CHARHIL KUMAR SAHOO,BHUBANESWAR vs. PR.CIT, BHUBANESWAR

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI ARUN KHODPIA, AM आयकर अपीऱ सं./ITA No.14/CTK/2021 (नििाारण वषा / Assessment Year :2016-2017) Charchil Kumar Sahoo, Vs Pr.CIT, Bhubaneswar-1 Plot No.L/124, Phase-1, Dumduma H.B.Colony, Dumduma, Bhubaneswar- 751019 PAN No. : BPHPS 6780 N (अऩीलाथी /Appellant) (प्रत्यथी / Respondent) .. ननधाारिती की ओर से /Assessee by : Shri S.K.Sarangi, CA : Shri Manoj Kumar Goutam, CIT-DR िाजस्व की ओर से /Revenue by सुनवाई की तािीख / Date of Hearing : 07/03/2022 घोषणा की तािीख/Date of Pronouncement : 30/03/2022 आदेश / O R D E R Per Arun Khodpia, AM: This appeal by the assessee made against the order dated 01.03.2021, passed by the ld. Pr.CIT, Bhubaneswar, u/s.263 of the Act, 1961 for the assessment year 2016-2017, on the following grounds :- 1. For that order Dt.01.03.2021 passed u/s.263 of the I.T Act by the Ld.PR.CIT, Bhubaneswar-1 is illegal and not sustainable in law. 2. For that Ld. PR.CIT erred in revising the assessment order and directing re-examination of issue of bank deposits, when the same issue has already been verified by the ld. A.O in original assessment completed u/s.143(3) of the I.T. Act on the facts and in the circumstances of the case. 3. For that ld. PR CIT is not legally justified to direct the A.O to initiate penal action u/s.271A and 271B of the I.T. Act on the facts and in the circumstances on the case. 2. Brief facts of the case are that the assessee is an individual, who derives income from business as a commission agent by way of sale of

2 ITA No.14/CTK/2021 potato and onion and cold drinks. The assessee filed return of income electronically on 16.02.2017 declaring total income of Rs.2,92,610/-. The AO completed the assessment assessing the total income of the assessee at Rs.3,99,640/- estimating the net profit @14% of the gross receipt. 3. Subsequently, the Pr.CIT invoking the revisionary power conferred upon him u/s.263 of the Act, held the assessment order passed by the AO as erroneous and prejudicial to the interest of revenue and remitted the issue back to the AO for examination of bank accounts and all debit entries reflecting remittance to the suppliers. Further the ld. Pr.CIT has also directed to initiate penal action u/s.271A & 271B of the Act along with penalty proceeding for providing inaccurate particulars as deemed necessary. 4. Dissatisfied with the above order of Pr.CIT, the assessee is in appeal before the Tribunal. 5. Ld. AR before us filed a paper book containing pages 1 to 100 and submitted that during the course of original assessment proceeding, in compliance to the notice issued by the AO u/s.142(1) of the Act, the assessee filed a detailed reply along with copies of all bank statements and explaining the queries raised in the said notice. Therefore, the AO convinced with the explanation of the assessee regarding the source of deposit in the bank accounts of the assessee. Before passing the assessment order, the AO has sent an Inspector of Income Tax, Ward-I, Bhubaneswar for field verification and after convincing with the

3 ITA No.14/CTK/2021 explanation of the assessee and the information received from the Inspector, the AO framed the assessment applying profit rate of 14% on gross commission income in absence of books of accounts. Accordingly, ld. AR of the assessee submitted that the assessment framed by the AO was just and proper and after proper verification of the details sought by the AO during the course of assessment proceedings. The assessee has also submitted all the details and explained each and every query raised by the AO during the course of assessment proceedings. Even before the Pr.CIT, the assessee complied to the notice issued u/s.263 of the Act seeking therein the nature of business, details of bank accounts, basis of gross receipt shown in the return of income and source of cash deposit, which was duly submitted by the assessee. It was categorically submitted by the ld. AR of the assessee that the assessee being engaged in commission business, did not hold the money or enjoyed with the payment received from the retailers, however, he deposits the same into the account of principal seller. It was also submitted by the ld. AR of the assessee that for the preceding assessment years i.e. A.Ys.2014-2015 & 2015-2016, the department has accepted the commission earned and net profit shown in the return of income. However, for the year under consideration, the Pr.CIT has set aside the assessment order to the AO only directing to verify the same, which de hors the provisions of Section 263 of the Act. It was also submitted by the ld. AR of the assessee that both the authorities below have not found that the assessee has made

4 ITA No.14/CTK/2021 any investment in movable or immovable properties during the year under consideration. 6. Apart from the above submissions, ld. AR of the assessee also drew our attention to the bank transaction details and submitted that all these details were also placed during the course of assessment proceedings and during the course of revision proceedings. During the course of assessment proceedings, the AO has completely verified all the details filed by the assessee and passed the order accordingly. However, the Pr.CIT only to use the power conferred upon him u/s.263 of the Act, has unnecessarily sent back the matter to the AO for verification of bank details only. Ld. AR of the assessee also submitted that the view taken by the AO applying profit rate of 14% on gross commission income in absence of books of accounts is a permissible view under the law, which cannot be held as erroneous and prejudicial to the interest of revenue. To support his contentions, ld. AR relied on the decision of Hon’ble Supreme Court in the case of CIT Vs. Max India Ltd. 295 ITR 282 (SC). Accordingly, ld. AR submitted that the revisionary order passed u/s.263 of the Act by the Pr.CIT deserves to be quashed. 7. Defending to the arguments of ld. AR of the assessee, ld. CIT-DR relied on the order of Pr.CIT and submitted that the Pr.CIT has rightly set aside the assessment order for proper verification. 8. We have heard the rival contentions of the parties and perused material available on record. In the instant case, the assessee, engaged in the business of commission agent of sale of potato, onion and cold

5 ITA No.14/CTK/2021 drinks to the retailers. The assessee receives the above goods from the principal seller and sales these goods to the retailers, located in Kuberapuri, Aiginia and Bhubaneswar, from which he earns commission and after collecting money from the retailers, he deposits the same to the principal seller’s account. The AO during the course of assessment proceedings, called for the details from the assessee which were duly submitted by the assessee and after proper verification of the same, the AO granted relief to the assessee partially estimating the net profit of the assessee @14% of the total gross receipt, which was also accepted by the assessee. However, the Pr.CIT held the assessment order as erroneous and prejudicial to the interest of revenue and remitted the issue to the AO for further verification. On careful perusal of the revisionary order at para 4.3, we found that the Pr.CIT has partly agreed to the inspectorial statement regarding existence of business. In para 5.3.1, the Pr.CIT has observed that the AO has not examined the cash deposits in the matter it should have been done by a prudent AO and in the face of bank account copies provided by the assessee. From the above observations of the Pr.CIT, it is discernible that the assessee has duly submitted all the bank details before the AO, which were duly examined and verified by the AO before passing the order and also before the Pr.CIT during the revisionary proceedings. There is no valid reasons in the hands of Pr.CIT to diminish the assessment order framed by the AO on the ground of to the lack of enquiry or non-application of mind on the part of the AO.

6 ITA No.14/CTK/2021 9. During the course of hearing before us, ld. AR drew our attention to the details of bank transactions and copies of the bank statements placed at page Nos.11 to 100 of the paper book, from which it is clear that the assessee deposited money in cash to his bank account after receiving the sale price of the goods and simultaneously the same amount has been transferred to the principal seller’s account. The assessee only receives/earns the commission income. In support of his contentions, ld. AR of the assessee drew our attention to page 14 of the paper book, wherein datewise details of deposits and withdrawals and details of deposits by interbank transfer have been shown. All these details were placed before both the authorities below and the AO after due verification of the same has framed the assessment order. 10. From the revisionary order, it is discernible that the assessee has submitted a comparative of its return of income for A.Y.2014-2015, 2015- 2016, 2017-2018 & 2018-2019, having similar income in all these years, however, for the earlier assessment years i.e. AYs.2014-2015 & 2015- 2016 the department has accepted the commission earned and net profit shown by the assessee in his return of income. Even for the assessment year under consideration also the assessee’s stand is same as was earlier. This submission of the assessee was recorded by the ld. Pr.CIT but no adverse comment was offered on the same. However, ld. Pr.CIT has again directed the AO to examine the bank details of the assessee, which were already duly verified by the AO, and this view of the Pr.CIT is not sustainable. This is not a case of lack of enquiry or non-application of

7 ITA No.14/CTK/2021 mind because the AO has already sent an Inspector for verification of the existence of business of the assessee, which has also considered by the Pr.CIT in his revisionary order. On these facts, the issue is as to whether the ld. Pr. CIT is correct in invoking his powers u/s 263 of the Act. In our considered view, the Assessing Officer has called for and verified all the details and documents in connection to the transactions made by the assessee in question and after examining the same, has taken a possible view that the transactions are genuine. This is not a case of non verification or non-application of mind by the AO. This is also not an order passed without making enquiries or verification. In fact, a number of decisions of the Tribunal support the view taken by the Assessing Officer on the very same issue on the very same evidences. Hence, in our opinion, the Assessing Officer has taken a possible view. In view of the above, we are of the opinion that the AO has passed the assessment order after making full verification and the order of the CIT is based on no reason and he has simply given an abrupt finding that the assessment order is erroneous insofar as it is prejudicial to the interest of the Revenue as the complete details were filed before the AO and he has examined and investigated the same in its correct perspective. 11. To support our above view, reliance can be placed on the decision of Hon’ble Delhi High Court in the case of CIT Vs. International Travel House Ltd. (2012) 344 ITR 554 (Delhi HC), wherein the Hon’ble High Court has held as under :- 13. It has to be kept in mind that while exercising power under s. 263 of the Act, the CIT has to be satisfied that the order is

8 ITA No.14/CTK/2021 prejudicial to the interest of the Revenue and there are materials available on record which require the CIT to satisfy him in a prima facie manner that the order is not only prejudicial to the interest of the Revenue but also erroneous in nature. In the absence of any of the factors being satisfied, he does not assume jurisdiction to initiate a suo motu power of revision. The exercise of such a power is dependent on the conditions precedent being satisfied. The CIT does not have unfettered power to initiate proceeding by revision, re-examining the matter and directing fresh enquiry on his own whim for change or having a different view. He has been conferred with a quasi-judicial power and the same is hedged with limitation and, therefore, it has to be exercised within the parameters of the provision. When the CIT is himself not able to form an opinion, he cannot direct another inquiry by the AO under s. 263 of the Act. In this regard, we may profitably reproduce a passage from Associated Food Products (P) Ltd. (supra) : "10. In view of the aforesaid pronouncement of law and taking into consideration the language employed under s. 263 of the Act, it is clear as crystal that before exercise of powers two requisites are imperative to be present. In the absence of such foundation exercise of a suo motu power is impermissible. It should not be presumed that initiation of power under suo motu revision is merely an administrative act. It is an act of a quasi- judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the AO is erroneous as well as prejudicial to the interests of the Revenue. The concept of "prejudicial to the interests of the Revenue" has to be correctly and soundly understood. It precisely means an order which has not been passed in consonance with the principles of law which has in ultimate eventuate affected realisation of lawful revenue either by the State has not been realised or it has gone beyond realisation. These two basic ingredients have to be satisfied as sine qua non for exercise of such power. On a perusal of the material brought on record and the order passed by the CIT it is perceptible that the said authority has not kept in view the requirement of s. 263 of the Act in as much as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AO is wrong. That may be so but that is not enough. What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focussed upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT." 14. In CIT vs. Arvind Jewellers (supra), it has been held thus : "Coming to the facts of the present case, it is the finding of fact given by the Tribunal that the assessee has produced relevant material and offered explanations in pursuance of the notices

9 ITA No.14/CTK/2021 issued under s. 142(1) as well as s. 143(2) of the Act and after considering the materials and explanation, the ITO has come to a definite conclusion. The CIT did not agree with the conclusion reached by the ITO. Sec. 263 of the Act does not empower him to take action on these facts to arrive at the conclusion that the order passed by the ITO is erroneous and prejudicial to the interests of the Revenue. Since the material was there on record and the said material was considered by the ITO and a particular view was taken, the mere fact that a different view can be taken, should not be the basis for an action under s. 263 of the Act and it cannot be held to be justified." 15. In the case at hand, the Tribunal had opined that while framing the assessment order under s. 143(3) of the Act, the AO asked the assessee to explain why the commission received by him from airlines which had been passed on to the customers by way of discount should not be added to the income of the assessee and the assessee had given the explanation. The AO accepted the explanation offered by the assessee. After so stating, the Tribunal had further opined that the Revenue could not point out any defect in the accounting system followed by the assessee in respect of the commission received by the assessee being shown in the books of accounts and the part of the same being passed on to the customers by the assessee by way of discounts and the net commission received by the assessee only being shown as income. After so stating, the Tribunal has concluded as follows : ".there is no error in the assessment completed under s. 143(3) of the Act nor there can be any prejudice caused to the Revenue as the assessee has been subjected to taxation in respect of net amount of commission earned during the relevant assessment year. The assessment order passed by the AO was after proper application of mind and the AO considered the details and the explanation furnished by the assessee and, therefore, the order passed by the AO under s. 143(3) of the Act is neither erroneous nor prejudicial to the interest of Revenue." 16. In view of the aforesaid analysis, we are of the considered opinion that the Tribunal had appositely appraised the law and come to hold that a change of opinion or view would not enable the CIT to exercise jurisdiction under s. 263 of the Act more so, when the AO had considered the details and the explanation offered by the assessee. 17. The second aspect that is required to be adverted is whether the CIT without recording a specific finding with regard to the fact that the order passed by the AO was prejudicial to the interest of the Revenue could have passed an order under s. 263 of the Act, or as Mr. Vohra, learned counsel for the assessee, would put it that the CIT had travelled beyond what was stated in the notice. The hub of the matter is whether the manner in which the CIT has proceeded to exercise the jurisdiction under s. 263 of the Act is

10 ITA No.14/CTK/2021 sustainable or not. As is discernible from the order, he has asked the AO to conduct an inquiry to verify the net commission transferred to P&L a/c afresh. The CIT has remained totally oblivious of the fact that the AO had already examined this aspect but the CIT had thought to direct a re-inquiry for merely a change of opinion which is impermissible under s. 263 of the Act. In this context, we may refer to the decision in Gabriel India Ltd. (supra) wherein the CIT, after scrutiny of the order of the ITO, found that the order did not disclose application of mind and despite examining the matter at length and hearing the assessee could not come to a definite conclusion that the expenditure was not revenue expenditure but expenditure of capital nature. He referred the matter back to the ITO to examine the same and to decide afresh. The said action of the CIT was not approved by the Tribunal. In that background, the High Court of Bombay expressed the view as follows : "From a reading of sub-s. (1) of s. 263, it is clear that the power of suo motu revision can be exercised by the CIT only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the ITO is 'erroneous insofar as it is prejudicial to the interests of the Revenue'. It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-s. (1). The consideration of the CIT as to whether an order is erroneous insofar 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 CIT acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The CIT 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." 18. In Sirpur Paper Mills Ltd. vs. ITO (1978) 114 ITR 404 (AP), it has been held that the Department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either on the facts disclosed or the weight of the circumstances. 19. If the obtaining factual matrix is tested on the anvil of the aforesaid pronouncement of law, it is quite clear that the CIT has really made an effort to cause a routine inquiry with regard to the matter that had already been concluded. The CIT, as it appears, has thought that he has the authority to begin a fresh litigation

11 ITA No.14/CTK/2021 because of the view entertained by him. The aforesaid inexhaustible approach is not permissible. He was required to arrive at a definite conclusion but he had not done so. 20. In view of our aforesaid analysis, we do not perceive any reason to interfere with the order of the Tribunal and, accordingly, we give the stamp of approval to the same. Consequently, the appeal, being devoid of merit, stands dismissed without any order as to costs. 12. Respectfully following the above proposition of law laid down by the Hon’ble Delhi High Court in the case cited supra, it cannot also be said that the Assessing Officer had failed to make any enquiry because no further enquiry was necessary and all the facts were before the Assessing Officer. If the Pr.CIT would have considered that further enquiry is necessary to prove that the order of AO is prejudicial to the interest of revenue, he himself would have conducted such enquiry but he had remitted the same to the AO under mere suspicion. Thus, we hold that the Pr. C.I.T. was not justified in setting aside the assessment order to the A.O. for passing fresh assessment order after making further inquiries/verifying the matters afresh. Accordingly, respectfully following the judgment of the Hon’ble Delhi High Court quoted above, we conclude that the Pr.CIT has wrongly invoked provisions of Section 263 of the Act in this matter, thus, we quash the impugned order passed by the ld. C.I.T. u/s.263 of the Act and allow the ground Nos.1 & 2 of assessee. 13. Since we have quashed the revisionary order passed u/s.263 of the Act, therefore, the ground No.3, raised by the assessee against the penalty directed to be initiated u/s.271A & 271B of the Act by the Pr.CIT, being consequential in nature, needs no adjudication.

12 ITA No.14/CTK/2021 14. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 30/03/ 2022.

Sd/- Sd/- (C.M.GARG) (ARUN KHODPIA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 30/03/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीलाथी / The Appellant- 1. Charchil Kumar Sahoo, Plot No.L/124, Phase-1, Dumduma H.B.Colony, Dumduma, Bhubaneswar-751019 2. प्रत्यथी / The Respondent- Pr.CIT, Bhubaneswar-1 आयकि आयुक्त(अऩील) / The CIT(A), 3. आयकि आयुक्त / CIT 4. ववभागीय प्रनतननधध, आयकि अऩीलीय अधधकिण, कटक / DR, 5. ITAT, Cuttack गार्ा पाईल / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यावऩत प्रनत //True Copy//

(Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack