KAMAL LOCHAN DAS,KUANSH vs. PR. CIT-1, BHUBANESWAR

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ITA 54/CTK/2022Status: DisposedITAT Cuttack28 September 2022AY 2017-187 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Principal CIT's order under Section 263 was bad in law as no proper enquiry was conducted by him before passing the order. It was also held that the Principal CIT could not impose his opinion over a possible view taken by the Assessing Officer.

What were the facts?

The assessee, a wholesale SIM card and mobile recharge dealer, had their assessment completed under Section 143(3) by estimating income at 8% on total bank deposits. The Principal CIT invoked Section 263, holding the assessment order was erroneous and prejudicial to revenue, suggesting the difference between bank credits and declared turnover as undisclosed income.

What were the issues?

Whether the Principal CIT's order under Section 263 was valid without conducting proper enquiry and whether he could substitute his opinion for that of the Assessing Officer.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3)

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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,

Before: ARUN KHODPIA & ARUN KHODPIA & ARUN KHODPIA

For Appellant: Shri P.K.Mishra, AR
For Respondent: Shri Suresh Shivanandan
Pronounced: 28/9

O R D E R Per Bench This is an appeal filed by the assessee This is an appeal filed by the assessee against the order against the order passed u/s 263 by the Pr. CIT the Pr. CIT-1, Bhubaneswar dated 29.11.2011 29.11.2011 in Din & Notice No.ITBA/.Rev/F/Rev1/2021 No.ITBA/.Rev/F/Rev1/2021-22/1037354583 (10) for the assessment year for the assessment year 2017-18.

2.

Shri P.K.Mishra, ld AR appeared for the assessee and Shri Suresh Shri P.K.Mishra, ld AR appeared for the assessee and Shri Suresh Shri P.K.Mishra, ld AR appeared for the assessee and Shri Suresh Shivanandan, ld CIT DR appeared for the revenue. Shivanandan, ld CIT DR appeared for the revenue.

3.

It was submitted by ld AR that the assessee is an individual who is It was submitted by ld AR that the assessee is an individual who is It was submitted by ld AR that the assessee is an individual who is deriving incom deriving income from wholesale trading in SIM Card and m Card and mobile recharging. It was the submission that the original assessment came to be compl It was the submission that the original assessment came to be compl It was the submission that the original assessment came to be completed

1.

P a g e 1 | 7 u/s.143(3) of the Act on 25.11.2019, wherein, the Assessing Officer had, on the ground that the assessee has not maintained proper books of account, adopted the provisions of section 44AD and applied the rate of 8% on the entire bank deposits of the assessee. It was the submission that the Assessing Officer had not given the assessee the benefit of debits in the bank account. It was the submission that the Pr. CIT invoked his power u/s 263 holding that the assessee had originally declared a turnover of Rs.63,05,410/- but the Assessing Officer has adopted the entire credits in the bank account of the assessee at Rs.1,32,67,045/- as the turnover of the assessee, it was the submission that the Pr. CIT took the view that the income of the assessee could not be estimated at 8% but the rate of 8% is to be applied to the turnover as declared by the assessee at Rs.63,05,410/- and the difference between the total credits in the bank account and the disclosed turnover should be treated as undisclosed income of the assessee. It was the further submission that the Pr. CIT also found that there was deposits of high value denomination notes during demonetization period for a total amount of Rs.3,04,000/-. It was the submission that the Pr. CIT had taken the view that this amount was also liable to be treated as income of the assessee. It was thus the submission that in case of SIM Card wholesale dealer and mobile recharger, the total turnover of the assessee is being treated as practically the income of the assessee and in addition to that further amount of the demonization SBNs deposits is also being

P a g e 2 | 7 added. It was the submission that at the outset, the SBNs were already included in the deposits in the bank account and this was part of the business turnover of the assessee. It was the further submission that the Assessing Officer after considering the facts had taken a view that the interest of justice would be served if the entire deposits in the bank account were treated as turnover and income was estimated at 8%. It was the submission that the Pr. CIT by directing the AO to treat the difference between the deposits in the bank account and the turnover as declared by the assessee, as undisclosed income of the assessee, is attempting to impose his opinion over that of the opinion of the Assessing Officer. It was the submission that this was not permissible in an order u/s.263 of the Act. It was the further submission that in para 3.1, the Pr. CIT has admittedly given the said direction of treating the difference as undisclosed income of the assessee, he further goes on to hold that no attempt has been made to find out the peak investment. It was thus the submission that this itself showed that the Pr. CIT was also contemplating the treatment of the peak credit as the turnover of the assessee. It was the submission that the different views are possible in the assessee’s case. The AO having taken one possible view, the Pr. CIT could not use his power u/s.263 for imposing a different opinion on that of the Assessing Officer. It was the prayer that the order u/s.263 of the Act is liable to be cancelled. It was the submission that after having gone through the records of assessment, the Pr. CIT has P a g e 3 | 7 not done any enquiry before setting aside the assessment order passed u/s.143(3) of the Act. He placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of M/s. Earth Minerals Co Ltd vs ACIT, in order dated 29.8.2022, wherein, following the decision of Hon’ble Jurisdictional High Court in the case of Orissa State Police Housing & Welfare Corporation Ltd., reported in (2022) 139 taxmann.com 207 (Ori), the order passed u/s.263 has been held to be bad in law on account of the absence of any enquiry being done by the Pr. CIT before passing the order u/s.263 of the Act.

4.

In reply, ld CIT DR submitted that the assessment order is prejudicial to the interest of the revenue. It was the submission that the assessment had originally been initiated under CASS on account of “Limited Scrutiny” in respect of the cash deposits during the year. It was the submission that the Assessing Officer has not mentioned even that in the assessment order. It was the submission that it was on account of high volume of the cash deposits in the bank account that Limited Scrutiny had been initiated. It was the submission that the assessment order itself is very vague. It was the further submission that the Pr. CIT had given multiple opportunities to the assessee to reply to the show cause notice but the assessee had chosen not to comply. It was the submission that in the absence of any compliance from the assessee, the Pr. CIT was left with no other option but to do

P a g e 4 | 7 exparte order. He submitted that the order of the Pr. CIT is liable to be upheld.

5.

We have considered the rival submissions. A perusal of the assessment order in the present case passed u/s.143(3) clearly shows that the Assessing Officer has adopted one view for estimating the income of the assessee at 8% on the total credits in the bank account of the assessee. It is an admitted fact that the assessee is a wholesale dealer of Simi Card and Mobile recharger. Obviously, there would be substantial debits in the bank account. It has not been looked into by the Assessing Officer. We are not going into the merits of the original assessment order passed u/s.143(3) of the Act. A perusal of the order passed u/s.263 of the Act shows that the Pr. CIT was also privy to the said bank account. Obviously, he would also have seen that there are debits in the bank account in respect of payments to various mobile companies for the purchase of SIM Card and recharge. Without considering any of the debits, which was very well available before the Pr. CIT in the 263 proceedings, to direct that the difference between the total credits in the bank account and the turnover as declared by the assessee as undisclosed income of the assessee, is in fact, an act of adding salt to the injury caused by the Assessing officer in the order passed u/s.143(3) of the Act itself. In any case, this clearly shows that no enquiry has been done by the Pr. CIT after the issuance of show cause notice on the assessee. A perusal of the order u/s.263 of the Act shows that the Pr.

P a g e 5 | 7 CIT has set aside the assessment to be done denovo. It is also noticed that the Pr. CIT has passed on burden of enquiry to the Assessing Officer without doing any enquiry by himself. It is also noticed that the AO has taken a view in respect of assessing the income of the assessee at 8% of the total credits in the bank account being treated as turnover. This admittedly is one of the possible views. The view expressed by the Pr. CIT is another alternative view that is also possible. The set aside assessment order passed u/s.143(3) of the Act for the purpose of imposing the view of the Pr. CIT over that taken by the AO is not something permissible in an order u/s.263. In these circumstances, on account of the fact that the Pr. CIT has not done any enquiry before passing the order u/s.263, following the principles laid down by the Co-ordinate Bench of this Tribunal in the case of M/s. Earth Minerals Co Ltd (supra), the order passed u/s 263 is liable to be set aside and we do so. Further also, on account of the fact that the Pr. CIT has attempted to impose his view over that possible view taken by the AO, same is impermissible in an order u/s.263 of the Act. Consequently, the order passed u/s.263 is set aside.

6.

In the result, appeal of the assessee is allowed.

Order dictated and pronounced in the open court on 28/9/2022.

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