RAJENDRASINH MANUBHA JETHWA,PORBANDAR vs. CIT, JAMNAGAR, JAMNAGAR
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Ms. Annapurna Gupta & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This assessee’s appeal for A.Y. 2017-18, arises from order of the Pr. CIT, Jamnagar dated 10-11-2021, in proceedings under section 263 of the Income Tax Act, 1961; in short “the Act”.
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The assessee has taken the following grounds of appeal:-
Grounds of Appeal Tax effect relating to each Ground of appeal 1 The grounds of appeal N.A. mentioned hereunder are As appeal is against the validity of without prejudice to one revisional jurisdiction of Pr. CIT. another.
2 The order passed by Pr. N.A. Commissioner of Income-tax, As appeal is against the validity of Jamnagar [hereinafter referred revisional jurisdiction of Pr. CIT. as to the "PCIT"] is bad in law, invalid and requires to be quashed, the same may kindly be quashed.
3 Ld. PCIT erred in law and on N.A. facts in arriving at a conclusion As appeal is against the validity of to the effect that the assessment revisional jurisdiction of Pr. CIT. order passed by the AO was erroneous as well as prejudicial to the interest of the revenue on the ground that such order was passed without making proper enquiries related to agriculture income shown by the appellant. Therefore, the order passed by Pr. CIT is requires to be quashed and may kindly be quashed.
4 The learned Pr. CIT erred on N.A. facts as also in law in setting As appeal is against the validity of aside the assessment order dated revisional jurisdiction of Pr. CIT. 30-09-2019 passed u/s. 143(3) of the I.T. Act, directing the A.O. to pass a fresh assessment order. The order passed u/s. 263 of the
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Act by the learned Pr. CIT is totally unjustified on facts as also in law therefore the same may kindly be quashed. 5 Your Honour’s appellant craves N.A. leave to add, to amend, alter, or As appeal is against the validity of withdraw any or more ground of revisional jurisdiction of Pr. CIT. appeal on or before the hearing of appeal.
The brief facts of the case are that the assessee had filed his return of income for A.Y. 2017-18 on 13-03-2018 declaring total income at Rs. 19,68,690/-. The case was selected for complete scrutiny in order to examine “ large agricultural income shown in ITR and large cash deposits during demonetization”. The assessment was finalised u/s. 143(3) of the Act vide order dated 30-09-2019 by accepting the returned income.
The Pr. CIT initiated 263 proceedings on the ground that despite the fact that assessee was having substantial land holdings, the Assessing Officer did not mention anything about returned agricultural income/assessed agricultural income in the assessment order. Further, it is observed that assessee had filed return of income for the previous assessment year i.e. A.Y. 2016-17 belatedly on 29-03-2017. However, the Assessing Officer simply accepted the opening cash balance of Rs. 15,29,587/- as on 01-04-2016 based on the return of income filed by the assessee without carrying out any inquiry in this regard. Therefore, the PCIT held that since the return of income for A.Y. 2016-17 was filed after demonetization, the Assessing Officer should have verified the genuineness of opening cash balance. The Assessing Officer has overlooked this aspect
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in the assessment proceedings and has not assessed this issue appropriately. In the light of the above observations, the PCIT held that in the instant facts, the assessment has been completed without any inquiry on the points for which the case was selected for scrutiny. Therefore, to this extent, the assessment order passed by the Assessing Officer is erroneous and in so far as prejudicial to the interest of the Revenue.
The assessee is in appeal against the aforesaid order passed by ld. CIT(A). Before us, the ld. counsel for the assessee drew our attention to notices issued by the Assessing Officer dated 25-09-2018 at page nos. 42-43 of the paper book and another notice dated 28-04-2019 (pages 46-47) of the paper book and notice dated 06-08-2019 at pages 62-63 of the paper book. Accordingly, the ld. counsel for the assessee submitted that during the course of assessment, the Assessing Officer had made due inquiry both with regard to agricultural income earned during the impugned assessment year as well as cash deposited in the bank account during demonetization period. The ld. counsel for the assessee drew our attention to reply filed by the assessee dated 14-08-2019, in which the assessee had furnished details of agricultural activities carried out during the impugned assessment year and also details regarding cash deposited amounting to Rs. 13.95 lakhs during the demonetization. The ld. counsel for the assessee submitted that the opening cash on hand as declared by the assessee was Rs. 15.62 lakhs which was more than the cash deposited during the demonetization period. He further submitted that payment for sale of agricultural produce was received by cheque and therefore the genuineness thereof cannot be doubted. Further to the above, the counsel for the assessee also took the legal plea that since
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explanation 2 to section 263 has not been invoked in the notice issued u/s 263 of the Act, 263 proceedings are liable to be set aside, on this legal ground alone.
In response, the ld. Departmental Representative submitted that in the instant facts, the ld. Assessing Officer has made insufficient inquiries. The ld. Departmental Representative drew our attention to page 1 of the 263 notice issued by the ld. PCIT and submitted that the PCIT has pointed out that on perusal of sale of agricultural produce obtained, the crop differs as per details submitted in Form no. 7/12. However, the Assessing Officer did not mention anything about returned agricultural income/assessed agricultural income in the body of assessment order and did not make any verification and investigation in this regard. The ld. Departmental Representative submitted that as per Form 7/12 furnished by the assessee during 263 proceedings, the assessee has been producing Moongfali for all the three years under consideration, whereas on analysis of the cash book submitted by the assessee, a very small amount has been shown towards sale of Moongfali. Accordingly, in the instant facts clearly this is a discrepancy in the data and therefore, apparently it is a case where inadequate inquiries have been done by the Assessing Officer.
We have heard the rival contentions and perused the material on record. We observe that in the 263 order, the ld. PCIT has set aside the assessment order as being erroneous in so far as prejudicial to the interest of the Revenue on the ground that “assessment has been completed without any inquiry on the points for which the case was selected for scrutiny”
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However, on perusal of notices issued by Assessing Officer dated 28-04- 2019 and another notice dated 06-08-2019, the Assessing Officer had enquired into details of large agricultural income reflected in the return of income and also with respect to cash deposited by the assessee during the demonetization period. In the aforesaid notice, the ld. Assessing Officer enquired into the aspect as to why the agricultural income declared by the assessee during the impugned year under consideration had increased by nearly three times more than the previous assessment year. Further, the Assessing Officer also enquired into the aspect of cash deposit of Rs. 13,95,310/- made in the bank account by the assessee. In response thereto, the assessee had filed reply dated 05-05-2019 and another reply dated 14-08- 2019, wherein the assessee had filed explanation with respect to aforesaid query put forth by the Assessing Officer. Further, the assessee also filed before the Assessing Officer copy of account of agricultural expenses along with sample copies of bills of expenses incurred for agricultural purposes. Therefore, from the facts placed before us it is observed that it is not a case where the assessment has been completed “without any inquiry” on the points for which the case was selected for scrutiny, as stated by the PCIT in the order passed u/s 263 of the Act order. Secondly, regarding the argument put forth ld. Departmental Representative thought that there was a mismatch between the income declared from the sale of Moongfali for all the three years as evident from Form 7/12 filed by the assessee, as against the minuscule amount shown from sale of Moongfali in the cash book filed by the assessee, we observe that ITAT Rajkot in the case Smt. Bhanuben Chimanlal Malavia v. Income tax officer 100 TTJ 337 (Rajkot) held that where during course of assessment proceedings, assessee had submitted a
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copy of land records in respect of agricultural land owned by it and sale bill of agricultural produce sold, merely because assessee had shown agricultural income for first time and land records showed produce of different products, that could not be reason for holding that income was not earned out of agricultural activities. Therefore, in view of the above facts, we are of the considered view that the ld. Assessing Officer had conducted inquiries during the course of assessment with regards large agricultural income and cash deposit made during the demonetization period and therefore, it is not a case where assessment was completed without any inquiry as stated by the PCIT in the order passed u/s 263 of the Act order.
The 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 on the ground of inadequate inquiry
“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
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the Commissioner to pass orders under section 263 of the Act, merely 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
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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’.”
8.1 In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113)
“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, 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-
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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.
8.2 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
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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.
As held by various Courts, s 263 of the Act does not visualise a case of substitution of the judgment of the Principal CIT for that of the Assessing Officer, who has passed the assessment order, unless the decision is held to be wholly erroneous. As noted in various judicial precedents highlighted above, the Principal CIT, 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-visit the entire assessment and determine the income himself at a higher figure. It is a well settled principle that proceedings u/s. 263 of the Act cannot be invoked only with a view to revise the assessment order on the basis that the ld. Assessing Officer should have conducted further inquiry, in the opinion of the ld. PCIT. In the instant facts, the Ld. Assessing Officer had made enquiries into the issues for which the assessment proceedings were initiated. Accordingly, looking into the facts of the instant case, order passed by PCIT u/s 263 of the Act, is directed to be set aside.
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In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 16-06-2023
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 16/06/2023 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order,
Assistant Registrar, Income Tax Appellate Tribunal, Rajkot
