SHREE ROSHAN COLD STORAGE,SAMBHAL vs. PRINCIPAL COMMISSIONER OF INCOME TAX, BAREILLY
Income Tax Appellate Tribunal, DELHI BENCHES ‘C’: NEW DELHI.
Before: SHRI SATBEER SINGH GODARA & SHRIS.RIFAUR RAHMANShree Roshan Cold Storage, vs.
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
The assessee has filed appeal against the order of the Learned Pr.Commissioner of Income-tax), Bareilly [“Ld. PCIT, for short] dated 22.03.2025for the Assessment Year 2017-18. 2. Brief facts of the case are, assessee filed his retune of income for AY 2017-18 on 11.10.2017 declaring total income of Rs.9,58,149/- on total storage rent received on Potatoes of Rs.1,64,45,520/-. Subsequently, the case of the assessee was selected under complete scrutiny through CASS.
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The reasons for scrutiny are undisclosed income reported by ld. PCIT after online verification of cash deposited during demonetization period and high value receipt of cash shown from third parties in response data.
Accordingly, notices under section 143(2) and 142(1) of the Income-tax
Act, 1961 (for short ‘the Act’) were issued and served on the assessee along with questionnaires. In response, assessee furnished the replies and other documents through e-proceedings. Based on the information submitted by the assessee, AO completed the assessment u/s 143 (3) of the Act at total income of Rs.11,83,611/- dated 30.12.2019 as against returned income of Rs.9,58,149/-.
3. Subsequently, ld. PCIT, Bareilly on verification of the assessment records found that the order is erroneous and prejudicial to the interest of the Revenue and assessment framed by the AO was set aside to be framed de novo as per law, keeping in view the observation made after giving reasonable opportunity to the assessee of being heard.
4. Aggrieved with the above order, assessee preferred an appeal before
ITAT, Lucknow. Before ITAT, it was submitted that the order passed by the ld. PCIT is ex-parte, accordingly it was prayed that the matter may be remitted back to the ld. PCIT for fresh consideration. Based on the order of ITAT dated 30.04.2024, the matter was remanded back to the ld. PCIT.
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5. Accordingly, a notice u/s 263 of the Act was issued to the assessee and opportunities were given to the assessee, a notice was issued to the assessee. In response to the notice u/s 263, assessee filed its submissions dated 12.12.2024. For the sake of brevity, the same is reproduced below:-
“On going through the order of the PCIT, it is found that the Ld. PCIT has not decided the issue on merit and passed the order impugned without hearing the Assessee. In our considered opinion, if an opportunity of being heard given to the Assessee and decide the issue on merit by the Ld. PCIT, substantial justice would be rendered. Accordingly, we remand the issue to the file of the PCIT for de-novo adjudication witha direction to the Assessee to fully co-operate with the proceedings before the Ld. PCIT.
It is submitted to your good self that assessee is engaged in the business of Cold Storage. The nature of the business is that, when potatoes kept in cold storage by the farmer about 90% of the potato market value is taken in advance from the cold storage owner. This practice is followed by every cold storage owner.
In the year ending 31.3.2016 the advance given under the head loan and advances of Rs.1,95,85,923/-. This was realized in the succeeding year on taken back the potatoes and potato is taken out from the cold storage. In the year ending 31.3.2017 there was loans and advances of Rs.1.94,65.323/-. The advance given during the year 31.3.2016 was realised during the year ending
31.3.2017. In the same manner advance given in 31.3.2017 was realised in succeeding year. This practice is followed. Therefore the credit in the bank were the advance given to farmers realised during the year and thus no any addition on this ground called for. Thus addition remaining of Rs.55,59,480/- kindly be deleted.”
After considering the submissions of the assessee, ld. PCIT made following observations with regard to the assessment order passed by the FAO being erroneous as pointed out in the show-cause notice as under :- “(a) The case was picked up for scrutiny and following issues were identified for examination by the AO.
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Undisclosed income reported by PCIT after online verification of cash deposit during demonetization period
High value receipt of cash shown from third parties in response data.
(b)
During the demonetization period of less than 2 months (09.11.2016 to 31.12.2016) the assessee deposited Rs.1,13,90,000/- in the bank as compared to Rs.1,06,00,000/- over a span of more than 7 months from 01.04.2016 to 08.11.2016 during the year under consideration, The AO has not examined how this cash deposited in demonetization period was far excess as compared to previous months. These cash deposits during demonetization period were also not in consonance with the cash deposits during the corresponding period in the previous (years). On nearly the same turnover, the assessee has deposited
Rs.1,26,00,000/-in November during the year under consideration as compared to Rs.29,50,000/- in November 2015 & Nil in November 2014. (c)
Further. the assessee has shown complete rent received during the year
(from 01.04.2016 to 08.11.2016) amounting Rs.1,64,45,520/-as cash in hand, which is not as per normal business practice, as the assessee was availing cash credit limit and loan ơn this account stood at Rs. 1,19,44,4211- as on 10.11.2016. Keeping the total rent received during the year as cash in hand is not normal business practice, when the assessee is paying interest on his cash credit account.
It is apparent that the Assessing officer has passed the assessment order on 30.12.2019 u/s 143(3) of the Act without conducting proper enquiries on the above issues.The assessing officer proceeded to accept the version of assessee without making sufficient third party enquiries during assessment proceeding. No documentary evidence in support of submission of the assessee was found during assessment proceedings. Hence, the inadequate inquiry over the issues made assessmenterroneous and prejudicial to the interest of revenue.”
On the above information, ld. PCIT held that the assessment order passed by the AO is erroneous and also prejudicial to the interest of the Revenue after following the case laws in his order which is at pages 3 & 4 of the impugned order. Accordingly, the assessment framed by the AO is set aside to be framed de novo as per law by keeping in view the above said observations after giving reasonable opportunity of being heard. 8. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :-
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“1. Because the assessment set aside de novo is based on the wrong imprison of mind framed by the Learned Principal Commissioner of Income Tax that Assessing Officer has not made inquiry in as much as inquiry from third parties the kastkar (so called third party by PCIT has not given any loan or advances. But paid back the advance taken in the last year including in outstanding balance of Rs.1,63,87,600/- which was returned after sale of potatoes.
Because assessee was having the sufficient advances as per his practice followed which was on 01/04/2018 Rs.1,63,87,600/- and on the date of announcement of demonetization on 08/11/2016 the advance was reduced to Rs.1,18,07,974.61/-
Because all the queries required for the verification of cash deposited during demonetization in the bank were raised by the Assessing officer and were complied with by the appellant.
Because the appellant is owning cold storage to store potatoes of the potatoes grower which start filling from last of March to May.
Because as per market demand bags of potatoes were taken out by the potatoes grower according to the demand in market.
Because from the month of October new corps of potatoes started to come in the market although that not having the storage life due to high quantity of water contents in the potatoes. Therefore because of starting of season the potatoes stored in cold storage are lifted and after selling it in the market i.e. mandi samiti or nearby big city like NRC they started to return the advance taken against potatoes kept in the cold storage.
Because huge advances balance were remaining with appellant containing the old potatoes advances the same was deposited in the bank during the period allowed by the Government from 09/11/2016 to 30/12/2016. Therefore depositing money in bank the cash balance as on 30/12/2016 reduced to Rs.36,387.61/-.
Because the appellant was having the advance to potatoes grower as on start of the year verifiable and verified by the Assessing Officer from the balance sheet for the year ending 31/03/2016 which was filed in the Income Tax on 09/09/2016 along with the return of income.
Because the Learned Principal Commissioner of Income Tax has erred in law and on facts in observing and holding that books of accounts were cooked up but no any instance is given or quoted by him in assessment order. Therefore such observation is far from reality misconception of mind and baseless as such observation is vague and based on no material except to give force to his order u/s 263 passed against the appellant by setting aside the assessment order passed originally by the Assessing Officer.
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10. Because the Principal Commissioner of Income Tax has misled himself in observing that Assessing Officer has not conducted proper enquiry.
Such word is vague and there is no length of making the proper enquiry. The Assessing Officer understood and aware of the nature of trade of cold storage.
When potatoes grower stored his product and takes advance free of interest for his house hold and to SOW next crop which was not possible from the bank.
And whereas act does not says for vague proper enquiry. It says only enquiry to the extent to satisfy himself and not to the satisfaction of the Principal Commissioner of Income Tax.
Because where the Learned Principal Commissioner of Income Tax exercises his juri iction he should sit on the chair of the Assessing Officer and not as Super Controller like General of Artillery/Army which he has not done in this case.”
At the time of hearing, ld. AR of the assessee submitted as under :- “The Assessing Officer issued various notices u/s 143(2) and u/s 142(1) on 11/08/2018, 21/08/2018, 04/09/2018 and 28/11/2019. In response to such notices the reply by the assessee were submitted which were examined by the Assessing Officer. The assessee submitted vide reply dated 25/01/2019 as under:-
With respect to the balance queries we wish to submit the remaining queries for your verification, perusal and records as under:- a.
Detailed comparative chart for three financials.
b.
Capital account with bank name and cheque no. details with respect to additions in capital account of partners being all credits are from the saving bank a/c of partners.
c.
Month wise rent of potatoes a/c d.
NEFT only Rs.2,00,000/- was taken from Smt. Krishna Tyagi who is wife of Abhay Pal tyagi and mother of AmitTyagi during the year.
e.
No gifts were taken or received during the year under consideration.
f.
All expenses that are being called for are attached in details ledger account of the same.
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g.
Annexure for cash as called for is being duly filled and attached.
h.
There are no creditors and so as no debtors appearing in the balance sheet. Rest all point are submitted in details in our other replies and any further query in this regard will always be appreciated.
The assessee on page no. 155 submitted the details of cash deposited in the bank form 09/11/2016 to 31/12/2016 during demonetization
Rs.1,13,90, 000/-. The Assessing Officer vide notice dated 28/11/2019
vide ITBA/AST/F/142(1)/2019-20/10212 12007(1) at as per point no. 2
of the annexure to this notice as under:-
We have information that you have deposited cash in your bank a/c during the demonetization period. Please submit reply:- a.
Whether the information is correct, if yes how much amount of cash was deposited by you?
b.
Whether the information is partly correct, furnish the correct information?
c
Whether the information is wrong?
In point no. 3 of the annexure please explain the nature of cash deposited during demonetization period:-
Out of loan receipts - Y/N
Out of repayment of loan - Y/N
Gifts-Y/N
Sale or advance for sale of land or any other capital Assets-Y/N
Other Exempt income - Y/N
Cash in hand - Y/N
Any other, please specify
In point no. 4 in annexure of this notice he again reiterated, Please explain in detailed the source of cash deposits in the bank a/c during demonetization period alongwith evidence.
In point no. 5 he again asked query that cash deposit in bank only in the format given below (which was made by CBDT) please furnish the information. The pro forma given is enclosed and annexed with the appeal. Thus whatever possible the Assessing officer raised queries
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inquired and verified truth ness of the source of cash deposited in bank during demonetization period.
Therefore the observation made by the Principal Commissioner of Income Tax in passing the order u/s 263 to set aside and pass the fresh order de novo. He made wrong interpretation of section 263(1) under explanation 2 as under For the purpose 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 interest of revenue if in the opinion of the Principal
Commissioner of Income Tax as under:-
The order is passed without making inquiries or verification which should have been made, while in the case of appellant all the required queries were raised, verified and found correct by the Assessing Officer for accepting the nature and source of the deposit in bank during8
demonetization period.”
On the other hand, ld. DR of the Revenue relied on the findings of the ld. PCIT. 11. Considered the rival submissions and material placed on record. We observed that the case of the assessee was specifically selected to verify the cash deposits made by the assessee during demonetization period. As per the information brought on record, we observed that the AO has asked specific queries relevant to the cash deposited during the demonetization period and assessee has submitted all the relevant information before him. After verification of the same, the AO did not proceed to make any addition and he has made other additions. The erstwhile ld. PCIT also taken a similar view by passing the order u/s 263 ex-parte and based on the direction of the ITAT, the same was remanded
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back to ld. PCIT. Ld. PCIT, after considering the submissions of the assessee did not give a clear finding, instead, he remanded the issue to the AO to redo the assessment de novo. After considering the factual matrix on record, in our view, the AO has verified the relevant issue and taken one of theplausible view and the view taken by the AO may be erroneous but ld. PCIT has not brought on record how it is prejudicial to the interest of Revenue, merely observed his views and set aside the assessment order and directed the AO to redo the assessment with the observation that assessee has deposited the complete rent during the year amounting to Rs.1.64 crores as cash-in-hand which is not as per normal business practice, as the assessee was availing cash from credit limit and loan on this account stood at Rs.1.19 crores as on 10.11.2016. Keeping the total rent received as cash-in-hand is not normal business practice when the assessee is paying interest on his cash credit account. At the same time, we observed that the assessee is engaged in the business of cold storage and the nature of the business is that farmers receives 90% of the value of Potatoes is taken as advance from the cold storage owner and this is normal practice in this nature of business and the loan held by the assessee is utilized for the above said purpose. Since the assessee has explained the peculiar nature of the business for availing the loan and giving advances to the farmers who are keeping Potatoes in cold storage.
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The AO has accepted the submissions of the assessee after due verification. It is fact that the demonetization period is abnormal period, all the cash holders had to deposit the same in the bank during the period, it is irrelevant whether the assessee had followed the past pattern of cash deposit or not, what is relevant is, whether the assessee able to explain the sources of cash deposit. Without bringing on record the proper reasons for set aside the assessment, Ld PCIT cannot remit this issue back to the AO for fresh assessment. Mere having another view without their being any material on record, Ld. PCIT has taken a contrary view on the facts available on record. Based on the material facts on record, we are inclined to allow the grounds raised by the assessee.
12. In the result, the appeal filed by the assessee is allowed, accordingly, the order passed u/s 263 of the Act is set aside.
Order pronounced in the open court on this22ndday of September, 2025
after the conclusion of the hearing. (SATBEER SINGH GODARA)
ACCOUNTANT MEMBER
Dated: 10.12.2025
TS
ITA No.3156/Del/2025