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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
आदेश / O R D E R PER DR. A. L. SAINI, AM: By way of this appeal, the assessee has challenged the correctness of the order dated 19.03.2022, passed by the Learned Principal Commissioner of Income-Tax (in short “Ld PCIT”) under section 263 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 2018-19.Grievances raised by the assessee, which, being interconnected, will be taken up together, are as follows: “1. On the facts and in circumstances of the case as well as law on the subject, the learned Pr. CIT has erred in passing the order u/s. 263, although the assessment order passed u/s. 143(3) of the I. T. Act, 1961 was neither erroneous nor prejudicial to the interest of the revenue. 2. On the facts and in circumstances of the case as well as law on the subject, the learned Pr. CIT has erred in setting aside the assessment with the direction to frame the assessment after making inquires in regard to cash deposits of Rs.14,97,750/- and other credit entries of Rs.1,20,44,870/- made in the bank account of the assessee. 3. It is therefore prayed that above order passed by Pr. CIT u/s. 263 may please be quashed or modified as your honors deem it proper.
124/SRT/2022/AY.2018-19 Shankar Zethabhai Patel 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
The facts necessary for disposal of the appeal are stated in brief. The assessee before us is an Individual and has filed return of income for assessment year (AY.) 2018-19 on 28.11.2018, declaring total income of Rs.4,92,920/-. Subsequently, scrutiny assessment was completed under section 143(3) of the Income-Tax Act, 1961 (here in after 'the Act') on 28.12.2019, by the Assessing Officer accepting the returned income.
3. Later on, Learned Principal Commissioner of Income-Tax (in short “Ld PCIT”) has exercised his jurisdiction under section 263 of the Income-Tax Act, 1961. On perusal of the assessment records, it was noticed by ld PCIT that a search u/s 132 of the Act was conducted in the case of Bipinchandra Naranbhai Patel Group on 14/11/2017 at the following premises: (a) B-54, Vishal Nagar, Near Swaminarayan School, Italva, Navsari (b) 223, Nava Falia, Italva, Navsari (c) Locker No.302, Central Bank of India, Luncikui, Navsari 4. During the course of search at the house of Shri Bipinbhai Naranbhai Patel at B-54, Vishal Nagar, Near Swaminarayan School, Italva, Navsari, several incriminating documents were seized/impounded and annexurised as A-1 to A-3. The seized documents in Annexure A-3, pages 01 to 04 are cheques issued by the assessee from his bank account, with SBI account number 34977252514. From the facts further gathered, it came to notice that the assessee has purchased agricultural land situated at Block No.176/3/1-B and 176/3/2, Moje: Hansapore, Jalalpore Taluka, Navsari District, for a total consideration of Rs.70,00,000/-, during the year under consideration, vide Sale Deed No. JLP/5588/2017 dated
124/SRT/2022/AY.2018-19 Shankar Zethabhai Patel 26.12.2017. It also came to notice that the payments (except one payment of Rs.5,00,000/- made on 11.08.2017 through RTGS from Axis Bank) for the purchase of the said property, as per the details available on the Sale Deed, have been made from the Bank Account bearing No.34977252514 maintained with State Bank of India, which was not disclosed in the return of income. It was also noticed by ld PCIT that though the total consideration for the property, as per the Sale Deed has been shown at Rs.70,00,000/- including TDS amount, however, the total amount reflected in the payment schedule mentioned in Page Nos. 7 and 8 of the Sale Deed, works out to Rs.90,00,000/-. However, the Assessing Officer failed to take these facts into consideration and to take them to their logical conclusion while completing the assessment u/s 143(3) of the Act and has passed the assessment order. In view of the above stated facts, the ld PCIT was of the view that assessment order passed u/s 143(3) of the Act in the case of the assessee for Asstt. Year 2018-19 is erroneous in so far as it is prejudicial to the interest of the revenue within the meaning of section 263 of the Act. Accordingly, a show cause notice bearing DIN and Notice No. ITBA/REV/F/REV1/2021-22/1039952311(1) dated 21.02.2022 was issued to the assessee, which is mentioned in the order of Ld PCIT vide page Nos.2 to 6.
5. In response to the above show cause notice, a reply vide letter dated 10/03/2022 was furnished by the assessee before the ld PCIT, which is reproduced as under: “1. Please refer to the notice u/s. 263 of the Act on 21.02.2022 requiring compliance on 01.03.2022. Thereafter, we sought for adjournment and the hearing is fixed for today. We have honour to submit as under on behalf of assessee client. 2. Your honour has raised the issue that the investment in purchase of the agricultural land was not properly explained by the assessee in the course of assessment proceedings. In this connection, it is submitted that assessing officer has required the assessee to furnish the details of the immovable 124/SRT/2022/AY.2018-19 Shankar Zethabhai Patel property purchased during the year along with the registered sale deed and source of investment with supporting evidences vide point no. 6 of the notice issued u/s. 142(1) on 14.11.2019. Further, the assessing officer also required assessee to furnish the bank statements. Accordingly, assessee filed all these details vide letter dated 20.11.2019 submitting registered purchase deed in respect of the agricultural land and bank statements. The details of the payments made by the assessee are reflected in the registered purchase deed filed in the course of assessment proceedings. The certain cheques issued by the assessee were not cleared. The assessing officer was aware of this fact and even your honour was aware of this fact as can be perused from the table projected by your honour in the notice. Assessee purchased the land for Rs. 70 lacs and not Rs. 90 lacs as mentioned by your honour. The same amount of Rs. 70 lacs was mentioned in the registered purchase deed. However, the cheque dated 27.12.2017 was stated at Rs. 20 lacs instead of actual amount of Rs. 2 lacs in the registered sale deed. However, the total of Rs. 70 lacs is worked out only on the basis of Rs. 2 lacs and not Rs. 20 lacs and so it is mistake apparent from record. The cheques were not cleared as assessee was not able to make the payment owing to the liquidity crunch. Even the sellers have filed the criminal complaint for the dishonour of cheques against the assessee. The assessing officer didn't make any further inquiry as the cheques that were cleared were tallying with the bank statements filed in the course of assessment proceedings. It is to be noted that assessee has actually paid Rs. 30 lacs to the seller and Rs. 70,000/- by way of TDS out of Rs. 70 lacs. The amount actually paid is evident from the bank statement as explained herein above.
Your honour has raised another issue that assessee has shown the turnover of Rs.31,35,000/- for the purpose of section 44AD whereas the credit entries appearing in bank accounts is Rs.1,20,44,870/- including cash deposit of Rs. 46,32,750/-. In this connection, it is submitted that whatever assessee has received as business receipts were shown as turnover. Other credit entries through cheques are from the Hanuman Purohit, Pushpak Electronics, Rajgharana Developers and Shree Arihant Developers, other parties and other credits.
Assessee received back the amount advanced earlier to Pushpak Electronics. Even your honour has mentioned in the show cause notice u/s. 263 that assessee received the amount from Hanuman Purohit, Pushpak Electronics, Rajgharana Developers and Shree Arihant Developers. It is to be noted that the Pushpak Electronics is not the proprietorship concern of Hanuman Purohit and Shree Arihant Developers is the partnership firm in which Hanuman Purohit is partner. It is to be noted that Hanuman Purohit was assessed in the same charge. It is clarified that the assessee didn't maintain the books of accounts and he is not liable to maintain the books of accounts being covered u/s. 44AD of the Act.
Even otherwise, the assessment order passed u/s. 143(3) on 28.12.2019 is invalid as no notice u/s. 143(2) was issued with reference to the proceedings u/s. 143(3). It is to be noted that notice u/s. 143(2) dated 30.09.2019 was issued on 11.10.2019 and served on 14.10.2019. This notice was issued with reference to proceedings u/s. 153C which was dropped. No notice u/s. 143(2) for the purpose of framing assessment u/s. 143(3) was issued. Further, it is 124/SRT/2022/AY.2018-19 Shankar Zethabhai Patel submitted that notice dated 30.09.2019 issued on 11.10.2019 which was served on 14.10.2019 was after limitation period laid down in the proviso to Section 143(2), so assessment is invalid and therefore action u/s. 263 cannot be taken for reopening the invalid proceedings. The copy of the letter dated 20.11.2019 filed before assessing officer in this regard is enclosed herewith.
6. From the above discussion, it is clear that assessment u/s. 143(3) is neither erroneous nor prejudicial to the interest of revenue.”
However, the Ld. PCIT rejected the contention of the assessee and held that the assessee has purchased agricultural land situated at block number 176/3/1-B and 176/3/2, “Moje: Hansapore, Jalalpore Taluka, Dist. Navsari for a total consideration of Rs.70,00,000/-. As per the details available on the sale deed, except payment of Rs. 5 lacs which has been made on 11.08.2017 through RTGS from Axis Bank, all payments in respect of said purchase have been made from bank account No.34977252514 maintained with the State Bank of India by the assessee, which was not disclosed in the return of income. The majority of credit entries of substantial amounts appearing in this account are received from Shri Hanuman S. Purohit, M/s. Pushpak Electronics, M/s. Rajgharana Developers and Shree Arihant developers. The assessee maintains bank account No.30472353692 with State Bank of India and account No. 915010045815894 with Axis Bank, Parle Point, Surat. In these accounts total credit through banking transactions are at Rs. 1,20,44,870/- and the total cash deposit during the period under consideration in the Axis Bank account is at Rs.46,32,750/-. Therefore, ld PCIT has set aside the assessment order with direction to the Assessing Officer to pass a fresh assessment order in accordance with the law after taking into consideration the issues discussed here in above.
Aggrieved, by the order of ld PCIT, the assessee is in appeal before us.
124/SRT/2022/AY.2018-19 Shankar Zethabhai Patel 8. Shri Rasesh Shah, learned Counsel for the assessee, begins by pointing out that bank account No.34977252514 was not disclosed by the assessee in his return of income, however, the said bank account number was disclosed by the assessee during the scrutiny assessment proceedings before the assessing officer. The assessee has explained each entry of said bank account number before the assessing officer. Therefore, during the assessment stage, the assessing officer has examined the said bank account and thereafter, he has passed the assessment order, hence such assessment order should not be erroneous. The ld Counsel further stated that majority of credit entries of substantial amounts appearing in this account are received from Shri Hanuman S. Purohit, M/s. Pushpak Electronics, M/s. Rajgharana Developers and Shree Arihant developers, which were explained to the assessing officer. The ld Counsel also argued that notice u/s 143(2) dated 30.09.2019, issued on 11.10.2019, which was served on 14.10.2019, was after limitation period laid down in the proviso to section 143(2) and therefore assessment is invalid and therefore action u/s 263 cannot be taken for reopening the invalid proceedings. The ld Counsel further stated that whatever query raised by assessing officer by way of issuing notice u/s 142(1) has been replied to the assessing officer, hence assessing officer has examined the issue under consideration, therefore, order passed by the assessing officer is neither erroneous nor prejudicial to the interest of Revenue, therefore, order passed by ld PCIT under section 263 of the Act may be quashed.
On the other hand, Learned Departmental Representative (Ld. DR) for the Revenue submitted that notice under section 143(2) was issued on 30.09.2019, within the time period available under the Act and after issuing notice under section 143(2) of the Act, the Assessing Officer further issued notice under section 153C of the Act to frame the 124/SRT/2022/AY.2018-19 Shankar Zethabhai Patel assessment under section 143(3) r.w.s. 153C of the Act. Just because the Assessing Officer did not mention section 153C, on the fact of its order, does not mean that the order so passed by the Assessing Officer is not under section 143(2) r.w.s. 153C of the Act. The Ld. DR, also contended that assessee has participated in the assessment proceedings, therefore as per provision of section 292BB of the Act, the assessee cannot raise this issue before the Tribunal. The ld DR also pointed out that the notice issued by the Assessing Officer was within the statutory time limit provided in the Act.
On merits, the Ld. DR for the Revenue submitted that assessee did not disclose SBI A/c. No. 34977252514 in his return of income. Since, the assessee has paid the amount out of undisclosed bank account, therefore Assessing Officer, despite having information of undisclosed bank account, did not conduct enquiry about the creditworthiness and genuineness of the transaction and did not apply his mind, therefore assessment order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of Revenue.
We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. PCIT and other material brought on record. We note that during the assessment stage, the Assessing Officer has issued notice under section 142(1) of the Act, which is placed at paper book page no.10. In response to notice under section 142(1) of the Act, the assessee has submitted its reply during the assessment stage, which is placed at paper book pave no.15. Therefore, we note that assessing officer has examined the issue, which was raised by the Ld. PCIT in his order under section 263 of the Act. We note that assessee has also submitted its 124/SRT/2022/AY.2018-19 Shankar Zethabhai Patel reply before the Assessing Officer dated 28.11.2019, which is placed at paper book pave no.16, therefore, we note that the issue raised by the Ld. PCIT in his order under section 263 of the Act, has been examined by the Assessing Officer. The only query raised by the Ld. PCIT, is that Assessing Officer has not made further enquiry. We note that it is prerogative of the Assessing Officer to make further enquiry or not, if the Assessing Officer is satisfied with the details and evidences filed before him, by the assessee, then in that circumstances, it is not necessary to make further enquiry.
We note that that bank account No.34977252514 was not disclosed by the assessee in his return of income, however, the said bank account number was disclosed by the assessee during the scrutiny assessment proceedings before the assessing officer. The assessee has explained each entry of said bank account number before the assessing officer. Therefore, during the assessment stage, the assessing officer has examined the said bank account. Besides, the majority of credit entries of substantial amounts appearing in this account which were received from Shri Hanuman S. Purohit, M/s. Pushpak Electronics, M/s. Rajgharana Developers and Shree Arihant developers, were explained to the assessing officer, during the assessment stage. Hence in these circumstances, it can be said that assessing officer conducted adequate enquiry. The ld PCIT has himself note in para 7 of his order that the assessing officer had issued notice u/s. 142(1) of the Act on 01.11.2019 and not on 14.11.2019, as has been submitted by the assessee. At point number 6 of the said notice the Assessing Officer had sought following details: “6. the details of the immovable properties purchased during the year under reference. File copy of registered deed/Sathakat along-with mode of payment and sources of investment with supporting evidences.”
124/SRT/2022/AY.2018-19 Shankar Zethabhai Patel 13. In response to the above notice, the assessee submitted the reply vide letter dated 20.11.2019 wherein at point number 7, it has submitted as under: “During the year under consideration, the assessee has purchased one agricultural land situated at block number 176/3/1-B and 176/3/2 "Moje" Hasanpore, Jalalpore, Navsari. Copy of purchase deed of the same is enclosed here with.” The assessee at point number 3 of his reply dated 20.11.2019 has submitted details of the bank accounts held by him along-with the bank account number, name of the bank and bank balance at the end of the year as per bank pass book. At point number 12 of the reply dated 20.11.2019, it has been mentioned that bank account number 34977252514 maintained with the State Bank of India was mistakenly not reflected in the return of income and that the credit entries of said bank were explained by assessee. With above said details submitted during the course of assessment and available on record, it can be seen that assessee has explained the sources of investments for the purchase of land in question before the assessing officer. In the case of the assessee, there is no denying the fact, as detailed above and acknowledged in the assessment order u/s 143(3) dated 28.12.2019, that in response to notices u/s. 143(2)/142(1) and further requisitions made during the course of assessment proceeding, the A/R of the assessee appeared from time to time before the assessing officer and produced/ submitted necessary details/documents as per requisitions in relation to the issues raised by the Ld. Pr. C.I.T., which were examined by Assessing Officer. Therefore, it is the appraisal of the same records which are already with the Ld. A.O. and the Ld. Pr. C.I.T. took a different view than adopted by the A.O. on the same set of facts, which is not permissible u/s 263 of the Act. In the above circumstances, the view taken by the A.O. was one of the possible views and the assessment order passed by him could not be held to be erroneous and prejudicial to the 124/SRT/2022/AY.2018-19 Shankar Zethabhai Patel interests of revenue. For that we rely on the decision of Hon’ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. [(2010) 189 Taxman 436 (Del)] .Further, it was settled by Hon`ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT [(2000) 243 ITR 83 (SC)] wherein it was held that if the A.O. adopts one of the possible courses available in the scheme of the I.T. Act which results in any loss of revenue or when two views are possible and the A.O. adopts one of them with which the P.C.I.T. does not agree, then it would not be an order prejudicial to the interest of revenue for invoking the jurisdiction u/s 263 of the Act. In other words, the Ld. Pr. C.I.T. on the same set of facts and evidences on record was of the opinion that the A.O. should have rejected the regrouping of debit and credit entries as explained above and he should have taken the stand which the Ld. Pr. C.I.T. hinted in the impugned order u/s 263 of the Act. This is not permissible under law. For better appreciation, the relevant portion of the judgment in the case of Malabar Industrial Co. Ltd. vs. CIT (supra) is quoted below: “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 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”.
We note that the Ld. Pr. C.I.T. by invoking his jurisdiction u/s. 263 of the Act is giving another opportunity to the Ld. A.O., which is not permissible. Hon’ble Bombay High Court in the case of Ranka Jewellers vs. Addl. CIT (328 ITR 148) relying on the decisions of Hon’ble Supreme Court in the cases of Malabar Industrial Co. Ltd. vs. CIT (supra) and CIT vs. Max India Ltd. [(2007) 295 ITR 282 (SC)], has held that once the issue was considered by the A.O., the remedy of the revenue could not 124/SRT/2022/AY.2018-19 Shankar Zethabhai Patel lie in invoking of the jurisdiction u/s 263 of the Act. Therefore, the order of the Ld. C.I.T. was definitely outside the purview of section 263 of the Act. Based on these facts and circumstances, we quash the order of ld PCIT, passed under section 263 of the Act, dated 19.03.2022.
In the result, appeal of the assessee is allowed.
Order pronounced on 28/08/2023 in the open court.