LEELA GUPTA ,JALANDHAR vs. PRINCIPAL COMISSIONER OF INCOME TAX-1, JALANDHAR

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER

I.T.A. No.75/Asr/2022 Assessment Year: 2017-18

Leela Gupta, Vs. Pr. Commissioner of 139, Defence Colony, Jalandhar Income Tax-1, [PAN:-AAUPG5480E] Jalandhar. (Respondent) (Appellant)

Appellant by None Respondent by Sh. Anupam Kant Garg, CIT. Dr.

Date of Hearing 12.09.2022 Date of Pronouncement 15.09.2022

ORDER Per:Anikesh Banerjee, JM:

The instant appeal of the assessee is directed against the order of the ld. Principal Commissioner of Income Tax, Jalandhar-1, [in brevity the ld. PCIT]

bearing appeal no.DIN & Order No. ITBA/REV/F/REV5/2021-22/1040362167(1),

I.T.A. No.75/Asr/2022 2

date of order 04.03.2022, the order passed u/s 263 of the Income Tax Act 1961, [in

brevity the Act] for A.Y. 2017-18.The impugned order was originated from the

order of the Income Tax Officer, Ward 3(5), Jalandhar, (in brevity the AO) order

passed u/s 143(3) of the Act date of order 13.12.2019. 2. The brief fact of the case is that the assessee deposited Rs.12 lac in different

dates during the demonetisation period in her bank account from dated 18.11.2016

to 21.11.2016 in different dates each amount of Rs.2 lac. The assessment was

selected for “limited scrutiny” under CASSconsidering the large value of cash

deposits during the demonetisation period. The information was called for by the

ld. AO. After the detailed examination by issuing notice u/s 142(1) the assessing

authority was satisfied & had completed the scrutiny with Nil demand. After the

order of ld. AO u/s 143(3), the ld. PCIT had issued the notice u/s 263 for

incomplete verification during assessment related to deposit of cash during

demonetisation period. Considering the assessment order as erroneous, the ld.

PCIT had set aside the order of ld. AO and directed for fresh assessment.

I.T.A. No.75/Asr/2022 3

assessee. The matter was taken up for adjudication with the consent of ld. CIT DR.

The orderod assessment was passed u/s 143(3). The relevant para of theorder of

PCIT is extracted as below:- “Return declaring income of Rs.5,43,450/- was e-filed by the assessee vide acknowledgment no. 558876240300318 on 30.03.2018, which was processed u/s 143(3) of the Income Tax Act, 1961. Later on, the case of the assessee was picked up for 'Limited' scrutiny under CASS on the reason of “Large value of cash deposits during demonetization period as compared to returned income''. Accordingly, statuary notices u/s 143(2)/142(1) were issued, served and complied with, electronically on the ITBA portal. During the year, the main source of income of assessee is income from house property. 2 in response to statutory notices, the assessee furnished the requisite information as called for on ITBA portal, which is placed on record. The information filed, supporting documents produced and submissions made by the assessee have been considered and issues arising from the return of income as compared to reasons for selection under CASS have been examined. Reply w.r.t. reasons for CASS selection have been obtained, supporting documents were test checked and found to be satisfactory.

I.T.A. No.75/Asr/2022 4

3 After examination and due consideration of written submissions filed by the assessee, returned income is accepted. Assessed. Issue requisite documents.”

aspect for initiation of notice U/s 263. The extract of the relevant para of the order

of PCIT is extracted as below:- “The assessee had deposited cash of Rs. 12,00,000/- during the demonetization period in her bank account No. 55036514315 maintained with SBI as under: Date Cash deposited 18.11.16 2,00,000/- 18.11.16 2,00,000/- 19.11.16 2,00,000/- 19.11.16 2,00,000/- 21.11.16 2,00,000/- 21.11.16 2,00,000/- (ii). During assessment proceedings, in response to notice u/s 142(1) dated 14.10.2019, the assessee filed reply on 6.11.2019 and submitted the source of cash deposited in her bank account during demonetization to be as under:

I.T.A. No.75/Asr/2022 5

- Cash of Rs 2,60,000/-, out of gift received from husband Sh. Jai Parkash Gupta. - Cash of Rs 2,50,000/-, from cash gift from son Sh.Sunil Gupta . - Cash of Rs 2,10,000/-, out of advance rent received from son Sh Ravi Gupta . - Cash of Rs 2,30,000/-, deposited out of opening cash in hand. - Cash of Rs 2,50,000/-, out of past personal savings. In support of above explanation, she filed confirmations from her husband Sh. Jai Parkash Gupta and son Sunil Gupta stating that they had given cash gifts to the assessee. Copies of Acknowledgements of their ITRs for AY 2017-18 were filed. A confirmation from her other son Ravi Gupta was filed stating that he had paid cash rent in advance to the assessee. No source or details of cash-in-hand or of the personal savings was filed. (iii). The AO was not satisfied with the above documents/ explanation filed by the assessee. So, vide notice u/s 142(1) of the Act dt 8.11.19, the assessee was asked by the AO to furnish the position of her cash in hand as on 31.3.15 and 31.3.16 . She was also asked to explain how the personal savings of Rs 2,50,000/- were accumulated. Vide further notice u/s 142(1) of the Act dt 2.12.19 the AO informed the assessee that the confirmations filed from son and husband were not satisfactory as even dates of the cash gifts had not been mentioned.

I.T.A. No.75/Asr/2022 6

The assessee was asked to file bank statements of her husband and son from whom she had claimed the cash gifts of Rs 2,60,000/- and Rs 2,50,000/-. Similarly, the date of payment of the advance rent had not been mentioned in the confirmation filed. The asessee was asked to file copy of Rent Deed executed by her with her son Sh Ravi Gupta from whom she had claimed receipt of Rs. 2,10,000/- as rent in advance in cash . (As per the reply of the asessee, rent was being received @ Rs 70,000/- per month).” 6. The ld. CIT DR vehemently argued and relied on the order of the ld. PCIT.

He further argued that the order which was passed by the ld. AO is a very cryptic

order. The verification was not done completely. The source of cash deposited was

not verified. So, the entire order of the ld. AO is erroneous and prejudicial to the

interest of the revenue.

But the assessing authority was satisfied on basis of his verification and documents

which was produced by the assessee during the assessment proceeding. The

scrutiny was started on basis of CASS forlarge number of cash deposit. The issue

was delt by the AO & considered the explanation of assessee. The entire

I.T.A. No.75/Asr/2022 7

assessment was only for cash deposit issue. The AO reached the finality on basis of

submission of assessee.

7.1. We have noticed earlier that the Ld Pr. CIT can revised the order only if it is

shown that the assessment order is erroneous in so far as prejudicial to the interests

of the revenue. The question as to when an order can be termed as "erroneous" was explained by Hon'ble Bombay High Court in the case of Gabriel India Ltd [1993]

203 ITR 108/71 Taxman 585 (Bom.)as under: — "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 the 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

I.T.A. No.75/Asr/2022 8

accounts or by making some estimate himself. The Commissioner, on perusal of

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 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 a 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 the 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."

The Hon'ble High Court has considered the definitions given to the words "erroneous", "erroneous assessment" and "erroneous judgment" in Black's

Law Dictionary and accordingly held that an order cannot be termed as erroneous

I.T.A. No.75/Asr/2022 9

unless it is not in accordance with law. An order can be termed as "erroneous" only

if it is not in accordance with the law.

7.2. The Hon'ble Delhi High Court has also followed the above said view in the case of Sunbeam Auto Ltd. [2011] 332 ITR 167/[2010] 189 Taxman 436 (Delhi). The Hon'ble Delhi High Court has also extracted following observations

made by the Tribunal: —

"38. Still further, the Hon'ble Supreme Court in Malabar Industrial Co. (2000) 243

ITR 83 has held that when two views are possible and the Assessing Officer has

taken one of the possible view, then the order cannot be held to be prejudicial to

the interest of the Revenue. Since the Commissioner of Income tax could not come

to a definite finding that the expenditure in question was a capital expenditure in

the proceedings under section 263, in our opinion, the order of the assessing

officer could not be held to be erroneous." 7.3. In the case of CIT v. Nagesh Knitwears (P.) Ltd. [2012] 345 ITR 135/210 Taxman 145/22 taxmann.com 309 (Delhi), the Hon'ble Delhi High Court has

elucidated and explained the scope of the provisions of sec. 263 of the Act and the same has been extracted by the Delhi High court in the case of CIT v.

I.T.A. No.75/Asr/2022 10

Goetze(India) Ltd. [2014] 361 ITR 505/225 Taxman 133/44 taxmann.com 138 as under: —

"Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income

tax has to come to the conclusion and himself decide that the order is erroneous,

by conducting necessary enquiry, if required and necessary, before the order under

section 263 is passed. In such cases, the order of the Assessing Officer will be

erroneous because the order is not sustainable in law and the said finding must be

recorded. The Commissioner of Income tax cannot remand the matter to the

Assessing Officer to decide whether the findings recorded are erroneous. In cases

where there is inadequate enquiry but not lack of enquiry, again the Commissioner

of Income tax must give and record a finding that the order/inquiry made is

erroneous. This can happen if an enquiry and verification is conducted by the

Commissioner of Income tax and he is able to establish and show the error or

mistake made by the Assessing officer, making the order unstainable in law. In

some cases possibly though rarely, the Commissioner of Income tax can also show

and establish that the facts on record or inferences drawn from facts on record per

se justified and mandated further enquiry or investigation but the Assessing officer

I.T.A. No.75/Asr/2022 11

had erroneously not undertaken the same. However, the said finding must be clear,

unambiguous and not debatable. The matter cannot be remitted for a fresh

decision to the Assessing Officer to conduct further enquiries without a finding that

the order is erroneous. Finding that the order is erroneous is a condition or

requirement which must be satisfied for exercise of jurisdiction under section 263

of the Act. In such matters, to remand the matter/issue to the Assessing Officer

would imply and mean the Commissioner of Income tax has not examined and

decided whether or not the order is erroneous but has directed the Assessing

Officer to decide the aspect/question…."

7.4. The law interpreted by the Hon’ableHigh Courts make it clear that the Ld.

PCIT, before holding an order to be erroneous, should have conducted necessary

enquiries or verification in order to show that the finding given by the assessing

officer is erroneous, the Ld. PCIT should have shown that the view taken by the

AO is unsustainable in law. In the instant case, the Ld PCIT has failed to do so and

has simply expressed the view that the assessing officer should have conducted

enquiry in a particular manner as desired by him. Such a course of action of the Ld.

PCIT is not in accordance with the mandate of the provisions of sec. 263 of the

I.T.A. No.75/Asr/2022 12

Act. The Ld Pr. CIT has taken support of the newly inserted Explanation 2(a) to

sec. 263 of the Act. The said explanationwas inserted by Finance Act 2015 w.e.f.

1.4.2015. If that be the case, then the Ld. PCIT can find fault with each and every

assessment order, without conducting any enquiry or verification in order to

establish that the assessment order is not sustainable in law and order for revision.

He can also force the AO to conduct the enquiries in the manner preferred by Ld.

PCIT, thus prejudicing the independent application of mind of the AO. Definitely,

that could not be the intention of the legislature in inserting Explanation 2 to sec.

263 of the Act, since it would lead to unending litigations and there would not be

any point of finality in the legal proceedings. The Hon'ble Supreme Court has held in the case of Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1

that there must be a point of finality in all legal proceedings and the stale issues

should not be reactivated beyond a particular stage and the 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.

7.5. 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

I.T.A. No.75/Asr/2022 13

should have been made. In our considered view, this provision 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. PCIT 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. PCIT 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. PCIT to show that

the enquiries or verification conducted by the AO was not in accordance with the

enquiries or verification that would have been carried out by a prudent officer.

7.6. During the notice u/s 142(1) the assessee submitted the relevant documents

before the revenue authorities. On basis of these documents the order was passed

I.T.A. No.75/Asr/2022 14

by the ld. AO. It cannot be said that the issue was untouched and unverified by the

assessing authority. Mere change of opinion an order cannot be called as

erroneous. We directed that the order passed by the PCIT is unjust for, and the

order is setting aside.

allowed.

Order pronounced in the open court on15.09.2022

Sd/- Sd/-

(Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member

AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.