ACIT, PIRAMAL vs. KESHRIYA CO-OP CREDIT SOCIETY LTD, MUMBAI

On further appeal, the assessee explained On further appeal, the assessee explained before the ld CIT(A) before the ld CIT(A) , the reasons for the part/no compliance before the Assessing the part/no compliance before the Assessing the part/no compliance before the Assessing Officer as due to due to on-going Covid Pandemic and consequent going Covid Pandemic and consequent lockdown. The Ld. CIT(A) in view of reasons stated admitted the lockdown. The Ld. CIT(A) in view of reasons stated admitted the lockdown. The Ld. CIT(A) in view of reasons stated admitted the additional evidence filed by the assessee and called for a remand additional evidence filed by the assessee and calle additional evidence filed by the assessee and calle report from the Assessing Officer. After going through the remand report from the Assessing Officer. After going through the remand report from the Assessing Officer. After going through the remand report of the Assessing Officer and the rejoinder of the assessee, the report of the Assessing Officer and the rejoinder of the assessee, the report of the Assessing Officer and the rejoinder of the assessee, the Ld. CIT(A) deleted the addition observing as under: Ld. CIT(A) deleted the addition observing as under:

We have heard rival submission the parties and perused the heard rival submission the parties and perused the heard rival submission the parties and perused the relevant material on record. Before us, the Ld. Departmental relevant material on record. Before us, the Ld. Departmental relevant material on record. Before us, the Ld. Departmental Representative (DR) submitted that source of investment has not Representative (DR) submitted that source of investment has not Representative (DR) submitted that source of investment has not been examined by the Ld. CIT(A). Further, he submitted that merely been examined by the Ld. CIT(A). Further, he submitted that merely been examined by the Ld. CIT(A). Further, he submitted that merely for the reason that the Assessing Officer has not examined the n that the Assessing Officer has not examined the n that the Assessing Officer has not examined the reconciliation of the quantum of fresh withdrawal as well as reconciliation of the quantum of fresh withdrawal as wel reconciliation of the quantum of fresh withdrawal as wel purpose of the withdrawal, t purpose of the withdrawal, the Ld. CIT(A) cannot delete the he Ld. CIT(A) cannot delete the addition. He submitted that the Ld. CIT(A) addition. He submitted that the Ld. CIT(A) was having co having co-terminus power of the Assessing Officer ing Officer, therefore, he himself should have he himself should have carried out the relevant inquiry and decided the issue on merit. carried out the relevant inquiry and decided the issue on merit. carried out the relevant inquiry and decided the issue on merit. Accordingly, he submitted that the order of the Ld. CIT(A) might be Accordingly, he submitted that the order of the Ld. CIT(A) might be Accordingly, he submitted that the order of the Ld. CIT(A) might be set aside and matter may be restored back to the Assessing Officer. set aside and matter may be restored back to the Assessing Officer. set aside and matter may be restored back to the Assessing Officer.

The further inquiry envisaged under Section 250(4) quoted above 39. The further inquiry envisaged under Section 250(4) quoted above 39. The further inquiry envisaged under Section 250(4) quoted above is generally by calling what is known as "remand report". The purpose is generally by calling what is known as "remand report". The purpose is generally by calling what is known as "remand report". The purpose of this enabling clause is essentially to ensure that the matter of of this enabling clause is essentially to ensure that the matter of of this enabling clause is essentially to ensure that the matter of assessment reaches finality with all assessment reaches finality with all the requisite facts found. The the requisite facts found. The assessment proceedings re assessment proceedings re-opened on the basis of preliminary opened on the basis of preliminary satisfaction that some part of the income has escaped assessment, satisfaction that some part of the income has escaped assessment, satisfaction that some part of the income has escaped assessment, particularly when some unexplained credit entries have come to the particularly when some unexplained credit entries have come to the particularly when some unexplained credit entries have come to the notice (as in Section 68), cann notice (as in Section 68), cannot conclude, save and except by reaching ot conclude, save and except by reaching satisfaction on the touchstone of the three tests mentioned earlier; viz. satisfaction on the touchstone of the three tests mentioned earlier; viz. satisfaction on the touchstone of the three tests mentioned earlier; viz. the the the identity identity identity of of of the the the third third third party party party making making making the the the payment, payment, payment, its its its creditworthiness and genuineness of the transaction. Whilst it is true creditworthiness and genuineness of the transaction. Whilst it is true creditworthiness and genuineness of the transaction. Whilst it is true that the assessee cannot be called upon to adduce conclusive proof on see cannot be called upon to adduce conclusive proof on see cannot be called upon to adduce conclusive proof on all these three questions, it is nonetheless legitimate expectation of the all these three questions, it is nonetheless legitimate expectation of the all these three questions, it is nonetheless legitimate expectation of the process that he would bring in some proof so as to discharge the initial process that he would bring in some proof so as to discharge the initial process that he would bring in some proof so as to discharge the initial burden placed on him. Since Section 68 itself declar burden placed on him. Since Section 68 itself declares that the es that the credited sum would have to be included in the income of the assessee credited sum would have to be included in the income of the assessee credited sum would have to be included in the income of the assessee in the absence of explanation, or in the event of explanation being not in the absence of explanation, or in the event of explanation being not in the absence of explanation, or in the event of explanation being not satisfactory, it naturally follows that the material submitted by the satisfactory, it naturally follows that the material submitted by the satisfactory, it naturally follows that the material submitted by the assessee with his explanation mus assessee with his explanation must itself be wholesome or not untrue. t itself be wholesome or not untrue. It is only when the explanation and the material offered by the It is only when the explanation and the material offered by the It is only when the explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed assessee at this stage passes this muster that the initial onus placed assessee at this stage passes this muster that the initial onus placed on him would shift leaving it to the AO to start inquiring into the affairs on him would shift leaving it to the AO to start inquiring into the affairs on him would shift leaving it to the AO to start inquiring into the affairs of the third party. hird party.

The CIT (Appeals), as also the ITAT, in the case at hand, in our 40. The CIT (Appeals), as also the ITAT, in the case at hand, in our 40. The CIT (Appeals), as also the ITAT, in the case at hand, in our view, unjustifiably criticized the AO for not having confronted the view, unjustifiably criticized the AO for not having confronted the view, unjustifiably criticized the AO for not having confronted the assessee with the facts regarding return of some of the summons assessee with the facts regarding return of some of the summons assessee with the facts regarding return of some of the summons under Section 131 or not having given oppor under Section 131 or not having given opportunity for the identity of all tunity for the identity of all the share applicants to be properly established. The order sheet the share applicants to be properly established. The order sheet the share applicants to be properly established. The order sheet entries taken note of in the order of CIT (Appeals) seem to indicate entries taken note of in the order of CIT (Appeals) seem to indicate entries taken note of in the order of CIT (Appeals) seem to indicate otherwise. The order of CIT (Appeals), which was confirmed by ITAT in otherwise. The order of CIT (Appeals), which was confirmed by ITAT in otherwise. The order of CIT (Appeals), which was confirmed by ITAT in the second appeal, do the second appeal, does not demonstrate as to on the basis of which es not demonstrate as to on the basis of which material it had been concluded that the genuineness of the material it had been concluded that the genuineness of the material it had been concluded that the genuineness of the transactions had been duly established. There is virtually no transactions had been duly established. There is virtually no transactions had been duly established. There is virtually no discussion in the said orders on such score, except for vague discussion in the said orders on such score, except for vague discussion in the said orders on such score, except for vague description of the materia description of the material submitted by the assessee at the appellate l submitted by the assessee at the appellate stage. Whilst it does appear that the time given to the assessee for stage. Whilst it does appear that the time given to the assessee for stage. Whilst it does appear that the time given to the assessee for proving the identity of the third party was too short, and further that it proving the identity of the third party was too short, and further that it proving the identity of the third party was too short, and further that it is probably not always possible for the assessee placed in such is probably not always possible for the assessee placed in such is probably not always possible for the assessee placed in such situation to be able to enforce the physical attendance of such third uation to be able to enforce the physical attendance of such third uation to be able to enforce the physical attendance of such third party (who, in the case of share applicants vis party (who, in the case of share applicants vis-à-vis a company, would vis a company, would be individuals at large and may not be even in direct or personal be individuals at large and may not be even in direct or personal be individuals at large and may not be even in direct or personal contact), the curtains on such exercise at verificat contact), the curtains on such exercise at verification may not be ion may not be drawn and adverse inferences reached only on the basis of returning drawn and adverse inferences reached only on the basis of returning drawn and adverse inferences reached only on the basis of returning undelivered of the summonses under Section 131. Conversely, with undelivered of the summonses under Section 131. Conversely, with undelivered of the summonses under Section 131. Conversely, with doubts as to the genuineness of some of the parties persisting on doubts as to the genuineness of some of the parties persisting on doubts as to the genuineness of some of the parties persisting on account of non account of non- delivery of the processes, the initial burden on the the initial burden on the assessee to adduce proof of identity cannot be treated as discharged. assessee to adduce proof of identity cannot be treated as discharged. assessee to adduce proof of identity cannot be treated as discharged.

We are inclined to agree with the CIT (Appeals), and consequently 41. We are inclined to agree with the CIT (Appeals), and consequently 41. We are inclined to agree with the CIT (Appeals), and consequently with ITAT, to the extent of their conclusion that the assessee herein with ITAT, to the extent of their conclusion that the assessee herein with ITAT, to the extent of their conclusion that the assessee herein had come up with so had come up with some proof of identity of some of the entries in me proof of identity of some of the entries in question. But, from this inference, or from the fact that the question. But, from this inference, or from the fact that the question. But, from this inference, or from the fact that the transactions were through banking channels, it does not necessarily transactions were through banking channels, it does not necessarily transactions were through banking channels, it does not necessarily follow that satisfaction as to the creditworthiness of the parties or the follow that satisfaction as to the creditworthiness of the parties or the follow that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in question would also have been neness of the transactions in question would also have been neness of the transactions in question would also have been established.

The AO here may have failed to discharge his obligation to conduct 42. The AO here may have failed to discharge his obligation to conduct 42. The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT a proper inquiry to take the matter to logical conclusion. But CIT a proper inquiry to take the matter to logical conclusion. But CIT (Appeals), having noticed want of proper inqu (Appeals), having noticed want of proper inquiry, could not have closed iry, could not have closed the chapter simply by allowing the appeal and deleting the additions the chapter simply by allowing the appeal and deleting the additions the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as made. It was also the obligation of the first appellate authority, as made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, indeed of ITAT, to have ensured that effective inquiry was carried out, indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in th particularly in the face of the allegations of the Revenue that the e face of the allegations of the Revenue that the account statements reveal a uniform pattern of cash deposits of equal account statements reveal a uniform pattern of cash deposits of equal account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in amounts in the respective accounts preceding the transactions in amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material question. This necessitated a detailed scrutiny of the material question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section 148 ed by the assessee in response to the notice under Section 148 ed by the assessee in response to the notice under Section 148 issued by the AO, as also the material submitted at the stage of issued by the AO, as also the material submitted at the stage of issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a appeals, if deemed proper by way of making or causing to be made a appeals, if deemed proper by way of making or causing to be made a "further inquiry" in exercise of the power under Section 250( "further inquiry" in exercise of the power under Section 250( "further inquiry" in exercise of the power under Section 250(4). This approach not having been adopted, the impugned order of ITAT, and approach not having been adopted, the impugned order of ITAT, and approach not having been adopted, the impugned order of ITAT, and consequently that of CIT (Appeals), cannot be approved or upheld. consequently that of CIT (Appeals), cannot be approved or upheld. consequently that of CIT (Appeals), cannot be approved or upheld.” 4.3 Respectfully, following the finding of the Hon’ble Delhi High following the finding of the Hon’ble Delhi High following the finding of the Hon’ble Delhi High Court (supra), we feel it appropriate to set aside the finding of the we feel it appropriate to set aside the finding of the we feel it appropriate to set aside the finding of the Ld. CIT(A) and restore the matter back to the Assessing Officer for Ld. CIT(A) and restore the matter back to the Assessing Officer for Ld. CIT(A) and restore the matter back to the Assessing Officer for (i) examining the source of the cash deposits in the bank account of (i) examining the source of the cash deposits in the bank account of (i) examining the source of the cash deposits in the bank account of the assessee society, (ii) reconciliation of the quantum of cash the assessee society, (ii) reconciliation of the quantum of cas the assessee society, (ii) reconciliation of the quantum of cas deposits from the bank statement (iii) examine/verify the end use of deposits from the bank statement (iii) examine/verify the end use of deposits from the bank statement (iii) examine/verify the end use of the cash withdrawal whether same was for the purpose of the the cash withdrawal whether same was for the purpose of the the cash withdrawal whether same was for the purpose of the objects of the society or not. After verification of the contention of objects of the society or not. After verification of the contention of objects of the society or not. After verification of the contention of the assessee along with the evidences, the Assessing Officer shall the assessee along with the evidences, the Assessing O the assessee along with the evidences, the Assessing O adjudicate the issue in dispute in accordance with law. The grounds adjudicate the issue in dispute in accordance with law. The grounds adjudicate the issue in dispute in accordance with law. The grounds of appeal of the Revenue are accordingly allowed for statistical of appeal of the Revenue are accordingly allowed for statistical of appeal of the Revenue are accordingly allowed for statistical purposes.

In the result, the appeal of the Revenue is allowed for In the result, the appeal of the Revenue is allowed for In the result, the appeal of the Revenue is allowed for statistical purposes.