BHARTESH JAIN,JAIPUR vs. PCIT, JAIPUR-1, JAIPUR

ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by the assessee aggrieved from the order of the Pr. Commissioner of Income Tax, Jaipur-1 [ Here in after referred as Ld. PCIT ] for the assessment year 2017-18 dated 27.03.2022 as per provision of section 263 of the Act, which in turn arises from the order passed by the ITO, Ward 1(4), Jaipur passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 06.06.2019. delayed by 94 days and for that he reiterated his written submission and submitted that the assessee has also supported his affidavit to support the contentions so raised in the condonation of delay petition filed. The contention of the assessee in his petition are reproduced here in below:

1. Jaipur passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred as "the Act"), dated 27-03-2022, which is sought to be challenged before this Hon'ble Tribunal, was passed by id PCIT with a direction to revise order passed by ITO, Ward 1(4), Jaipur us 143(3) of the Act. Order passed u/s 263 was served upon assessee through E portal with Income Tax Department, and therefore date of service is taken as 28.03.2022. Accordingly, appeal against such order was supposed to have been filed by 26.05.2022 before Hon'ble Income Tax Appellate Tribunal. However, the appeal got delayed by 94 days, as the appeal is being filed now for the reasons as explained below: 1. That, the impugned appellate order of Ld. PCIT, Jaipur-1, was received by the assessee. Regular counsel of the assessee advised him that there was no requirement of filing an appeal against the order of PCIT, Jaipur u/s 263 as effectively addition if any would be made vide order passed by assessing officer in accordance with directions of PCIT.

2. Under such advice, assessee was under bonafide belief that the appeal would be filed only if assessing officer makes addition in order passed in accordance with the directions given by the Ld. PCIT.

3. Subsequently when the assessee consulted with other counsel, the latter advised the assessee to challenge the validity of 263 proceedings by filing appeal before Hon'ble ITAT instead of waiting till order being passed by Ld. AO. However, by the time, due date of filing appeal before Hon'ble ITAT had already expired.

4. Thus, it is submitted that the delay in filing the appeal is solely attributable to the bona fide mistake on part of the advice of previous counsel, under which assessee had not filed the appeal. Hence, the delay is absolutely inadvertent and has occurred due to circumstances beyond the control of assessee.

5. That, the assessee has always acted bonafide and the delay is of only 94 days.

6. An affidavit of assessee is enclosed herewith in confirmation of above facts.

3 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur In the circumstances of the matter it is humbly prayed to the Hon’ble Bench to please direct the condonation of delay which is merely of 94 days and to be kind enough to direct the listing of the appeal for disposal on the merits. Your kindness would go a long way to depart effective justice to the ignorant litigants.”

In this regard, he has further supported his view based upon the judgment passed by the Hon’ble Apex Court in the matter of Collector, Land Acquisition vs. Mst. Katiji & Ors., reported in (1987

AIR 1353) wherein the delay has been condoned in a meritorious matter for the ends of justice.

2.1 On the other hand ld. DR submitted that the reason given by the assessee that difference of opinion between the counsel is not a correct reasons to substantiate the delay however, he fairly left the decision to the bench in the interest of justice.

2.3 Having heard both the parties and having regard to the facts and circumstances of the case, we find that sufficient cause has been shown by the assessee for not been able to file the instant appeal before us in due time and furthermore, respectfully relying upon the order of the Hon’ble Apex Court we condone the delay of 94 days.

3. The assessee has assailed this appeal on following grounds; “1. On the facts and in the circumstances of the case, the Ld. PCIT has erred in holding the order passed u/s 143(3) of the Act as erroneous and prejudicial to the interest of the revenue. Appellant prays that ld. AO has passed order after due application of mind and order so passed is neither erroneous nor prejudicial to the interest of the Revenue, therefore Revision proceedings u/s 263 are not in accordance with law and deserves to be quashed.

either before or at the time of hearing of appeal.”

4. The fact as culled out from the records is that in the case, the assessee filed his ITR on 25.07.2017 at total income of Rs. 7,71,990/-. The case was selected for scrutiny under CASS. One of the reasons for scrutiny was large cash deposits in the bank during the demonetization period. The assessment in the case was completed u/s 143(3) of the Act on 06.06.2019 at an income of Rs. 8,03,415/-, after making a disallowance of expenses of Rs. 31,425/-. After culmination of the assessment proceeding, the PCIT on examination of assessment record for the year under consideration observed that assessment was completed by making addition of Rs. 31,425/- after making disallowance of travelling and other expenses. He further observed “substantial cash deposit during the year, abnormal increase in cash deposit during the demonetization period, high value receipt of cash shown from third parties in response data.” He found that cash of Rs. 1,37,90,000/- was deposited into bank accounts during the year, out of which Rs. 94,42,000/- was deposited during the period of demonetization. During the course of assessment proceedings, it was filed that out of cash deposits of Rs. 94,42,000/- during demonetization period, Rs. 92,42,000/- were in new currency and Rs. 2,00,000/- were in old currency note which were out of receipts in Nov. and Dec. from vegetable vendors to whom assessee had sold peas of agriculturists on commission. There is no detail and evidence on record in support of his claim of sale of kairies and peas of agriculturists to vegetable vendor, receipt of cash from vendors, withdrawal of cash and payment of the same to agriculturists. There is no detail and evidence on record to reflect creation and availability of cash of Rs. 94.42 lakhs. Perusal of bank account statement shows very little cash withdrawal from bank accounts till 31.03.2017 and thus there is hardly any cash payment to farmers as claimed. There is no detail on record showing from whom cash of Rs. 94.42 lakhs were received and to which farmers, how much and on which dates cash was paid. Thus, these various issues have not been examined. He further noted that rebate u/s occupied house property situated at 53. Siyaram Nagar, Shyopur Road, Sanganer. However, perusal of bank loan certificate shows that loan of Rs. 50 lakhs was taken in joint names of Bhartesh, Neeraj, Kamlesh and Rajender Jain for the property situated at B-07, Jagan nath puri Yojna, Shyopur Road, Sanganer. Thus, the interest was wrongly allowed by the AO. It appears that the rebate u/s. 24(b) has been wrongly claimed and needs to be examined. He has also observed that Salary payment of Rs. 12.24 lakhs and other expenses were not verified. No details of sundry debtors of Rs. 23.70 lakhs are on record. Various car expenses were claimed including car loan interest payment of Rs. 57,055/-. Drawing of Rs. 1,32,000/- only have been claimed from capital account which cannot be held as sufficient for family but this aspect has also not been examined.

Therefore, a show cause notice was issued incorporating all these observation vide notice dated 16.02.2022 and the assessee was requested to file their objection in the proceeding u/s. 263.

“8. The reply submitted by the assessee has been considered but not found tenable. Assessee deposited cash of Rs.1,37,90,000/- in his bank A/c during the year, out of which Rs.94,42,000/- was deposited during demonetization period. Vide notice u/s 142(1) dated: 13.02.2019, AO asked assessee to furnish source of cash deposited in bank A/c with supporting evidence. Assessee submitted that out of cash deposits of Rs.94,42,000/-, Rs.92,42,000/- were in new currency and Rs.2,00,000/- were in old demonetized notes which were out of receipts in Nov. and Dec. from vegetable vendors to whom he sold peas of agriculturists on commission. Cash of Rs.30.35 lakhs was deposited in June out of sale of Kairies and balance cash of Rs. 13,13,000/- was in other 9 months of the year. There are no detail and evidence on record in support of assessee's claim of sale of kaines and peas from agriculturists to vegetable vendors, receipt of cash from vendors, withdrawal of cash and payment of the same to agriculturists. There is no detail and evidence on record to reflect creation and availability of cash of Rs.94.42 lakhs with the assessee. Assessee claims that he deposited cash received out of peas sale on behalf of agriculturists & made cash payment to them afterwards but on perusal of bank statement it is found that there are very little cash withdrawals till 31.03.2017 and major part of cash deposits of Rs.94.42 lakhs were transferred by RTGS, Cheques & thus there is hardly any cash payment to farmers as claimed by the assessee. There is no detail on record as of which farmers peas were sold, to which agriculture vendors peas were sold, from whom cash of Rs.94.42 lakhs was received and to which farmers, how much and on which dates cash was paid.

1. As mentioned in reasons for selection for scrutiny, assessee just after demonetization was given option to explain source of cash deposits and in response thereto assessee submitted that time on e-filing portal that out of cash deposited of Rs.94.42 lakhs were in new notes (non demonetized) collected after 08.11.2016 as recovery from fruit vendors for payment to farmers and further that details of this cash deposited as cash received from identifiable persons with PAN and cash received from identifiable persons (without PAN) cannot be filed as all are small payers from unorganized sector not holding PAN e.g. fruit vendors. Thus neither at that time nor during assessment proceedings assessee could give identity of the persons from whom cash was claimed to have been received.

8 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur This is turn has resulted in passing of an erroneous order by the Assessing Officer in the case due to non-application of mind to relevant material, an incorrect assumption of facts and an incorrect application of mind to the law which is prejudicial to the interest of the revenue and hence liable for revision under section 263 of the Income Tax Act. The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/S CIT 243 ITR it has held as under- “........An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind."

“12. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 06.06.2019 for A.Y 2017- 18 passed by the AO is held erroneous is held erroneous in so far as it is prejudicial to the interests of the revenue for the purpose of section 263 of the I.T. Act. The said order has been passed by the Assessing Officer in a routine and casual manner without applying the applicable sections of the Act. The Assessing Officer has not verified the details which were required to be verified under the scope of scrutiny. The order of the Assessing Officer is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Income Tax Act. The assessment order is set asset aside to be made afresh in the light of the observations made in this order. The AO is required to make necessary verification to determine and finalize the assessment in accordance with the prevailing law to determine the correct income of the assessee liable to tax for the AY 2017-18 after allowing reasonable opportunity to the assessee.”

“Brief facts of the case are that the assessee is Proprietor of M/s Anil Trading Company and is engaged in the business of Commission agent/ Aartiya of Vegetables at Muhana Mandi, Terminal market, Sanganer, Jaipur. The return of income for the year under appeal was filed on 25.10.2017 declaring total income at Rs. 7,71,990/- (APB 48-54). The case of the assessee was selected for scrutiny under CASS for verification of the source of large cash deposit in bank during demonetization period. After obtaining the necessary information and after examining the books of accounts the assessment was completed by ld. AO u/s 143(3) of the Income Tax Act, 1961 by making disallowance of Rs. 31,425/- out of 9 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur certain expenses. Thereafter the ld.PCIT has initiated revision proceedings u/s 263 by issuing notice dated 16.02.2022 (APB 1-3) wherein the sole emphasis was on verification of cash deposit during the demonetization amounting to Rs. 94.42 lacs though out of which Rs. 2.00 lacs only were in SBN (Specified Bank Notes i.e. Rs. 500/- and 1000/- note currency) and balance was in legal tender i.e. new currency. After considering the submission filed by the assessee (APB 4-9), the ld. PCIT issued direction to assessing officer to verify and make enquiries about cash deposits and pass fresh assessment order. Against the order so passed by ld. PCIT, present appeal has been filed.

Ground-wise submission is made as under:

Ground of Appeal No.1 &2: In both these grounds of appeal, assessee has challenged the action of ld. PCIT in passing order u/s 263 whereby ld. PCIT has concluded that order passed by ld.AO is erroneous and prejudicial to the interest of revenue in so far as ld.AO has not examined the source of deposit by assessee in his bank account during the demonetization though the ld.AO has specifically mentioned in the assessment order about the outcome of the enquiries conducted by him in this regard.

Brief facts as submitted above, are that the assessee is a vegetable merchant cum commission agent at Muhana Mandi, Jaipur and during the year under consideration has carried out trading activity of purchase and sales of vegetable (kairi) on his own account of Rs.32,63,899/- besides having commission agency business of Peas. The income declared from both the activities is evident from the Trading and Profit & Loss Account (APB 58) where turnover from the sales of Kairies is shown at Rs. 32,63,899/- in the Trading account and Commission of Rs. 30,32,646/- is credited in P&L a/c from Peas. During the course of assessment proceedings cash book, purchases book, sales book and ledger were produced before the ld.AO who after test checking of the same, in para 2 at page 2 of the assessment order has categorically observed as under : “During the course of verification, the source of the cash deposits were examined. The assessee sells bulk of his vegetables to small vendors who have mostly made the payment in cash. The assessee has sold peas during November and December which has resulted into huge cash inflow, as this is peak season for peas. It was also seen that the assessee has only deposited Rs. 2,00,000/- in demonetized notes out of the cash balance available with him. So, the assessee has huge cash availability with him which was deposited into his bank account as per the requirements of business. The source of the cash deposits stands substantiated.

From the perusal of the aforesaid observation of ld. AO, it is very much evident that he has properly examined the issue of source of cash deposit in the bank account and also applied his mind towards the source of huge cash deposited during the month of November and December, 2016. The ld. PCIT in the order u/s 263 has observed that the assessee has made very less withdrawals from the bank

10 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur account, thus it is not clear whether the payments to the agriculturists from whom the vegetables were purchased were finally made or not. In this regard, during the course of proceedings before ld. PCIT, it was submitted that assessee is having three types of transactions 1) where assessee directly purchases and sells the goods 2) where the farmer comes to assessee’s place, directly sells the goods to the buyers and pays commission and mandi tax to assessee and 3) where farmers come to assessee’s place and sold their produce on credit basis, consideration of which was collected by the assessee at a later stage and after collection the amount was transferred to them through bank. This fact is also verified from the bank transactions where cash was deposited and payments were made through RTGS etc. to the respective farmers against their produce.

During the demonetization period from 08.11.2016 to 31.12.2016, Assessee has made deposit of Rs.94,42,000/- in his bank account which is mainly out of the consideration received from the sale of peas whose major production period is between October –January which fact the ld. PCIT has failed to appreciate. The cash deposited in the bank account during demonetization period was sourced from receipts from the debtors, commission amount received in cash, cash received from cash sales on behalf of farmers/ growers during the normal course of business. In support of the same cash book was produced alongwith the sales and purchases book before the ld.AO and daily cash ledger (General Ledger) for the period from 8.11.2016 to 31.12.2016 alongwith list of Debtors and some party ledgers were submitted before the ld. PCIT (APB 11-36). Ld. PCIT has failed to point out any defect in the details so filed more particularly when all such details were submitted before the ld.AO (APB 88-90)

It is not the case that only during the demonetization period cash was deposited in the bank account. The cash receipts are from the customers/debtors against which the delivery of the goods was made to them and the same was deposited in the bank account at regular intervals. As submitted above, the cash received from the debtors and from cash sales were used to make the payment to the farmers/ growers on whose behalf peas were sold in the market. Since the payments were made to farmers mainly through banking channels and only small payments were made in cash, thus almost entire cash collection was deposited in bank. It also a matter of fact that there was no creditor at the end of the year.

It is also pertinent to note that out of total cash deposit Rs.94,42,000/- made during the period of demonetization, only a sum of Rs.2,00,000/- were made in SBN and balance was in legal tender, which fact as stated above, was also admitted by ld.AO. The necessary bank certificate was also filed during the course of assessment proceedings which fact remained undoubted. This fact further substantiate the claim of the assessee that the cash deposited during the demonetization period pertained to the regular business receipts only. With regard to the allegation that only commission income has been in earlier years and no sale- purchases was shown, it was explained to the ld. PCIT that major

11 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur portion of the assessee business is from commission income and for the first time in the year under appeal assessee has entered into sale and purchase of "Kairi" (seasonal vegetable item) having total turnover of Rs.32,63,899 only in May-July 2016. Besides this no other purchase and sale of other vegetable in assessee’s on own account was carried out during the whole year.

At this juncture, kind attention of Hon’ble bench is invited to Explanation 2 inserted in section 263 by Finance Act, 2015, w.e.f. 01.06.2015, which has widened the powers of CIT to revise the already completed assessment and has been taken shelter by the ld. CIT (Admn.) in the present case also, which reads as under: Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,—

(a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.]

A perusal of above clarifies that order passed by assessing officer shall be “deemed to be erroneous and prejudicial to the interest of the revenue if AO has passed such order without making inquiries or verification which should have been made;

It is worthwhile to note here that the phrase “which should have been made” here in no way means that enquiries should have been made in manner as desired by CIT, rather it means that assessing officer should conduct necessary enquiries or verification as a prudent officer shall carry out in normal circumstances. This phrase in no way means that enquiries should have been conducted in the manner Principal Commissioner wishes the same to be. In this regard reliance is placed on the following decisions:

282 Taxman 464 (SC) PCIT v. Shreeji Prints (P) Ltd. (case law pb pages 1-6) In this case the hon’ble Supreme court has dismissed the SLP filed by the department against the order of Hon’ble Gujarat High court reported in 130 Taxmann.com 293 wherein while considering the Explanation-2 to section 263, the hon’ble high court has held that where the AO has made inquiries in detail and after applying mind, accepted the loans taken which is a possible view, therefore, the said order cannot be said to be erroneous or prejudicial to the interest of revenue. While observing so, the hon’ble high court further relied upon the order

12 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur of hon’ble ITAT Surat Bench where the hon’ble bench in ITA No. 406/SRT/2018 has observed as under (relevant page 5): 17. We thus find merit in the plea of the assessee that the Revisional Commissioner is expected show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action as interpreted by the Revisional Commissioner in the light of the Explanation 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to section 263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. The AO in the present case has not accepted the submissions of the assessee on various issues summarily but has shown appetite for inquiry and verifications. The AO has passed after making due enquiries issues involved impliedly after due application of mind. Therefore, the Explanation 2 to section 263 of the Act do not, in our view, thwart the assessment process in the facts and the context of the case. Consequently, we find that the foundation for exercise of revisional jurisdiction is sorely missing in the present case."

The aforesaid judgment has been followed by the Banglore bench of hon’ble ITAT in the case of Om Sai Co-op. Credit Souharda Shakari Niyamit vs. PCIT in wherein vide orders dt. 27.7.2022 hon’ble bench has quashed the revision order passed by the Pr. CIT for making further enquiries (Case law paper book pages 7-14). Similarly in the case of Vanishree Holabasu Shettar vs. PCIT in ITA No. 270/Bang/2022 wherein vide orders dt. 25.7.2022 hon’ble Banglore bench of hon’ble ITAT also expressed the same view (Case law paper book pages 15-23).

In the case of Shri Narayan Tatu Rane vs ITO & 2691/Mum/16 (case law paper book page 29-39) dated 06.05.2016 the hon’ble Mumbai ITAT has observed as under: “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 provision 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.

13 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur 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 out 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.”

Sanjeev Kr. Khemka vs Pr. CIT (Kolkatta ITAT) (case law paper book pages 40- 45) “5.1 In view of the above we find that Ld. CIT has passed impugned order u/s. 263 of the Act by holding the order of AO as erroneous in so far as prejudicial to the interest of revenue on account of inadequate enquiry made by AO while passing order u/s. 143(3) of the Act. However, we find that proper and sufficient enquiries were conducted by the AO at the time of assessment as evident from the order of AO. Therefore it cannot be concluded that no proper enquiry has been conducted by the AO at the time of assessment proceedings. The AO has taken conscious view after considering the facts and circumstances of the case and giving proper opportunity to the assessee. Thus, the view expressed by AO in the form in his assessment order cannot be replaced with the view of Ld. CIT u/s 263 of the Act. In holding so, we find support and guidance from the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. M/s. J.L. Morrison (India) Ltd.(ITA No 168 of 2011) in GA No 1541 of 2012 dated 15.05.2014, wherein it was held as under:-

“By sections 3 and 4, the Indian Income-tax Act, 1922, imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision.”

We also rely on the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Max India Limited reported in 295 ITR 282 wherein it was held as under :

14 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur “When the CIT passed the impugned order under s. 263, two views were inherently possible on the word "profits" occurring in the proviso to s. 80HHC(3) and therefore, subsequent amendment of s. 80HHC made in the year 2005, though retrospective, did not render the order of the AO erroneous and prejudicial to the interest of the Revenue, and CIT could not exercise powers under s. 263.”

In view of the above proposition, and respectfully following principle laid down by the Hon'ble courts and keeping in view all these discussion, as also bearing in mind entirety of the case, we deem it fit and proper to uphold the grievance of the assessee and quash the impugned revision order as devoid of jurisdiction. The assessee gets the relief, accordingly.”

It is further submitted that, the Hon’ble Bombay High Court in the case of CIT Vs. Gabrial India Ltd., reported in 203 ITR 108, has held that, “CIT cannot revise order merely because he disagrees with the conclusion arrived at by the ITO”. Further, in the case of CIT Vs. Sunbeam Auto Ltd., reported in 227 CTR 133, the Hon’ble Delhi High Court drew a distinction between “Lack of inquiry” and “inadequate enquiry” and held that, ‘in the case of inadequate enquiry, provisions under section 263 cannot be invoked.’

Kind attention of the hon’ble bench is also invited to the judgment of hon’ble ITAT Indore Bench in the case of Rakesh Khandelwal in the hon’ble bench in para 8 as under : 8. Therefore, it is not the case where there was no enquiry at all by the A.O. The assessee had furnished certain evidences, which the assessing officer has gone through. There is no dispute that the Ld. Principal CIT can exercise the revisionary jurisdiction u/s 263 of the Act. If he considers that any order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue. Explanation (2) to section 263 of the Act further clarifies that an order passed by the A.O. shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of the Principal Commissioner or Commissioner (a) the order is passed without making enquiries or verification which should have been made (b) the order is passed allowing any relief without enquiring into the claim (c) the order has not been 19 made in accordance with the order, direction or instruction issued by the Board u/s 119 or (d) order has not been passed in accordance with any decision, which is prejudicial to the assessee rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. In the present case, Principal CIT has revised the order on the ground that the A.O. has failed to make enquiries or verification, which should have been made. Ld. Principal CIT has not specified that what enquiries the A.O. has not made. There is no material suggesting that the Principal CIT has expressed his view about insufficiency of enquiry on the material placed on record. The issue regarding whether the assessment order is erroneous or prejudicial on the ground of insufficiency of enquiry has been dealt by the Hon'ble Delhi High Court in the judgement of ITO Vs. DG Housing

15 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur Projects Ltd. (2012) 20 Taxmann.com 587, which has been followed by this Tribunal in various cases. Hon'ble High Court while adverting to the issue held that in cases of wrong opinion for finding on merit, the CIT has to come to the conclusion and himself decide that order is erroneous, by conducting necessary enquiry, if required and necessary before the order u/s 263 of the Act is passed. In such cases, the order of the A.O. will be erroneous because the order passed is not sustainable in law and the said finding must be recorded CIT cannot remand the matter to the assessing officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/enquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the A.O. making the order unsustainable in law. In some cases, possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the A.O. had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable.

The matter cannot be remitted for a fresh decision to the A.O. who conduct further enquiries without a finding that the order is erroneous finding that order is erroneous the condition or requirement which must be satisfied for exercise of jurisdiction u/s 263 of the Act. In such matters, to remand the matter/issue to the A.O. would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the A.O. to decide the aspect/question. The Hon'ble Court further held that this distinction must be kept in mind by the CIT while exercising jurisdiction u/s 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the A.O., who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/enquiry.

The order of the A.O. may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the A.O. to decide whether the order was erroneous. This is not permissible. An order is erroneous, unless the CIT held and records reason why it is erroneous. An order will become erroneous because on remit, the A.O. may decide that order is erroneous. Therefore, CIT must after recording reasons, hold that order is erroneous the jurisdictional pre-condition stipulated is that CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It was further observed that the material, which the CIT can rely includes not only the records as it stands at the time when the order in question was passed by the A.O. but also record as it stands at the time of the examination by the CIT. Nothing appears/prohibits CIT from collecting and relying new/additional

16 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur material which evidence to show and state that the order of the A.O. is erroneous. We find that Ld. CIT in the present case has not carried out any enquiry of his own has merely set aside the assessment to the file of the A.O. to re-examine issue of source of cash deposited by the assessee. Therefore, it is contrary to the guidelines as mandated in the Hon'ble Delhi High Court in the case of ITO Vs. DG Housing Projects Ltd. (supra) coupled with the fact that the assessee during the assessment proceedings had submitted evidences in support of sale of jewelleries and receipt of gift. Moreover, the issue of examination of source of gift was not subject matter of the scrutiny. Therefore, the decision of the Ld. CIT invoking provisions of section 263 of the Act is not justified and cannot be sustained under the facts and circumstances of the present case. We therefore, set aside the impugned order and allow the grounds raised by the assessee. It may however, be noted that the instance case is neither the case of inadequate enquiry nor lack of enquiry during assessment proceedings as it can be seen that due, necessary and most pertinent enquiries to all the issues emerging from the return filed by the assessee were conducted by the Ld. AO. Therefore, in view of such factual and legal position, no action u/s 263 could have been taken. In view of above, it is submitted that assessment order passed by ld. assessing officer is neither erroneous nor prejudicial to the interest of revenue, therefore, the directions given by the ld.PCIT for making further enquiries is not in accordance with law and revision order so passed u/s 263 of the Act deserves to be quashed.”

“In response to the said notice, Shri O. P. Vyas, CA and A/R of the assessee, attended. Online reply was filed along with the required information. Copy of cash book was made available as the same could not be uploaded, as it exceeded the permissible limits. Books of accounts comprising of cash book, purchase books, sales book and ledger along with vouchers/bills, were produced, which were test checked. The case was discussed with him. The assessee is a Commission agent of vegetables in Muhana Mandi. He deals in kairi and peas only. During the year, he has received commission of Rs.30,32,646/-. He has also done trading and has effected sales of Rs.32,63,899/- which has resulted into gross profit of Rs.3,06,865/- After claiming various expenses, he has shown a net profit of Rs.10,36,094/- which includes commission.. The Net profit rate has increased as compared to the preceding year. The indirect expenses have gone down considerably. The case of the assessee was taken up for verifying the source of cash deposits made by him in his bank account, and in particular during the demonetization period. During the course of verification, the source of the cash deposits was examined. The assessee sells bulk of his vegetables to small vendors who have mostly made the payment in cash. The assessee has sold peas during November and December which has resulted into huge cashinflow, as this is peak reason for peas. It was also seen that the assessee has only deposited Rs. 2,00,000/- in demonetized notes out of the cash balance available with him. So, the assessee has huge cash availability with him which was deposited into his bank account as per the requirements of business. The source of the cash deposits stands substantiated.” 9. Thus, it is clear from the finding recorded by the ld. AO that he has called for the details required to complete the assessment based on the reason of selection under CASS, the ld. AO has also recorded his clear finding on the issue for which the cash was selected under CASS. Based on the details submitted by the assessee ld. AO has taken a plausible view of the matter on the cash deposited by the assessee. The ld. AR of the assessee further submitted it is not disputed by the revenue that the cash deposited was not the demonetized money except 2 lac rest of all money deposited in the bank account was fresh currency in operation was deposited and is not disputed by the ld. AO as money received on account of the business carried out by the assessee. Whereas the ld. Pr. CIT considered that the same has not been seen by the AO in light of the observations made by her in the proceedings before her as depicted by her in the show cause notice issued by her. The bench notes that the prerequisite exercise of jurisdiction by the learned Principal CIT under section 263 of the Act is that the order of the AO is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Principal CIT has to be satisfied of twin conditions, namely (i) the order of the AO sought to be revised is erroneous; absent i.e., if the assessment order is not erroneous but it is prejudicial to the Revenue, provision of section 263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, then the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Pr. CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. Here in this case the ld. AO called for the details verified with the nature of income which is supported by the books of account and cash book produced before the AO. It is also not a case of the revenue that the assessee has deposited cash of the demonetized currency. Thus, we draw strength from the decision of CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC). We also draw strength from the decision of the Hon'ble Supreme Court in the case of CIT vs. Max India Ltd. (2007) 213 CTR (SC) 266: (2007) 295 ITR 282 (SC) wherein it was held that:

The phrase 'prejudicial to the interests of the Revenue' in s. 263 of the IT Act, 1961, has to be read in conjunction with the expression 'erroneous' order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue. For example, when the AO adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the AO is unsustainable in law.

10. Thus, based on this decision it is also noteworthy to mention that one of the pre-requisites before invoking S. 263 and the allegation of the Ld. Pr.

CIT is that there has been incorrect assumption of fact and law by the Assessing Officer. However, despite our deep and careful consideration of the material on record including the finding recorded in the subjected Assessment order dated 06.06.2019 and in the findings recorded in the order under challenge, we do not find any incorrectness and incompleteness in the appreciation of facts made by the AO after hearing the arguments of the assessee. In the light of these observations, we do not agree on this aspect to this extent with the view drawn by the Ld. Pr.

CIT. appreciated and assumed the law while making the subjected assessment to be termed, as erroneous and prejudicial to the interest of the revenue?

The facts are not disputed that the in the assessment proceeding the issue which are raised by the PCIT is raised by the AO or not. The assessing officer called for the information from the assessee on the issue under dispute in the order of the PCIT and has considered the issue by taking a plausible view of the matter. It is also not in dispute that the assessee has provided all the relevant details in the assessment proceedings as it is clarly find placed in the assessment order and the same is also not disputed by the ld. DR. The ld. AO based on the information provided by the assessee applied mind on the issue. On the other hand, the ld. DR did not demonstrate that what are the error apparent on which the ld. PCIT is raising and has not been considered by the AO. Even the assessee has submitted their version on the issues in the assessment proceedings and based on the submission the ld. AO has taken a view which is also a plausible view on the matter based on the complete facts placed before AO. Whereas, the ld. AR also proved from the paper book filed that the related aspect of the issue has been duly considered in the assessment proceeding and find place in the assessment to why the view taken by the AO is incorrect in law. The view taken by him is even not violates the conditions prescribed under the explanation 2 of section 263 of the Act. The ld. AR controverted on all the aspect argued the ld. DR based on the PCIT’s order. Considering the fact, that assessee ld. AO has considered overall facts of the case, source of cash deposited after verifying the cash book submitted by the assessee in the assessment proceeding and considered the cash deposit out of the income disclosed in the return of income. It is also not disputed by the revenue that the cash deposit of 2 lac deposited is below the limit of 2.5 lac for which no cognizance will be taken thereof and rest of the money is of the new currency and the source of which is already verified merely the cash is deposited during the demonetization currency deposit time allowed the view taken by the PCIT is not correct to invoke the provision of section 263.

The ld. Pr. CIT evidently did not place on record any apparent error on the part of the AO so as to substantiate that order passed by the ld. AO is prejudicial to the interest of revenue.

(i) The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 of the Act cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view with which the does not 24 Bhartesh Jain vs. PCIT, Jaipur-1, Jaipur agree. If cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under law (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the Commissioner of Income-tax, while exercising his power under section 263 of the Act is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the Commissioner of Income-tax does not fee stratified with the conclusion. (viii) The Commissioner of Income-tax, before exercising his jurisdiction under section 263 of the Act must have material on record to arrive at a satisfaction and (ix) If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Officer allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.

11. Undoubtedly, the jurisdiction under section 263 is wide and is meant to ensure that due revenue ought to reach the public treasury and if it does not reach on account of some mistake of law or fact committed by the Assessing Officer, the CIT can cancel that order and require the concerned Assessing Officer to pass a fresh order in accordance with law after holding a detailed enquiry. But when enquiry in fact has been conducted and the Assessing Officer has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, but the same is apparent from the record of the proceedings, in the present case, without anything to say how and why the enquiry conducted by the Assessing Officer was not in accordance with law, the invocation of jurisdiction by the CIT was unsustainable. As the exercise of jurisdiction by the CIT is founded on no material, it was liable to be set aside. Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. 12. The finding of the Tribunal that the ITO had passed assessment order after relevant enquiries and considering the aspects of the matter required by the CIT to be considered by him is a finding of fact and on the basis of which, the jurisdiction assumed by the CIT being non-existent must be held to be not sustainable.

Order pronounced in the open court on 31/01/2023.

Sd/- Sd/- ¼Mk0 ,l- lhrky{eh ½ ¼jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;dlnL;@Judicial Member ys[kklnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 31/01/2023 *Ganesh Kr. आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Bhartesh Jain, Jaipur izR;FkhZ@ The Respondent- PCIT, Jaipur-1, Jaipur 2. 3. vk;djvk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZQkbZy@ Guard File (ITA No. 326/JP/2022) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेजज. त्महपेजतंत