M/S PREMJI VALJI & SONS,,RAJKOT-GUJARAT vs. THE PR. CIT-1, RAJKOT, RAJKOT

आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E- COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER, And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./ITA No. 125/Rjt/2022 िनधा�रण वष�/Asstt. Years: 2017-2018 M/s Premji Valji & Sons, The Principal Commissioner of “Kuvarjibhai Tower”, Vs. Income Tax, Palace Road, Rajkot-1, Rajkot. Rajkot. PAN: AACFP7696K

Assessee by : Shri R.D. Lalchandani, A.R Revenue by : Shri Aarsi Prasad, CIT. D.R सुनवाई क� तारीख/Date of Hearing : 04/07/2022 घोषणा क� तारीख /Date of Pronouncement: 09/09/2022 आदेश/O R D E R PER BENCH:

The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Principal Commissioner of Income, Rajkot-1, dated 10/03/2022 arising in the matter of revision order passed under s. 263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2017-18.

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Act as erroneous insofar prejudicial to the interest of Revenue under the provisions of section 263 of the Act.

3.1 The assessee in response to such show cause notice submitted that it has deposited cash in the bank account which was withdrawn earlier from the bank and cash received against the sales on or before 8th of November 2016 which was utilized for making the deposits in the bank. According to the assessee, the facts of deposit of cash in the bank account was duly verified and enquired by the AO and the ADIT. Furthermore, the assessment was framed under section 143(3) of the Act after taking the approval from the ld. JCIT. Likewise, there was no doubt raised in respect to the cash sales made by it which was duly recorded in the books of accounts and the same was accepted in the assessment framed under section 143(3) of the Act. As such, the cash was generated as a result of sale and the same was accepted by the AO. Thus the action taken by the AO was one of the plausible/possible view and therefore proceedings under section 263 of the Act cannot be initiated.

3.2 However, the ld. PCIT after considering the assessment records and submission of the assessee observed certain facts as detailed below:

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i. Majority of the sales bills issued by the assessee was less than of Rs. 2 Lacs, without proper address of the purchaser, PAN. Most of the bills were issued within few hours after 8 PM dated 8 November 2016 when demonetization was announced. Many of the bills were without time stamp. Thus, it seems that the assessee has deposited its unaccounted cash in the garb of sales. ii. As such, there was huge cash available with the assessee as on 8 November 2016 but the assessee has not deposited the same in one go rather it has deposited the same during the demonetization period in various instalments, although there was no restriction/ banned from the Government or RBI for deposit of cash in the bank accounts. iii. The cash deposits during the demonetization period should have been correspondingly compared/ verified with the immediate preceding year order to find out genuineness of cash deposits against the cash sales. iv. Similarly, cash sales prior and post to demonetization period should have been verified to ascertain the genuineness of the cash sales. v. The sales has been shown less than 2 lakhs in order to avoid the applicability of the provisions of section 269ST of the Act and identity of the purchaser so as to circumvent genuineness sale and creditworthiness of the purchaser. vi. There was no signature or the id proof taken from the purchaser to justify the genuineness of the cash sales. vii. All the sales vouchers are self-serving documents and therefore the same cannot be relied upon without having independent enquiries. viii. There was no verification or application of mind that assessee has made any profit out of such sales made on our before 8th November 2016.

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3.3 According to the learned CIT, the above facts were not verified by the AO during the assessment proceedings. As per the learned CIT, at least some outdoor enquiries should have conducted to ascertain the genuineness of the cash sales. Based on the above, the learned PCIT was of the view that possibility of channelizing unaccounted cash cannot be ruled out. But all these facts have not been verified by the AO during the assessment proceedings. In view of the above, the principal CIT concluded that the assessment has been framed without necessary verification therefore the same is erroneous insofar pre-judicial to the interest of revenue by observing as under: 11. It is the bounden duty of the Assessing Officer to collect and appreciate the facts collected and proper application of law is to be made while making the assessment. There is incorrect application of law by allowing deduction contrary to the provisions of Income tax Act. In the interest of justice and since the twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous and (ii) it is prejudicial to the interests of the Revenue, are satisfied, the assessment order passed u/s.143(3) needs to be set aside for the discussion made above. 12. It may be mentioned that with effect from 01/06/2015. Explanation 2 to the section 263(1) has been inserted 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, it, 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 pprejudicial to the assessee. rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 13. As per the Explanation 2, the order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue if the order is passed allowing any relief without inquiring into the claim. However, the AO did not conduct any such inquiries or verification as outlined above and simply accepted the assessee's submission, in this manner the assessee s case is also covered under para 'a' of Explanation 2, of section 263{1) of I. T. Act. Therefore the order passed by the AO is erroneous and prejudicial to the interest of revenue to that extent. 14. Keeping in view these facts, I am of the considered view that this is a fit case for invoking section 263 of !.T. Act as the twin conditions namely, (i) the order of the Assessing Officer sought to be revised is erroneous: and (ii) it is prejudicial to the interests of the revenue are satisfied. The AO is directed to make fresh assessment keeping in view the observations made above, after conducting necessary verifications and inquiries and after providing proper opportunity of being heard.

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5.1 The learned AR further contended that the assessment was framed by the AO after considering the necessary details and verification and application of mind. The learned AR in support of his contention drew our attention on pages 26 to 34, page Nos. 170 to 171, page Nos. 210 to 213 and page Nos. 217 to 218 where the copy of the notice under section 142(1) of the Act dated 22-08-2019, dated 24-10- 2019, dated 05-11-2019 and 14-11-2019 were placed where the assessee was asked about the details of cash sales/cash deposits in bank. Likewise, the learned AR also drew our attention on pages 35 to 169, page Nos. 172 to 209, page Nos. 214 to 216 and page Nos. 219 to 249 of the paper book where the reply of the assessee in response to the notice issued under section 142(1) of the Act as mentioned above was placed. Thus, the learned AR contended that there cannot be

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said that the assessment order is erroneous and causing prejudice to the interest of Revenue in the given facts and circumstances.

7.1 An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer’s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon’ble High Courts in this regard.

7.2 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 of the Act on the ground of

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inadequate inquiry. The relevant observation of Hon’ble Delhi High Court reads as under: “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 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 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’.”

7.3 The Hon’ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner: “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

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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-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.

7.4 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 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.”

7.5 The Hon’ble Supreme Court in recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revised order after making addition to assessee's income under section 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of such on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by

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making addition of said amount to assessee's income. The Principal Commissioner passed a revised order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's on-money transactions and Tribunal, thus, set aside the revised order passed by Commissioner. The Hon’ble High Court upheld Tribunal's order. The Hon’ble Supreme Court while dismissing the SLP filed by the Department held as under:- “We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Tax Appeal is dismissed”

7.6 The Supreme Court in the another recent case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Revenue’s SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations: “Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed”

7.7 From an analysis of the above judicial precedents, the principle which emerges is that 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

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Assessing Officer adopts one of the course permissible in law and it has resulted in loss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order causing prejudice to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind.

7.8 Now in the facts before us, in the case of the assessee, we find that the AO during the course of assessment proceedings, made enquiries on this issue and after consideration of written submissions filed by the assessee and documents / evidence placed on record, and then framed the assessment under section 143(3) accepting the return of income. This fact can be verified from the notice under section 142(1) of the Act by the AO and submissions of the assessee against such notice.

Relevant queries raised in the notice dated 22-08-2019:

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Bank Account Cash deposited during Cash deposited during Quantum of cash the year demonetization period deposit in SBN during demonetization period

Month wise Op. cash in Cash Sales Cash Cash Closing cash hand deposited withdrawal on hand bank from bank April 2016 May 2016 June 2016 July 2016

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August 2016 Sept. 2016 Oct. 2016 Nov. till 08.11.2015

The reply made by the assessee dated 11-10-2019

15 Closing Stock and Opening Stock:- Please find enclosed copy of audit report showing the same 16 Item wise Purchase and Sales:- Month wise details of Purchases and Sales as is enclosed 17 Sec.43B Copy of Chart for audit report Annexure for Section 43B and Amount paid during the year Challan enclosed. 18 Cash Deposited: Details of Cash Deposited during the year in given format 19 Explanation regarding source of cash deposited during the demonetization period with corroborative evidences: The explanation retgarding the source of cash deposited during the demonetization period with corroborative evidence is enclosed 20 Day wise Stock Register Details of Stock register enclosed 21 Information in respect of cash sales; Details of Cash receipts in given format is/are enclosed. 22 Information in respect of cash sales: Details of Cash Sales in given format is /are enclosed 23 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2015-16 in given format is enclosed herewith. 24 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2016-17 in given format is enclosed herewith. 25 VAT Audit Report or Form 205: VAT Report for the year 2016-16 in Form 205 is enclosed herewith. We have not revised return file after 08.11.2016. 26 Day wise cash book:

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Day wise cash book attached herewith 15 Closing Stock and Opening Stock:- Please find enclosed copy of audit report showing the same 16 Item wise Purchase and Sales:- Month wise details of Purchases and Sales as is enclosed 17 Sec.43B Copy of Chart for audit report Annexure for Section 43B and Amount paid during the year Challan enclosed. 18 Cash Deposited: Details of Cash Deposited during the year in given format 19 Explanation regarding source of cash deposited during the demonetization period with corroborative evidences: The explanation retgarding the source of cash deposited during the demonetization period with corroborative evidence is enclosed 20 Day wise Stock Register Details of Stock register enclosed 21 Information in respect of cash sales; Details of Cash receipts in given format is/are enclosed. 22 Information in respect of cash sales: Details of Cash Sales in given format is /are enclosed 23 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2015-16 in given format is enclosed herewith. 24 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2016-17 in given format is enclosed herewith. 25 VAT Audit Report or Form 205: VAT Report for the year 2016-16 in Form 205 is enclosed herewith. We have not revised return file after 08.11.2016. 26 Day wise cash book: Day wise cash book attached herewith 15 Closing Stock and Opening Stock:- Please find enclosed copy of audit report showing the same 16 Item wise Purchase and Sales:- Month wise details of Purchases and Sales as is enclosed 17 Sec.43B Copy of Chart for audit report Annexure for Section 43B and Amount paid during the year Challan enclosed. 18 Cash Deposited: Details of Cash Deposited during the year in given format 19 Explanation regarding source of cash deposited during the demonetization period with corroborative evidences: The explanation retgarding the source of cash deposited during the demonetization period with corroborative evidence is enclosed 20 Day wise Stock Register Details of Stock register enclosed 21 Information in respect of cash sales; Details of Cash receipts in given format is/are enclosed.

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22 Information in respect of cash sales: Details of Cash Sales in given format is /are enclosed 23 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2015-16 in given format is enclosed herewith. 24 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2016-17 in given format is enclosed herewith. 25 VAT Audit Report or Form 205: VAT Report for the year 2016-16 in Form 205 is enclosed herewith. We have not revised return file after 08.11.2016. 26 Day wise cash book: Day wise cash book attached herewith Relevant queries raised in the notice dated 24-10-2019:

Please refer to the notice u/s.142(1) dated 22.08.2019. You have been requested to furnish the details however, you have partially responded to the questions asked in statutory notice issues. For ex: you have not submitted any response in respect of questions no.6 (bank statement & reconcillation not provided), 7 (old loans not provided), 15 with respect to cash sales and advances received on 08.11.2019 provide following details 1, Orginal bills and vourcher 2.PAN as mandated by section 285BA of the Act, Rule 114B) and address of purchases 3. Also provide monthly VAT returns from April to December, asked in statutory notice.

The reply made by the assessee dated 05-11-2019

Sub: Notice U/s 142(1) of Income Tax Act, 1961

6 Copies of bank statement and reconciliation where necessary 7 Copies of accounts of all loans 15 Details of cash sales and advances received on 8.11.2016 a copy of the invoice raised are enclosed. Copy of VAT return from April to December are enclosed.

Relevant queries raised in the notice dated 5-11-2019:

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Cash sales Name of Address of Amount of cash Item Sold Weight purchaser purchaser bill

Cash Advances received Name of person Address of person Amount of advance Date of advance received

The reply made by the assessee dated 11-11-2019

12/13 Cash Deposited during demonetization: Details regarding Cash Deposited in demonetization period is already submitted along with day wise chart in our submission dated 11/10/2019 also Scan copies Sales Invoice are attached in our submission dated 30/10/2019. 114 VAT Returns: Month Wise VAT Return from April 16 to Dec. 16 is already given in our earlier submission dated 30.10.2019 Ack Receipt is attached herewith. 15 Cash Book Cash Books From 01.11.2016 to 30.12.2016 is attached herewith

Relevant queries raised in the notice dated 14-11-2019: 1. Provide October 2016 sales register. The file you have submitted with title “Oct sales register” contains September sales register. 2. Provide copy of cash bills numbered from TRS/1111 to TRS/1137 and TRS/1027 issued for cash sales made on 07/08. 11.2016. The above numbered bills have not been submitted by you in response to earlier notice. Also submit other cash bills issued on 08.11.2016 if not submitted earier. 3. Provide copy of any 10 cash bills issued in the month of October 2016. 4. Provide details of staff, their roles/duties assigned as on 8.11.2016 along with staff register. 5. Provide names, detailed address of the persons who have signed on the cash bills issued on 08.11.2016 as provided by you.

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The reply made by the assessee dated 18-11-2019

PAN No.AACEFP7696K Sub: Assessment Proceedings for A.Y. 2017-18 Reference is invited to your notice U/s 142(1) vide No.ITBA/AST/F/142(1)/2019-20/1020416785(1) dated 14/11/2019 calling us to furnish the details/information as per the notice. Please find enclosed the required details/information as called for as under: Sr.No. Particulars 1. Details of Sales Register for the Month of Oct. 2016 has been already uploaded vide our submission dated 11.10.2019 in reply to point no.16. However, the same is again re- uploaded 2. Copies of Bills as mentioned vide No.TRS/1111 to TRS/1137 have been already submitted vide our submission dated 05.11.2019. However, the copies of same are again re-uploaded. 3. Copies of 10 Cash bills issued in the month of Oct. 16 are submitted as required by you. 4. Details of Staff their roles/duties assigned as on 08.11.2016 along with staff register submitted as required by you. The same was also submitted before the Investigation wing of the department. 5. We have already submitted the bills of cash sales as on 08.11.2016 along with the names of the customers. In the bills the signatures of the customers is taken on the left side. This practice is being following since the years and per conditions prevailing in the market. 6. Copies of VAT Return for the period from Jan-2017 to March-2017 as required by you and called for

The reply made by the assessee dated 20-11-2019 In continuation to out earlier submission dated 18.11.2019 in response to your notice U/s 142(1) vide No.ITBA/AST/F/142(1) /2019-20/1020416785(1) dated 14/11/2019 and as per the instructions from you please find enclosed the required details/information as called for as under: 1. Sales invoices from TRS/1111 to TRS/1137 and TRS/1027 issued for cash sales made on 07/08.11.2016 re-uploaded serially. 2. Chart showing names, detailed address of the persons who have signed on the cash bills.

The reply made by the assessee dated 26-11-2019 Reference is invited to your notice U/s 142(1) vide No.ITBA/ASF/F/142(1)/ 2019- 20/1020416785(1) dated 14/11/2019 calling us to furnish the details/information as per the notice. In continuation to our letter dated 18.11.2019 please enclosed the required details/information as called for as under: Sr.No. Particulars 5 Detailed chart of person who have signed the sale bills

Relevant queries raised in the notice dated 21-11-2019:

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Relevant queries raised in the show cause notice dated 24-12-2019:

The reason for such huge sales according to you is customer rush due to demonetisation. On 08.11.2016 demonetisation was declared at 20,00hrs. taking liberal view even if it is presumed that customer inflow began at 21.00 hrs, the approximate time for which you attended customers can not be more than 180 min [ assuming shop remained open till midnight 00.00 hrs] on 08.11.2016 after declaration of demonetisation. On 08.11.2016 you had 15 sales person [ including 03 sales executive]. Total customers attended by these 15 sales person were 414. This means 01 sales person attended aroung 28 customers in 180 min which in turn means on an average one customer took just 6.44 min to purchase goods. During these 6.44 min customer not just selected the good but also made payment for it. Considering the nature of business and nature of goods the time taken by customers [as shown by you] is very less and is not coterminous with the general behaviour of the customers vis a vis transaction is gold. It is common knowledge the customers take quite lot of time to select precious items like god. Even if we consider the rush it is unacceptable that someone would just give money and pick up any item without due selection. Also customer have to be shown the purity, weight and other details of the item. As per sales shown by you this entire process took just 6.44 minutes. In view of the above facts and circumstances you are requested to explain the possibility of events taking them together and also show causes as to why the sales shown by you should not be not treated as bogus and the proceeds be added back to total income.

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The reply made by the assessee dated 25-12-2019

Sub: SHOW CAUSE NOTICE DATED 24.12.2019 1. It has been stated that by making a mathematical calculation we took 6.44 minutes per sale. We submit that assumption on such mathematical calculation 2. We have been asked to show cause why the entire sale shown by us be not considered as bogus and the sale proceeds be not added back to income. 3. We submit that the proposed action is not justified as 3.1 We have already included this amount in the sales. Since it is included in sales it is included in profit and income. The proposed addition would lead to double taxation. A copy of the sales register has been filed 3.2 We maintain day to day stock register. The sales have been accounted for in the stock register. Copy of the stock register has been filed. Since we have a day to day stock register all the quantity are included in opening stock purchases sales and closing stock. We have filed all the details of the closing stock. It may also be seen that we have never sold more than the stock on hand.

3.3 It is very well known fact and has been reported in all newspapers that once the demonetization was announced all the shops were full of people. All major newspapers have carried these articles. We are enclosing herewith copies of articles in some news papers. Hence since the customers came and paid us money we worked hard and overtime to meet the demand. We have 6 data entry operators working on 6 computers making bills. 3.4 many of the bills are for sale of bullion. There is no time taken in selling and preparing the bills for the same. The customers just pick up the quantity. Further it is well known that there was a huge shortage of time. The customers did not really sit down to choose. They just picked up what they could in a very short time. 3.5 We have made sales, given delivery of goods and accounted the same in our books. Since they have been accounted for in the books of account, it implies that the same have been added to the profit on which we have paid income tax. The proposal to add the amount again would lead to double taxation. 3.6 further, since all the transactions are accounted for there is no violation of any provisions under the Income tax Act.

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7.9 From the above, it is revealed it is not the case that the AO has not made any enquiry. Indeed the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enquiries or verification which should have been made in respect of cash deposited during the demonization period. It is not the case of the Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of material placed on record accepted the genuineness of the claim of the assessee.

7.10 At this juncture, it is also important to note that the learned PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue. In this regard, we make our observation that the learned PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice dated 17 January 2022 about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the course of such provisions while deciding the issue against the assessee. Secondly, the learned PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 of the Act.

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7.11 In view of the above and after considering the facts in totality, we hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed.

Order pronounced in the Court on 09/09/2022 at Ahmedabad.

Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 09/09/2022 Manish