MOJILAL RAJPUT,SUJALPUR MANDI vs. THE ITO, SHAJAPUR

PER Ms. MADHUMITA ROY - JM:

Both the appeals filed by the assessee are directed against the separate orders dated 04.09.2020 & 29.03.2019 passed by the Ld. CIT(A), Ujjain (M.P.) and Ld. PCIT, Ujjain arising out of the separate orders dated 26.07.2019 & 13.06.2016 passed by the ITO, Sahajpur under Section 143/263 & 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) respectively for A.Y. 2009-10. Since both the matters are inter connected and of the same assessee, these are heard analogously and are being disposed of by a common order for the sake of convenience.

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 2 – 2. These appeals are barred by limitation for about 412 days and 987 days respectively admittedly due to lock down arising out of Covid pandemic 2020. Hence, keeping in view the guidelines framed by the Hon’ble Apex Court we condone the delay in filing such appeals before us.

ITA No. 21/Ind/2022 (A.Y. 2009-10):- 3. The brief facts leading to the case is this that the assessee, an individual, filed its return of income for the year under consideration on 30.09.2009 declaring income at Rs.1,76,580/- and agricultural income of Rs.1,40,576/-. On the basis of AIR information to this effect that the assessee has deposited cash of Rs.24,49,626/- in his Savings Bank Account, upon obtaining approval from the PCIT, Ujjain, notice under Section 148 dated 23.03.2016 was issued and served upon the assessee followed by a notice dated 03.05.2016 under Section 142(1) of the Act. The assessee on 11.05.2016 requested to treat the return of income filed on 30.09.2009 in compliance with the notice under Section 148 of the Act. It is relevant to mention that the assessee is in the business of buying and selling tractors in the name of M/s. Shivam Traders. The accounts of the assessee is also maintained under Section 44AB of the Act as per which, the assessee had shown sales of Rs.1,68,97,139/- on which GP was @ 4.9% - as Rs.827860/- and net profit @ 1.37% to the tune of Rs.2,30,711/-. The assessee for the year under consideration also claimed exemption of Rs.54,135/- under Section 80C of the Act.

During the course of re-assessment proceedings, the assessee duly filed the statements of bank accounts where it was found that the assessee had deposited Rs.24,49,626/- which was claimed as his and his family

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 3 – members’ income from sale of agricultural crops and business. In support of the same, the evidence in respect of agricultural land recorded in the name of the assessee and his family members were duly produced. Upon verification of the entire records submitted by the assessee, the return filed by the assessee was accepted and no addition was made.

Subsequently, the assessee was issued with the notice dated 18.03.2019 by and under the signature of the PCIT, Ujjain under Section 263 of the Act, whereby and whereunder the order dated 13.06.2016 passed under Section 143(3) r.w.s. 147 of the Act was found erroneous in as much as it is prejudicial to the interest of the Revenue. The Ld. PCIT was of the view that the cash deposit of Rs.24,49,626/- by the assessee in the Narmada Malwa Gramin Bank is not reflecting in the balance sheet of the assessee. In support of the claim that agricultural income has been deposited in the bank, except Bhu Adhikar Patrika no other details was filed by the assessee. Neither any document relating to agricultural expenses was submitted during the assessment proceeding and therefore, the assessee has failed to explain the deposit of Rs.24,49,626/- in his savings bank account leading to the opinion that the order dated 13.06.2016 under Section 143(3) r.w.s. 147 of the Act as erroneous and prejudicial to the interest of the Revenue due to no enquiry and/or insufficient enquiry by the A.O. The contents of the said order issued by the Ld. PCIT under Section 263 of the Act dated 18.03.2019 is appearing at Page No.34 of the Paper Book filed before us. The contents of the said show-cause dated 18.03.2019 is reproduced hereinbelow:

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 4 –

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 5 –

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 6 – 4. Before the Ld. PCIT, the assessee stated as under: “3. In response to the above notice, Shri B S Rajput, CA & AR of the assessee attended on 26.03.2019 and filed written submission along with relevant details. In the written submission, the assessee stated as under:- “With reference to the above, assessee is in receipts of notice u/s 263 of the Income Tax Act, 1961 dated 18th March, 2019 for the A.Y. 2009-10. In this connection, as per the information received from the assessee we are submitting as under: 1. Nature of Business of the Assessee Sir, assessee is engaged in the business of trading of Tractors & Parts thereof in name and style of M/s Shivam Traders at Shujalpur Mandi, Dist. Shjapur (M.P.). Further the assessee is also carrying agricultural activities along with his family members on agricultural land owned by himself as well as other family members. 2. Sir, assessee is residing at Village Tajpur Ukala, Tehsil-Shujalpur, Dist-Shajapur jointly with his 3 brother and 14 family members. Copy of Samgra ID is enclosed as annexure-I for ready reference and records. 3. Sir, assessee is engaged in agricultural activities along with his family members on agricultural land {25.959 Hectare (123 Bigha approx)} is situated at Villagte Tajpur and Chowki Nasirabad, these lands are in the name of "A "and his brother, those are jointly residing with the assessee and carrying agricultural activities jointly on that land. Details of agricultural land {25.959 Hectare (123 Bigha approx)} like Name of Owner, Patwari Halka No., Survey No. Area (in Hectare / in Bigha), Khasra, B-1, P-II and other relevant papers are enclosed along with this letter as Annexure-II for your ready reference and records. 4. Sir, during the F. Y. 2008-09 assessee had been deposited cash in saving bank account and withdraw cash from that saving bank account and same persisted during that financial year, hence cash deposit reached at huge level while same amount deposits which is withdraw from same saving bank account. Sir, if your honor view the saving bank account you will be observed that cash deposited and withdraw only transaction, since highest balance during the F. Y. 2008-09 is Rs. 4,06,492/-. Hence it is clear that the same cash deposited and withdraw not additional cash deposited and transferred to others or elsewhere. 5. As informed by the assessee, it is to mention here that this cash amount deposited in subjected saving bank account during the F.Y. 2008-09

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 7 – by the assessee and their family members (which were not maintaining any bank account/s for the relevant financial year) hence income of the above agricultural land {25.959 Hectare (123 Bigha approx)} was also deposited in this saving bank account. As informed by the assessee during the relevant F.Y. 2008-09 all three brothers were not maintaining any bank account hence agricultural income earned from the above agricultural land {25.959 Hectare (123 Bigha approx)} was deposited in assessee's saving bank account, since assessee and few amount deposited out of tractor trading business and returned to business after his withdrawal and all facts and agricultural land paper was presented before the AO for verification during the course of assessment u/s 148 of the Income Tax Act, 1961. Same facts are recorded by the AO in his order in Para No.3 passed u/s 148 of the Income Tax Act, 1961 dated 13th June, 2016, Copy of the same is enclosed herewith this letter. In view of the above, it is clear that the cash deposited by the assessee and his family members are quite reasonable and acceptable, hence we request your honour to kindly do needful in the matter and oblige”.

The assessee is residing in Village Tajpur Ukala, Tehsil – Shujalpur, Dist.- Shajapur (M.P.), jointly with three brothers and 14 family members. The Samgra ID i.e. details of family members were duly filed by the assessee. It is relevant to mention that the assessee is having a joint family and carrying the agricultural activity jointly on that land lying at Khasra B-I P-II relevant documents whereof were duly submitted before the Ld. AO

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 8 – during the course of assessment proceedings. It appears from the records available before us that the assessee is having an agricultural income in respect of agricultural land measuring about 25.959 Hectors (1.23 Bigha approx..) out of which cash has been deposited in the Bank account. Certain amounts were also deposited by the assessee from the Tractor trading business. Some amounts were also deposited out of the withdrawal made by the assessee; the said amount as deposited by the assessee also includes the total sales of Rs.1,68,97,139/- made in the business of the assessee, which has been verified from the Accounts maintained in the business of the assessee.

Under this facts and circumstances of the case we find that specific information in regard to the alleged cash deposits was furnished and the Ld. AO upon being duly satisfied on explanation of the complete details being the source of such deposits in the Bank Account in its proper perspective accepted the return filed by the assessee. Therefore, the same cannot be said to be a case of no enquiry or inadequate enquiry.

In this regard, we have followed the judgment passed in the case of Ram Swaroop Bairagi vs. PCIT, Ujjain in ITA No. 633/Ind/2019, dated 24.11.2020; the Co-ordinate Bench has been pleased to observe that

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 9 – provisions of Section 263 of the Act cannot be invoked where the AO has passed order after due application of mind and after making enquiry. The relevant observation of the Co-ordinate Bench is as follows:

“22. On going through the above details we find that all necessary evidences which could explain the source of cash deposits in the bank account by the respective assessee(s) at Rs.19,05,000/- is established and in the family partition deed the name of three assessee(s) named S/Shri Ram Swarrop Bairagi, Sriram Vaishnav and Shailendra Vashav who are in appeal before us are appearing. Copy of sale deed dated 05.01.2008 is also available. Family partition agreement is dated 21.05.2008. The financial year in question is 2008-09. Cash is deposited on 22.5.2008, which is a day after the date of family partition agreement. The nexus of cash deposit is proved with copy of sale deed, partition deed and bank pass book. We therefore in the given facts and circumstances of the case are of the considered view that specific information was called by Ld. A.O about the alleged cash deposits and the assessee has satisfied the Ld. A.O with complete details giving the source of cash deposit in the bank account. Therefore it is neither a case of no enquiry or inadequate enquiry. Thus the order of Ld. A.O u/s 143(3) r.w.s. 148 of the Act dated 12.12.2016 framed in the case of S/Shri Ram Swaroop Bairagi, Shriram Vaishnav and Shailendra Vaishnav are neither erroneous nor prejudicial to the interest of revenue. Therefore in our considered view Ld. PCIT has wrongly assumed jurisdiction u/s 263 of the Act and the impugned order deserves to be quashed. We therefore allow respective ground raised in ITA Nos.633, 636 & 639/Ind./2019 and restore the order of Ld. A.O u/s 143(3) r.w.s. 148 of the Act dated 12.12.2016 in the case of all the three assessee(s).”

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 10 – under Section 263 of the Act the Coordinate Bench was pleased to observe as follows: “Even this is not the case of the Ld. CIT that certain evidences were overlooked which were very much on record or in the knowledge of the AO. Even this is not the case of Ld. CIT that certain new facts or evidences were brought to the notice of the Revenue Department which were having a direct impact on the income assessed by the AO. Neither there was an escapement of evidence nor there was any evidence now brought to the notice of the revenue department, therefore if that was not the position, then we are not inclined to give our approval to such directions.” 8. It is also a fact that not only the Ld. AO examined the matter but also recorded a categorical finding on the issue as evident from AO’s order sought to be reopened by the Ld. PCIT in the order impugned. The Ld. PCIT has set- aside the original assessment to the file of the Ld. AO in effect requires to do the same exercises which has already been done during the course original proceeding. Thus, in our considered, opinion the order passed by the Ld. AO in the original proceeding, when neither erroneous nor prejudicial to the interest of the Revenue the same is not required to be reopened by the impugned order passed by the Ld. PCIT. In that view of the matter we do not find any merit in the impugned order passed by the Ld. PCIT under Section 263 of the Act which is found to be not sustainable and thus, quashed.”

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 11 – two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous or prejudicial to the interest of the Revenue unless the view taken by the ITO is unsustainable in law. On this ground, the Ld. A.R. has relied upon the judgment passed by the Hon’ble High Court of Gujarat in the case of CIT vs. Nirma Chemicals Works Pvt. Ltd. Reported in (2009) 182 taxman 183 (Gujarat). It was further argued by him that upon considering the entire documents, and upon examining different memos issued by different authorities clarifying the distance of the land and upon exhaustive enquiry, the Ld. AO has finalized the assessment accepting the return filed by the assessee which is evident from the assessment order itself and also from the noting made the Ld. AO in the regular order sheet entries, the same cannot be interfered with by the Ld. PCIT. On the contrary, the Revenue pointed out that the same is not reflecting from the order passed by the Ld.AO. In reply, it was submitted by the assessee’s Counsel that the assessment order cannot give detailed reasons in respect of each and every item of deduction, which would cause impossible burden on the AO. On this count, he has further relied upon the judgment passed by the Hon’ble High Court of Gujarat in the case of CIT vs. Kamal Galani, reported in (2018) 95 taxmann.com 261 (Gujarat) and CIT vs. Nirma Chemicals Works (P.) Ltd., reported in [2009] 309 ITR 67 (Guj.), wherein Hon’ble High Court held as under: “22. The contention on behalf of the revenue that the assessment border does not reflect any application of mind as to the eligibility or otherwise under section 80-1 of the Act requires to be noted to be rejected. An assessment order cannot incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic some. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 12 – that he carries and the period of limitation within which an order is required to be made; and, secondly, the order is an appealable order. An appeal lies, would be filed, only against disallowances which an assessee feels aggrieved with. 23. As far as absence of discussion in the assessment order is concerned, this is what has been laid down by this court in the case of Rayon Silk Mills v. CIT [1996] 221 ITR 155 :— "In the first instance it was contended by learned counsel for the assessee that the very premise on which order under section 263 was made against the assessee, namely, that the Income-tax Officer has not at all examined the goodwill account is not existent. According to him, it is apparent from the record that the goodwill account was thoroughly examined by the Income-tax Officer before making the assessment and after examining when he accepted the contention of the assessee its discussion did not find place in the assessment order, as no additions were going to be made or no modifications in the return filed by the assessee were required to be made in that regard. This contention of the assessee appears to be well-founded. It is true that the assessment order does not speak about the examination of goodwill account as such. However, as we have noticed above, the assessee in his reply to the show-cause notice under section 263 had specifically mentioned that the entire matter was scrutinised and accepted while passing the assessment order. Our attention was also drawn to annexure 'D’. A submission made by the assessee to the Income-tax Officer, Surat, dated 18-10-1976, regarding the assessment year 1974- 75 giving detailed chronological data of the constitution of the firm on November 11, 1968, induction of four more partners on 7-11-1972, the creation of goodwill in the books of account of the firm by debiting the goodwill account and crediting the old partners' capital accounts in their profit sharing ratio on that date, formation of a private limited company in the name of Rayon Silk Mills (P.) Ltd., and its induction into the firm as partner by the deed of partnership dated 27-10-1973, and the dissolution of the partnership firm on 23-2-1974, leaving the private limited company as a sole proprietor thereof and the valuation of the business at the book value as on that date. After giving the chronological sequence of events, the assessee also contended in his submission before the Income-tax Officer that there was no actual transfer of any asset inasmuch as when a partner is admitted into the firm no transfer takes place. It was also contended that no cash transfer took place from person to person and the transfer and the dissolution of the firm also did not result in accrual of capital gains. In the face of this material on record, it is difficult to explain that the

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 13 – assessment order was made without making any enquiry into the goodwill account of Rs. 10,75,000. . . ." (p. 158) 11. So far as the jurisdiction of the Ld. PCIT under Section 263 of the Act is concerned, we have carefully considered the judgment relied upon by the assessee in the case of CIT vs. Nirma Chemicals Works (P.) Ltd. (supra). We find, while holding the Tribunal committed an error in upholding the exercise of powers under section 263 of the Act by the Ld. CIT(A) to be valid in the facts and circumstances of the case, the Hon’ble Court has been pleased to observe as follows:

“24. There is another aspect of the matter. The assessee had challenged jurisdiction of the Commissioner of Income-tax to exercise powers under section 263 of the Act. For an order of the Assessing Officer to be interfered with in exercise of revisional powers the Commissioner of Income-tax has to find in the first instance that the order is erroneous and, secondly, the order is prejudicial to the interests of the revenue. The conditions are twin condition's as held by the Apex Court and both of them have to be fulfilled before the Commissioner of Income-tax can exercise jurisdiction under section 263 of the Act. In the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 the Apex Court has held (headnote) : "The phrase 'prejudicial to the interests of the revenue1 has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law."

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 14 – Act because when two views are possible and the Commissioner of Income- tax does not agree with the view taken by the Assessing Officer, the assessment order cannot be treated as erroneous and prejudicial to the interests of the revenue unless the view taken by the Assessing Officer is unsustainable in law. That is not the position in the present case. In fact even the partial denial of relief under section 80-1 of the Act has been found to be incorrect by the appellate authority. Therefore, existence of two views stands established. In the aforesaid circumstances, the Commissioner of Income-tax could not have exercised jurisdiction under section 263 of the Act as per settled legal position. 26. The view expressed by this court in the case of Shashi Theatre (P.) Ltd. (supra), therefore, is in consonance with not only the requirement of law but concludes the issue insofar as the present case is concerned. Just as it is not possible to decide grant of investment allowance in relation to one or the other item without considering the eligibility thereof, similarly deduction under section 80-1 of the Act cannot be considered without deciding whether a particular portion of profits and gains has been derived from an industrial undertaking which fulfils the requisite conditions stipulated by the section. 27. In the aforesaid set of facts and circumstances of the case and the view that the court has adopted, it is not necessary to enter into any discussion as regards merits of the controversy which has been brought before this court by the other questions at the instance of the assessee and the question at the instance of the revenue. The reference is answered accordingly by holding that the Tribunal committed an error in upholding the exercise of powers under section 263 of the Act by the Commissioner of Income-tax to be valid in the facts and circumstances of the case, when not only was there a prohibition as stipulated by Explanation (c) of section 263 of the Act but even the twin requirements, viz., pre-conditions for exercise of jurisdiction under section 263 of the Act were not fulfilled. 28. The reference stands disposed of accordingly. There shall be no order as to costs.”

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 15 – Explanation does not give unlettered power to the PC1T to assume revisional-jurisdiction to revise every order of the Assessing Officer to re- examine the issues already examined during assessment-proceeding. It is judicially interpreted in several decisions that the intention of legislature behind introduction of Explanation 2 could not have been to enable the PCIT to find fault with each and every assessment-order in unlimited terms, since such an interpretation would lead to unending litigation and there would not be any point of finality of assessment-proceeding done by Ld. AO.

"5. The learned AR before us filed a paper hook running from pages 1 to 157 and contended that all the necessary details about the advances received from the parties, sales shown in the financial statement and details of the service tax returns were filed during the assessment proceedings. The learned AR further contended that the assessment was framed by the AO after considering the, necessary details and verification and application of mind. The learned AR in support of his contention drew our attention on pages 151 to 153 of the paper hook where the copy of the notice under section 142(1) of the Act was placed. Likewise, the learned AR also drew our attention on pages 154 to 157 of the paper book where the reply of the assessee in response to the notice issued under section 142(1) of the Act was placed.

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 16 – Thus, the learned AR contended that there cannot he said that the assessment order is erroneous and causing prejudice to the interest of Revenue in the given facts and circumstances on account non-verification. 6. On the contrary, the learned DR before us contended that reconciliation of the amount shown in the service tax return and financial statement was not available before the AO during the assessment proceedings. Accordingly the learned DR vehemently supported the order of the learned PCIT. 7. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the present case relates whether the assessment order has been passed by AO without making inquiries or verification with respect to the difference in the figures as discussed above and hence the assessment is erroneous insofar prejudicial to the interest of the Revenue. Thus, requiring revision by Pr. CIT u/s 263 of the Act. 7.1 An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer’s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon’ble High Courts in this regard. 7.2 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon’ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. The relevant observation of Hon’ble Delhi High Court reads as under: “12. …. There are judgments galore laying down the principle 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. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between “lack of inquiry” and “inadequate inquiry”. If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 17 – because he has different opinion in the matter. It is only in cases of “lack of inquiry”, that such a course of action would be open.——— 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 visualise 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 visualised 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. 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. 15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of ‘lack of inquiry’.” 7.3 The Hon’ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner: “The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue,

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 18 – must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity. 7.4 The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:- “20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provison shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquries or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant.” 7.5 The Hon’ble Supreme Court in recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revised order after making addition to assessee's income under section 69A in respect of on-money receipts,

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 19 – however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of such on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revised order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's on-money transactions and Tribunal, thus, set aside the revised order passed by Commissioner. The Hon’ble High Court upheld Tribunal's order. The Hon’ble Supreme Court while dismissing the SLP filed by the Department held as under:- “We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Tax Appeal is dismissed” 7.6 The Supreme Court in the another recent case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Revenue’s SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations: “Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed”

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 20 – 7.7 From an analysis of the above judicial precedents, the principle which emerges is that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Assessing Officer adopts one of the course permissible in law and it has resulted in loss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order causing prejudice to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind. 7.8 Now in the facts before us, in the case of the assessee the AO during the course of assessment proceedings, made enquiries on this issue and after consideration of written submissions filed by the assessee and documents / evidence placed on record, framed the assessment under section 143(3) of the Act without making the addition of the amount as note above. This fact can be verified from the notice under section 142(1) of the Act by the AO and submission in reply of the assessee against such notice. XXXX 7.9 From the above it is revealed that it is not the case that the AO has not made any enquiry. Indeed the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect of cash deposited during the demonization period. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of materials placed on record accepted the genuineness of the claim of the assessee. 7.10 At this juncture, it is also important to note that the learned PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue. In this regard, we make our observation that the learned PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 21 – learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 of the Act.” 14. We are in respectful agreement with the aforesaid decision of Hon’ble ITAT which is on the similar set of facts and law as in the present appeal. Therefore, we too hold that the revision order passed in present case by Ld. PCIT is not a valid order in terms of Section 263 of the Act.

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 22 –

ITA No. 20/Ind/2022(A.Y. 2009-10):- 17. Since, re-assessment proceeding initiated under Section 263 of the Act has already been quashed in ITA No.21/Ind/2022, the appeal preferred in ITA No.20/Ind/2022 challenging the consequential order dated 02.09.2020 passed under Section 263 r.w.s. 143(3) of the Act by the CIT(A), Ujjain thus, become infructuous as the submission made by the Ld. AR, found to be acceptable and therefore, appeal (ITA No.20/Ind/2022) is dismissed as infructuous.

Sd/- Sd/- Sd/- Sd/- (BHAGIRATH MAL BIYANI) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 06/12/2022 TRUE COPY TANMAY, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Indore 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER,

(Sr. Private Secretary) ITAT, Indore

ITA Nos.20&21/Ind/2022 Mojilal Rajput vs. ITO&PCIT Asst. Year–2009-10 - 23 –