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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
The instant appeal of the assessee was filed against the order of the ld.
Principal Commissioner of Income-tax-I, Amritsar (in brevity ‘the PCIT’) order passed u/s 263 of the Income-tax Act (in brevity the Act) for assessment year 2017-18. The assessment was duly framed by the 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 on the facts and circumstances of the case and in law, the order dated 22.03.2022 passed by the Ld CIT, Amritsar under section 263 holding the assessment order dated 24.12.2019 to be erroneous in so far as it is prejudicial to interests of revenue on certain issues, is beyond jurisdiction, bad in law and void ab initio.
2. That the Ld CIT, Amritsar erred on facts and in law in setting aside the assessment order dated 24.12.2019, without conducting his own inquiry or verification to establish that the assessment order is not sustainable in law nor is there any conclusive finding on merits as to how the assessment order was erroneous as well as prejudicial to the interests of Revenue.
3. That on the facts and circumstances of the case and in law, the Ld CIT, Amritsar has erred in exercising jurisdiction u/s 263 of the Act as the show cause notice dated 09.03.2022 issued in the present case alleges that no independent enquires were made by the Ld. AO, where as in the order passed u/s 263, the Ld CIT, Amritsar alleges that the AO failed to make necessary enquires or verification which should have been made.
4. That on the facts and circumstances of the case and in law, the order dated 22.03.2022 passed by the Ld CIT, Amritsar under section 263 is beyond jurisdiction, bad in law and void ab initio since during the course of assessment proceedings, the Ld: AO made proper enquiry and verified the facts which should have been made by issuing notice u/s 142(1) along with questionnaire dated 18.09.2019 containing 59 questions and another notice u/s 142(1) along with questionnaire dated 21.12.2019 which were duly replied to by the assessee.
5. That during the course of assessment proceedings, the Ld AO made proper enquiry and examined facts and accepted the source of cash
deposited during the demonetization period, could not be said that the Ld. AO failed to make necessary enquires or verification which should have been made.
6. The appellant craves leave to add, amend or vary from the above grounds of appeal at or before the time of hearing.”
The brief fact of the case is that during the demonetisation period the assessee deposited cash amount to Rs.41,49,000/- in its bank a/c. The assessee claimed that as per “online response” filed on e-filing portal the payment of cash sales of the unidentifiable persons was duly submitted before the assessing authority. The assessee filed return with a total income of Rs.4,17,700/-. The notice u/s 143(2) was issued and the assessee time to time had complied the notice. The details about the cash sale related to cash deposited in the bank account amount of Rs.41,49,000/- was filed. The assessment was completed, and the ld. AO accepted the cash sale which was deposited in the bank account of assessee. The notice u/s 263 was issued. The grievance of the ld. PCIT was that there is no such independent inquiry was conducted by the ld. AO during assessment proceeding. So, the assessment order is erroneous and prejudicial to the interest of the revenue. The hearing was completed related to proceeding U/s
Accordingly, the assessment order u/s 143 (3) was duly set aside for fresh assessment. Being aggrieved assessee filed an appeal before us by challenging the revision order, passed u/s 263.
The ld. AR for assessee filed written submission, which is kept in the record. The ld. AR first pointed out that the proceeding u/s 263 was initiated without proper verification of the assessment record and the ld. PCIT had not made any specific inspection related to the cash sale of the assessee. The assessee is a medicine whole seller and sold the medicine equipment. The sale was made to the unidentified person and the details was duly filed during the demonetisation as per the CBDT Instruction No. 4/2017 dated 03/03/2017 during notice U/s 142(1) issued and the query was duly complied. The ld. AO issued further notice to the assessee and for asking the details. The stock register, sale register, VAT return were duly filed before the ld.AO. The assessee explained the stock and the sale which are supported the cash deposited in the bank.
4.1 The ld. AR further submitted that during hearing u/s 263, the assessee submitted all the details before the revisional authority. Although the entire documents were duly produced before the ld. PCIT, copies are annexed in APB page nos. 237 to 345.
4.2 The ld. AR further replied that the assessee has no control about the observation of the ld. AO which will be drafted in the order of assessment, but ld. AO had applied his mind by issuing the notice u/s 142(1) repetitively related to this cash sale. The assessee fully relied on the order of the Hon’ble High Court of Punjab & Haryana in the case of Hari Iron Trading Company Vs. CIT (2003) 263 ITR 437. The relevant paragraph is extracted as below:-
“The Commissioner can exercise powers under subsection (1) of section 263 of the Income-tax Act, 1961, only after examining the record of any proceedings under the Act. The expression "record” has been defined in clause (b) of the Explanation so as to include all records relating to any proceedings available at the time of examination by the Commissioner. It is not only the assessment order but the entire record which has to be examined before arriving at a conclusion as to whether the Assessing Officer had examined any issue or not..................”
“..............The assessee had no control over the way the assessment order was drafted."
4.3 The assessee further relied on the orders of Hon’ble Supreme Court in the case of Lalchand Bhagat Ambica Ramvs. CIT [1959] 37 ITR 288.Held
“Section 143 of the Income-tax Act, 1961 - Assessment - Addition to income - Assessment year 1946-47 - Assessee carried on extensive business in grain as merchant and commission agent - Assessee maintained its books of account according to mercantile system and there were maintained in its cash books two accounts: one showing cash balances from day to day and other known as "Almirah account" wherein were kept large balances which were not required for day-to-day working of business - It filed its return showing loss in business - However, ITO noticed that assessee had encashed high denomination notes of value of Rs. 2.91 lakhs on 19-1-1946 - Assessee's explanation that those notes formed part of its cash balances including cash balances in Almirah account was rejected by ITO who took into account several surrounding circumstances and included said sum in its total income - ITO also found that portions of entries in assessee's accounts to effect that money's had been received in high denomination notes were subsequent interpolations - Before Tribunal assessee stated that said entries were made in nervousness after coming into force of High Denomination Bank Notes (Demonetization) Ordinance, 1946 on 12-1-1946, as it did not know it had specific proof in its possession of having high denomination notes as part of its cash balances - Tribunal accepted assessee's explanation in respect of said interpolations and held that there was no other reason to suspect genuineness of account books - It was also found that as per book entries cash balance on 12- 1-1946 aggregated to more than Rs. 3.1 lakh - However, examining cash book and taking into account all circumstances adverted to by ITO, Tribunal held that assessee might be expected to have possessed as part of its business cash balance of at least Rs. 1.5 lakhs in shape of high denomination notes on date when said ordinance was promulgated but nature of source from which it derived remaining high denomination notes remained unexplained - Accordingly, Tribunal reduced addition - Whether when entries in books of account in regard to cash balances were held to be genuine, there was no escape from conclusion that assessee had offered reasonable explanation as to source of all high denomination notes which it encashed on 19-1-1946 and it was not open to Tribunal to accept genuineness of those books and accept assessee's explanation in part and reject same in regard to balance sum - Held, yes - Whether, therefore, it was clear that Tribunal in arriving at its conclusion indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained or finding was perverse which could not be sustained and Supreme Court was entitled to interfere with such finding - Held, yes - Whether, therefore, addition made was liable to be deleted - Held, yes”
The ld. DR. vehemently argued and relied on the order of the ld. PCIT order which is reproduced as below:
We heard the rival submissions and relied on the documents available in the record. During the hearing the ld. AR submitted catena of judgment which are reproduced as below.
6.1. Hon’ble Supreme Court of IndiaPrincipal Commissioner of Income-tax, Surat-2vs ShreejiPrints (P.) Ltd, [2021]130 taxmann.com 294 (SC). The relevant paragraph is extracted as below: -
“Section 69, read with section 263, of the Income-tax Act, 1961 -Unexplained investments (Unsecured loans) - Assessment year 2013-14 – Assesseecompany had received unsecured loans from two different companies - Commissioner noting that said loans were shown as investment in assessee’s name in balance sheet of respective companies exercised his revisionary powers and passed an order without giving an opportunity to assessee of being heard, invoking Explanation 2 to section 263 - High court by impugned order held that since Assessing Officer has made inquiries in details and accepted genuineness of loans received by assessee, such view of Assessing Officer was a plausible view and same cannot to be considered erroneous or prejudicial to interest of revenue - Whether SLP against said impugned order was to be dismissed - Held, yes” 6.2. ITAT, Amritsar Bench in the case of Smt. Rajinder Kaur Vs. ITO, Date of Pronouncement- 22/03/2023.
“7. Heard rival contentions, perused the material on record, impugned order, written submission and case law cited before us. Admittedly, the proceedings were initiated u/s 263 of the Act on the basis of audit objection (APB, Pgs. 13-16) and consequent order passed u/s 263 of the Act is opposed to judgment of Honourable Punjab and Haryana High Court in the case of SOHANA WOOLLEN MILLS (Supra).
8. From the record, it is established that the Ld. PCIT has initiated the proceedings u/s 263 of the Act by invoking
provisions contained in clause (a) of explanation 2 to sub section 1 of section 263 of the Act. In our view, the subject proceeding initiated by the Ld. PCIT u/s 263 of the Act, is illegal and bad in law, since the provisions contained in clause (a) of explanation 2 below to section of section 263 of the Act were introduced by Finance Act 2015 are not applicable retrospectively and therefore, clause (a) of explanation 2 to sub section 1 of section 263 of the Act, is not applicable to Assessment Year (2011-12), under consideration.
In the above view, we hold that the order of the Learned Commissioner of Income Tax, Jalandhar-l (‘Ld. CIT’) passed u/s 263 of the Act, is bad in law and as such it is quashed.
In the result, appeal of the assessee is allowed.”
Cash sales of the assessee were duly verified before the ld. AO during the scrutiny proceedings. Before the assessment proceeding, the detail of sales was submitted online as per the CBDT Circular. We respectfully relied on the order of Hon’ble jurisdictional High Court in the case of Hari Iron Trading Company(supra).The record means not the assessment order but the whole assessment record. Werespectfully consider the orders of Apex court & coordinate bench, the investigation by the ld. AO cannot be called ‘lack of investigation’. The ld. PCIT was not adduced any contrary material on record to show that the view taken by the ld. AO is erroneous and there is no investigation on part of the ld. AO. There is multiplicity of investigation in same cash sales related cash deposit in bank of assessee. In the light of these discussions and placing respectful reliance on the decisions of Hon'ble Supreme Court, Hon’ble jurisdictional High Court& Coordinate bench of Amritsar, supra, in our considered view the ld. PCIT is not justified in setting aside the order of the ld. AO. Accordingly, the order U/s 263 of the ld. PCIT is quashed.
In the result, appeal of the assessee is allowed.