SMT. SUDHA MODI,BHOPAL vs. PCIT-1, BHOPAL

The instant appeal filed by the assessee is directed against the order dated 25.02.2022 passed by the PCIT-1, Bhopal (M.P.) (hereinafter referred to as ‘PCIT)’) under Section 263 of the Income-Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the order dated 29.11.2019 passed by the DCIT/ACIT-5(1), Bhopal (hereinafter referred to as ‘Ld. AO’) under Section 143(3) of the Act for Assessment Year 2017-18.

The assessee filed her return of income for A.Y. 2017-18 on 07.11.2017 declaring her total income at Rs.74,230/-. The case was selected for limited scrutiny under Section 143(3) of the Act under CASS and notice under Section 143(2) of the Act was served upon the assessee by email through ITBA Portal on 25.09.2018. The reason for limited scrutiny under CASS was large value cash deposits during demonetization as compared to return of income. Notice under Section 133(6) of the Act was duly issued to the Union Bank of India on 02.05.2019 requiring the bank statement of the reported bank account in SFT. It was found from the said bank documents that the assessee deposited cash of Rs.11,08,000/- during demonetization. Specific queries were issued on 18.01.2019 and 03.04.2019 requiring the assessee to furnish the details of cash deposit and the source thereon. In response to the same, the assessee duly submitted all details. After being satisfied on perusal of the details, evidences including e-submissions filed by the assessee on 17.05.2019, the Ld. AO accepted the returned income of the assessee. However, the same was, subsequently, found to be erroneous. As per the Ld. PCIT, it was finalized without enquiry or verification and thus further directed to be reassessed by the Ld. AO by invoking Section 263 of the Act. Hence, the instant appeal before us.

The brief facts leading to the case is this that the assessee purchased a plot of land admeasuring 1.019 acre from Shri Bholaram, S/o Shri Kishan R/o. of Gram Bawadia Kalan, Tehsil Huzur, Bhopal through sale deed, registered 3 Smt. Sudha Modi vs. PCIT (A.Y. 2017-18) at the office of the Sub-Registrar, Bhopal on 3rd June, 2006, recorded in Book No. 1-A, Vol. No. 24497, Page No. 99 to 104, Document No. 818 and thereafter alongwith two co-owners entered into an agreement for sale on 12.05.2018 and received an amount of Rs.10,58,500/- from the prospective purchaser Shri Sanjeev Agrawal upon execution of the Agreement of Sale. The relevant documents including the agreement of sale was duly furnished before the Ld. AO during scrutiny assessment. The said agreement was executed jointly to sell their lands to Shri Sanjeev Agrawal and they received a total sum of Rs 75,00,000/- including Rs. 50,00,000/- in cash. In fact, the assessee received a sum of Rs. 10,58,500/- as her share proportionate to the area of land belonged to her, in respect to the consideration amount decided in between the parties. However, some dispute relating to the property cropped up and a suit for specific performance was filed before the Hon’ble Additional District Judge, Bhopal M.P., which was ultimately decreed on 13.10.2012 against which a First Appeal before the Hon’ble High Court of Madhya Pradesh was filed. Relevant to mention that the sale transaction did not materialized and is still pending. This particular fact has been placed on record by the assessee before the Ld. AO by filing the relevant orders passed by the different judicial forums. The same is also filed before us by way of paper book on 02.01.2013, appearing from page Nos. 1 to 30 of the same. In that view of the matter, it was the case made out by the assessee that as the land deal remained disputed and the matter is subjudice, the cash was kept with herself during the pendency of the court proceedings and the same cash was deposited by her during demonetization. All other relevant documents including the copy of the agreement was also filed before the Ld. AO during the scrutiny assessment and having regard to the facts and circumstances of 4 Smt. Sudha Modi vs. PCIT (A.Y. 2017-18) the case, particularly, the order passed by different judicial forums, the Ld. AO accepted the plea taken by the assessee and further accepted the return of income filed by the assessee. On the other hand, the cash kept by the assessee at home idle for more than eight years was not found to be viable particularly when the assessee has been depositing cash in bank on a regular year to year basis in F.Y. 2014-15 & 2015-16 and therefore, the Ld. PCIT proposed to initiate the proceedings under Section 263 of the Act which was culminated into quashing of the order dated 29.11.2009 passed under Section 143(3) of the Act with a further direction upon the Ld. AO to make de novo examination, enquiry and verification of the all aspects of the matter and to pass an order afresh upon granting opportunity of being heard to the assessee, on the premise that the Ld. AO failed to conduct the investigation on the facts required to be examined and verified to complete assessment as per law particularly in view of amended provision of Clause (a) to Explanation 2 of Section 263(1) of the Act.

It appears from the records placed before us and also scrutiny assessment order dated 29.11.2019 passed by the Ld. AO that sufficient enquiry was made to the issue involved in this particular case including the source of deposit of cash of Rs.11,08,000/- by the assessee during demonetization period. The said fact is evident from the following observation made by the Ld. AO :

In fact, we find without going into this particular aspect of the matter that the assessee though received the amount in cash out of the agreement for sale entered into by the assessee alongwith two co-owners with the prospective purchaser, namely, Sanjeev Agrawal, the same was kept with him due to the dispute arose in regard to the title of the property resulting into court proceedings initiated by the parties and was pending adjudication before 6 Smt. Sudha Modi vs. PCIT (A.Y. 2017-18) different judicial forums, the Ld. CIT(A) sought to invoke the provision of Section 263 of the Act attempting to take advantage of Explanation 2 of Clause (a) of Section 263(1) of the Act alleging no enquiry and/or investigation conducted by the Ld. AO on this particular fact of depositing cash of Rs.11,08,000/- by the assessee which in our considered opinion, is nothing but non-application of mind and further colourable exercise of power, arbitrary, whimsical and erroneous in nature. In this regard, we have considered the judgment passed by the Mumbai ITAT in the case of Sh. Narayan TatuRane Vs. ITO, dt. 06.05.2016 as relied upon by the Ld. AR. The same examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:-

We note that the said amendment gives power to the Ld. PCIT to see as to whether the Ld. AO has passed order upon carrying out enquiries or verification which a reasonable and a prudent officer would have carried out but the explanation did not confer a special or unfettered right and/or power in 7 Smt. Sudha Modi vs. PCIT (A.Y. 2017-18) the hands of the PCIT to revise each and every order according to his whims and fancies alleging the order passed by the Ld. AO is being passed without making enquiry or verification which ought to have been made by a prudent officer. Rather the statutory duty, on the other hand, cast upon the PCIT is to show distinctly that the same has not been conducted properly by the Ld. AO which, in our considered opinion, in this particular fact of case, is found to be just opposite as it is established from the observation made in the order so passed by the Ld. AO. The fact of the case and the corroborative evidences is sufficient enough to accept the plea taken by the assessee in not depositing the amount in Bank and kept it with him for a long period particularly keeping in view of the order passed by the Hon’ble Additional District Judge, Bhopal M.P. and the proceeding pending in First Appeal before the Hon’ble High Court at M.P.

Even otherwise, it is also held in several decisions that the said Explanation does not give unfettered power to the PCIT 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.

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 8 Smt. Sudha Modi vs. PCIT (A.Y. 2017-18) 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:

Applying the aforesaid tests to the facts of the case it is not possible to uphold the order of the Tribunal as regards jurisdiction after considering the law enunciated by the Apex Court. The Assessing Officer after making due inquiries, as noted hereinbefore, adopted one view and granted partial relief under section 80-1 of the Act. The Commissioner of Income-tax takes a different view of the matter. However, that would not be sufficient to permit the Commissioner of Income-tax to exercise powers under section 263 of the 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.

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.

The reference stands disposed of accordingly. There shall be no order as to costs.”

There is no iota of doubt that the Ld. AO has made a detailed enquiry in the case of the assessee in the scrutiny proceeding, particularly, in regard to the issue raised by the Ld. PCIT in the order impugned. Upon making the exhaustive enquiry and excessive documents so placed by the assessee before the Ld. AO, the return of income filed by the assessee has been accepted. We would like to mention that though the PCIT sought to justify his point of view in holding the order passed by the Ld. AO erroneous so as to prejudicial to the interest of the Revenue due to lack of enquiry, such finding is totally found to be non-applicability of mind and a colorable exercise of power by the PCIT. We find that in this case proper and adequate enquiry has been conducted by the Ld. AO in regard to the entire aspect of the matter, particularly, the Court case relating to the dispute on the land and the orders passed by different judicial forums and upon adequate examination of the records placed by the assessee, the assessment was completed. Simply because the money was deposited during demonetization the same cannot lead to the conclusion of having any ingenuine plea of the assessee as narrated above. Thus, the order passed by the Ld. PCIT quashing the order passed by the Ld. AO holding it erroneous and prejudicial to the interest of the Revenue due to lack of adequate enquiry is not sustainable in the eye of law. In that view of the matter, under the particular 10 Smt. Sudha Modi vs. PCIT (A.Y. 2017-18) facts and circumstances of the case, when record reveals sufficient enquiry has been conducted by the Ld. AO in coming to a conclusion and completing the assessment, the impugned order invoking a provision of Section 263 of the Act in a mechanical and stereo type manner without taking into consideration the factual matrix of the matter, is found to be not sustainable in law and thus quashed.

In the result, appeal filed by the assessee is allowed.