MANEPALLI RANADHEER,VIJAYAWADA vs. THE INCOME TAX OFFICER, WARD-3(1),, VIJAYAWADA

O R D E R

Per Shri Duvvuru RL Reddy, Judicial Member :

2. Brief facts of the case are that the assessee is an individual, filed his return of income for the A.Y.2010-11 on 19.01.2012, admitting total income of Rs.1,47,764/-. A survey operation was conducted by ADIT (Inv.), Unit-IV(2), Vijayawada on 22.01.2016 and during the survey, as the assessee failed to produce any evidence for the sources for acquiring various properties of value of Rs.2.31 crores during the F.Ys.2008-09 to 2014-15, the assessee has admitted an amount of Rs.2 crores as additional income for all these years. Further, during the survey, it was observed that the assessee has got 7 bank accounts in Andhra Bank, Axis Bank, Karur Vysya Bank and HDFC Bank which contained huge cash deposits and cash withdrawals during F.Ys.2009-10 to 2015-16. The ADIT(Inv) worked out the peak cash balance for each year for the purpose of assessment and arrived at the undisclosed income of Rs.32,24,500/- during the A.Y.2010-11, which consisted of unaccounted investment in immovable properties to the tune of Rs.20,91,500 and 3 I.T.A. No. 256-261/Viz/2020 A.Y.2010-11 to 2015-16 Manepalli Ranadheer & I.T.A.No.19-21/Viz/2021 Late Manepalli Pushpalatha Rep. By Manepalli, Ranadheer, A.Y.2011-12, 2012-13 & 2015-16 Rs.11,33,000/- by way of peak cash credit. As the same was not shown in the return of income and in order to bring to tax the said undisclosed income, the Assessing Officer (AO) issued notice u/s 148 with prior aproval of the Pr.CIT, Vijayawada. The assessment was completed by AO u/s 148 on 18/12/2017 determining the total income at Rs.23,67,229/- after reworking the unexplained investment in immovable properties of Rs.22,19,465/- as against the unexplained investment reported by the ADIT (Inv.) of Rs.20,91,500/-. On examination of records, the Ld.PCIT observed that the AO has not properly examined certain issues and conisdered the assessment as erroneous and prejudicial to the interest of the revenue and accordingly issued a detailed show cause notice u/s 263 dated 13.02.2020 to the assessee calling for objections and served on the assessee through e-mail. The assessee reiterated the submissions made before the ADIT and the AO. The assessee submitted that the bank transactions are related to his real estate business. Usually, purchasers contact him, he will show some properties and collect some amount as advances and deposit in his bank account. When the transaction materializes, he withdraws the amount and handover to the seller of the property, after deducting his small portion of commission. If the transaction is not fultilled, he withdraws the money and handover to the 4 A.Y.2010-11 to 2015-16 Manepalli Ranadheer & I.T.A.No.19-21/Viz/2021 Late Manepalli Pushpalatha Rep. By Manepalli, Ranadheer, A.Y.2011-12, 2012-13 & 2015-16 proposed purchaser. He, therefore, pleaded to drop the proceedings in the interest of justice. The Ld.PCIT observed that the assessee failed to submit any further evidences, except reiterating the same which was submitted before the ADIT and the AO and held that the assessment order passed u/s 143(3) r.w.s. 147 dated 18.12.2017 for the A.Y.2010-11 is erroneous and prejudical to the interest of the revenue. He, therefore, directed the AO to redo the assessment de-novo in accordance with law and established procedure on the issue of cash deposits in the bank accounts after affording a reasonable opportunity of being heard to the assessee.

“6. We have heard both the parties and perused the material placed on record. We find merit in the argument of the Ld.AR that the Ld.Pr.CIT has directed the AO to revise the assessment order passed on the proposal sent by the Ld.AO. In this connection, it is appropriate to quote section 263 of the Act which reads as follows : 263. (1) The 88[Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer 89[or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, 90[including,— (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988] by the Assessing Officer 91[or the Transfer Pricing Officer, as the case may be,] shall include— (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer 92[or the Transfer Pricing Officer, as the case may be,] conferred on, or assigned to, him under 7 A.Y.2010-11 to 2015-16 Manepalli Ranadheer & I.T.A.No.19-21/Viz/2021 Late Manepalli Pushpalatha Rep. By Manepalli, Ranadheer, A.Y.2011-12, 2012-13 & 2015-16 the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; 92[(iii) an order under section 92CA by the Transfer Pricing Officer;] (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal 93[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer 92[or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the* Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 94[or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal 95[Chief Commissioner or Chief Commissioner or 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 prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 96[Explanation 3.—For the purposes of this section, "Transfer Pricing Officer" shall have the same meaning as assigned to it in the Explanation to section 92CA.] On plain reading of the above section, it is clear that the Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous, in so far as it is prejudicial to the interest of the revenue. In the instant case, the Commissioner reopened the case u/s 263 of the Act based on the proposal sent by the AO and not on his own volition. We are therefore, of the considered view that reopening is bad in law and hence, we quash the order of the Ld.Pr.CIT.:

Hon’ble High Court of Calcutta in the case of Prinicpal Commissioner of Inocme Tax Vs. Reeta Lakhmani [2022] 145 taxmann.com 590 (Calcutta) held that PCIT, in order to exercise jurisdiction under section 263 of the Act, exercised jurisdiction at the instance of the assessing officer is against the provisons of the law. For the sake of clarity and convenience, relevant part of the order of the Hon’ble High Court is extracted as under:

8. This aspect was considered by the learned Tribunal and after going through the facts of the case it was found that the initiation of the proceedigns udner section 263 of the Act was based on a proposal given by the assessing officer and not at the behest of the PCIT. It may be true that the PCIT may have information from the assessment file or through other sources. Nevertheless while exercising pwoers under section 263 of the Act, the PCIT has to bear in mind the twin conditions are to be conjointly fulfilled. Therefore, before exercising of power under section 263, it is the PCIT who has to apply its mind to the issue and thereafter record reasons as to how the twin conditions are satisfied and then issue a show-cause notice to the assessee. Int he cases on hand there is nothing on record to show that such an exercise was done by the PCIT. Therefore, learned Tribuanl after noting several decisions on the subject rendered by the Coordinate Benches of the Tribunal had allowed the assessee’s appeal and set aside the order passed by the PCIT under seciton 263 of the Act. Thereafter, the learned Tribunal has proceeded to examine the merits of the matter and granted relief. It is the submission of Mr. Mitra that so far as the merrit of the cases are concerned, similar issue was tested by this Court in the case of Pr.CIT Vs. Swati Bajaj (2022) 139 taxmann.com 352/288 Taxman 403/446 ITR 56. Though such may be the issue, as pointed out earlier, the learned Tribunal had granted relief to the assessee on two grounds, the firs tof which being that the exercise of power under seciton 263 of the Act was not in accordance with law. Ascould be seen from the substantial questions f law suggested by the revenue, the revenue has not raised any question on the said finding of the Tribunal which goes to show that the revenue had reconciled with the reasoning given by the learned Tribunal in that record. Therefore, a piecemeal challenge to the order passed by the learned Tribunal on one of 9 A.Y.2010-11 to 2015-16 Manepalli Ranadheer & I.T.A.No.19-21/Viz/2021 Late Manepalli Pushpalatha Rep. By Manepalli, Ranadheer, A.Y.2011-12, 2012-13 & 2015-16 the grounds on which relief was granted to the assessee is not maintainable.

Respectfully, following the order of the coordinate bench of the Tribunal in the case of M/s Sai Bhagya Lakshmi Estates, Sri Challamcherla Hanumantha Rao Vs. ITO, Ward-2, Narasaraopet (supra) and the decision of the Hon’ble High Court of Calcutta, we are inclined to quash the order passed by the PCIT u/s 263 and allow the appeal of the assessee.

Order pronounced in the open court on 23rd May 2023. (एस बालाकृष्णन) (दुव्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER Dated : 23 .05.2023 L.Rama, SPS