CHOKSI RANCHHODLAL KISHORDAS,AHMEDABAD V. THE PR. CIT, AHMEDABAD-1, AHMEDABAD

ITA 558/AHD/2024

AI Insights

The case involves Choksi Ranchhodlal Kishordas, the appellant, contesting the order of the Principal Commissioner of Income Tax, Ahmedabad-1, which invoked revisional jurisdiction under Section 263 of the Income Tax Act, 1961, for the Assessment Year 2013-14. The PCIT had directed a fresh assessment, believing the original assessment order was erroneous and prejudicial to the Revenue's interests, as it did not add income believed to have escaped assessment. This was based on the premise that the assessee had received a substantial amount from Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd., allegedly a conduit for unaccounted cash. The ITAT, after reviewing the submissions and evidence, found that the AO had adequately inquired into the matter during reassessment proceedings and that the assessee had provided sufficient evidence to substantiate the transactions.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 835967 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 28-03-2024
• Other Referred Cases: Siddhi Infrabuild (P.) Ltd. vs. PCIT, Commissioner of Income Tax vs. Nirma Chemicals Works (P.) Ltd., PCIT vs. Shreeji Prints (P.) Ltd., Ramotar Choudhari HUF vs. PCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: RUSHIN PATEL
• Keywords: Set aside; Business income; Reassessment proceedings; Corroborative evidences; Unexplained cash credit; Reason to believe; Revision of order; Co-operative Credit Society
• Section: 263; 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 558/Ahd/2024 (िनधा[रण वष[ / Assessment Year : 2013-14) Choksi Ranchhodlal Kishordas 2219/1, Manekchowk, Opp. Police Chowki, Ahmedabad, Gujarat – 380001 बनाम/ Vs. Principal Commissioner of Income Tax Ahmedabad-1, Ahmedabad Öथायी लेखा सं./जीआइआर सं./PAN/GIR No. : AACFC1913A (Appellant) .. (Respondent) अपीलाथȸ ओर से /Appellant by : Shri Rushin Patel, AR Ĥ×यथȸ कȧ ओर से/Respondent by : Shri Rignesh Das, CIT.DR Date of Hearing 17/12/2025 Date of Pronouncement 09/02/2026 (आदेश)/ORDER PER ANNAPURNA GUPTA, AM: The present appeal has been filed by the assessee against the order of the Principal Commissioner of Income Tax, PCIT, Ahmedabad-1 (hereinafter referred to as “PCIT”), dated 21.03.2024 invoking his revisional jurisdiction under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2013-14. Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 2 – 2. The grounds of appeal raised by the assessee read as under: “1. The Principal C.I.T. erred in law and on fact in holding that assessment order passed u/s.143(3) r.w.s. 147 dated 29.03.2022 is erroneous and prejudicial to the interest of Revenue by invoking the provision of sec.263 of the Act and thereby directing the Assessing Officer to pass fresh assessment order after examining the issue discussed in the order passed u/s.263 of the Act. 2. The appellant craves leave to add, amend or alter the grounds of appeal at the time of hearing, if need arise.” 3. We have heard both the parties. The Ld. PCIT assumed revisionary jurisdiction over the order passed in re-assessment proceedings u/s.147 of the Act for the impugned year before us, A.Y. 2013-14, in the case of the assessee. According to the Ld. PCIT, the reasons for which the case of the assessee was reopened was not properly inquired into by the AO and, therefore, the assessment order, according to him, was erroneous causing prejudice to the Revenue for not having made any addition on account of income which was believed to have escaped assessment in the case of the assessee. The reopening, it transpires, was resorted to on finding that the assessee had received an amount of Rs.2,36,38,665/- from Shri Renuka Mata Multi State Urban Co- operative Credit Society Ltd. (hereinafter referred to as “Shri Renuka Mata Society)”, which as per the information available with the Department was mainly used as a conduit for placement of unaccounted cash into the banking system. That Renukamata had been used as a conduit to channelize the unaccounted cash of the assessee. Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 3 – 4. The contention of the Ld. Counsel for the assessee before us was that the issue had been thoroughly inquired into during the reassessment proceedings. The assessee had explained the nature of the amounts received from Shri Renuka Mata Society duly substantiated with evidences, after appreciating which the AO had taken a plausible view in favour of the assessee that the source of the amounts so received stood duly explained and, therefore, rightly made no addition to the income of the assessee. His case before us was that proper enquiries were made by the AO and the assessee had duly satisfied the AO with explanation and evidences regarding the source of the amounts received from Shri Renuka Mata Society. That it was not a case inadequate enquiry by the AO at all. Ld. Counsel for the assessee contended that the Ld.PCIT had ignored the documents placed on record relating to the re-assessment proceedings substantiating his contention as above. That he had completely ignored the submissions made by the assessee before him stating so and had found the AO to have not conducted adequate enquiries cursorily, without pointing out any inadequacy in the enquiry conducted by the AO so as to hold the assessment order passed in the present case to be erroneous causing prejudice to the interest of the Revenue. 5. In this regard, he drew our attention to the submissions made to the AO during re-assessment proceedings placed before us at paper book page no.28-61, being the objection filed by the assessee to the reopening of the case, vide letter dated 13th January 2022. Ld. Counsel for the assessee drew our attention to Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 4 – para 5 & 6 of the said letter at paper book page nos. 31 & 32 pointing out therefrom that it was explained to the AO that the money received from Shri Renuka Mata Society were on account of sales made to Parishram Bullion, the assessee being in the business of retail and wholesale trading of gold and silver and trading of securities and commodities. The PAN number of Parishram Bullion had been provided to the AO. Para 5 & 6 of the said letter are reproduced hereunder: “5) We are a partnership firm engaged in the business of retail and wholesale trading of gold and silver and trading of securities and commodities. We had filed our return of income for A.Y. 2013-14 on 09.10.2013 declaring total income of Rs.NIL/-. Scrutiny assessment u/s.143(3) of the Act completed vide assessment order dated 29.01.2016. 6) We must at the outset state that, we have made total sales to Parishram Bullion (PAN - AUFPS6421G) amounting to Rs.3,33,06,944/- during the relevant year, out of which proceeds amounting to Rs.2,36,28,655/- have been received from the party through its account with SRMMSUCCS during the relevant year. However, we do not have any account with SRMMSUCCS and have no direct transactions with the society, nor are we members of the said society. A copy of the our bank statement where the money was credited, ledger confirmation of Parishram Bullion and sale A, B and C bills/invoices is annexed herewith as Annexures respectively.” 6. Thereafter, our attention was drawn to para 11 of the said letter at paper book page no.35 as under: “11) It is further submitted that we have sufficiently substantiated by providing details and documents relating to the alleged transactions of amount received from SRMMSUCCS, which could have been verified if inquiry was carried out and if information was verified prior to issuance of notice u/s.148 of the Act, that the said amount is received as sale proceeds as a result of sales to Parishram Bullion. The PAN of Parishram Bullion is also provided hereinabove. It is submitted that the entries in our bank account also mention in the Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 5 – column of transaction details as \"SHRI RENUKAMATA / PARISHRAM BULLION\" against the credits in the statement. It is further submitted that these transactions are duly accounted for and considered in the computation of total income. It is submitted that our accounts are audited and the tax audit report in Form 3CB-3CD as well as VAT audit report were already submitted during the course of original assessment proceedings. This clearly substantiates that there is no escapement of income and the belief formed by your goodself based in general information is not a valid reason to believe as required u/s.147 of the Act but is merely a reason to suspect on the basis of presumptions and conjectures and reopening is done to carry fishing and roving inquiries.” 7. Referring to the same, it was pointed out that the assessee had clearly pointed out that the entries in their books of accounts reflected receipts from Shri Renuka Mata Society / Parishram Bullion, clearly showing that the amounts were received by the assessee from Parishram Bullion. Ld. Counsel for the assessee further stated that it was also pointed out to the AO that all these transactions were duly recorded in the books of accounts and considered for the computation of income; the books of accounts were audited and tax audit report in Form 3CB & 3CD furnished and even VAT audit report were submitted during the course of original proceedings. Our attention was drawn to the copy of assessee’s bank statement reflecting receipts from Shri Renuka Mata Society / Parishram Bullion placed at paper book page nos. 37 to 42; to the confirmation furnished by Parishram Bullion placed at paper book page nos.43 & 44 and to the copies of bills raised by the assessee of Parishram Bullion placed at paper book page nos. 45 to 61. Thereafter, our attention was drawn to the submissions made to the Ld. PCIT in proceedings u/s.263 of the Act reiterating the facts submitted to the AO during re-assessment Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 6 – proceedings that the amount received from Shri Renuka Mata Society related to sale receipts from Parishram Bullion evidenced with copies of sales invoices, ledger confirmation from Parishram Bullion, copies of bank statement wherein the amounts received from Parishram Bullion was credited. Our attention was drawn to paper book page no.66 wherein said explanation was furnished by the Ld. PCIT. 8. Ld. Counsel for the assessee, thereafter, pointed out that the Ld. PCIT in his order has failed to point out the inadequacy of enquiry so demonstrated before him to have been conducted by the AO during re-assessment proceedings. He drew our attention to para 5.2 & 5.3 of the Ld. PCIT’s order pointing out therefrom that the Ld. PCIT had nowhere stated any inadequacy in the enquiry conducted by the AO but had only reiterated the information in the possession of the Department that Shri Renuka Mata Society was only a conduit for placement of unaccounted cash and based on that the Ld.PCIT had rejected the explanation of the assessee. Para 5.2 & 5.3 of the Ld.PCIT’s order are reproduced hereunder: “5.2 During the course of assessment proceedings and current proceeding also, the assessee has submitted that the amount of Rs.2,36,28,665/- is sale proceeds received by Parishram Bullion. Further, out of total sale proceeds of Rs. 3,33,06,944/-an amount of Rs. 2,36,28,665/- has been received through SRMUCS. The partner of the firm has stated that remaining amount of Rs.96,78,279/- has been received directly from Parishram Bullion for its Axis Bank account. The source of credit of Rs.2,36,28,665/-, therefore, remains unexplained. 5.3 As per the information, it is seen that an amount of Rs. 2,36,38,665/- has been credited in the bank account of the assessee Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 7 – from M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. The main activity of Sri Renukamata has been to receive huge amounts of cash of Rs. 2,36,38,665/- from the assessee, depositing the same in its Bank accounts and transferring out these funds through RTGS/other banking modes to various non-genuine entities on the instructions of the persons bringing the cash/the operators managing them. No proper KYC documents, deposit and withdrawal slips and other such documents were maintained. Thus, the society was being mainly used as a conduit for placement of unaccounted cash into the banking system. Therefore, it can be concluded that the unaccounted cash of the assessee has been channelized through bank via Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd.\" Therefore, the credits of Rs.2,36,38,665/- in the bank account is nothing but cash credits within the meaning of provisions of section 68 of the Act. The A.O. ought to have added such unexplained cash credits to the total income of the assessee. The order of the A.O. is erroneous which caused loss of taxes/revenue. The order of the A.O. is, thus, found erroneous and prejudicial to the interest of the revenue. Accordingly, the order of the A.O. is set aside and the A.O. is directed to make fresh assessment and make addition of Rs.2,36,38,665/- u/s 68 of the Act.” 9. He, thereafter, drew our attention to para 7 of the Ld.PCIT is reproduced hereunder: “7. In the light of facts and circumstances narrated above, I hold that the Assessing Officer has erred in not considering the fact that the society, namely, Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. was accommodation entry provider. The A.O. has erred in accepting contention of the assessee that sales transactions were executed without any supporting evidences of sales. The A.O. has erred in not verifying the transportation receipts etc, so as to prove the genuineness of sales. The A.O. has failed to make addition u/s 68 of the Act despite the society being entry provider. The order of the A.O. is therefore treated as erroneous in so far as prejudicial to the interest of the revenue.” 10. Referring to the same, he pointed out that Ld.PCIT had noted the AO had accepted the assessee’s contention of sale transactions having been executed without any supporting evidence and without Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 8 – verifying the transportation receipt. These, he contented, were incorrect findings of the Ld.PCIT. Referring to his communication to the AO during re-assessment proceedings and to the Ld.PCIT during revisionary proceeding as reproduced above, he pointed out that the assessee had submitted the copy of sale invoices to the AO and the finding of the Ld.PCIT that the sale invoices were not furnished was, therefore, incorrect. He further contended that the assessee had also furnished other documentary evidences i.e. confirmation from the said parties, copy of the bank statement clearly showing receipt from Parishram Bullion coming through its Shri Renuka Mata Society Bank account and even VAT audit report which sufficiently explained the source of amounts received from Shri Renuka Mata Society as being sale receipts from Parishram Bullion and, therefore, there was no case, he contended that the Ld. PCIT to hold that the AO had not conducted proper enquiries on the issue. 11. Ld. Counsel for the assessee contended that courts in a number of decisions have repeatedly held that where enquiries were conducted during assessment proceedings and the AO had taken plausible view, merely because the Commissioner had a different view on the matter it would not permit him to exercise powers u/s.263 of the Act. Our attention was drawn to the following decisions holding so; i. Siddhi Infrabuild (P.) Ltd. vs. PCIT, [2025] 172 taxmann.com 232 (Gujarat), Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 9 – ii. Commissioner of Income Tax vs. Nirma Chemicals Works (P.) Ltd. [2009] 182 Taxman 183 (Gujarat), iii. PCIT vs. Shreeji Prints (P.) Ltd. [2021] 130 taxmannn.com 294 (SC). iv. Ramotar Choudhari HUF vs. PCIT in ITA No.1336/Kol/2023, dated 9th May, 2024. 12. Ld. DR, however, supported the order of the Ld. PCIT contending that he had rightly held the assessment order passed in the present case to be erroneous causing prejudice to the Revenue, since, he had found the AO to have not conducted proper enquiries on the issue of the source of amounts received from Shri Renuka Mata Society. 13. We have heard both the parties. The Ld. PCIT in the present case has found the assessment order passed in the case of the assessee u/s 147 of the Act to be erroneous causing prejudice to the Revenue, since the AO allegedly did not conduct proper inquiries on the issue for which the case of the assessee was reopened. The reopening was resorted to on the basis of information that the assessee had received amounts from Shree Renuka Mata co-op society, which was an entity acting as a conduit for channelizing unaccounted money of various persons. 14. Considering the contentions made by both the parties before us and the documents referred to before us, we agree with the Ld. Counsel for the assessee that the Ld.PCIT’s finding of inadequate Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 10 – inquiry by the AO is without any basis, least of all on the basis of records before him. And for this reason the order passed u/s 263 of the Act is not sustainable. 15. It not the case of the Ld.PCIT that no inquiry was conducted by the AO on the issue of reopening. And the Ld.Counsel for the assessee has suitably demonstrated before us that the assessee had suitably demonstrated with evidence the genuineness of the receipts from Renuka Mata. He has pointed out that the nature of receipts from Renuka Mata was explained as being sales consideration received from Parishram Bullion a sales debtor of the assessee. He has also pointed out that the said explanation was duly supported with evidences in the form of the bank statement of the assessee reflecting the amounts received from Shri Renuka Mata Society as relating to Parishram Bullion, filing confirmation of Parishram Bullion in this regard, filing copies of audited balance sheet and P&L account and filing copies of its VAT return also of the assessee. 16. The Ld.PCIT, we find, has not pointed out any deficiency /infirmity/falsity in the explanation of the assessee, requiring further inquiries to be made. His finding of inadequate inquiry is based merely on the information in the possession of the AO relating to routing of cash by Renuka Mata, but this information, which we find is only general information with nothing specific relating to the assessee. The Ld.PCIT has not pointed out how assesses transaction fitted into the modus operandi of Renuka Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 11 – Mata society, to justify his finding that the AO ought to have conducted more inquiry and had erred in accepting assesses explanation of the transaction being genuine. He has not pointed out how the explanation furnished by the assessee failed to controvert/deal with the adverse information in the possession of the AO. 17. The Ld.PCIT’s finding of inadequate inquiry by AO, we find, is also based on his finding that no evidences were furnished by the assessee in support of its explanation of the genuineness of the transaction. This, we find, is an incorrect finding of the Ld.PCIT, since undoubtedly the records reveal the assessee to have furnished all evidences, as noted, above by us and the Ld.PCIT has not dealt with the assesses pleadings before him to this effect while holding so. It is not his case that the assessee has wrongly stated to have substantiated his explanation to the AO. 18. The ITAT in the case of Ramotar Choudhari HUF (supra) has explained the provision u/s.263 of the Act as providing for, that once an explanation is sought from the assessee on the error noted by the Ld.PCIT, he is supposed to examine the contention of the assessee. That before passing an order u/s.263 of the Act, he is supposed to either himself make or cause to make such enquiry as he deems necessary. The ITAT has noted that word “conduct inquiry as he deems necessary’ in section 263 of the Act does not mean that the Ld. PCIT is left with a choice either to make or not to make an enquiry. On the contrary, it has interpreted the phrase Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 12 – to suggest that the enquiries which are necessary to form a view as to whether the AO is erroneous and prejudicial to the interest of the Revenue’ must be made. The ITAT has held that once a point- wise reply is given by the assessee, then a duty was cast upon the Ld. PCIT to examine the reply of the assessee and form a prima facie opinion as to whether the assessment order is erroneous so far as it is prejudicial to the interest of the Revenue. The opinion of the Commissioner that there is error in the assessment order ought to be based on his objective satisfactions and not a subjective satisfaction from the assessment order. The relevant findings of the ITAT in this regard are contained at para 5 of its order as under: “5. As per the provisions of section 263, as enumerated above, after getting the explanation from the assessee, the Ld. Pr. CIT was supposed to examine the contention of the assessee. Before passing an order of modifying, enhancing or cancelling the assessment, he was supposed either to himself make or cause to make such an enquiry as he deems necessary. The words \"as he deems necessary\", in our view, do not mean that the Ld. Pr. CIT is left with a choice either to make or not to make an enquiry. As per the relevant provisions of section 263, it was incumbent upon the Ld. Pr. CIT to make or cause to make such an enquiry. So far as the words \"as he deems necessary\" are concerned, the said words suggest that the enquiries which are necessary to form a view as to whether the order of the Assessing Officer is erroneous and prejudicial to the interest of Revenue? Once a point wise reply was given by the assessee, then a duty was cast upon the Ld. Pr. CIT to examine the reply of the assessee and form a prima-facie opinion as to whether the order of the Assessing Officer was erroneous so far as it was prejudicial to the interest of Revenue. We further note that the Ld. Pr. CIT did not raise any query as to what enquiries were made by the Assessing Officer before proceeding to pass the assessment order in question. The opinion of the Commissioner that the Assessing Officer had not made proper enquiries or verifications should be based on his objective satisfaction and not a subjective satisfaction from the assessment order. The reopening in this case was held on the basis of Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 13 – some information received from Investigation Wing, whereby, the Assessing Officer asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the Assessing Officer passed the assessment order. However, a perusal of the revision order passed by the Id. Pr. CIT shows that the Id. Pr. CIT has not pointed out any error or discrepancy in the explanations and details furnished by the assessee and without examining such evidence and without counter questioning the assessee on the relevant points and even without considering the submission of the assessee furnished in reply to the show-cause notice, the ld. Pr CIT, in our view, was not justified in setting aside the order, simply stating that in his view more enquiries were needed to be carried out by the Assessing Officer.” 19. As per the provision of law therefore, the Ld. PCIT ought to have conducted enquiry on the submissions made by the assessee and based on the results of his enquiry only he should have arrived at a finding of error in the order of the AO. In the present case, we find that the assessee submitted his reply to the Ld.PCIT regarding the issue for which revisionary jurisdiction was exercised by the Ld.PCIT pointing out the same being examined during assessment itself. Ld. PCIT found no infirmity in the explanation of the assessee, conducted no inquiry, but simply went on to hold the assessment order to be erroneous so as to cause prejudice to the Revenue for not having conducted proper enquiries. The findings of the Ld. PCIT of the assessment order being erroneous, clearly, we hold are not in consonance with law. In fact, we find that the finding of the Ld.PCIT of the AO having conducted inadequate enquiry is without any basis. 20. In the light of the above, we hold that in the facts of the present case, there is no basis with the Ld.PCIT to hold the Printed from counselvise.com ITA No.558/Ahd/2024 [Choksi Ranchhodlal Kishordas vs. PCIT] A.Y. 2013-14 - 14 – assessment order to be erroneous so as to cause prejudice to the Revenue. 21. The order of the Ld.PCIT u/s. 263 of the Act is, therefore, set aside as not sustainable in law. The grounds of appeal raised by the assessee are accordingly allowed. 22. In the result, appeal filed by the assessee is allowed. This Order pronounced on 09/02/2026 Sd/- Sd/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 09/02/2026 S. K. SINHA True Copy आदेश कȧ Ĥितिलǒप अĒेǒषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंिधत आयकर आयुƠ / Concerned CIT 4. आयकर आयुƠ(अपील) / The CIT(A)- 5. ǒवभागीय Ĥितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "