HARSAHAIMAL SHIAMLAL JEWELLERS PVIVATE LIMITED,BAREILLY vs. PCIT(CENTRAL), BAREILLY

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW ‘B’ BENCH, LUCKNOW BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.65/Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers Shri Vimalendu Verma, Private Limited, 148, Civil Lines, vs. PCIT (Central), Lucknow, U.P. Bareilly, U.P.-243001 PAN:AACCH3785L (Appellant) (Respondent) Assessee by: Sh. Rakesh Garg, Adv Revenue by: Sh. S.H. Usmani, CIT DR Date of hearing: 06.08.2024 Date of pronouncement: 25.10.2024 O R D E R PER SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER: This is an appeal filed against the order under section 263 of the Act, passed by the ld. PCIT, Central ,Lucknow on 17.02.2022, setting aside the orders of the ld. Assessing Officer, passed under section 143(3) of the Income Tax Act on 29.07.2019. The grounds of appeal preferred, are as under:-

“Grounds No.1 The Learned PCIT, Bareilly has erred in initiating and completing the revisionary proceedings u/s 263 of the Act in the hands of the assessee, and setting aside the case to the Assessing officer, with total disregard to the facts and circumstances of the case, and is untenable under the law. Grounds No. 2 The Learned PCIT, Bareilly erred in setting aside the assessment made vide order under section 143(3) dated 29/07/2019 and passing an order under section 263 of the Act on the grounds that the original assessment order passed under section 143(3) was erroneous and prejudicial to the interest of the revenue and directing AO to frame fresh

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. assessment order (de novo) after giving reasonable opportunity of hearing to the appellants. Grounds No. 3 The Learned PCIT, Bareilly has further failed to appreciate that the original assessment order was passed by the Assessing officer after considering all the issues mentioned in his show cause notice and after making due enquiries, and thus the case was not the one of lack of enquiry by the Assessing officer. Grounds No. 4 The Learned PCIT, Bareilly erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 29/07/2019 despite there being complete application of mind by the AO on the subjected issues and it was nothing but a case of change of opinion, based on which, assumption of jurisdiction u/s 263 is not permissible. The impugned order dated 17/02/2022 therefore, lacks valid jurisdiction u/s 263 of the Act and hence, the same kindly be quashed. Grounds No. 5 The Learned PCIT, Bareilly further failed to appreciate that where there were two possible views and a logical view had been taken by the Assessing officer in the original assessment proceedings, the revisionary proceedings could not be initiated to substitute his own view. Grounds No. 6 That the finding of Learned PCIT, Bareilly that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable. Grounds No. 7 That the Learned PCIT, Bareilly has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s 263 of the Act. Grounds No. 8 The Learned PCIT, Bareilly has without conducting any independent enquiries has held the order to be erroneous and prejudicial to the interest of the revenue, has set aside the assessment back to the file of the Assessing officer with total disregard to the facts and circumstances of the case. The CIT has failed to appreciate that powers of revision u/s 263 cannot be exercised for redoing the investigation, rather the CIT ought to have done the investigation himself before restoring the matter to the AO. Grounds No. 9 The Learned PCIT, Bareilly has further ignored that in view of the provisions of explanation 2 of section 263, it is incumbent to point out what more enquiries would the AO ought to have conducted. Grounds No. 10 That the Learned PCIT, Bareilly has also failed to appreciate that, u/s 263 of the Act, an order of assessment cannot be set- aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence,

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. unsustainable. The learned Principal Commissioner of Income Tax has failed to appreciate that surmises, conjecture and suspicion could not be a basis much less a valid basis to invoke section 263 of the Act. Grounds No. 11 That the Learned PCIT, Bareilly has framed the impugned order without granting sufficient opportunity to the appellant and therefore the order made is illegal, invalid and, vitiated order Prayer It is therefore prayed that, impugned order dated 17.02.2022 under section 263 of the Act be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. Grounds No. 12 The assessee's case does not fall within the mischief of section 263 and As such the order is bad in law and the same is liable to be cancelled. Grounds No. 13 That the Appellant craves leave to amend alters, add or forego any of the above grounds.

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. Income Tax Act that was done on 29.07.2019, was erroneous, in so far as it was prejudicial to the interest of Revenue on the following issues:- i. The ld. AO had not followed the guidelines issued by the CBDT vide internal guidance note for assistance of AOs for verification of cash deposits and framing of assessments in demonetization related cases issued on 13.06.2019 vide F. No.225/145/2019-ITA-II and accordingly, had not issued relevant queries raised for examination of cash deposits during the demonetization period and the queries raised by him were of a general in nature. ii. Even the information collected had not been examined properly to verify whether the cash deposits have actually accrued from the cash sales of the assessee company and thus there were no in depth enquires to ascertain cash in hand. iii. Besides routine queries, no concerted efforts had been made to examine the books of accounts. iv. No third party enquiries had been made and the ld. AO had accepted all the balances in the balance-sheet and P&L account and accepted all the submissions of the assessee.

2.1 The ld. PCIT observed in the course of his order that, in the preceding year, the assessee only had sales of Rs.17.27 Crores in the period of October and November which had increased to Rs.31.76 Crores in this period of two months under consideration. Thus, the increase in sales for this crucial period was 83.91% as compared to last year, while the sales for the entire year had increased by only 8.80%. The ld. PCIT held that this was suspicious as the abnormal sales made during the period of October and November, 2016 was against the normal cycle of business of the assessee. He further observed that, the sale of the assessee for the period April to September in F.Y. 2016-17 was Rs. 25.75 Crores, as compared to the previous year’s sales of Rs.34.37 Crores, which showed a downward trend in the

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. assessee’s business for the year. He also observed that the sales figures for the period December to March, in both financial years under comparison, was almost identical. From this, he concluded that the sales had been inflated for the months of October and November, 2016 just to inflate the cash in hand as on 8.11.2016, so as to justify the huge cash deposits of Rs.18.84 Crores in old SBNs during the demonetization period. The ld. PCIT, Bareilly also observed that the assessee company had chosen to deposit the cash on various dates right upto 18.11.2016 and he opined that keeping demonetized currency for so long without any valid reason was against natural human behavior. The ld. AO had not sought any explanation as to why the demonetized currency was not deposited in the first instance on 10th or 11th of November, 2016 when the banks opened or at once on anyone of the dates. The ld. PCIT also observed that on 7.11.2016, the assessee had deposited cash of Rs.10,00,000/- and on 8.11.2016, the assessee had deposited cash of Rs.37,00,000/-. On that date, it had a negative balance of Rs.1.1 Crore in the bank. The ld. PCIT held that it was difficult to believe that a person who had a cash balance of Rs.18.95 Crores would only deposit Rs.37,00,000/- in his bank account and keep the rest of the amounts in idle mode. Further, keeping cash in hand to the extent of three times its monthly sale was against the canons of human probability and the ld. AO should have examined it minutely. The ld. PCIT referred to the decision of demonetization taken by the Government of India and pointed out that these contradictions indicated that the assessee had inflated sales so as to account for cash deposits in SBNs in his bank accounts, as a means to introduce unaccounted income in the books of accounts and, by the failure of the ld. AO to notice that the sales credited to its books of accounts were unsupported by the past trends and data prevailing in its case, he was unable to bring the same to tax as unexplained cash credits under section 68 of the Act. The ld. PCIT opined that the assessee does not appear to be able to substantiate the cash availability leading upto 8.11.2016 i.e. the day Government announced demonetization and the few details furnished appeared to

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. be fabricated, only to show an inflated cash balance as on 8.11.2016. The ld. PCIT opined that the ld. AO should have concluded on the basis of bank account details, circumstantial evidences, human conduct and preponderance of probabilities that what was apparent in this case was not real and these cash deposits in the garb of cash balance in cash book was actually a colourable device, used to evade tax. He further held that the ld. AO should have been guided by the judgments of the Hon’ble Supreme Court Sumati Dayal vs. Commissioner of Income Tax [214] ITR 801 and Commissioner of Income Tax vs. Durga Prasad More 72 ITR 807 (SC). Further the ld. AO should have relied on the judgment of the ITAT, Chandigarh Bench in the case of Som Nath Maini vs. Income Tax Officer 100 TTJ 917, wherein the Hon’ble ITAT had held that if the facts and circumstances show that the transactions do not accord with the test of human probabilities, they have to be held to be non-genuine. Accordingly, the assessee was issued a show cause notice containing all the aforesaid material. The ld. PCIT records that the assessee did not file a written submissions in response to the show cause notices issued on 3.12.2020 and reminder issued on 28.01.2021. Thereafter, after the case was centralized, the ld. PCIT, Central, Lucknow on 4.02.2022, a fresh reminder was issued to the assessee and the date wherein the compliance was fixed 10.02.2020, but the assessee did not turn up and did not furnish a reply either in person or through any authorized representative or in dak or online mode till the date of passing of order (17.02.2022). 3. Thereafter, the ld. PCIT reproduced the provisions of section 263 and made particular reference to explanation 2 of the said section, as inserted w.e.f. 1.06.2015. He also quoted from numerous case laws in support of his decision to hold that the failure on the party of the ld. AO to conduct necessary enquires in the circumstances of the case make the order erroneous and prejudicial to the interest of Revenue and that, when the officer was expected to make enquiry of a particular item of income and did not make an enquiry, as expected that would be a ground for the 6

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. Commissioner to revise order because such an order would also be erroneous and prejudicial to the interest of Revenue. 3.1 The ld. CIT also referred to the judgment of Hon’ble Supreme Court in the case of CIT vs. Amitabh Bachchan (384) ITR 200, wherein the Hon’ble Supreme Court had held that section 263 did not require any specific show cause notice detailing the specific grounds on which the revision was tentatively proposed, or required the Commissioner to confine himself to the notice, foreclosing consideration of any other issue or question of fact, but gave the Commissioner powers to exercise his jurisdiction on consideration of all relevant facts. The ld. PCIT held that all the judgments referred to by him were now in explicit in the section itself and the judgments which state that once an enquiry is made, the order is insulated from the provisions of section 263, will no longer be applicable by virtue of explanation 2 to section 263, as inserted w.e.f. 1.06.2015. Thereafter, on account of the grounds cited earlier in the order, the ld. PCIT held that the order passed by the ld. AO on 29.07.2019 under section 143(3) of the Income Tax Act, for the assessment year 2017-18 was erroneous and prejudicial to the Revenue and he accordingly set it aside to the ld. AO, for passing a fresh order, after considering the issues highlighted by him and after giving the assessee an opportunity to be heard. 4. The assessee is aggrieved at this order under section 263 and has accordingly filed this appeal. Shri Rakesh Garg, Advocate (hereinafter referred to as the ld. AR) referred to the paper book filed by him and submitted that the ld. PCIT, Bareilly had erred in initiating and Ld PCIT Central Lucknow had also erred in completing the revisionary proceedings under section 263, with total disregard to the facts and circumstances of the case, which made the said order untenable in the eyes of law. It was submitted that he had failed to appreciate that the original assessment order had been passed by the ld. AO after considering all the issues mentioned in his show cause notice and after making due enquiries and thus the case was not one if lack of

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. enquiry by the ld. AO. The ld. AR submitted that, in fact, it was not even a case of inadequate enquiry. The ld. AO had raised the relevant questions and the assessee had replied to them. He pointed out that no evidence had been placed on record that any amount of sales or purchases, as presented by the assessee before the ld. AO were false. There had not been a case of rejection of books of accounts and the ld. PCIT had not demonstrated how the order was erroneous and prejudicial the Revenue. He submitted a summary of number of case laws upon which he relied, all of which stated that the revision proceedings could not be valid if a query had been raised and replied to. The ld. AR further submitted that entire exercise of section 263 had been based on suspicion, assumptions and presumptions. The ld. PCIT had drawn assumptions, without reference to the facts as they existed. No adverse inference could be drawn with regard to the assessee not submitting all the specified bank notes immediately after demonetization, because the banks were not accepting notes to that extent and the assessee had deposited almost all the notes within ten days of demonetization. Therefore, since the time period was reasonable, it was incorrect to doubt the cash position as on 8.11.2016 solely on this basis. It was further submitted that the details of the enquiries raised by the ld. AO could be seen from page 48 of the paper book. The ld. AR took us through the questionnaire issued by the ld. AO wherein the ld. AO had required the assessee to file i. copies of ledger of ledger accounts held by the assessee. ii. To substantiate the deposits that they are related to business transaction iii. To furnish copies of ledger accounts or confirmation in case the receipt of money was from existing debtors, gifts, unsecured advances, loan or any other matter other than business consideration. iv. A chart of month wise total purchase and total sale of trading for both financial years A.Y. 2015-16 and A.Y. 2016-17. v. Annual VAT statement Form No. 52 alongwith Form No. 23 (Audit Report) and various annexures as submitted under U.P. VAT Act and the copy of VAT order under section 28 or provisional order. vi. Verification of turnover and deposits during the demonetization with reference to

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. cash book. vii. Details regarding TDR. viii. Details regarding previous assessments under section 143(3). viii. Description of amounts offered for taxation under section 115BBE. ix. Copy of ledger account of recipient under section 40A(2)(b). 5. The ld. AR also took us through the reply filed by the assessee on 5.11.2018, in response to such notice which was placed on pages 51 and 56 of the paper book and pointed out that he had submitted a copy of the income tax return filed, computation of income, audit report and financial statements for the ready reference of the ld. AO. Further, copies of all bank accounts statements held by the assessee company during the current year had been furnished along with copies of accounts from the books of accounts, explaining the nature of all debit and credit entries in the said bank accounts. The ld. counsel also pointed out that the detailed explanation of cash deposited by the company during the demonetization period had been submitted by producing complete cash book from 9.11.2016 to 30.12.2016. Besides this, the assessee had submitted a statement of month wise cash deposits done by the assessee during the year in each bank account held by the assessee company and also the details of cash withdrawn by the assessee company from each of the bank accounts. Further to the above, the ld. counsel pointed out that the assessee had furnished complete details of month wise sales and purchases for the Financial Years 2015-16 and 2016-17, along with copy of monthly VAT returns acknowledgment. It had also furnished Form 52 (consolidated return for 20.06.2017) along with form 23 (for VAT audit report) for the ready reference of the ld. AO. The assessee had also furnished the details of time deposit made by the assessee company under the Prime Minster’s Gareeb Kalyan Yojna and also its income tax order for the preceding assessment year. It had also furnished the details of income offered for taxation under section 115BBE, details regarding payments made to persons specified under section 40A(2)(b) and details regarding squared up loans and other loans taken during the year. Subsequently, the ld. counsel took us through the second notice issued by the ld. AO on 27.07.2019 which was placed at 9

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. pages 57 and 58 of the paper book and pointed out that, in response to that the assessee had furnished the balance confirmation with specific persons, copies of TDS returns, details regarding donations, details regarding unsecured loans, details of statutory payments and additions to fixed assets, confirmations for purchases made by the assessee company and ledgers and documentary evidences of all expenses, which had been called for by the ld. AO vide his notice dated 27.07.2019. It was, therefore, submitted that everything that had been called for by the ld. AO had been submitted by the assessee and it was only after satisfying himself of the correctness and completeness of the assessee’s statements, that the ld. AO had passed the assessment order, wherein he had not made any additions on account of the cash deposited during the demonetization period. It was further submitted that the books of accounts had not been rejected by the ld. AO and therefore, on the basis of the compendium of case laws (40 in number) that the ld. AR submitted, it was submitted, that since the ld. AO had made proper enquiries, there was no reason for the ld. PCIT to order the proceedings under section 263, holding the order to be erroneous or prejudicial to Revenue. It was pointed out that the Courts have consistently held, that where the enquiries had been done, and the ld. AO had taken one of the two views permissible in law, with which the Commissioner did not agree, that could not be treated as an erroneous order, prejudicial to the interest of Revenue unless the view of the ld. AO was completely unsustainable in law. It was also submitted that the ld. PCIT had to give reasons as to why the order passed by the ld. AO was erroneous and in the present case, the ld. PCIT had not given any reason as to why the order was erroneous and prejudicial to Revenue. It was submitted that the Courts had consistently held that where orders had been passed without enquiry, it could held that the orders were erroneous but where the orders are passed after enquiry, the order could not be regarded as erroneous merely because the revisionary authority felt and was of the opinion that further enquiry / investigation was required, or deeper or further scrutiny should be undertaken. In

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. such cases, the Commissioner was required to record a finding that the order or enquiry made was erroneous and that could only happen if an enquiry or verification was conducted by the Commissioner and he was able to establish and show that the error or mistake made by the ld. AO made the order unsustainable in law. The Commissioner could not ask the ld. AO to re-investigate the matter to decide whether his order was erroneous. The ld. AR took us through a number of judgments in which the Hon’ble Courts had held that an assessment order could not be held to be erroneous, if in the opinion of the ld. PCIT, the order should have been more elaborate or that further enquiry should have been made. For reasons of brevity, the details of the case laws submitted by the ld. AR in his compendium have not been recounted but the general thrust of arguments of the ld. AR were, that when the ld. AO had conducted an enquiry and satisfied himself that there was nothing amiss, the Commissioner did not have the power to order revisionary proceedings only because he believed that more enquiries should have been done or because the ld. AO should have come to different conclusions. It was submitted in view of the provisions of Explanation 2 of section 263, it was incumbent to point out what more enquiries the ld. AO ought to have conducted and that the powers of revision under section 263 could not be exercised for redoing the investigation. Rather the ld. PCIT ought to have done the investigation himself, before restoring the matter to the ld. AO. It was also submitted that a plain reading of the order of the ld. PCIT, which show that it was based on surmises, conjecture and suspicion without an iota of evidence to show what was recorded in the books of accounts of the assessee was incorrect or false in any way and surmises, conjecture and suspicion, could not be a basis to invoke section 263. 6. In conclusion, it was submitted that the order of the ld. PCIT was even otherwise bad in law because adequate opportunity had not been provided to the assessee and the assessee’s submission had not been considered by him before passing the order. Our attention was invited to paragraph 2 on page 5 of the ld. 11

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. PCIT’s order in which the ld. PCIT had recorded his satisfaction that the assessee had not furnished any submission in response to the notices issued on 3.12.2020 and 28.01.2021. Thereafter, our attention was invited to page 360 of the second paper book filed by the assessee, in response to the notice dated 28.01.2021 filed vide acknowledgement no. 155405791100222. It was submitted that the detailed reply filed vide this acknowledgment was contained from page no. 338 to page no. 358 of the first paper book, which was on the records of the Department, but had not been considered by the ld. PCIT before passing his order under section 263. It was further submitted that the notice issued by the ld. PCIT, Central, Lucknow on 4.02.2022 was not shown on the portal of the assessee under the heading, “revision proceedings under section 263 (Income Tax)” but mentioned as, “issue letter” on the e-proceedings tab of the portal of the assessee company. It was submitted that the assessee company had furnished a reply to the notices on 10.02.2022 which was the date set for compliance by notice issued on 4.02.2022. But the same was not reflected in the, “revision proceedings” window. The technical error was on the part of the Income tax Department, in issuing the notice, since the notice was not issued under the correct head on the portal and this led to the ambiguity, leading to the reply, that was furnished by the assessee, not being reflected on the portal of the correct authority. It was further informed that the response had been duly filed on 10.02.2022 and each and every point had been responded to in full detail. Since the notice issued by the ld. PCIT was not reflected in the revision proceedings under section 263 (Income Tax), the reply filed by the assessee should have been transferred to the appropriate PCIT. Our attention was invited to a petition that was filed vide acknowledgment no. 229718461180222, enclosing the response filed, acknowledgment of response filed and an application filed under section 154 requesting the ld. PCIT to reverse his order and pass the same only after due consideration of the response filed by the assessee company.

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. 7. On the other hand, Shri S.H. Usmani, CIT DR (hereinafter referred to as the “ld. DR” appearing on behalf of the Revenue relied upon the orders of the ld. PCIT and submitted that there were good reasons for the ld. PCIT to initiate action under section 263. He submitted that the suspicious circumstances leading to the deposit of Rs. 18.84 Crores of tax had been spelt out by the ld. PCIT in his order which included an 84% increase in the volume of cash generated in the two month period as compared to and only 8 or 9 percent increase during the year. It was submitted that the assessee had not been able to substantiate the cash in hand held by him prior to demonetization as the ld. AO did not conduct any enquiry with regard to the same. Ld. CIT DR took us through paragraphs 4 to paragraph 18 of the ld. PCIT’s order and pointed out that the ld. PCIT had identified the shortcomings and errors committed by the ld. AO during the course of investigation. The ld. PCIT had pointed out that the ld. AO had not followed the guidelines laid down in the approach note of the CBDT issued vide F. No. 225/145/2019-ITA-2 dated 13.06.2019 and raised relevant queries before the completion of the assessment proceedings. He had observed that the AO accepted all the submissions of the assessee as true and correct without any further verification or enquiry, not issued any relevant queries for the examination of cash deposits, not properly examined the information collected to verify whether cash deposits have accrued from the cash sales of the assessee company and not made any efforts to examine the books of accounts. Further the ld. PCIT had held that third party enquiries had not been undertaken by the ld. AO and in-depth enquiries had not been made to ascertain the cash in hand as on 8.11.2016. Therefore, in view of the amended Explanation 2 to section 263, the order was deemed to be erroneous and prejudicial to the Revenue. The ld. CIT DR also made a prayer that the entire demonetization exercise was an attempt to identify and bring to tax black money at an enhanced rate and accounting jugglery should not be allowed to confuse the purpose of demonetization.

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. 8. We have duly considered the facts and circumstances of the case. At the very first instance, we notice that the ld. PCIT has passed the order under section 263, without considering the submission made by the assessee, in response to the notices issued on 3.12.2020 and 28.01.2021. Ongoing through the second paper book filed by the assessee and the acknowledgments contained therein, there is no doubt regarding the fact that the assessee did submit a response to the notices dated 3.12.2020 and 28.01.2021 vide acknowledgment no. 155405791100222. The order of the ld. PCIT does not take this reply into consideration. Furthermore, a perusal of acknowledgment no. 229718461180222 reveals that the notice that was issued by the ld. PCIT on 4th February, 2022 was issued under the, “issue letter” proceeding and not under, “revision proceedings under section 263 (Income tax)”. Thus, it appears that due to some technical glitch, the replies filed by the assessee were not seen or considered by the ld. PCIT, before passing the order under section 263. The failure to consider the response of the assessee that had been duly filed before adjudicating upon the matter, renders the order of the ld. PCIT legally unsustainable on the ground of violation of principles of natural justice. The Hon’ble Supreme Court in the case of Amitabh Bachchan 384 ITR 0200 (SC) has held as under:- “10. Reverting to the specific provisions of Section 263 of the Act what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre- condition for exercise of jurisdiction under Section 263 of the Act. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed. Such a notice is not required. What is

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. Reference in this regard may be illustratively made to the decisions of this Court in Gita Devi Aggarwal vs. Commissioner of Income Tax, West Bengal and others 1 and in The C.I.T., West Bengal, II, Calcutta vs. M/s Electro House 2. Paragraph 4 of the decision in The C.I.T., West Bengal, II, Calcutta vs. M/s Electro House (supra) being illumination of the issue indicated above may be usefully reproduced hereunder..........."

ITA No.65 /Lkw/2022 A.Y. 2017-18 Harsahaimal Shiamlal Jewellers P. Ltd. replies of the assessee filed in response to the notices issued by him, the arguments preferred by the assessee during the course of this appeal and also after giving the assessee due opportunity of being heard in the matter. As we are remanding the matter back to the file of the ld. PCIT for fresh consideration of the issues, in the light of submissions made by the assessee, it is not necessary to pronounce judgment on the individual grounds of appeal preferred before us. The appeal of the assessee is held to be allowed for statistical purposes. 10. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 25.10.2024 at Allahabad, U.P.

Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25/10/2024 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR , ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S.