EASTERN DRUG & SANITARY PRODUCT,MEERUT vs. PR,CIT, GHAZIABAD

Now the learned PCIT, in his revisionary jurisdiction has tried to give a different angle by stating that the AO has failed to consider the books of accounts and accepted the reconciliation without verification. If that was the case, then learned PCIT himself should himself point out, what was the defect or error in the finding of the learned AO as well as explanation and material given by the assessee during the course of assessment proceedings. If the books of accounts have been produced in the original assessment 21 proceedings and then again before the AO in reassessment proceedings and they have given a categorical observation and finding that the assessee has produced books of accounts and the details, which has been verified and examined, then saying that it was not produced before the Investigation Wing after gap of more than 10 years, then the finding of AO, both in the original assessment proceedings and reassessment proceedings cannot be believed, is bald allegation just because assessee stated before the Investigation Wing that books of accounts are not available at present. Does he contend to show that the AO’s observation and finding are wrong?

Here the only issue was, there was a difference of credit in the bank and the turnover of Rs.8,59,45,770/- and some commission paid to two persons. Once, that was reconciled and explained before the AO who has examined it and has even dealt with in his order, then there could not be case of lack of inquiry. The only basis of learned PCIT is reference to some NHRM scam and observation of the Hon’ble Allahabad High Court, which have been reproduced above. Thus, his entire edifice to set aside the assessment order is based upon the observation of the Hon’ble High Court and nothing else. If this was foundation of setting aside the assessment order, then this can no longer the basis, because the Hon’ble Supreme Court against the said very judgment of Hon’ble Allahabad High 22 Court has reversed and set-aside the said observation of the Hon’ble Court. For the sake of ready reference, the concluding part of the judgment of the Hon’ble Supreme Court dated 13.12.2019 is reproduced hereunder:-

“15. In the present case, even if one assumes that Surender Chaudhary, the accused in the pending criminal case was involved and had sought to indulge in objectionable activities, that ipso facto could not have resulted in unilateral action of the kind which the State resorted to- against Daffodils, which was never granted any opportunity of hearing or a chance to represent against the impugned order. If there is one constant lodestar that lights the judicial horizon in this country, it is this: that no one can be inflicted with an adverse order, without being afforded a minimum opportunity of hearing, and prior intimation of such a move. This principle is too well entrenched in the legal ethos of this country to be ignored, as the state did, in this case.

Thus, in the light of Hon’ble Supreme Court judgment, all the observation made by the learned PCIT deserves to be quashed.

Apart from that, once the AO has carried out the necessary verification of the details which was his reason to believe and assuming jurisdiction under section 147 and has accepted the explanation, then learned PCIT could not have set-aside the assessment unless he himself founds any error or defect in such material or in explanation. Thus, we agree with the contention of the learned counsel for the assessee that once the entire order of the Hon’ble High Court has been reversed and set-aside by the Hon’ble Supreme Court, then the basis of setting aside itself does not stand.

In the result, the appeal of the assessee is allowed.