SHRI ATUL SRIVASTAVA,AGRA vs. PCIT-1, AGRA, AGRA

4. That the Ld. Pr. CIT while making the order U/S 263 had ignored that the Asstt Order dt. 31-10-2019 had been passed U/S 143(3) read with Sec 148, and there is no escapement of Income as per Reason to Believe recorded by A.O. then no other matter can be subject to examination / verification in reassessment proceedings. Thus the Pr. CIT has erred in imitating proceedings U/S 263.

5. That the Asstt. Order dated 31-10-2019 is not prejudicial to the interests of the revenue.”

5. The order of the ld. PCIT in the case of Sarika Srivastava reveals that the assessee is a Doctor. For the impugned year, A .Y 2012-13, return of income was e-filed on 14.09.2012 declaring total income of Rs.17,94,720/-.

Thereafter case was opened for scrutiny assessment u/s. 148 of the Act and assessment completed u/s. 143(3) r.w.s. 147 of the Act accepting the returned income of Rs.17,94,720/-. It is this assessment order passed u/s. 147 of the Act which has been held to be erroneous causing prejudice to the interest of revenue by the ld. PCIT in the impugned order before us passed u/s 263 of the Act.

6. Ld. PCIT, on perusal of record of assessment, noted several discrepancies therein, which find listed in his show cause notice reproduced at page -2 to 8 of the order as under :

“I. In this regard, Notices u/s 263 of the Income Tax Act, 1961 dated 27.10.2021 and 18.11.2021 have been issued calling for certain explanations and documents. However, no compliance has been made till date. II. You are being given further opportunity to explain your case. You are once again requested to submit explanations and documents as called for vide Notice u/s 263 dated 27.10.2021 (copy of which is enclosed). III. I have examined the case record in your case for A.Υ. 2012-13 and on examination of the case record several issues have emerged, which are discussed hereunder:

2. The Assessee has claimed deduction u/s 54F of the Income Tax Act, 1961 amounting to Rs. 16,06,618/- as per Computation of Income filed along with Return. No proof of Construction/purchase of Residential 4 | P a g e

House or the quantum of investment in the same is available on record, and hence excess deduction has been allowed. Not only the deduction was wrongly allowed but also no inquiry was done during the Assessment proceedings u/s 147 of the Income Tax Act, 1961.

"4. Copy of bank statements of all the account for the concerned year and source of all the cash deposits made during the year." 3.1 Another Notice u/s 142(1) was issued by the DCIT, Circle 2(1)(1), Agra on 23.07.2019 and as per point no. 4 of the Annexure to the Notice u/s 142(1) dated 23.07.2019 again required the Assessee to comply as under:

"4. Copy of bank statements of all the account for the concerned year and source of all the cash deposits made during the year."

3.2 Despite the repeated requirements u/s 142(1), the Assessee did not file the statement of Bank Accounts for all the year and filed the copy of Bank Account statements for a very short period i.e. 05.12.2011 to 24.12.2011 for HDFC Bank, Sanjay Place, Agra. Perusal of the Balance Sheet as on 31.03.2012 of the Assessee Dr. Sarika Srivastava shows that the details of Cash & Banks have been given in Schedule "D" from which it can be seen that the Assessee had in addition to bank account at HDFC Bank, a Bank Account No. 7398 at State Bank of India and a Bank Account No. 9865 in Punjab National bank along with FDRs in SBI and HDFC Bank. However, the Assessee did not file any statement of the account at State Bank of India & PNB and filed the Bank Statement for a very short period in December, 2011 for the HDFC Bank Account. Thus, the Assessee deliberately evaded furnishing the Bank Account statements.

It is further very surprising to note that the Assessing Officer did not make any inquiry on this issue despite the blatant non-compliance by the Assessee and completed the Assessment at Returned Income without any verification of the Bank Account and without any proper inquiry.

2,50,000/- only have been disclosed in the Balance Sheet. The AO did not make inquiry in to the fact as to how the rest of the units worth Rs. 3,00,000/- have been disclosed.

7. In the Balance Sheet, a portion of "Land TIBCO" has been shown as sold during the year. However, Sale Deed of the said land is not available on record. The AO did not ask about the details of this transaction.

8. It is seen that the last reply by the Assessee was filed on 07.08.2019 in which the Assessee has mainly tried to explain the source of investment in Mutual funds. It is noteworthy that these investments include investments by the Assessee and her husband Dr. Atul Srivastava not only for the month of December 2011 but also February 2012 i.c. Rs. 50,000/- on 04.02.2012 by the Assessee and Rs. 1,50,000/- on 04.02.2012 by Dr. Atul Srivastava, husband of the Assessee. However, despite the fact that investments in Mutual Funds were claimed in February 2012, copy of bank account for any period outside December 2011 was neither submitted by the Assessee nor asked for again by the DCIT, Circle 2(1)(1), Agra before completion of the assessment, despite having earlier asked for complete bank statements for the year and for Cash Flow Statement, which was again not filed. It is further noticed that an investment of Rs. 15,00,000/- in Mutual Funds is shown on the date 08.12.2012 by the Assessee in the Reply dated 07.08.2019 but no query or clarification regarding the same has been made.

9. It is seen that the reply by the Assessee was filed on 07.08.2019 which did not cover many of the queries raised by the DCIT, Circle 2(1) (1), Agra and left many questions unanswered, and after a period of almost 3 months, rather than making further inquiry or verification which should have been made, the Assessing Officer suddenly passed the Assessment Order on 31.10.2019 accepting the Returned Income. IV. In view of the above observations, please explain as to why it should not be concluded that the Assessment Order u/s 143(3)/147 of the Income Tax Act, 1961 dated 31.10.2019 for A.Y. 2012-13 in your case is erroneous in so far as it is prejudicial to interests of the revenue, and why it should not be revised u/s 263 of the Income Tax Act, 1961 by passing an order, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. V. You are hereby being granted final opportunity to furnish your explanation on each of the above mentioned issue(s) and issues mentioned in the Notice dated 27.10.2021, which you may submit in my 7 | P a g e

office on or before 24.03.2022(on any working day) or you may file e-reply to the email ID agra.pcitl@incometax.gov.in or on e-filing portal. In case you wish to be heard personally, you or your duly authorized Representative may attend my office on 23.03.2022 at 03.30 P.M. In case of non-compliance, it will be presumed that you have nothing to say in your case and the case will be decided on merits on the basis of documents available on record.”

7. As is evident from the above, the discrepancies noted by the ld. PCIT are as under :

(1) . That despite records revealing stamp duty value of 2 properties sold by the assessee during the year exceeding the actual consideration received, the AO failed to invoke section 50C of the Act, while assessing capital gains earned on the said transaction, and make addition of the excess of the stamp duty value to the actual consideration received.

(2) . The assessee was found to have been allowed claim of deduction

/exemption of its capital gain u/s. 54F of the Act amounting to Rs.16,06,618/- without any proof / evidence of eligibility of the same.

He noted no enquiry conducted by the Assessing Officer with respect to the same.

(3) That despite the AO asking the assessee to file copies of all bank statements, the same were not filed by the assessee and the AO ignored the said fact. 8 | P a g e

(4) . That even on the issue for which jurisdiction to assess u/s 147 of the Act was assumed by the AO complete inquiry was not conducted.

Learned PCIT noted that the case of the assessee was reopened for examining the source of investment in mutual funds of Rs.50,00,000/-. He noted from the records that the assessee while explaining the source of investments, highlighted four payments for the limited period from 05.12.2011 to 24.12.2011 amounting in all to Rs.25,00,000/-, but no enquiry or investigation was made with respect to the same by the Assessing Officer.

(5) . Ld. PCIT also noted that there were several cash deposits in bank and despite the fact that queries had been raised for explaining the source, the same was not examined by the Assessing Officer.

(6) . PCIT also noted that while the assessee had bought units of Kotak

Floater Fund worth Rs.5.50 lacs. However, in the balance sheet, units worth Rs.2.5 lacs only were disclosed and the Assessing

Officer did not make any enquiry into the fact as to how rest of the units of Rs.3.00 lacs had been disclosed.

(7) . He further noted the assessee to have shown long term capital gain on sale of land in Profit and loss account, but no enquiry was made

9 | P a g e by the Assessing Officer with respect to the same nor were deeds of purchase and sale of the land available on record. The assessee was also noted to have sold a portion of “Land TIBCO” and no sale deed was available on record.

(8) . Learned PCIT noted that the only reply filed to explain the source of investment in the mutual funds stated the assessee to have made the investment in the period December, 2011 and Feb. 2012.

However, copy of the bank account for February, 2012 was not filed by the assessee.

Ld. PCIT accordingly noted that many queries raised by the AO were un-answered / not completely answered yet the Assessing Officer had accepted the returned income of the assessee as also several claims /issues were allowed without being examined.

8. When confronted with the same, the assessee stated to the Ld. PCIT that there was no error in the order of the AO since the assessee had explained to the satisfaction of the AO that there was no escapement of income vis a vis source of investment in mutual funds remaining unexplained, for which reason the case of the assessee was reopened. It was pointed out to the Ld.PCIT that the assessee had explained to the AO

10 | P a g e that the said investments were duly reflected in her Balance Sheet and the source of investment therein therefore duly disclosed. That therefore there was no question of escapement of income and the proceedings initiated by the AO were therefore invalid and needed to be dropped.The assessee pointed out to ld. PCIT,that despite stating so, ld. Assessing Officer did not drop the proceedings but completed the assessment though without making any addition to the returned income. She pointed out to the ld. PCIT that from the contents of assessment order it is evident that the reasons to believe recorded by the Assessing Officer failed. That it is settled proposition of law that if no addition had been made by the Assessing Officer in the assessment order on the basis of the reasons recorded, notice u/s. 148 becomes invalid and no addition can be made on any other income.

“The reply filed by the Assessee has been considered along with the submissions by her learned Counsel. On consideration of the entire facts of the case including departmental record, ITBA Portal etc. the following conclusions are drawn: 11 | P a g e The Assessee's entire reply revolves around the Hon'ble Maharashtra High Court decision in the case of CIT v/s Jet Airways [331 ITR 236] as quoted by the Assessee that "if no addition had been made by A.O. in Asstt Order on basis of such reasons recorded. Then in such circumstance the Notice U/S 148 becomes invalid then no additions can be made for any other income." However, no relief can be given to the Assessee on the basis of the above decision as it has been clearly enumerated in the Point 5 and Point 8 of the Notice u/s 263 dated 17.03.2022 that the Reason recorded u/s 148 of the Income Tax Act, 1961 i.e. Issues regarding investments in Mutual Funds had not been properly inquired into and verified by the Assessing Officer during the course of assessment proceeding, and these are to be examined for which directions have to be issued u/s 263 and hence, the issues forming the basis of reason recorded are itself to be examined. Accordingly, the Notice u/s 148 does not become invalid even if the principle laid down in the decision of Jet Airways (Supra) is applied. Hence the argument by the learned Counsel does not in any way affect the proceedings u/s 263, b. The Assessee's contention that the A.O. made no addition on basis of Reason to believe hence, the AO was not legally empowered to make any addition for any other Income does not stand as Point 3 of the Reasons recorded u/s 148 of the Income Tax Act, 1961 clearly mentions that the Assessee had Cash Deposits to be explained, which was entirely left to be inquired into during the course of assessment proceedings. The Hon'ble Supreme Court in Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC) and Tara Devi Agarwal vs. CIT (1973) 88 ITR 323 (SC) held that "...where Assessing Officer has accepted a particular contention/issue without any enquiry or evidence whatsoever, Order w/s 263 in the case of Sarika Srivastava the order is erroneous and prejudicial to the interest of the Revenue".

9. After careful consideration of the material available on record, it is found that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue on the issues mentioned 12 | P a g e

above. Therefore, the Assessment Order passed u/s 143(3) r.w.s. 147 dated 31.10.2019 by the Assessing Officer in your case for A.Y. 2012-13 is hereby modified (partly set aside) with the directions to the Assessing Officer to examine the issues as mentioned in Para 1 to Para 8 of Notice u/s 263 dated 17.03.2022 (appearing in Para 3 of this Order) and to pass an Order accordingly after affording reasonable opportunity of being heard to the Assessee.”

(1) . There was no finding of any error by the ld. PCIT.

(2) . Once the Assessing Officer was satisfied in proceedings u/s 147 of the Act, no proceedings u/s 263 of the Act can be resorted to. In this regard she relied upon the decision of Calcutta High Court in PCIT vs.

(3) . Once proceedings u/s 147 of the Act have taken place, no proceedings u/s. 263 of the Act can happen. Reliance was placed on the order of ITAT, Ahmedabad in Hiren Kumar Lavjibhai Kanani (ITA No. 522/Ahd/2024) and of Hon’ble Allahabad High Court in Meerut Roller Flour Mills (P) Ltd. vs. CIT (2019) 110 taxmann.com 170 (Allahabad).

16 | P a g e There is no case, we agree with the Ld. Counsel for the assessee, of such investments being from undisclosed sources.

When the investment is duly disclosed in the Balance Sheet of the assessee, the source thereof also stands accounted for and reflected in the balance sheet. It is not that the investment is from sources outside the books of the assessee. There is no question of the same being from undisclosed sources and no need therefore for the AO to make any inquiries vis avis the source of the same.

Order pronounced in the open court on 30.04.2025.