact of the case is that the assessee has filed return of income declaring total income of Rs.7,25,000/- The case was selected for scrutiny assessment through CASS under Compete Scrutiny. The assessment was completed at an assessed income of Rs.1,4532,260/- by making the addition under Section 143(3) of the Act. The contention of the PCIT is that while framing the assessment order the Assessing officer has not enquired about the cash deposits amounting to Rs. 835000/- there by making the assessment order not only erroneous but also prejudicial to the interest of the revenue. 7. The PCIT served the following notice assuming jurisdiction us 263 of the Act:

A perusal of the aforementioned notice shows that the Principal CIT has alleged that the assessee has not shown the cash deposit of Rs.8,35,000/- in the bank account of the assessee and in PPF account of his minor son. Further, the assessee put our attention to the following factual position: “I have gone through the assessment record, issue raised and the details received from NSDL on the issue. The following pertinent observations are made: i) I have gone through the facts and circumstances of the case as well as examined the assessment record of the assessee for A.Y. 2015-16.It is clear that the Assessing Officer was under obligation to properly verify the source of cash deposit into bank accounts of the assessee. However, the Assessing Officer, without making proper verification, completed the assessment.

We find that the notice under Section 142(1) of the Act dated 18-10-2017 was issued and served upon the assessee to which, on 02-11-2017 the assessee filed a detailed reply submitting copy of reply filed by assessee before assessing officer, copy of acknowledgment slip dated 01-01-2013, copy of letter of allotment, copy of notes, copy of ledger and copy of details of value of securities transaction. Relevant reply is as under:

After perusing the aforementioned details, the assessing officer further made the enquiries and completed the assessment proceedings under Section 143(3) of the Act vide order dated 21-12- 2017.

The PCIT at para 8(ii)of his order has observed that the assessee has deposited the unexplained cash deposit of Rs 835000/- and manipulated the share transaction of penny stocks and the assessing officer has failed to enquire all his Demat accounts as there was every likelihood of assessee indulging in more such transactions. It was assessing officer duty to at least call for Demat Accounts, if any linked to its bank branch in HDFC Bank, Greater Kailash -II New Delhi.

Considering the facts of the case in totality, we are of the considered view that the assessing officer had made specific enquiries during the assessment proceedings to which specific reply was furnished by the assessee along with supporting documentary evidences and all such evidences were duly examine and considered by the assessing officer before completing the assessment proceedings under Section 143(3) of the Act. 13. The power of revision can be exercised where no enquiry, as required under the law is done. Admittedly the assessing officer asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the assessing officer has completed the assessment.

The Hon'ble Bombay High Court in ITR 108 has held as under: "The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise? power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black's Law Dictionary. According to the definition, "erroneous" means "involving error; deviating from the law". "Erroneous assessment" refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment" means "one rendered according to course and practice of court, but contrary to law upon mistaken view of law; or upon erroneous application of legal principles".

From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately This section does not visualize a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous, Cases may be visualized where the income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the Interests of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income- tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power.

We find that the Hon’ble Delhi High Court in the case of CIT vs Sunbeam Auto reported in 332 ITR 167 has held that the Assessing officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Whether there was application of mind before allowing the expenditure in question has to be seen. If there was any inquiry, even inadequate, that would not by itself give occasion to the CIT to pass orders u/s 263 of the Act, merely because he has different opinion in the matter.

The Hon’ble Delhi High Court in the case of Anil Kumar Sharma 335 ITR 83 has held that there is a distinction between “lack of enquiry and inadequate enquiry. If there was any enquiry, even inadequate, that would not by itself give occasion to the commissioner to pass orders u/s 263 of the Act.

Considering the facts of the case in hand, in the light of the judicial decision discussed above, we set aside the assessment order of the PCIT dated 30-03-2021and restore the assessment order of the assessing officer dated 21-12-2017 framed u/s 143(3) of the Act 18. In the result the appeal of the assessee is allowed. Order pronounced in the open court on 20 /12/2024.