M/S KIRTI DIAM , MUMBAI V. PR COMMISSIONER OF INCOME TAX MUMBAI-27 , MUMBAI

ITA 1147/MUM/2022

AI Insights

The case involves M/s Kirti Diam, a retail jewelry business, which faced scrutiny under the Income Tax Act due to substantial cash deposits during the demonetization period in India. The Assessing Officer initially accepted the assessee's explanation and the returned loss in the assessment year 2017-18. However, the Principal Commissioner of Income-tax later revised this order, deeming it erroneous and prejudicial to the revenue's interests, leading to an appeal by the assessee to the Income Tax Appellate Tribunal. The Tribunal examined whether the Assessing Officer had adequately investigated the sources of the cash deposits and whether the revision under section 263 was warranted.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123682 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 22-01-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 17-05-2022
• Other Referred Cases: National Thermal Power Corporation Vs CIT, CIT Vs Pruthvi brokers and shareholders, Abhusan Jewellary Vs PCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Revision of order; Principle of natural justice; Difference of opinion; Set aside
• Section: 143(3); 133(6); 69A; 43; 73; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 1147/MUM/2022 Assessment Year: 2017-18 M/s Kirti Diam, 7/8/9, Shankar Nagar Vallabha Baug Lane, Tilak Road Corner Ghatkoper (E), Mumbai-400077. Vs. Pr. CIT-27, Room No. 401, 4 th floor, Tower No. 6, Vashi Railway Station Commercial Complex, Vashi, Navi Mumbai-400703 PAN No. AAFFK 7000 F Appellant Respondent Assessee by : Mr. Dhaval Shah, Adv. a/w Mr. Ankit Mehta Revenue by : Mr. Rakesh Ranjan, CIT-DR a/w Smt. Shreekala Nair, AO Date of Hearing : 23/01/2023 Date of pronouncement : 23/02/2023 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against revision order dated 21/03/2022 passed by the Ld. Principal Commissioner of Income-tax, Mumbai-27 [in short ‘the Ld. PCIT’] for assessment year 2017-18, wherein he has held the assessment order dated 27/12/2019 passed by the Assessing Officer as erroneous insofar as prejudicial to the interest of the revenue. The grounds raised by the assessee are reproduced as under: “On the facts and in the circumstances of the case as well as in law, the learned PCIT: Violation of the principles of natural justice 1. erred in passing the order us. 263 of the Act, without giving a fair and reasonable opportunity hearing to the Appellant and thereby violating the principles of natural justice; 2. erred in exercising jurisdictio basis of issues/reasons which was not referred in the show cause notice issued by the PCIT to the Appellant and without giving the Appellant the opportunity to controvert the same, therefore the order passed by the PCIT u/s. 263 No evidence brought on record to show how the assessment order passed is erroneous in law as well as prejudicial to the interests of the revenue 3. erred in holding that the order passed by the AO is erroneous and prejudicial to t and therefore such order should be quashed; 4. erred in initiating the revision proceedings u/s 263 of the Act without appreciating that section 263 can be invoked only if the conjunctive conditions that assessment order passed is e prejudicial to the interests of the revenue, are satisfied, therefore the initiation of revisionary assessment proceedings, without satisfaction of such conditions is bad in law; 5. failed to appreciate that the assessment order was passed after making through enquiries and after filing the necessary information as desired and required from time to time. It is pertinent to point out that this was a cases of tax audit. The case of the Appellant was taken up several time and queries we complied. As such the reopening by invoking the as prejudicial to the interest of the revenue. The grounds raised by the assessee are reproduced as under: On the facts and in the circumstances of the case as well as in law, the learned PCIT: Violation of the principles of natural justice erred in passing the order us. 263 of the Act, without giving a fair and reasonable opportunity hearing to the Appellant and thereby violating the principles of natural justice; erred in exercising jurisdiction under section 263 on the basis of issues/reasons which was not referred in the show cause notice issued by the PCIT to the Appellant and without giving the Appellant the opportunity to controvert the same, therefore the order passed by the PCIT u/s. 263 shall be held as bad in law; No evidence brought on record to show how the assessment order passed is erroneous in law as well as prejudicial to the interests of the revenue erred in holding that the order passed by the AO is erroneous and prejudicial to the interest of the revenue and therefore such order should be quashed; erred in initiating the revision proceedings u/s 263 of the Act without appreciating that section 263 can be invoked only if the conjunctive conditions that assessment order passed is erroneous in law as well as prejudicial to the interests of the revenue, are satisfied, therefore the initiation of revisionary assessment proceedings, without satisfaction of such conditions is bad in law; failed to appreciate that the assessment order was passed after making through enquiries and after filing the necessary information as desired and required from time to time. It is pertinent to point out that this was a cases of tax audit. The case of the Appellant was taken up several time and queries were raised and were duly complied. As such the reopening by invoking the ITA No. 1147/M/2022 2 M/s Kirti Diam as prejudicial to the interest of the revenue. The grounds raised by On the facts and in the circumstances of the case as well as erred in passing the order us. 263 of the Act, without giving a fair and reasonable opportunity hearing to the Appellant and thereby violating the principles of natural n under section 263 on the basis of issues/reasons which was not referred in the show cause notice issued by the PCIT to the Appellant and without giving the Appellant the opportunity to controvert the same, therefore the order passed by the No evidence brought on record to show how the assessment order passed is erroneous in law as well as erred in holding that the order passed by the AO is he interest of the revenue and therefore such order should be quashed; erred in initiating the revision proceedings u/s 263 of the Act without appreciating that section 263 can be invoked only if the conjunctive conditions that rroneous in law as well as prejudicial to the interests of the revenue, are satisfied, therefore the initiation of revisionary assessment proceedings, without satisfaction of such conditions is failed to appreciate that the assessment order was passed after making through enquiries and after filing the necessary information as desired and required from time to time. It is pertinent to point out that this was a cases of tax audit. The case of the Appellant was taken re raised and were duly complied. As such the reopening by invoking the provisions of section 263 is not all justified and as such the order by the PCIT is liable to be cancelled; Proceedings u/s 263 of the Act initiated only to make roving enquiries on th enquired by the AO in detailed manner 6. erred in law and in fact by initiating the proceedings under section 263 of the Act, without appreciating the fact that the AO has already applied his mind on the same issue and made adequate necessary verification/ investigation basis the details/documents sought from the Appellant and even from suppliers and customers of the Appellant under section 133 and 133 (6) of the Act, verified the stock during the course of asses has passed the order post inquiries and verification of fact relating to only issue which is subject matter of the order Wis. 263, the order is neither erroneous nor it can be deemed to be erroneous and therefore the proceedings un 7. erred in making a difference of opinion as a basis for invoking the provisions of section 263; 8. erred in assuming jurisdiction u/s. 263 for making fishing/roving enquiry on the issues which are already enquired by the Ass order dated 27 December 2019; 9. erred in not appreciating the fact that the learned AO had passed the assessment order u/s. 143(3) of the Act, after verifying, examining and critically & legally analyzing the facts of the App written submissions filed by the Appellant along with documentary evidences in support thereof. Thus, the act of the learned PIT of considering the assessment order as erroneous and prejudicial to the interest of the revenue is nothin same set of facts leading to unlawful revision of a lawfully concluded assessment u/s. 143(3) of the Act. Because the PCIT takes a different view should not be made the basis for invoking the provisions of section 263. As provisions of section 263. provisions of section 263 is not all justified and as such the order by the PCIT is liable to be cancelled; Proceedings u/s 263 of the Act initiated only to make roving enquiries on the issues which are already enquired by the AO in detailed manner erred in law and in fact by initiating the proceedings under section 263 of the Act, without appreciating the fact that the AO has already applied his mind on the same issue and made adequate inquires, undertaken necessary verification/ investigation basis the details/documents sought from the Appellant and even from suppliers and customers of the Appellant under section 133 and 133 (6) of the Act, verified the stock during the course of assessment proceedings. As AO has passed the order post inquiries and verification of fact relating to only issue which is subject matter of the order Wis. 263, the order is neither erroneous nor it can be deemed to be erroneous and therefore the proceedings under section 263 is not called for; erred in making a difference of opinion as a basis for invoking the provisions of section 263; erred in assuming jurisdiction u/s. 263 for making fishing/roving enquiry on the issues which are already enquired by the Assessing Officer (A0') passing the order dated 27 December 2019; erred in not appreciating the fact that the learned AO had passed the assessment order u/s. 143(3) of the Act, after verifying, examining and critically & legally analyzing the facts of the Appellant's case and the written submissions filed by the Appellant along with documentary evidences in support thereof. Thus, the act of the learned PIT of considering the assessment order as erroneous and prejudicial to the interest of the revenue is nothing but the change in opinion on the same set of facts leading to unlawful revision of a lawfully concluded assessment u/s. 143(3) of the Act. Because the PCIT takes a different view should not be made the basis for invoking the provisions of section 263. As such the CIT was not justified in invoking the provisions of section 263. ITA No. 1147/M/2022 3 M/s Kirti Diam provisions of section 263 is not all justified and as such the order by the PCIT is liable to be cancelled; Proceedings u/s 263 of the Act initiated only to make e issues which are already erred in law and in fact by initiating the proceedings under section 263 of the Act, without appreciating the fact that the AO has already applied his mind on the inquires, undertaken necessary verification/ investigation basis the details/documents sought from the Appellant and even from suppliers and customers of the Appellant under section 133 and 133 (6) of the Act, verified the stock sment proceedings. As AO has passed the order post inquiries and verification of fact relating to only issue which is subject matter of the order Wis. 263, the order is neither erroneous nor it can be deemed to be erroneous and therefore the der section 263 is not called for; erred in making a difference of opinion as a basis for erred in assuming jurisdiction u/s. 263 for making fishing/roving enquiry on the issues which are already essing Officer (A0') passing the erred in not appreciating the fact that the learned AO had passed the assessment order u/s. 143(3) of the Act, after verifying, examining and critically & legally ellant's case and the written submissions filed by the Appellant along with documentary evidences in support thereof. Thus, the act of the learned PIT of considering the assessment order as erroneous and prejudicial to the interest of the g but the change in opinion on the same set of facts leading to unlawful revision of a lawfully concluded assessment u/s. 143(3) of the Act. Because the PCIT takes a different view should not be made the basis for invoking the provisions of section such the CIT was not justified in invoking the 2. The assessee also raise which is reproduced as under: 1. The Ld. PCIT has erred in law and in facts in assuming jurisdiction u/s 263 of the Act on sent by the Ld. AO and without independent application of mind and which is invalid and bad in law 3. The additional ground raised by the assessee being purely of the legal nature and not requiring any investigation of fresh facts therefore same was admitted for adjudication in view of the settled principles laid down by the Hon’ble Supreme Court in the case of National Thermal Power Corporation Vs CIT 229 ITR 383 (SC) and CIT Vs Pruthvi brokers and shareholders 349 ITR 336 (Bom). 4. Briefly stated facts of the case are that the assessee was engaged in retail sales of jewelry items. For the year under consideration, the assessee filed declaring total loss at ₹2,65,44,000/- in post of the assessee was selected for scrutiny and the Assessing Officer after issuing questionnaire and considering submission of the assessee, accepted the returned income(loss). 4.1 Subsequently, on the proposal sent by the Assessing Officer, the Ld. PCIT called for the records and after examination, he was of the view that assessment order passed by the Assessing Officer was assessee also raised additional ground of the appeal, which is reproduced as under: The Ld. PCIT has erred in law and in facts in assuming jurisdiction u/s 263 of the Act on the basis of proposal sent by the Ld. AO and without independent application of mind and which is invalid and bad in law ground raised by the assessee being purely of the legal nature and not requiring any investigation of fresh facts herefore same was admitted for adjudication in view of the settled principles laid down by the Hon’ble Supreme Court in the case of Power Corporation Vs CIT 229 ITR 383 (SC) CIT Vs Pruthvi brokers and shareholders 349 ITR 336 Briefly stated facts of the case are that the assessee was engaged in retail sales of jewelry items. For the year under assessee filed return of income on 07/11/2017 declaring total loss at ₹12,28,630/-. In view of the cash deposits of in post-demonetizing period, the return of assessee was selected for scrutiny and the Assessing Officer after issuing questionnaire and considering submission of the accepted the returned income(loss). on the proposal sent by the Assessing Officer, called for the records and after examination, he was of the view that assessment order passed by the Assessing Officer was ITA No. 1147/M/2022 4 M/s Kirti Diam additional ground of the appeal, The Ld. PCIT has erred in law and in facts in assuming the basis of proposal sent by the Ld. AO and without independent application of mind and which is invalid and bad in law. ground raised by the assessee being purely of the legal nature and not requiring any investigation of fresh facts, herefore same was admitted for adjudication in view of the settled principles laid down by the Hon’ble Supreme Court in the case of Power Corporation Vs CIT 229 ITR 383 (SC) CIT Vs Pruthvi brokers and shareholders 349 ITR 336 Briefly stated facts of the case are that the assessee was engaged in retail sales of jewelry items. For the year under return of income on 07/11/2017 . In view of the cash deposits of demonetizing period, the return of income assessee was selected for scrutiny and the Assessing Officer after issuing questionnaire and considering submission of the on the proposal sent by the Assessing Officer, called for the records and after examination, he was of the view that assessment order passed by the Assessing Officer was erroneous insofar as prejudicial to the interest of the rev therefore, he issued a notice under section 26 Act, 1961 (in short ‘ said letter the Ld. PCIT observed that the Assessing Officer had not examined the issue of cash deposits properly was without proper verification of the records. The assessee file detailed submission and submitted that the Assessing Officer issued numerous notices which assessee and filed all details including month deposits for financial years 2015 parties with details of cash sales, stock registers, parties from purchases were made in the month of October and December 2016, details of parties from noted that notices were issued by the Assessing Officer, however according to him the Assessing Officer has not examined the issue in proper perspective been examined by the Assessing Offic “4.6 It can be seen from the above that there was huge cash deposits by the assessee during the demonetization period. The assessee explained that cash deposited during the demonetization period was out of self proceeds of Rs. 2,61.95,330/ during the month of October 2016 and the entire cash of the cash sales made in October 2016 was lying with the assessee as on 08.11.2016. From the details submitted by the assessee, it can be seen that cash sales made during the month of Octob 9,00,702/-, In other words, according to the assessee the cash sales in the month of Oc erroneous insofar as prejudicial to the interest of the rev issued a notice under section 263 of the Income ‘the Act’) vide letter dated 02/03/2022. In the PCIT observed that the Assessing Officer had not examined the issue of cash deposits properly and the was without proper verification of the records. The assessee file detailed submission and submitted that the Assessing Officer issued numerous notices which were duly responded assessee and filed all details including monthly cash sales and cash deposits for financial years 2015-16 and 16-17, VAT returns, details of cash sales, stock registers, parties from purchases were made in the month of October and December 2016, from whom purchases were made etc. were issued by the Assessing Officer, however according to him the Assessing Officer has not examined the issue perspective. According to him following issues are not been examined by the Assessing Officer: 4.6 It can be seen from the above that there was huge cash deposits by the assessee during the demonetization period. The assessee explained that cash deposited during the demonetization period was out of self proceeds of Rs. 2,61.95,330/- of sales made in cash during the month of October 2016 and the entire cash of the cash sales made in October 2016 was lying with the assessee as on 08.11.2016. From the details submitted by the assessee, it can be seen that cash sales made during the month of October 2015 was only of Rs. , In other words, according to the assessee the cash sales in the month of October 2016 was 2908% of ITA No. 1147/M/2022 5 M/s Kirti Diam erroneous insofar as prejudicial to the interest of the revenue, 3 of the Income-tax ide letter dated 02/03/2022. In the PCIT observed that the Assessing Officer had not d the order passed was without proper verification of the records. The assessee filed a detailed submission and submitted that the Assessing Officer had duly responded by the ly cash sales and cash 17, VAT returns, details of cash sales, stock registers, parties from purchases were made in the month of October and December 2016, made etc. the Ld. PCIT were issued by the Assessing Officer, however according to him the Assessing Officer has not examined the issue . According to him following issues are not 4.6 It can be seen from the above that there was huge cash deposits by the assessee during the demonetization period. The assessee explained that cash deposited during the demonetization period was out of self- made in cash during the month of October 2016 and the entire cash of the cash sales made in October 2016 was lying with the assessee as on 08.11.2016. From the details submitted by the assessee, it can be seen that cash sales made er 2015 was only of Rs. , In other words, according to the assessee the ber 2016 was 2908% of the cash sales made during the corresponding period of 2015~ There cannot be any justification for this extra ordinary and abnormal increase in the cash sales in the month of October 2016. Festival seasons etc., comes every year (prior to or after F.Y. 2016 sales reported in the month of October 2016 is abnormally high compared to the cash sales reported in the preceding or succeeding year of F.Y. 2016 Assessing Officer has ignored this aspect while accepting the explanation of the assessee that cash deposited during the demonetization period was out of the cash sales made during the month of October 4.7 It is seen that the Assessing Officer instead of verifying the claim of the assessee with regard to cash sales claimed to have been made during the month of October 2016, has examined the purchases made by the assessee. Whereas to examine the the cash deposited during the demonetization period, the AO should have examined the genuineness of the cash sales claimed to have been made by the assessee. Even in respect of purchases claimed to have been made by the assessee in the the purchases were made in credit and the payments to the parties from whom the purchases were claimed to have been made, was shown to have been made only in the month of February 2017 i.e., out of the cash deposited during the demonetization period, which was not the trend in the books of the assessee in the period prior to October 2016. The purchases were also claimed to have been made of cut and polished diamonds, whereas the sales is claimed to have been made in r of small amount to ordinary customers, complete name and addresses of whom are available with the assessee. An ordinary person does not purchase cut and polished diamond, that too in such a large number in a particular month. The ordinary men general either made of gold or diamond jewellery but not cut and polished diamond in such a large number. 4.2 In view of no proper enquiry or verification carried out by the Assessing Officer, the the cash sales made during the corresponding period of 2015~ There cannot be any justification for this extra d abnormal increase in the cash sales in the month of October 2016. Festival seasons etc., comes every year (prior to or after F.Y. 2016-17) but the cash sales reported in the month of October 2016 is abnormally high compared to the cash sales reported in the preceding or succeeding year of F.Y. 2016-17. The Assessing Officer has ignored this aspect while accepting the explanation of the assessee that cash deposited during the demonetization period was out of the cash sales made during the month of October 2016. 4.7 It is seen that the Assessing Officer instead of verifying the claim of the assessee with regard to cash sales claimed to have been made during the month of October 2016, has examined the purchases made by the assessee. Whereas to examine the nature and source of the cash deposited during the demonetization period, the AO should have examined the genuineness of the cash sales claimed to have been made by the assessee. Even in respect of purchases claimed to have been made by the assessee in the month of October 2016, it is seen that the purchases were made in credit and the payments to the parties from whom the purchases were claimed to have been made, was shown to have been made only in the month of February 2017 i.e., out of the cash during the demonetization period, which was not the trend in the books of the assessee in the period prior to October 2016. The purchases were also claimed to have been made of cut and polished diamonds, whereas the sales is claimed to have been made in r of small amount to ordinary customers, complete name and addresses of whom are available with the assessee. An ordinary person does not purchase cut and polished diamond, that too in such a large number in a particular month. The ordinary men generally purchases jewellery either made of gold or diamond jewellery but not cut and polished diamond in such a large number.” view of no proper enquiry or verification carried out by the Assessing Officer, the Ld. PCIT invoked section 263 of the ITA No. 1147/M/2022 6 M/s Kirti Diam the cash sales made during the corresponding period of 2015~ There cannot be any justification for this extra d abnormal increase in the cash sales in the month of October 2016. Festival seasons etc., comes 17) but the cash sales reported in the month of October 2016 is abnormally high compared to the cash sales reported in 17. The Assessing Officer has ignored this aspect while accepting the explanation of the assessee that cash deposited during the demonetization period was out of the cash 4.7 It is seen that the Assessing Officer instead of verifying the claim of the assessee with regard to cash sales claimed to have been made during the month of October 2016, has examined the purchases made by the nature and source of the cash deposited during the demonetization period, the AO should have examined the genuineness of the cash sales claimed to have been made by the assessee. Even in respect of purchases claimed to have been made by month of October 2016, it is seen that the purchases were made in credit and the payments to the parties from whom the purchases were claimed to have been made, was shown to have been made only in the month of February 2017 i.e., out of the cash during the demonetization period, which was not the trend in the books of the assessee in the period prior to October 2016. The purchases were also claimed to have been made of cut and polished diamonds, whereas the sales is claimed to have been made in retail of small amount to ordinary customers, complete name and addresses of whom are available with the assessee. An ordinary person does not purchase cut and polished diamond, that too in such a large number in a particular ly purchases jewellery either made of gold or diamond jewellery but not cut and view of no proper enquiry or verification carried out by the invoked section 263 of the Act and set aside the assessment order with the direction to make a fresh assessment as under: “6. In view of the facts discussed in para 4.1 to 4.8, I am of the considered view that the assessment order dated 27.12.2019 passed by the AO has been passed without making enquiry and verification which should have been made by him. Hence, the assessment order dated 27.12.2019 passed u/s 143(3) is erroneous in so far as it is prejudicial to the interest of revenue. Therefore, the assessment order dated 27.12.2019 passe 143(3) is set aside to the AO with a direction to make a fresh assessment. While completing the fresh assessment the AO shall examine and verily the issue discussed in para 4.1 to 4.8. The nature and source of cash deposited during the demon keeping in view the facts discussed in para 4.1 to 4.8, particularly the extraordinary and abnormally high cash sales reported by the assessee in the month of October 2016 and upto 8th November assessee with regard to cash sales may be accepted by estimating the reasonable amount of cash sales, the assessee could have made in the month of October 2016 and upto 8th November 2016, considering the cash sales made during the same period during the year 2 amount of cash deposits remaining unexplained shall be taxed as unexplained money us. 69A and charged to tax at the rates given in section 115BBE. Initiation of penalty proceedings under appropriate sections may also be considered by the AO while Before completing the assessment a reasonable opportunity of being heard shail be allowed to the assessee by the 5. Aggrieved, the assessee is before the grounds as reproduced above. set aside the assessment order with the direction to make a fresh assessment as under: In view of the facts discussed in para 4.1 to 4.8, I am of the considered view that the assessment order dated 27.12.2019 passed by the AO has been passed aking enquiry and verification which should have been made by him. Hence, the assessment order dated 27.12.2019 passed u/s 143(3) is erroneous in so far as it is prejudicial to the interest of revenue. Therefore, the assessment order dated 27.12.2019 passed by the AO us 143(3) is set aside to the AO with a direction to make a fresh assessment. While completing the fresh assessment the AO shall examine and verily the issue discussed in para 4.1 to 4.8. The nature and source of cash deposited during the demonetization period shall be examined keeping in view the facts discussed in para 4.1 to 4.8, particularly the extraordinary and abnormally high cash sales reported by the assessee in the month of October 2016 and upto 8th November 2016. The claim of the ssee with regard to cash sales may be accepted by estimating the reasonable amount of cash sales, the assessee could have made in the month of October 2016 and upto 8th November 2016, considering the cash sales made during the same period during the year 2 amount of cash deposits remaining unexplained shall be taxed as unexplained money us. 69A and charged to tax at the rates given in section 115BBE. Initiation of penalty proceedings under appropriate sections may also be considered by the AO while making the fresh assessment. Before completing the assessment a reasonable opportunity of being heard shail be allowed to the assessee by the AO.” , the assessee is before the Tribunal by way of raising s reproduced above. ITA No. 1147/M/2022 7 M/s Kirti Diam set aside the assessment order with the direction to make a fresh In view of the facts discussed in para 4.1 to 4.8, I am of the considered view that the assessment order dated 27.12.2019 passed by the AO has been passed aking enquiry and verification which should have been made by him. Hence, the assessment order dated 27.12.2019 passed u/s 143(3) is erroneous in so far as it is prejudicial to the interest of revenue. Therefore, the d by the AO us 143(3) is set aside to the AO with a direction to make a fresh assessment. While completing the fresh assessment the AO shall examine and verily the issue discussed in para 4.1 to 4.8. The nature and source of cash deposited etization period shall be examined keeping in view the facts discussed in para 4.1 to 4.8, particularly the extraordinary and abnormally high cash sales reported by the assessee in the month of October 2016. The claim of the ssee with regard to cash sales may be accepted by estimating the reasonable amount of cash sales, the assessee could have made in the month of October 2016 and upto 8th November 2016, considering the cash sales made during the same period during the year 2015. The amount of cash deposits remaining unexplained shall be taxed as unexplained money us. 69A and charged to tax at the rates given in section 115BBE. Initiation of penalty proceedings under appropriate sections may also be making the fresh assessment. Before completing the assessment a reasonable opportunity of being heard shail be allowed to the by way of raising 6. Before us the Ld. counsel four volumes containing pages books. 6.1 Regarding the grounds raised, the submitted that during assessment proceeding on the issue of the cash deposits during the monetization period been issued by the Assessing Officer and filed nine submissions including three shows notices. He submitted the assessee had filed audited financials, tax audit report, sale bills purchases, quantitative stock register as confirmed by the auditor, cash book showing sufficient bills, labour bills for preparing jewelry, VAT returns, marketing and exhibition expenses et had sufficient opening sto cash sales made in October 2016 and those sales have already been offered to tax and hence again cannot be su section 69A of the Act verified by the Ld. Assessing Officer by issuing notices to the directly under section 133(6) of the confirmed to have made purchases from the assessee. Few such notices issued and reply filed are available on paperbook. The Ld. counsel corresponding purchases Ld. counsel of the assessee filed a paper book in volumes containing pages1 to 548 including caselaw paper Regarding the grounds raised, the Ld. counsel submitted that during assessment proceeding on the issue of the cash deposits during the monetization period, total five notices have been issued by the Assessing Officer and in response filed nine submissions including three detailed submissions again shows notices. He submitted the assessee had filed audited financials, tax audit report, sale bills complete details of sales and purchases, quantitative stock register as confirmed by the auditor, cash book showing sufficient cash balance, corresponding purchase bills, labour bills for preparing jewelry, VAT returns, marketing and exhibition expenses etc. It was the contention of the assessee that it had sufficient opening stock as on 01/04/2016 to cover most of the made in October 2016 and those sales have already been offered to tax and hence again cannot be subjected to tax under Act. He submitted that cash sales were cross Assessing Officer by issuing notices to the directly under section 133(6) of the Act and those to have made purchases from the assessee. Few such reply filed are available on page Ld. counsel of the assessee further submitted t purchases have also been verified by issuing notice ITA No. 1147/M/2022 8 M/s Kirti Diam of the assessee filed a paper book in 1 to 548 including caselaw paper Ld. counsel of the assessee submitted that during assessment proceeding on the issue of the otal five notices have response, the assessee detailed submissions against shows notices. He submitted the assessee had filed audited details of sales and purchases, quantitative stock register as confirmed by the auditor, cash balance, corresponding purchase bills, labour bills for preparing jewelry, VAT returns, marketing and . It was the contention of the assessee that it as on 01/04/2016 to cover most of the made in October 2016 and those sales have already been bjected to tax under . He submitted that cash sales were cross Assessing Officer by issuing notices to the parties and those parties have to have made purchases from the assessee. Few such 73 to 94 of the of the assessee further submitted that have also been verified by issuing notice under section 133(6) of the recording their statement for confirming to have made sales by assessee. Further submitted that Assessing Officer in dated 27/12/2019 has duly a deposits was thoroughly examined and view was taken following the various judicial precedents after analyz on record, therefore the order of the said to be erroneous revenue. 7. The Ld. counsel identical circumstances in the case of in ITA No. 793/Mum/2000 2022 the order passed u/s 7.1 The Ld. counsel of the Act also cannot be invoked in dispute have been carried out by the Assessing Of instant case. The inadequate enquiry could only be shown if the Assessing Officer does not make relevant and meaningful inquiries or there is gross negligence in making inquiries. But in the present case the Assessing Officer has made all inqu been possibly made by any person of the reasonable prudence, hence the assessment order cannot be held to be erroneous prejudicial to the interest of the under section 133(6) of the Act and also calling the partie recording their statement for confirming to have made sales by assessee. Further submitted that Assessing Officer in dated 27/12/2019 has duly acknowledged that the issue of cash deposits was thoroughly examined and view was taken following the judicial precedents after analyzing the evidence on record, therefore the order of the Ld. Assessing Officer cannot be erroneous insofar as prejudicial to the interest of the Ld. counsel of the assessee submitted that ITAT in identical circumstances in the case of Abhusan Jewellary Vs PCIT No. 793/Mum/2000 2022 dated 12/08/2022 has set aside u/s 263 of the Act. Ld. counsel submitted that Explanation-2 to section 263 also cannot be invoked as sufficient inquiries on the issue been carried out by the Assessing Of instant case. The inadequate enquiry could only be shown if the Assessing Officer does not make relevant and meaningful inquiries or there is gross negligence in making inquiries. But in the present case the Assessing Officer has made all inquiries, which could have been possibly made by any person of the reasonable prudence, hence the assessment order cannot be held to be erroneous prejudicial to the interest of the Revenue. ITA No. 1147/M/2022 9 M/s Kirti Diam and also calling the parties and recording their statement for confirming to have made sales by the assessee. Further submitted that Assessing Officer in the order she that the issue of cash deposits was thoroughly examined and view was taken following the ing the evidence as available sessing Officer cannot be insofar as prejudicial to the interest of the of the assessee submitted that ITAT in Abhusan Jewellary Vs PCIT 12/08/2022 has set aside 2 to section 263 sufficient inquiries on the issue been carried out by the Assessing Officer in the instant case. The inadequate enquiry could only be shown if the Assessing Officer does not make relevant and meaningful inquiries or there is gross negligence in making inquiries. But in the present iries, which could have been possibly made by any person of the reasonable prudence, hence the assessment order cannot be held to be erroneous and 7.2 In view of the above facts, the submitted that Ld. incorrect facts and therefore same cannot be sustained. 7.3 The Ld. counsel submitted that proceedings have been initiated at the behest of the proposal sent by the independent application of the mind proceedings are liable to be invalidated. 8. The Ld. DR on the other hand relied on the order of the PCIT and submitted that in spite of circumstances leading to cash deposits being in the nature of the unexplained, the Assessing Officer has admitted the claim of the assessee without carrying out the enquiry which he ought to have carried out and therefore PCIT is correct in invoking 9. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In th raised the main dispute is whether the Assessing Officer has carried out the inquiries or verification in regard to cash deposits under reference which ought to have been carried out in the circumstances of the case. 9.1 Before us, the showing queries raised by the assessee for making enquiry or verification and submission by the assessee along with evidence In view of the above facts, the Ld. counsel PCIT has concluded the 263 proceedings on incorrect facts and therefore same cannot be sustained. Ld. counsel also supported the additional submitted that proceedings have been initiated at the behest of the proposal sent by the Ld. Assessing Officer and there was no independent application of the mind by the PCIT, therefore also the proceedings are liable to be invalidated. DR on the other hand relied on the order of the PCIT and submitted that in spite of circumstances leading to cash deposits being in the nature of the unexplained, the Assessing Officer has admitted the claim of the assessee without carrying out e enquiry which he ought to have carried out and therefore PCIT is correct in invoking Explanation-2 to section 263 of the We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In th raised the main dispute is whether the Assessing Officer has carried out the inquiries or verification in regard to cash deposits under reference which ought to have been carried out in the circumstances of the case. Before us, the Ld. Counsel of the assessee has showing queries raised by the assessee for making enquiry or verification and submission by the assessee along with evidence ITA No. 1147/M/2022 10 M/s Kirti Diam of the assessee 263 proceedings on incorrect facts and therefore same cannot be sustained. additional ground and submitted that proceedings have been initiated at the behest of the Assessing Officer and there was no therefore also the DR on the other hand relied on the order of the Ld. PCIT and submitted that in spite of circumstances leading to cash deposits being in the nature of the unexplained, the Assessing Officer has admitted the claim of the assessee without carrying out e enquiry which he ought to have carried out and therefore Ld. 2 to section 263 of the Act. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In the grounds raised the main dispute is whether the Assessing Officer has carried out the inquiries or verification in regard to cash deposits under reference which ought to have been carried out in the has filed a chart showing queries raised by the assessee for making enquiry or verification and submission by the assessee along with evidence filed during the proceeding under section 143(3) of the issue of cash deposit. For as under: “Chart showing queries raised by Id. A0 and submissions and evidences fled by appellant in assessment proceedings concluded u/s 143(3) of the Act. Sr. No. Details of various notices issues and relevant queries raised by Ld. AO in assessment proceedings 1. Notice dated 23.05.2019 1. Pt. 1 – Tax audit report and Financial statement of the appellant 2. Pt. 5 – Details of bank account and bank account statements 2. Notice dated 26.08.2019 details failing which rejected and cash deposits may be taxed u/s 68/69A and taxed u/s 115BBE. [Pg 31-40] 1. Pt. 7 - Details of Online response filed w.r.t. cash deposited during demonetization period. 2. Pt. 8 - Source of cash deposited during demonetization period. 3. Pt. 9 - Cash account of the assessee filed during the proceeding under section 143(3) of the issue of cash deposit. For ready reference said chart is reproduced “Chart showing queries raised by Id. A0 and submissions and evidences fled by appellant in assessment proceedings concluded u/s 143(3) of the Act. Details of various notices issues and queries raised by Ld. AO in assessment proceedings Details of reply filed by the appellant during the assessment proceedings Notice dated 23.05.2019 Submission dated 19.11.2019 wherein the various details as called for are filed before the Ld. AO [pg. 41-42 of PB] Tax audit report and Financial statement of the appellant  Pt. 4 of the submission dated 19.11.2019 [Pg. 41 of PB]  Evidence filed at Pg. 2 PB. Details of bank account and bank account statements  Pt. 5-6 of the dated 19.11.2019 [Pg. 41 of PB]  Evidences filed at Pg. 287 301 of PB Notice dated 26.08.2019 asking for various details failing which the books may be rejected and cash deposits may be taxed u/s 68/69A and taxed u/s 115BBE. Submission dated 19.11.2019 and 04.12.2019 wherein the various details as called for are filed before the Ld. AO [Pg. 41 and Pg. 43 of PB] Details of Online response filed w.r.t. cash deposited during demonetization period.  Pt. 7 of submission dated 19.11.2019 [Pg. 41 of PB]  Evidence filed at Pg 302 of PB. Source of cash deposited during demonetization period.  Pt. 8 of submission dated 19.11.2019 [Pg. 41 of PB] Cash account of the assessee  Pt. 9 of 19.11.2019 [Pg. 41 of PB]  Evidences filed at Pg 153 162 of PB ITA No. 1147/M/2022 11 M/s Kirti Diam filed during the proceeding under section 143(3) of the Act on the chart is reproduced “Chart showing queries raised by Id. A0 and submissions and evidences fled by appellant in assessment proceedings concluded u/s 143(3) of the Act. Details of reply filed by the appellant during the assessment proceedings Submission dated 19.11.2019 wherein the various details as called for are filed before the Ld. 42 of PB] Pt. 4 of the submission dated 19.11.2019 [Pg. 41-42 Evidence filed at Pg. 2-28 of 6 of the submission dated 19.11.2019 [Pg. 41-42 Evidences filed at Pg. 287- 301 of PB mission dated 19.11.2019 and 04.12.2019 wherein the various details as called for are filed before the Ld. AO [Pg. 41-42 and Pg. 43 of PB] Pt. 7 of submission dated 19.11.2019 [Pg. 41 of PB] Evidence filed at Pg 302-304 Pt. 8 of submission dated 19.11.2019 [Pg. 41 of PB] Pt. 9 of submission dated 19.11.2019 [Pg. 41 of PB] Evidences filed at Pg 153- 162 of PB 4. Pt. 10 - Details of persons from whom cash has been received 5. Pt. 19 - Monthwise purchases of current year and preceding year and reason for sharp variation, if any of figures of current year with Preceding year 6. Pt. 20 - Monthw and deposits of F.Y. 2015 7. Pt. 21 - Monthwise details of cash sales and cash deposits for F.Y. 2016 8. Pt. 22 - Details of top parties to whom sales are made including cash sales. 9. Pt. 23 - Details of top purchases are made 10. Pt. 24 - Monthwise stock details along with stock register/stock statement 11. Pt. 25 - VAT returns 3. Notice dated 22.11.2019. [Pg 44 1. Pt. 1 - Bifurcation of purchase and sales along with GP/NP ratio for A.Y. 2015 to A.Y. 2017-18 Details of persons from whom cash has been received  Pt. 1 of submission dated 04.12.2019 [Pg. 43 of PB]  Evidenced filed at Pg 99 of PB Monthwise details of sales and purchases of current year and preceding year and reason for sharp variation, if any of figures of current year with  Pt. 19 of submission dated 19,11.2019. [Pg. 42 of PB].  Evidences filed at Pg 95 of PB. Monthwise details of cash sales and deposits of F.Y. 2015-16  Pt. 20 of submission dated 19.11.2019. [Pg. 42 of PB].  Evidences filed at Pg 97 of PB. Monthwise details of cash sales and cash deposits for F.Y. 2016-17.  Pt. 21 of submission dated 19.11.2019. [Pg. 42 of PB].  Evidences filed at Pg 96 of PB. Details of top parties to whom sales are made including cash sales.  Pt. 3 of submission dated 04.12.2019. [Pg. 43 of PB].  Evidences filed at Pg 117 118 of PB. Details of top parties from whom purchases are made  Pt. 2 of submission dated 04.12.2019. [Pg. 43 of PB].  Evidences filed at Pg 115 116 of PB. Monthwise stock details along with stock register/stock statement  Pt. 4 of submission dated 04.12.2019. [Pg. 43 of  Evidences filed at Pg 127 152 of PB. VAT returns  Pt. 25 of submission dated 19.11.2019. [Pg. 42 of PB].  Evidences filed at Pg 274 280 of PB. Notice dated 22.11.2019. [Pg 44-45 of PB] Bifurcation of purchase and sales GP/NP ratio for A.Y. 2015-16 Submission dated 28. and 6) 04.12.2019 and (i 04.12.2019 Wherein the various details as called for are filed before the Ld. AO. [Pg. 43, 46 and 47 of PB]  Pt. 1 of submission dated 28.11.2010. [Pg. 46 of  Evidences filed at Pg 22 PB.  Pt. 1 and 7 of submission dated 04.12.2019. [Pg. 47 of ITA No. 1147/M/2022 12 M/s Kirti Diam Pt. 1 of submission dated 04.12.2019 [Pg. 43 of PB] Evidenced filed at Pg 99-104 Pt. 19 of submission dated 19,11.2019. [Pg. 42 of PB]. Evidences filed at Pg 95 of Pt. 20 of submission dated 19.11.2019. [Pg. 42 of PB]. Evidences filed at Pg 97 of Pt. 21 of submission dated 19.11.2019. [Pg. 42 of PB]. Evidences filed at Pg 96 of Pt. 3 of submission dated 04.12.2019. [Pg. 43 of PB]. Evidences filed at Pg 117- 118 of PB. Pt. 2 of submission dated 04.12.2019. [Pg. 43 of PB]. Evidences filed at Pg 115- 116 of PB. Pt. 4 of submission dated 04.12.2019. [Pg. 43 of PB]. Evidences filed at Pg 127- 152 of PB. Pt. 25 of submission dated 19.11.2019. [Pg. 42 of PB]. Evidences filed at Pg 274- 280 of PB. Submission dated 28.11.2019 and 6) 04.12.2019 and (ii) 04.12.2019 Wherein the various details as called for are filed before the Ld. AO. [Pg. 43, 46 and 47 of PB] Pt. 1 of submission dated 28.11.2010. [Pg. 46 of PB]. Evidences filed at Pg 22-28 of Pt. 1 and 7 of submission dated 04.12.2019. [Pg. 47 of 2. Pt 6. - Monthwise quantitative itemwise details of gold, silver etc. 3. Pt. 7 and 10 - Details of labour charges paid along with evidences 4. Pt. 8 - Sales and purchase register 5. Pt. 9 - GP, NP ratio of 3 years 6. Pt. 11 - Name and address of purchase and sale parties 7. Pt. 12 - Day to day cash book 4. Notice dated 05.12.2019. [ 1. Pt. 1 - Address of parties from whom purchases made in October and December'2016. Pt. 2 – Address of parties from whom sale made in October and December’ 2016 5. Show cause notice dated 18.12.2019 PB].  Evidences filed at Pg 98 of PB. Monthwise quantitative itemwise details of gold, silver etc.  Pt. 4 of submission dated 04.12.2019. [Pg. 43 of  Evidences filed at Pg 127 of PB. Details of labour charges paid along with evidences  Pt. 5 and 8 of submission dated 04.12.2019. [Pg. 47 of PB].  Evidences filed at Pg 259 of PB. Sales and purchase register  Pt. 6 of 04.12.2019. [Pg. 47 of PB].  Evidences filed at Pg 119 of PB. GP, NP ratio of 3 years  Pt. 1 and 7 of submission dated 04.12.2019. [Pg. 47 of PB].  Evidences filed at Pg 98 of PB Name and address of purchase parties  Pt. 1 to 3 of submission dated 04.12.2019. [Pg. 43 of PB].  Evidences filed at Pg 99 of PB. Day to day cash book  Pt. 9 of submission dated 19.11.2019. [Pg. 41 of PB].  Evidences filed at Pg 153 of PB. Notice dated 05.12.2019. [Pg 48-49 of PB] Address of parties from whom purchases made in October and December'2016. Submission dated 09.12.2019 and 13.12.2019 wherein various details as called for are filed before the Ld. AO. [Pg. 50 PB]  Pt. 1 of submission dated 09.12.2019 [Pg. 50 of PB]. and  Pt. 1 of submission dated 13.12.2019 [Pg. 51 of PB]  Evidences filed at Pg 115 of PB. Address of parties from whom sale made in October and December’ 2016  Pt. 2 of submission [Pg. 50 of PB].  Evidences filed at Pg of PB. Show cause notice dated 18.12.2019 Submission filed by the ITA No. 1147/M/2022 13 M/s Kirti Diam Evidences filed at Pg 98 of Pt. 4 of submission dated 04.12.2019. [Pg. 43 of PB]. Evidences filed at Pg 127-152 Pt. 5 and 8 of submission dated 04.12.2019. [Pg. 47 of Evidences filed at Pg 259-273 Pt. 6 of submission dated 04.12.2019. [Pg. 47 of PB]. Evidences filed at Pg 119-126 Pt. 1 and 7 of submission dated 04.12.2019. [Pg. 47 of Evidences filed at Pg 98 of PB Pt. 1 to 3 of submission dated 04.12.2019. [Pg. 43 of PB]. Evidences filed at Pg 99-118 Pt. 9 of submission dated 19.11.2019. [Pg. 41 of PB]. Evidences filed at Pg 153-162 Submission dated 09.12.2019 and 13.12.2019 wherein various details as called for are filed before the Ld. AO. [Pg. 50-51 of Pt. 1 of submission dated 09.12.2019 [Pg. 50 of PB]. Pt. 1 of submission dated 13.12.2019 [Pg. 51 of PB] Evidences filed at Pg 115-116 Pt. 2 of submission [Pg. 50 of Evidences filed at Pg 105-114 Submission filed by the asking to show cause why cash deposits of Rs.2,65,44,000/- shall note be treated as unexplained cash credit and higher tax rate u/s 115 BBE of the Act be not applied. [Pg 52-53 of PB] 6. Show cause notice dated 23.12.2019 asking to explain why large number of sale transactions are shown in October'2016 and why the same may be treated as genuine. [Pg 58 of PB] 7. Notice us 133(6) of the Act issued by Ld. AO to Sale parties. [Pg. 73-87 of PB] 8. Notice us 133(6) of the Act issued to purchase party. [Pg. 88 of PB] 9.2 Further, the assess formed basis for conclusion verification which ought to have been done, had not carried out by the Ld. Assessing Officer. The observation of the Ld. following reasons: asking to show cause why cash deposits of shall note be treated as unexplained cash credit and higher tax rate u/s 115 BBE of the Act be not applied. appellant dated 23.12.2019 justifying the nature and source of cash deposits made during demonetization period and why no addition shall be made in the present case. [Pg. 54  Evidences in the nature of purchase and sale bil A.Y.2017- 205 of PB]  Evidences in the nature of purchase bills, bank statements for earlier year and subsequent year filed Pg. 206-258 of PB Show cause notice dated 23.12.2019 asking to explain why large number of sale ons are shown in October'2016 and why the same may be treated as genuine. [Pg 2. submissions filed by the appellant, each dated 24.12.2019 justifying the nature and source of cash deposits made during demonetization period and why no addition sha be made in the present case. [Pg. 59-66 and 67 Notice us 133(6) of the Act issued by Ld. AO Reply filed by various customers directly to the Ld. AO confirming sales made by the appellant to them along with evidences [Pg. 73-87 of PB] Notice us 133(6) of the Act issued to Reply filed by purchase party directly to the Ld. AO confirming purchases made by the appellant from them. [Pg. 89-94 of PB] Further, the assessee has also rebutted the grounds, which for conclusion by the learned PCIT, that inquiries or verification which ought to have been done, had not carried out by Assessing Officer. The Ld. counsel submitted that Ld. PCIT are based on incorrect fact due to ITA No. 1147/M/2022 14 M/s Kirti Diam appellant dated 23.12.2019 justifying the nature and source of cash deposits made during demonetization period and why no addition shall be made in the present case. [Pg. 54-57 of PB] Evidences in the nature of purchase and sale bills of -18 filed [Pg. 163- 205 of PB] Evidences in the nature of purchase bills, bank statements for earlier year and subsequent year filed Pg. 258 of PB] submissions filed by the appellant, each dated 24.12.2019 justifying the nature and source of cash deposits made during demonetization period and why no addition shall be made in the present case. 66 and 67-72 of PB] Reply filed by various customers directly to the Ld. AO confirming sales made by the appellant to with evidences 87 of PB] Reply filed by purchase party directly to the Ld. AO confirming purchases made by the appellant 94 of PB] also rebutted the grounds, which , that inquiries or verification which ought to have been done, had not carried out by submitted that are based on incorrect fact due to a. the Ld. PCIT has stated that the Assessing Officer ignored the fact of high cash sales in the month of October 2016. In this regard, it was submitted that Assessing Officer has issued specific show cause notice dated 23/12/2019, which is available on page 58 of t assessee was asked to substantiate the genuineness of the high cash sales made in the month of October 2016. In response thereto, the assessee filed submissions on 24/12/2019, which are available on paperbook page 59 to 66 and 67 to 72. The other notices issued and information called under section 133(6) of the high cash sales. I that Assessing Officer ignored the fact of the cash sales. b. The Ld. PCIT stated that th verified purchase instead of sales. The submitted that the Assessing Officer sales and thereafter also verified corresponding stock, books of accounts etc sale registers, stock register, partywise cash sales, have been filed during assessment proceeding, which demonstrates that not only purchases, but sales were also duly verified by the Assessing Officer. c. The Ld. PCIT has stated that in respect of pu in October 2016, payments were made in February 2017 after recycling the cash and the books of accounts. The PCIT has stated that the Assessing Officer ignored the fact of high cash sales in the month of October 2016. In this regard, it was submitted that Assessing Officer has issued specific show cause notice dated 23/12/2019, which is available on page 58 of the paperbook, wherein the assessee was asked to substantiate the genuineness of the high cash sales made in the month of October 2016. In response thereto, the assessee filed submissions on 24/12/2019, which are available on paperbook page 59 to to 72. The other notices issued and information called under section 133(6) of the Act are also in relation to high cash sales. In such circumstances, it cannot be said that Assessing Officer ignored the fact of the cash sales. PCIT stated that the Assessing Officer has only verified purchase instead of sales. The submitted that the Assessing Officer has primarily verified sales and thereafter also verified corresponding books of accounts etc. The evidences like sale b sale registers, stock register, partywise cash sales, have been filed during assessment proceeding, which demonstrates that not only purchases, but sales were also duly verified by the Assessing Officer. PCIT has stated that in respect of pu in October 2016, payments were made in February 2017 after recycling the cash and the books of accounts. The ITA No. 1147/M/2022 15 M/s Kirti Diam PCIT has stated that the Assessing Officer ignored the fact of high cash sales in the month of October 2016. In this regard, it was submitted that Assessing Officer has issued specific show cause notice dated 23/12/2019, which he paperbook, wherein the assessee was asked to substantiate the genuineness of the high cash sales made in the month of October 2016. In response thereto, the assessee filed submissions on 24/12/2019, which are available on paperbook page 59 to to 72. The other notices issued and information also in relation to it cannot be said that Assessing Officer ignored the fact of the cash sales. e Assessing Officer has only verified purchase instead of sales. The Ld. counsel primarily verified sales and thereafter also verified corresponding purchases, . The evidences like sale bills, sale registers, stock register, partywise cash sales, have been filed during assessment proceeding, which demonstrates that not only purchases, but sales were also PCIT has stated that in respect of purchases made in October 2016, payments were made in February 2017 after recycling the cash and the books of accounts. The Ld. counsel submitted that this statement is factually incorrect and payment towards purchases were made immediately except for one sm The Ld. counsel showing details of purchases and payments made immediately along with evidences in the form of accounts, invoices and bank statement, which have been made part of the paperbook. d. The Ld. PCIT stated that assessee has purchas and sold diamonds to small customers, which is not practical as a small retail customers don’t buy loose diamonds. In this regard, the assessee submitted that it has not sold loose diamonds to customers, but loose diamonds are purchased and after engaging labourers made, which was then sold. The sales are only in respect of the jewelry during October 2016 and bangles, pendants, rings, earings et the copy of the bills, detailed filed in the paperbook. 9.3 Before us the statement of the Ld. counsel the finding of the Ld. to have been done, had not been done justified. The Explanation submitted that this statement is factually incorrect and payment towards purchases were made immediately except for one small amount which was paid in Feb. 2017. Ld. counsel submitted that assessee had filed a chart showing details of purchases and payments made immediately along with evidences in the form of accounts, invoices and bank statement, which have been ade part of the paperbook. PCIT stated that assessee has purchas diamonds to small customers, which is not practical as a small retail customers don’t buy loose diamonds. In this regard, the assessee submitted that it has old loose diamonds to customers, but loose diamonds are purchased and after engaging labourers made, which was then sold. The sales are only in respect of the jewelry during October 2016 and which includes bangles, pendants, rings, earings etc, which is evident from the copy of the bills, ledger accounts, labour bills etc. detailed filed in the paperbook. Before us the Ld. DR could not controvert above factual Ld. counsel of the assessee. In the circumstances, Ld. PCIT that enquiry or verification which ought had not been done, is devoid of merit and not Explanation -2 to section 263 of the ITA No. 1147/M/2022 16 M/s Kirti Diam submitted that this statement is factually incorrect and payment towards purchases were made immediately all amount which was paid in Feb. 2017. submitted that assessee had filed a chart showing details of purchases and payments made immediately along with evidences in the form of ledger accounts, invoices and bank statement, which have been PCIT stated that assessee has purchased diamonds diamonds to small customers, which is not practical as a small retail customers don’t buy loose diamonds. In this regard, the assessee submitted that it has old loose diamonds to customers, but loose diamonds are purchased and after engaging labourers, jewelry was made, which was then sold. The sales are only in respect of which includes , which is evident from ledger accounts, labour bills etc. DR could not controvert above factual assessee. In the circumstances, PCIT that enquiry or verification which ought is devoid of merit and not 2 to section 263 of the Act cannot be invoked in such circumstances. The order of the accordingly set aside. The grounds of the appeal of the assessee accordingly allowed. 9.4 Since the ground in favour of the assessee, the academic, and therefore we a hence dismissed as infructuous. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on Sd/- (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 23/02/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// circumstances. The order of the gly set aside. The grounds of the appeal of the assessee Since the grounds of the appeal have already been adjudicated in favour of the assessee, the additional ground is rendered merely academic, and therefore we are not adjudicating upon the same hence dismissed as infructuous. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 23/02/2023. Sd/ KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai ITA No. 1147/M/2022 17 M/s Kirti Diam circumstances. The order of the Ld. PCIT is gly set aside. The grounds of the appeal of the assessee are already been adjudicated ground is rendered merely upon the same, In the result, the appeal of the assessee is allowed. 02/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai