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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per: Anikesh Banerjee, JM: The instant appeal of the assessee was filed against the order of the ld. Principal Commissioner of Income-l, Amritsar, (in brevity ‘the PCIT’) order passed u/s 263 of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2017-18. The impugned order was emanated from the order of ld. Income Tax Officer, Ward-5(1), Amritsar, (in brevity ‘the AO’) order passed u/s 143 (3) of the Act.
The assessee has taken the following grounds:
“1 That the ld.Pr.CIT-1, Amritsar has erred in initiating proceedings u/s 263 of the Act without application of mind purely on the basis of audit objection.
2 That the ld.Pr.CIT-1, Amritsar has erred in holding that the assessment order passed by the AO u/s 143(3) is erroneous in so far as prejudicial to the interest of revenue and setting aside the order of the AO with direction to make fresh assessment.
3 That Pr.CIT has erred in ignoring the fact that AO had framed assessment u/s 143(3) after thorough examination of case and collecting all the necessary evidence and material in respect of deposit for S. 1600000 by the assessee in her bank account during demonetization period.
4 That the ld.Pr.CIT-1, Amritsar has erred in completely ignoring the factthat this isnot the case where no enquiry or investigation by AO was made and so much soit wasnoteven the case of inadequate enquiry since assessment was framed after thorough examination and after examining all necessary evidences. Hence the provision of section 263 is not applicable in this case.
5 That the order passed by Pr.CIT-1, Amritsar is bad in law and on facts.
6 That the appellant craves leave to add or amend the ground of appeal before theappeal is heard and disposed off.”
Brief fact of the case is that the assessment was completed u/s 143(3) of the Act and the same assessment was initiated by the ld. AO under the CASS system with the reason “Large Value cash deposit during demonization period as compared to returned income”. The ld. AO asked the documents and details of cash deposit and source from the assessee. The assessee submitted the same and the order was passed as per acceptance of the returned income. The ld. PCIT issued notice invoking section 263 by considering the assessment order erroneous and prejudicial to the revenue. The ld. PCIT had grievance that the cash deposit during impugned assessment year was not verified the source by the ld. AO only relied on the assessee’s submission without proper verification.
Accordingly, the total cash deposit Rs.16 lac was treated as unverified cash deposit during demonetisation period. The ld. PCIT set aside the assessment order by treating it as erroneous and prejudicial to the interest of the revenue.
Being aggrieved assessee filed an appeal before us.
The ld. AR of the assessee has filed written submissions which are kept in the record. The ld. AR submitted that the details of cash deposit was duly submitted before the ld. AO in persuasion of the notice u/s 142(1). The ld. AR invited our attention in notice u/s 142(1) in APB page 1 and its annexure APB pages 4 to 7. The assessee explained the details of cash deposit before the ld. AO. The written submission is duly annexed in APB page 2 to 3. The ld. AR further relied on the catena of judgments which are reproduced as below:
CIT V Sunbeam Auto Ltd 332 ITR 167 (Del)
"Revision—Erroneous and prejudicial order—Lack of proper enquiry— There is a distinction between "lack of enquiry" and "inadequate enquiry"—If there is an enquiry, even inadequate, that would not by itself give occasion to the CIT to pass order under s. 263, merely because he has a different opinion in the matter—Such a course of action is open only in cases of "lack of enquiry"
CIT V Anil Kumar Sharma 335 ITR 83 (Del)
"Revision—Erroneous and prejudicial order—Lack of proper enquiry—CIT came to the conclusion that the issue relating to taxability of compensation received by the assessee was not examined by the AO and held that the order of the AO is erroneous and prejudicial to the interest of the Revenue—Tribunal has arrived at a conclusive finding that though the assessment order does not patently indicate that issue of the taxability of the compensation has been considered by the AO, the record shows that the AO had applied his mind—Thus, it is not a case of lack of enquiry evdn if the enquiry was inadequate and the CIT was not justified in passing the order under s. 263—Findings of the Tribunal quashing the order of the CIT passed under s. 263 do not warrant any interference"
CIT V Sohana Woollen Mills,[2008] 296 ITR 238 (Punjab & Haryana)
“Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Mere objection and merely because a different view could be taken, are not enough to say that order of Assessing Officer was erroneous or prejudicial to interest of revenue”.
The Hon’ble High Court of Delhiin case ofCIT vs. Sunbeam AutoLtd, 332 ITR 167 (Del.) held as under: -
“One has to keep in mind the distinction between 'lack of inquiry' and 'inadequateinquiry'. If there was any inquiry, even inadequate, that would not, by itself, giveoccasion to the Commissioner to pass orders under section 263 merely becausehe has different opinion in the matter. It is only in cases of 'lack of inquiry' thatsuch a course of action would be open”.
In the above view, we hold that the impugned order passed by thePCIT is perverse to facts on record in holding assessment order erroneousand prejudice to the interest of revenue on account of lack of enquiry.Accordingly, the order passed by the PCIT -1, Jalandhar u/s 263, iscancelled being bad in law.
In the result, appeal of the assessee is allowed.”
The ld. DR vehemently argued and first placed that the assessee declared the opening cash on April 2016 amount of Rs.11,25,000/- which was totalling unverified by the ld. AO. In respect to the cash withdrawn and deposit was not properly explained before the ld. AO during assessment proceeding. There is no evidence that the ld. AO had made the verification on this issue. He fully relied on the order of the ld. PCIT in para nos. 5 to 8 which are reproduced as below:
“05. All the replies filed by the assessee have been perused and duly considered and found not tenable on the ground that neither nexus of cash withdrawal before demonetization period and the same cash was deposited during demonetization by the assessee was verified/ examined nor any enquiry was conducted by the AO during the assessment proceedings. AO wrongly accepted the version of assessee. No any prudent person hold the alleged withdrawal of heavy amount in cash at home such a long time. The fabricated submission of assessee required thorough verification which AO completely failed to do so. This makes order defective and erroneous and prejudicial to the interest of revenue.
6. Attention of the assessee is invited to the amendment Explanation 2 has been inserted by Finance Act w.e.f. 01.06.2015 reproduced as under: -
Explanation 2: - For the purpose of this section, it is hq that an order passed by the Assessing Officer shall be erroneous in so far as it is prejudicial to the interests of the opinion of the 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 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.
07 In my view the order passed by the Assessing Officer also comes within the meaning of the explanation as the Assessing Officer has failed to make necessary inquiries or verification which should have been made. This results the assessment order for the year under consideration defective.
In view of para 05, 06 8s 07, I am of the considered opinion that the assessment order passed by the Assessing Officer is erroneous is in so far as it is prejudicial to the interest of revenue. Thus, assessment order under consideration is set aside. The Assessing Officer is directed to make denovo assessment after giving reasonable opportunity of being heard to the assessee in view of the observations made above.”
We heard the rival submission and considered the documents available in the record. From the perusal of the documents,it is clear that the ld. AO had accepted the documents persuasion of notice u/s 142(1). The details of the opening cash were duly submitted by the assessee during the assessment proceedings which is annexed in APB page no. 8. The issue cannot be said that there is a lack of verification. The ld. PCIT was unable to ascertain the fact that within the purview of limited scrutinythe ld. AO had not made the verification. The issue of lack of verification and inadequate verification is well settled in the case of Sunbeam Auto (supra) and Sunbeam Auto Ltd (supra). But the assessment was completed within limited purview by inadequate enquiry. We respectfully relied on the orders of the Hon’ble High Court of Delhi. The assessment order cannot be taken under purview of erroneous. Accordingly, we accept the assessee’s submission and allow the ground of appeal. Theimpugned order passed u/s 263 is quashed.
In the result, appeal of the assessee is allowed.