M J GOLD PRIVATE LIMITED,MEERUT vs. PR,CIT GHAZIABAD, GHAIZABAD

Briefly stated the facts of the case are that the assessee filed its return of income showing total income at Rs.1,32,74,001/- on 26.10.2017. The return was selected for scrutiny assessment under CASS and accordingly statutory notices were issued and served upon the assessee. After scrutinizing the return of income the returned income of Rs.1,32,74,001/- was assessed at Rs.19,44,43,860/-.

Assuming jurisdiction conferred upon him by the provisions of section 263 of the Act. The Pr. CIT issued a show cause notice to the assessee alleging the following :-

It would be pertinent to mention here that as per CASS selection reasons and issue, the following rational was provided in the assessment year for selection for scrutiny :- a) Large squared up loans during the year b) abnormal increase in cash deposited during demonetization period as compared to pre-demonetization period.

During the course of the scrutiny assessment proceedings the AO did not make any observation with respect to the issue of large squared up loans during the year. In so far as abnormal increase in cash deposited during demonetization period is concerned Investigation was conducted by the Director of Income Tax Wing-2, Meerut and statement was recorded of Mr. Rishab, Maheshwari Director of the assessee company. It was observed by the DDIT-II, Meerut that out of total cash sales of Rs.34.45 crores almost 21.94 crore cash has been deposited in the month of October and November. Further Rs. 12 crores cash deposited in the month of November itself which shows cash sales and deposit is highly skewed and points towards infirmity in month wise sales.

Further bank transfers from customers were examined as per information received from ITO, Ward-2(3), Meerut informing that the one M/s. Vaishno had deposited cash of Rs.1,27,97,500/-in his bank account during demonetization out of which Rs.86,50,000/- was transferred to the assessee immediately through RTGS. It was noted by the AO that these facts were also observe by him and same stand corroborated by the report of investigation wing.

We find that the assessee had filed various submissions and documents in response to the allegations raised by the AO during the assessment proceedings. After satisfying himself no addition was made by the AO with respect to the bank transfers received by the assessee. However, the AO made addition of Rs.18,11,69,860/- being the cash deposited by the assessee in its bank accounts between 09.11.2016 and 30.12.2016 u/s.68 r.w.s. 115BBE of the Act. 9. Assuming jurisdiction u/s.263 of the Act the Pr. CIT, Ghaziabad framed the order. The observations of the Pr. CIT can be summarized as under :-

We have given a thoughtful consideration to the orders of the authorities below. In our considered opinion section 263 does not envisage of substution of judgment of the CIT from that of the AO who has passed the assessment order unless the said order is held to be erroneous. Hon’ble Delhi High Court in the case of DG Housing Projected Limited 343 ITR 329 has held :- “term as erroneous means a wrong / incorrect decision deviating from law”.

Hon’ble Bombay High Court in the case of Gaberiel India Ltd. 203 ITR 108 has held as under :-

In our understanding of the aforementioned judgment of the Hon’ble High Court an order cannot be termed as erroneous unless it is not in accordance with law. In our understanding if an officer acting in accordance with law makes a certain assessment the same cannot be branded erroneous by the Commissioner simply because according to him the order should have been written more elaborately.

The commissioner, on perusal of the records may be of the opinion that the estimate by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at figure higher than one determined by the officer that would not vest the commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the officer is exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion.

In the light of the aforementioned decision of the Hon’ble High Court and considering the provisions of section 263 of the Act we are of the considered view that

The facts on record show that during the course of the scrutiny assessment proceedings the AO has extensively incorporated findings about the sales, purchase, cash deposit during and before the demonetization period with respect to the bank transfers made by the customers the assessee filed various details like bank statements, sales bills from all parties during demonetization period and details of credit/ cash sales from F.Y.2015-16 to 2018-19. We further find that the AO had thoroughly analysed the sales data of the assessee which is evident from page 2 and 3 of the assessment order.

It can be seen that the AO has specifically observed that the sales made by the assessee were abnormally high during the demonetization period which fact was relied upon by the AO while making addition of cash deposited u/s.68 of the Act.

From the facts discussed here in above we are of the considered view that if the AO had conducted an enquiry as he deemed fit then further enquiries cannot be a valid basis for issuance of notice for revision u/s. 263 of the Act. It has to be kept in mind that there is a distinction between lack of enquiry and inadequate enquiry. In our considered view if there was an enquiry, even inadequate that would not by itself gave occasion to the Commissioner to pass order u/s. 263 of the Act merely because he has a different opinion in the matter. The Pr. CIT cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded.

It would not be out of place to point out that the assessments of M/s. Vaishno Associate proprietor Gaurav Sahai was framed u/s. 144 vide order dated 24.12.2019 wherein the addition of Rs.1.27 crores was made by the AO. This order was before the assessment of the present assessee which means that the source of the cash deposit on account of money received from M/s. Vaishno Associate is self explanatory as per assessment order of M/s. Vaishno Associate. This means that to this extent the observations by the Pr. CIT are itself erroneous and against the facts on record.

The Hon’ble High Court in the case of Gabriel India Ltd. 203 ITR 108 has held as under :-

Considering the facts of the case in totality in the light of the judicial decisions discussed here in above we are of the considered opinion that no enquiry or investigation has been made by the Pr. CIT, Ghaziabad with respect to the issues raised u/s. 263 of the Act. The Pr. CIT, Ghaziabad has failed to bring on record cogent evidences in support of his allegation for the order passed by the AO is erroneous in as much as it is pre judicial to the interest of the revenue. For this proposition we draw support from the decision of the Hon’ble Delhi High Court in the case of DG Housing Projects Limited 343 ITR 329 wherein Hon’ble High Court held as under :

In the light of the above we set aside the order of the Pr. CIT, Ghaziabad dated 29.03.2022 and restore that of the AO dated 31.12.2019. The appeal is accordingly allowed.