ARVINDER GANDHI,RANCHI V. PCIT, RANCHI

ITA 162/RAN/2023

AI Insights

The case revolves around an appeal by Arvinder Gandhi against the order of the PCIT, Ranchi, which was passed under section 263 of the Income Tax Act, 1961, for the Assessment Year 2017-18. The PCIT had revised the assessment order on the grounds that the AO had not adequately verified certain aspects such as sundry debtors and third-party transactions. However, the Tribunal found that the AO had indeed conducted a detailed inquiry into the cash deposits during the demonetization period and other related transactions, as evidenced by the comprehensive questionnaires issued and the responses provided by the assessee. The Tribunal highlighted that the mere inadequacy of inquiry does not justify the assumption of revisionary jurisdiction under section 263, referencing several judicial precedents that support this view.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 475574 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 25-07-2023
• Other Referred Cases: M/s Chandukaka Saraf & Co VS PCIT, CIT Vs. Ashish Rajpal, CIT Vs. Max India Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Revision of order; FORM 26AS
• Section: 142(1); 263; 13

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL \"RANCHI BENCH\", RANCHI Shri Partha Sarathi Chaudhury, Judicial Member Shri Ratnesh Nandan Sahay, Accountant Member I.T.A. No. 162/RAN/2023 Assessment Year: 2017-18 Arvinder Gandhi, Hindustan Infotech, Jain Temple Road, Upper Bazar, Ranchi - 834001 [PAN: ACEPG2966P] ............…...………… Appellant vs. PCIT, Ranchi, Central Revenue Building, 5A Main Road, Ranchi-834001 ........................... Respondent Appearances by: Assessee represented by : Devesh Poddar, Advocate Department represented by : Sanjay Kumar, CIT DR Date of concluding the hearing : 11.11.2024 Date of pronouncing the order : 20.11.2024 ORDER Per Partha Sarathi Chaudhury, Judicial Member: This appeal preferred by the assessee emanates from the order of Ld. Principal Commissioner of Income Tax, Ranchi (in short 'the Ld. PCIT\") dated 30.03.2022 passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the \"Act\") for Assessment Year 2017-18 as per the grounds of appeal on record. 2. That the solitary grievance of the assessee assailed through the grounds of appeal is the assumption of revisionary jurisdiction by the Ld. PCIT and passing order u/s 263 of the Act. 3. The relevant facts in this case are that the assessee had e-filed the return of income in original for Assessment Year (A.Y.) 2017-18 in I.T.A. No.162/RAN/2023 Arvinder Gandhi 2 respect of Financial Year (FY) 2016-17 on 10.10.2017 declaring total income at Rs. 76,63,680/-. This return was processed u/s 142(1) of the Act and subsequently the matter was selected for complete scrutiny through CASS for verifying the genuineness and source of cash deposited during demonetization period. In the proceedings before the AO, the assessee was asked to submit a detailed note on the nature and business carried on during FY 2014-15, 2015-16 and 2016-17, address of office or place of business/factory godown related to the company, details of the transaction undertaken with related concerns u/s 40A(2)(b) of the Act, details of loans advances and deposit given, details of bank account, details of secure loan borrowed, details of travelling allowance along with discount any incentive sales promotion expenses, details of any receipts for FY 2016-17 which have not been taken as income but which were required to be done so as per section 41(1) of the Act, details of sundry debtors, details of unsecured loans were called for by the AO. The assessee complied with these notices and furnished copy of ITR, computation of income along with bank statement, balance sheet, Form 26AS and all other relevant documents as being called for as aforestated. Therefore, the AO verified the genuineness and source of the cash deposit during demonetization period, carefully examining and verifying as stated at para 4.0 of the assessment order dated 10.12.2019 and consequently accepting the returned income filed by the assessee. 4. That as evident from the order of the Ld. PCIT passed u/s 263 of the Act, he observes that the AO did not verify the sundry debtors and the AO has not verified third party transactions. Therefore, the order passed by the AO was erroneous so as to be prejudicial to the interest of the revenue. I.T.A. No.162/RAN/2023 Arvinder Gandhi 3 5. At the time of hearing, the Ld. Counsel for the assessee demonstrated through the paper book filed, wherein at pages 13 and 14, there is a copy filed of the first notice issued dated 23.04.2019 by the AO to the assessee u/s 142(1) of the Act along with relevant questionnaire therein and at point No. 1 and 2, the AO had asked for complete postal address with PIN and PAN of the parties from whom cash was received during FY 2016-17 and also the main correspondence address with PIN and PAN of sundry debtors for FY 2016-17. Therefore, as evident, the AO in the first notice itself had enquired regarding the details of the cash receipts as well as had called for details of sundry debtors for FY 2016-17. Thereafter, another notice was issued by the AO u/s 142(1) along with questionnaire dated 03.12.2019 and therein at point No. 6, the AO had asked for complete details and source of cash deposited during the period of demonetization. The AO had also asked to clarify the reasons of abnormal increase in sales with decrease in profitability as compared to preceding previous years. The Ld. Counsel also demonstrated the reply filed by the assessee in this regard starting from page 39 onwards in the paper book. Further, at pages 50 to 61 of the paper book it was submitted by the Ld. Counsel that the assessee had furnished before the AO copy of ledger account, sundry debtors of both the proprietary concern of the assessee. The Ld. Counsel further submitted that the assessee had called for certified copy of the submission filed during assessment hearing and the AO has certified the copy and furnished the same to the assessee wherein it is evident that all the details and documentary evidences regarding cash deposit as well as sundry debtors have been filed by the assessee at the time of assessment proceedings as per enquiry by the AO. This is demonstrated at pages 17-18 onwards in the paper book. Finally, the Ld. Counsel submitted that hence the AO has duly considered the I.T.A. No.162/RAN/2023 Arvinder Gandhi 4 submission of the assessee along with books of account and other relevant documents on record and thereafter, framed the assessment accepting the returned income of the assessee. 6. Per contra, the Ld. DR supported the order of the Ld. PCIT u/s 263 of the Act and submitted that the assessee had not furnished individual ledger account and the name and address of the parties. The Ld. DR submitted that there is inadequate enquiry conducted on the part of the AO. 7. We have carefully considered the submission of the parties, analysed the facts and circumstances in this case and have provided thoughtful consideration to the documents on record. That once the case of the assessee was selected for complete scrutiny under CASS, statutory notices were issued and we have examined in the course of hearing that detailed questionnaires were issued by the AO wherein all the details regarding the cash deposit during demonetization and the details of sundry debtors for FY 2016-17 were called for and examined by the AO. Similarly, the assessee had also furnished the detailed reply including the ledger account of sundry debtors of both the proprietary concern of the assessee before the AO. The Ld. DR could not refute these facts on record. That as evident from documents enclosed in the paper book, detailed enquiry has been done by the AO regarding cash deposits as well as sundry debtors, which is even accepted by the department and the Ld. DR had only submitted that individual ledger account of the parties were not produced and thereby it is a case of inadequate enquiry by the AO. That when in this present case of the assessee was subjected to scrutiny for cash deposit during demonetization and in that regard the issue of sundry debtors were even examined by the AO then in such scenario, the Ld. PCIT could not have resorted to assuming revisionary jurisdiction and passing an I.T.A. No.162/RAN/2023 Arvinder Gandhi 5 order u/s 263 of the Act. Mandate of the law is very clear that there is a difference between inadequate enquiry by the AO and no enquiry at all. That in this case even the Ld. DR accepts it can at best be called a case of inadequate enquiry by the AO. However, as we have examined the AO has considered all documentary evidences relevant to the case of the assessee and then has accepted the returned income. This case will also not came in the category of inadequate enquiry. That for academic purpose even if it is assumed for a moment that it is a case of inadequate enquiry then also the Ld. PCIT is not legally mandated to pass an order u/s 263 of the Act. The coordinate Bench of the Pune in the case of M/s Chandukaka Saraf & Co VS PCIT in ITA No. 759/Pun/2019 dated 19.12.2019 have held that the Ld. PCIT can exercise revisionary power u/s 263 of the Act only in case when there is no enquiry conducted by the AO. Further, the Hon'ble Delhi High Court in the case of CIT Vs. Ashish Rajpal 320 ITR 674 (Delhi) have observed and held that where the AO during the scrutiny assessment proceedings has raised a query which was answered by the assessee to the satisfaction of the AO but the same was not reflected in the assessment order conclusion cannot be drawn by the Commissioner that no proper enquiry with respect to the issue was made by the AO enabling him to assume jurisdiction u/s 263 of the Act. In CIT Vs. Max India Ltd. (2007) 295 ITR (SC) it was held that the phrase \"prejudicial to the interest of revenue in section 263 has to be read in conjunction with the expression erroneous\". When the AO takes one of the two views permissible in law and which the Commissioner does not agree with it cannot be treated as erroneous or prejudicial to the interest of the revenue unless the view taken by the AO is completely unsustainable in law. Reverting to the facts of the present case, the AO had issued questionnaire to the assessee asking for production of entire details of transaction undertaken with other business concerns, I.T.A. No.162/RAN/2023 Arvinder Gandhi 6 details of deposits of cash, loans, details of sundry debtors and unsecured loans as evident from the assessment order itself dated 10.12.2019 and therefore, when all the possible enquiry has been done by the AO, in such scenario, as per the legal principles enshrined in the aforestated judicial mandate the said assessment order cannot be termed as erroneous so as to be prejudicial to the interest of the revenue. The AO has done all necessary enquiry and had verified the genuineness of cash deposited during demonetisation. The Ld. PCIT has therefore erred in law in assuming revisionary jurisdiction and passing order u/s 263 of the Act which is therefore, arbitrary and bad in law. In view thereof, we set aside the order passed by the Ld. PCIT and allow the appeal of the assessee. 8. In the result, the appeal of the assessee is allowed. Order pronounced on 20.11.2024. Sd/- Sd/- [Ratnesh Nandan Sahay] [Partha Sarathi Chaudhury] Accountant Member Judicial Member Dated: 20.11.2024. AK, PS (on tour) I.T.A. No.162/RAN/2023 Arvinder Gandhi 7 Copy of the order forwarded to: 1. Arvinder Gandhi 2. PCIT, Ranchi 3. CIT(A) 4. Pr. CIT 5. CIT(DR) 6. Guard File //True copy// BY ORDER, (Senior Private Secretary) (On Tour), ITAT, Ranchi "