MAHALAXMI KUNDAN MEENA DIAMOND JEWELLERS P LTD, JAIPUR V. PR. CIT-1, JAIPUR

ITA 119/JPR/2022

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 1197 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 04-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVDESH KUMAR
• Keywords: Revision of order; Assessment record; Revenue expenditure; Set aside
• Section: 68; 263; 143(3); 142(1); 133A; 143(2); 44AB

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR MkWa- ,e- ,y- ehuk] ys[kk lnL; ,oa MkWa- ,l-lhrky{eh] U;kf;d lnL; ds le{k BEFORE: DR. M.L. MEENA, AM & DR. S. SEETHALAKSHMI, JM vk;dj vihy la-@ITA No. 119/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2017-18 M/s Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. 3, New Colony, M.I. Road, Jaipur. cuke Vs. Pr. Commissioner of Income Tax, Jaipur-1, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAFCM 8619 P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri S.L. Poddar (Adv.) jktLo dh vksj ls@Revenue by: Shri Avdesh Kumar (CIT) lquokbZ dh rkjh[k@Date of Hearing :23/05/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 01/08/2022 vkns'k@ORDER Per Dr. M.L. MEENA, AM This appeal by the assessee is directed against the order of the Ld. Pr. CIT(A), Jaipur-1dated 29.03.2022 challenging the order passed u/s 263 of the Act for assessment year 2017-18 wherein the assessee has raised the following grounds of appeal:- “1. In the facts and circumstances of the case the learned Pr. CIT, Jaipur-1, Jaipur has erred in holding that the order passed by Learned Assessing Officer u/s 143(3) of the Income Tax Act, 1961 dated 25.12.2019 was erroneous and prejudice to the interest of the revenue. 2. In the facts and circumstances of the case the learned Pr. CIT, Jaipur-1, Jaipur has erred in not considering the opening balances of cash and debtors while cash deposit was out of the same. 2 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. 3. In the facts and circumstances of the case the learned Pr. CIT, Jaipur-1, Jaipur has erred in holding that there is no mention about the discrepancies noted during survey proceedings. During demonetization, there was sudden growth in the sales and huge cash was deposited in bank account whereas the assessment was completed u/s 143(3) after considering the outcome of survey proceedings u/s 133A of the Income Tax act, 1961. 4. In the facts and circumstances of the case the learned Pr. CIT, Jaipur-1, Jaipur has erred in holding that the order has been passed by the AO in a routine and causal manner without applying the applicable sections of the Act without bringing any material on record. 5. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing. 6. In the facts and circumstances of the case the learned Pr. CIT, Jaipur-1, Jaipur has erred in passing the order u/s263 of the Income Tax Act, 1961 which is void ab-inito deserves to be quashed.” 2. The assessee company’s case was selected under compulsory scrutiny selection as per CBDT guidelines. The assessment was completed u/s 143(3) vide order dated 25.12.2019 by making an addition of Rs. 1 crore u/s 68 of the Income Tax Act on account of alleged unexplained cash credits. 3. The ld. Pr. CIT-Jaipur-1, has stated that there were huge cash deposited in the bank account of the assessee every month although it was against the cash sales made during the Financial Year 2016-17, under consideration. He has further noted that an overall surplus cash deposits for the year under consideration i.e. F.Y 2016-17 were more than Rs. 2.55 Crore and that the source of such huge cash deposit in the bank does not 3 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. commensurate with the sales made during the year and which has not been examined by the Assessing Officer. He has also noted that on the date of survey the cash found was less than what was reflected in the books of account. The ld. PCIT further mentioned that the AO has not examined the genuineness of cash sales as per for the details found during the course of survey up to 11.11.2016 by way of cross verification. 3.1 The ld. Pr.CIT also noted that in December 2016, there was negative gold stock (-) 44.96 grams which was not examined by the AO and that there was no explanation furnished by the assessee regarding as how the cash deposit in the bank reported at Rs. 3,31,84,500/- is Rs. 3,01,84,500/- only. The ld. Pr.CIT also questioned the assessment order on account of introduction of fresh unsecured loan being payment amount to Rs. 2,48,29,062/- being not examined by the AO. The Assessing Officer ought to have inquired/examined unsecured loan during the course of assessment proceedings. Accordingly, ld. PCIT has held that the matter has been accepted by the Assessing Officer without any verification/enquiry and as such manner contradictory provisions of law. The resultant was held erroneous it is prejudicial to the interest of Revenue. Accordingly, he initiated proceedings u/s 263 of the Act. He has issued a 4 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. show cause notice dated 16.02.2022 to the assessee electronically on ITBA system. After considering reply of the assessee he has held the assessment order erroneous as much as prejudicial to the interest of the revenue vide para Nos. 6 to 12 as under:- “6. I have considered the assessment record and the submission made by the assessee during the proceedings u/s 263. The assessee in his reply, with regard to the cash deposits made in the bank account which are not commensurate with the cash sales, has submitted that the cash receipts from the debtors and opening cash balance was not considered. The same requires verification. Further, on perusal of the reply it is found that the assessee has not submitted comparative chart of cash receipts from debtors out of credit sales, opening balance vis-à-vis cash deposited in the bank accounts in order to substantiate its claim. Thus, in absence of these documentary evidences, the cash deposits made in the bank accounts of the assessee remain unverified. 6.1 Further, with regard to the unsecured loans, the amount of Rs. 2,48,29,062/- was taken during the year for which the assessee submitted a chart as per which the total credit in the year was Rs.3,28,66,049/- out of which Rs.34 lakhs is for new loans and remaining Rs.2,94,66,049/- for interest credited during the year. 7. The reasons for scrutiny are not available on file. It appears that the case was selected for compulsory manual scrutiny as a survey was conducted on 10-11-2016 in its case during the demonetization period. However, there is nothing on record to show that the AO has examined the survey report. As per preliminary survey available on record, balance in the cash book as on 11.11.2016 was Rs. 4,27,870/-whereas, on physical verification, cash of Rs. 1,28,835/- was found. It has also been mentioned in the report that no stock register was maintained. Further, it has been mentioned in the survey report regarding impounding of books of accounts in the case of the assessee that Annexure-A, Exhibit -1 to 3 was impounded. The questionnaire issued by the AO, during assessment proceedings, (on 21- 05-2019 is very vast comprising of 24 details sought; however, it does not, 5 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. contain any query related to survey conducted on 11-11-2016.(There is no motion about the discrepancies noted during survey proceedings. During demonetization, there was sudden growth in the sales and huge cash was deposited in Bank account. In the second query letter dated 07-12-2019, some queries related to cash deposit demonetization are raised but not related to survey. 9. It is seen from the assessment record that there are huge surplus cash- deposits in bank every month as against cash-sales made during the financial year 2016-17(except in the months of May-2016 & October-2016). The cumulative cash-sales and cash-deposits from April-2016 to June 2016 are 1,43,99,473/- & 1,63,57,000/- respectively-shows surplus cash deposits of Rs. 19,57,527/- during the quart& even if it is presumed that the entire cash sales is deposited. Then, there is a surge of Rs. 70,71,958/- in the surplus-cash deposit as compared to cash-sales of Rs. 90,29,485/- up to July-2016; overall surplus of cash deposits during the year under consideration i.e. F.Y .2016-17 is seen to be over Rs. 2.55 Crore. The source of such huge cash deposits in the bank, which are not commensurate with the sales made during the year, has not been examined. More so when on the date of survey, the cash found is less than reflected in books of accounts. Further, the genuineness of sales shown with the purchases was not examined. No attempt has been made to mach the sales shown in the P&L account with the cash sale details found during survey upto 11-11-2016. 10. In Dec. 2016, there is negative gold stock (-) 44.906 gram which has was not examined. The assessee in its reply, during revision proceedings, has submitted that in the stock statements of December -2016, the purchase is less than goods return. The total purchase in this month is 116.334 gm and the return of gold was 161.240 gms. The assessee has submitted that opening balance of Gold on 01.12.2016 of 17810.475 gm has not been considered. The - assessee's submission requires verification. 11.It is also observed that certified copies of Audited Balance Sheet and profit & Loss Account are not available on the assessment record; only unsigned copies of Balance Sheets and P&L Account are placed on record without their accompanying schedules or accounting notes. The same have now been submitted which require verification. 6 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. 12. Reliance has been placed on the following judicial pronouncements in this regard:- In the case of M/s Gee Vee Enterprises 99 ITR 375 (Delhi High Court) [1995]. It was held that the Assessing Officer (AO) is not only an adjudicator but also an investigator, and failure of the AO to conduct the required inquiring and accepting the statement of the assessee without due verification enders the order erroneous as well as prejudicial to the interest of the revenue. Absence of proper inquiring by the AO would render the assessment order erroneous as well as prejudicial to the interest of the revenue as held in following cases:- 1. Jagdish Kumar Gulati vs CIT 269 ITR 71 (Allahabad) 2. Duggal & Co. 220 ITR 456 (Delhi) 3. K.A. Rama Swami Chettiar vs CIT 220 ITR 657 (Mad.) 12. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 25-12-2019 for A.Y. 2017-18 passed by the AO is held erroneous in so far as it is prejudicial to the interests of the revenue for the purpose of section 263 of the I.T. Act. The said order has been passed by the Assessing Officer in a routine and casual manner without applying the applicable sections of the Act. The Assessing Officer has not verified the details which were required to be verified under the scope of scrutiny. The order of the Assessing Officer is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Income Tax Act. The assessment order is set aside to be made afresh in the light of the observation made in this order. The AO is required to make necessary verification in respect of the observations made in this order after all owing reasonable opportunity to the assessee.” 4. The ld. AR has submitted that action of the Pr.CIT was arbitrarily and unjustified in holding the assessment order was passed in a routine manner without appreciating the material facts of the case. In support, the ld. AR raised 7 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. various contentions duly supported with written submissions which read as under:- “The assessee is a partnership firm engaged in the business of Manufacturing & Trading of kundan, meena, gold and silver jewellery. Return declaring total income at Rs. 1,22,18,870/- was filed on 28.10.2017. The Learned Assessing Officer completed assessment u/s 143(3) on 22.12.2019 determining total income at Rs. 2,22,18,870/- inter-alia making addition of Rs. 1,00,00,000/- u/s 68 of the Income Tax Act, 1961 on account of alleged unexplained cash deposited in bank during demonetization period. Aggrieved with the order of the learned Assessing Officer the assessee has preferred appeal before the learned CIT(A) which is still pending for disposal. The case was selected for scrutiny under compulsory manual selection. The same was specifically mentioned in the assessment order. In this case the first notice u/s 143(2) was issued on 17.09.2018. The assessee has respond this notice by filing its reply on 29.09.2018 immediately. The details of notices issued by the learned AO and reply submitted by the assessee are as under: - Sr. No. Notice issued under section Date of issuance of notice Date of reply submitted by the assessee 1 143(2) 17.09.2018 29.09.2018 2 142(1) 21.05.2019 28.05.2019 3 142(1) 29.07.2019 01.08.2019 4 142(1) 23.08.2019 02.09.2019/25.10.2019 5 142(1) 07.12.2019 11.12.2019/13.12.2019 6 142(1) 17.12.2019 22.12.2019 7 Order u/s 25.12.2019 8 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. 143(3) Copies of notices are available on paper book page no. 58 to 76. It is submitted that the learned AO has made so many queries in these notices, notice dated 07.12.2019 are running 10 pages. More than 100 queries were raised. The assessee has made detailed replied all the queries. Copies of replies submitted before the learned AO are available on paper book page no. 77 to 90. In these replies the assessee has submitted all the details regarding cash deposited in the bank. The cash was generated out of sales and cash available in the books. The assessee has also maintained quantitative stock register which has also been submitted before the learned AO. Books of accounts of the assessee are audited u/s 44AB of the Income Tax Act, 1961. The assessee has maintained cash book, bank book, purchase register, sales register, ledger, journal and other supporting. No defect what so ever has been pointed out in the maintenance of the books of accounts by the Learned AO as well as the Chartered Accountants. No defect has been found in the books of accounts consisting of cash book, ledger and purchase, sales register, it tantamount to acceptance of the books of accounts as correct. Even though, the learned Assessing Officer has made the addition of Rs. 1,00,00,000/- on possible to have leakage of revenue. When the trading account has been accepted, i.e. sales and purchases and GP have not been disturbed, then the Learned Assessing Officer was not justified in holding sales to the extent of Rs. 1,00,00,000/- as manipulated. The deposit in bank has been made as a result of cash generated on account of sales conducted by the assessee. The sales are with respect to goods available in the stock register. A survey was conducted u/s 133A on 11.11.2016 at the business premises of the assessee. During the course of survey no discrepancy was noticed in accounts, in stock or in cash. At the time of survey the book position of stock tallied with the stock found physically. This shows that purchases were genuine and the sales conducted and shown by the assessee are also genuine. After considering all aspects and replies submitted by the assessee assessment for the under consideration was completed u/s 143(3) of the I.T. Act, 1961 by making the addition of Rs. 1,00,00,000/- on 25/12/2019. Hence it cannot be said the order was passed by the AO is erroneous or prejudicial to the interests of the revenue. 9 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. The order has not passed by the learned AO in routine and casual manner without applying the applicable sections of the Act. 2. In this case the assessment proceeding were taken up with the issue of notice u/s 143(2) on 17.09.2018. The assessment order in the above case was completed u/s 143(3) of the Income Tax Act, 1961 on 25.12.2019. Thus the department has taken a period of almost 1 year and 3 months for completing the assessment proceedings. This shows that adequate time was devoted by the assessing authority in making enquiries and looking into the papers filed. The assessment cannot be said to have been completed in hurry. 3. The Learned CIT has observed that the said order has been passed by the Assessing Officer in a routine and casual manner without applying the applicable sections of the Act. The order passed by the AO is held erroneous in so far as it is prejudicial to the interests of the revenue for the purpose of section 263 of the I.T. Act. The observations of the Learned CIT are not in conformity with the facts of the case. The Learned Assessing Officer has caused thorough enquiries and has made extensive verifications before passing the order. The same is detailed below 4. Queries letters issued by the Learned Assessing Officer – The Learned Assessing Officer during the assessment proceedings issued detailed query letters as under – Sr. No. Notice issued under section Date of issuance of notice Date of reply submitted by the assessee 1 143(2) 17.09.2018 29.09.2018 2 142(1) 21.05.2019 28.05.2019 3 142(1) 29.07.2019 01.08.2019 4 142(1) 23.08.2019 02.09.2019/25.10.2019 5 142(1) 07.12.2019 11.12.2019/13.12.2019 10 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. In these query letters detailed information was called for by the Learned Assessing Officer in as much as raising more than 100 queries. It is submitted that in the replies of these query letters specifically information was furnished in respect unsecured loan and cash deposited during the demonetization period. This must be available on assessment record and deserved to be looked into by your honour so as to verify the aforesaid submission. In the query letter the Learned Assessing Officer had called for name and complete address of the depositors with their PAN and confirmations. He has further called-for for all the details regarding cash deposited in the bank during the demonetization period and source thereof. The Learned has also called for the other details which includes, sundry creditors, debtors, VAT/GST returns, evidence regarding agriculture income shown and so many more things. Compliance of these queries were made by furnishing detailed replies. Copy of replies are available on paper book page no. 58 to 76. In view of the aforesaid facts it is clear that the assessment in this case was completed after causing enquiries diligently in respect of all the matters material for completing the assessment. The enquiries conducted by the Learned Assessing Officer cover all the issues raised in the order u/s 263. It cannot be said that the Learned Assessing Officer was blind to any matter or failed to make proper enquiries. As submitted above the assessee also made compliance of all the queries made by the learned AO. 5. Reply of the assessee in response to show cause notice u/s 263 – The assessee has again submitted the specific replies to the queries raised in the show notice u/s 263 issued by the learned CIT regarding the explanation regarding cash deposited in the bank account and evidence creditworthiness/genuineness of 6 142(1) 17.12.2019 22.12.2019 7 Order u/s 143(3) 25.12.2019 11 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. unsecured loans and pointwise reply of issues raised in the notice. The reply of the assessee are as under: - “To, The Principal Commissioner of Income Tax, Jaipur-1, Jaipur Sub: Reply of Show cause U/s 263 of the Income Tax Act, 1961 on the case of M/s Mahalaxmi Kundan Meena Diamond Jewellers Private Limited, 3, New Colony, M. I. Road, Jaipur dated 16.02.2022. PAN - AAFCM8619P Assessment Year - 2017-18 Respected Madam, With reference to your above show cause notice our para-wise reply is as under:- 1) In the 1 st para of your notice you have observe that we have deposited huge surplus cash in bank. You have further observe that the cash deposit from April- 2016 to June-2016 are Rs. 1,43,99,473/- and Rs. 1,63,57,000/- respectively shows surplus cash deposit of Rs. 19,57,527/- during the Quarter. You further observe that there is a surge of Rs. 70,71,958/- in the surplus cash deposit as compare to cash sales Rs. 90,29,485/- up to July-2016. Therefore, the source of cash deposit is not explaining for Rs. 2.55 Crore. In this regard our submission is that a) You have not considered the opening Cash Balance of Rs. 58,46,127.28/- available with the assessee as on 01.04.2016. As per last Audited Balance Sheet. b) You have not considered the recovery in cash from the sundry debtors as on 01.04.2016 and The credit sales made during the year and sub-sequent recovery from those debtors during the year which is Rs. 2,45,83,955/-. c) That the chart which is enclosed herewith and is also available on record clearly shows that the amount deposited in every month is out of Opening Balance + Cash Sales and Recovery from Debtors in each month. The chart enclosed clearly shows everything and it was verified by the AO with cash 12 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. book and audited accounts and Cash Sales Memo produced before him. The chart is also enclosed for your kind perusal. (Annexure-A & B) d) The Learned AO has also cross verified the sales details found at the time of survey on 11.11.2016 and it is tallied with cash sales and cash memos and cash found at the time of survey. e) Complete detail of month wise cash Sales and cash deposit in bank along with cash received from debtors for financial year 2016-17 was already submitted during course of assessment U/s 143(3) of The Income Tax Act 1961 as per point no 6 of reply dated 13/12/2019, which must be placed on assessment record. 2) In next para you have further observe that there is a negative stock of Gold 44.906 gm. In this regard we would like to submit that in the stock statement of December-2016 the purchase is less than goods return. The total purchase in this month is 116.334 gm and the return of gold was 161.240gm. Therefore, you have taken the months transaction (Inward and Outward Transactions) and you have not considered that there is opening balance of Gold on 01.12.2016 of 17810.475gm . Copy of consolidated stock register and December-2016 stock register is enclosed herewith. (Annexure-C) 3) You have further observed that the cash deposited in bank from 09.11.2016 to 31.12.2016 is Rs. 3,01,84,500/- whereas the reported amount is Rs. 3,31,84,500/-. In this regard our submission is that in reported amount you have considered Rs. 30,00,000/- which was deposited on 08.11.2016. Whereas the figures are from 09.11.2016 to 31.12.2016. Copy of bank statement is enclosed in which we have highlighted all the 3 entries of Rs. 10,00,000/- each deposited on 08.11.2016. There is no difference. (Annexure-D) 4) You have further observed that there are fresh unsecured loans taken amounting to Rs. 2,48,39,062/- which have not been examined and you have further observed that the unsecured loan of Rs. 1,58,93,762. In this regard our submission is that a) We have furnished complete details of unsecured loans along with confirmations of all unsecured loans during the assessment proceedings vide 13 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. replied dated 13.12.2019 in Point No. 12. The details chart of unsecured loan is enclosed herewith in which the total credit in the year was Rs. 3,28,66,049/- out of which Rs. 34 Lakhs is for new loans and remaining Rs. 2,94,66,049/- is for interest credited during the year. b) Copy of all the confirmations along with bank passbook and acknowledgement of return is enclosed herewith again. The same were also submitted during the assessment proceedings. (Annexure-E) 5) We have submitted the signed copy of balance sheet, Profit & Loss account along with all annexures during the assessment proceedings. However, the same is submitting herewith again. (Annexure-F) Thanking you, Yours Faithfully, Sd/- Date: 18.02.2022 (S.L. Poddar) Place: Jaipur (Counsel of the Assessee)” It is the submission of the assessee that it was after making proper enquiries and scrutinizing the papers submitted by the assessee regarding unsecured loans, agriculture income, cash deposited during demonetization period and others, and the same was accepted by the Learned Assessing Officer. Thus there cannot be any action u/s 263 on this issue. The Learned CIT is not justified in adversely commenting on this issue and making this one of the grounds for setting aside the order u/s 263. There was no error or anything prejudicial to the interest of revenue on this issue. The order of the Learned CIT therefore deserves to be quashed. 6. The Learned CIT is also wrong in observing that the said order has been passed by the Assessing Officer in a routine and casual manner without applying the applicable sections of the Act. The Assessing Officer has not verified the details which were required to be verified under the scope of scrutiny. The order of the Assessing Officer is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Income Tax Act. The assessment order is set aside to be made afresh in the light of the observation made in this order. 14 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. In this regard it is submitted that assessee had furnished complete details of unsecured loans, agriculture income, cash deposited during demonetization period along with supporting. In this case after considering the facts of the case the Learned Assessing Officer had accepted the position of the assessee. Action u/s 263 does not arise in a case where the Learned Assessing Officer had adopted one possible view on issue having two divergent views. In view of these facts the Learned CIT was not justified in setting aside the assessment order on this ground. 7. In view of the aforesaid discussion it is submitted that it is not a case where intervention was required by the Learned CIT for action u/s 263. It was a survey case where already department had reached to the door steps of the house of the assessee and search was made at every nook and corner. There was nothing left for the assessee to hide or conceal. The Learned Assessing Officer had also taken a long period of 1 year and 3 months for completing the assessment by raising various queries. It cannot be said that assessment was completed in a routine manner. Detailed queries were made and equally detailed replies were submitted. It is settled principle that "when it has came on record that the Assessing Officer had made reasonably detailed enquiries, collected relevant material and discussed various facts of the case with the assessee the order of the CIT to direct fresh assessment by going deeper into the matter would not form a valid or legal basis to exercise jurisdiction under section 263" CIT Vs. Hindustan Marketing and Advertising Co. Ltd. (2012) 341 ITR 180 (Delhi) The Learned CIT is not empowered to direct the Assessing Officer simply to cause further enquiries, when each and every fact of the case is laid thread bare before him. He should have himself decided the issues instead of shirking the responsibility. "The revisionary jurisdiction cannot be allowed to be exercised by the Commissioner either for substituting his own option for that of the Assessing Officer or for making a fishing or roving enquiry" Jhulelal Land Development Corpn Vs. DCIT (1996) 56 ITD 345 (Bom.) The Commissioner did not come to a positive finding that the claim of the assessee was erroneous. He simply asked the Assessing Officer to re-examine the matter. This was not possible. CIT Vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom.) 8. Ratio of case laws quoted by the Learned CIT are not applicable in the case of the assessee – 15 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. The Learned CIT has cited the following case in support of his action u/s 263. The ratio of these case is not applicable to the facts of the case as is shown in the column in the table below – Sr. No. Name of the case Remarks 1 M/s Gee Vee Enterprises 99 ITR 375 (Delhi High Court)[1995] In this case the action u/s 263 was justified as there the case is pertaining to the existence of the assessee firm. Wherein ITO had not made sufficient enquiries before granting registration. The court has held that the partnership was required to be in existence as a genuine firm in the previous year before it could be registered under s. 185 of the Act. Such registration gives a substantial advantage to it for the purpose of taxation. In the very first assessment of the company and the firm, the advantage of the registration was given to the firm. The question would naturally arise whether the firm was formed merely for the purpose of getting a tax advantage.Thus the ratio is not applicable. 2 Jagdish Kumar Gulati vs CIT 269 ITR 71 (Allahabad) In this case the Learned AO himself putting a note to the assessment under section 143(3) that it was made without proper enquiries in order to save limitation. This is not in the position of the assesse’s case. The learned AO has not made any note in his order that he passed an order without proper enquiries. Thus the ratio is not applicable. 3 Duggal & Co. 220 ITR 456 (Delhi) It is a case where the assessee has paid interest on its borrowings at rates varying from 9 to 12 per cent while it charged interest on advances at 4 per cent only. The learned CIT found that ITO omitted to enquire into this question. But in our case this is not the position. The assessee has not given any advances/loans. Thus the ratio is not applicable. 4 K.A. Rama This case is pertaining to conflicting views of the 16 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. Swami Chettiar vs CIT 220 ITR 657 (Mad) various High Courts in the matter of applicability of the Expln. to s. 263(1) of the Act beyond the period of 1st June, 1988. This issue is not involved in the assessee’s case. Thus the ratio is not applicable. 9. Case laws in favour of the assessee – (i) Krishnamurthy (V.G.) Vs. CIT (1985) 152 ITR 683 (Karn) Where it was found that the Assessing Officer had raised specific queries in regard to all relevant points involved in the assessment and the assessee had met those queries with supporting evidence, but where the Assessing Officer made a brief assessment without recording therein all facts and accepted assessee's version, the assessment order could not be set aside on the ground that no proper enquiry was made. (ii) Jagjit Industries Ltd. Vs. CIT (Asst) (1997) 60 ITD 295 (Del) Similarly while making assessment, if the Assessing Officer had made reasonable and requisite enquiries on issues raised by the Commissioner during proceedings under section 263, no order under section 263 could be passed. (iii) Venkatakrishna Rice Co. Vs. CIT (1987) 163 ITR 12 (Mad.) ITO's order must contain grievous error which is subversive of the administration of revenue. The expression prejudicial to the interests of the revenue must be regarded as involving a conception of facts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the ITO which might set a bad trend or pattern for similar assessment which on a broad reckoning the Commissioner might think to be prejudicial to the interests of revenue administration. The scope of the interference under section 263 is not to set aside merely unfavourable order and bring to tax some more money into the treasury. Nor is the section means to get a sheer escapement or revenue. (iv) Bismillah Trading Co. Vs. Intelligence Officer (2001) 248 ITR 292 (Ker.) 17 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. 'Prejudice' must be prejudice to revenue administration – The word 'prejudice' must be judicially examined. What constitutes 'prejudice to the Revenue' has been the subject matter of a judicial debate. One view was that 'prejudicial to the interests of the Revenue' does not necessarily mean loss of revenue. The expression is not to the constructed in a pettifogging manner, but must be given a dignified construction. The interests of the revenue are not to be equated to rupees and paise merely. There must be grievous error in the order passed by the ITO which might set a bad trend or pattern for similar assessments which, on a broad reckoning, the commissioner might think to be prejudicial to the revenue administration. The prejudice must be prejudice to the Revenue administration. (v) CIT vs. Leisure Wear Exports Ltd. (2011) 202 Taxmann 130 (Mag) Where assessment order has been passed by the AO after taking into account assessee’s submissions and documents furnished by him and no material whatsoever has been brought on record by the CIT which showed that there was any discrepancy or falsity in evidences furnished by the assessee, the order of AO cannot be set aside for making deep inquiry only on the presumption and assumption that something new may come out. (vi) CIT vs Vikas Polymers (2010) 194 Taxman 57 (Del) If a query is raised during course of scrutiny by assessment order, which is answered to the satisfaction of Assessing Officer, but neither query nor that order of Assessing Officer calls for interference and revision. (viii) CIT vs. International Travel House Ltd. (2010) 194 Taxman 324 (Del) Whether by passing on order u/s 263, Commissioner had really made an effort to cause a routine inquiry with regard to matter that had already been conducted, such approach of Commission was impermissible. (ix) CIT vs. Anil Kumar Sharma (2010) 194 Taxman 50 18 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. Where Tribunal had arrived at a conclusive finding that though assessment, Assessing Officer, yet record showed that Assessing Officer had applied his mind, once such application of mind, was discernible from record, proceeding under section 263 would not fall into area of Commissioner having a different opinion. (x) CIT vs. Sun Beam Auto Ltd. (2009) 31 DTR 1 (Del) There is a distinction between "lack of enquiry" and "inadequate enquiry"—If there is an enquiry, even inadequate, that would not by itself give occasion to the CIT to pass order under s. 263, merely because he has a different opinion in the matter—Such a course of action is open only in cases of "lack of enquiry"—Contention of the Revenue that the AO did not consider as to whether the expenditure in question was capital or revenue expenditure cannot be accepted—Although apparently the assessment does not give any reasons for allowing the entire expenditure as revenue expenditure, that by itself would not be indicative of the fact that the AO has not applied his mind to the issue—AO is not required to give detailed reason in respect of each and every item of deduction in the assessment order—AO had called for explanation regarding this very item and the assessee had furnished its explanation—This fact has been noticed by the CIT himself in his order—Thus, it cannot be said that it is a case of 'lack of enquiry'—Further, even the CIT was not clear as to whether the said expenditure is to be treated as capital or revenue expenditure—Dyes used by the assessee, a manufacturer of car parts, are the components of the machines and need constant replacement as their life span is not more than a year—With the replacement of such tools and dyes, no new asset comes into existence, nor there is benefit of enduring nature—It does not enhance the life of the existing machine or increase its production capacity— Therefore, the view taken by the AO was one of the possible views and the assessment order passed by the AO could not be held to be prejudicial to the Revenue. (xi) COMMISSIONER OF INCOME TAX vs. GANPAT RAM BISHNOI 296 ITR 292 (Raj) 19 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. Revision—Erroneous and prejudicial order—Lack of proper enquiry— Tribunal has found that the AO framed the assessment after due application of mind and holding enquiries into all aspects which according to the CIT, have not been enquired into— This is a finding of fact—No presumption can be drawn that the AO had not applied his mind to various aspects of the matter—Once enquiry in fact has been conducted and the AO has reached a particular conclusion, though reference to such enquiries has not been made in the order of the assessment, the invocation of jurisdiction by CIT is not sustainable—Same liable to be set aside. From the aforesaid discussion, it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. Section 263 does not visualize a case of substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order, unless the decision is held to be erroneous in law and in spirit. In view of the above the Hon'ble Tribunal is requested to quash the order passed u/s 263 by the Learned CIT. 5. On the other hand, the ld. DR supported the orders of the lower authorities. 6. We have heard the rival submissions, pursued the material available on record, impugned order and case law cited before us. It is admitted fact on record that the survey team found a shortage of cash and stock at the business premises of the assessee, during the course of survey and consequently the case was selected for compulsory scrutiny. In our view, according to the standard principles of accountancy, the shortage of cash and stock is treated as unaccounted sales made in cash by the assessee which is either deposited in the bank account or invested in the unknown assets. The PCIT had mentioned that AO has not examined the 20 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. genuineness of cash sales and the shortage of the gold stock of 44.96 gms vis-a-vis cash deposit in the bank account. However, the observation of the PCIT that the cash deposits in the assessee’s bank accounts and shortage of the cash and stock found by the survey team has been accepted by the AO without any verification or enquiry is factually incorrect.The details of notices issued by the AO and corresponding reply submitted by the assessee are as under: - Sr. No. Notice issued under section Date of issuance of notice Date of reply submitted by the assessee 1 143(2) 17.09.2018 29.09.2018 2 142(1) 21.05.2019 28.05.2019 3 142(1) 29.07.2019 01.08.2019 4 142(1) 23.08.2019 02.09.2019/25.10.2019 5 142(1) 07.12.2019 11.12.2019/13.12.2019 6 142(1) 17.12.2019 22.12.2019 7 Order u/s 143(3) 25.12.2019 7. It is seen that the AO has made proper enquiries by way of aforementioned notices. The assessee has filed detailed replied to the queries before the AO (APB, Pg. 77 to 90) explaining therein all the details regarding cash deposited in the bank that the cash deposited in the bank, was generated out of cash sales and cash available in the books. The Ld AR contended that the assessee has maintained quantitative stock register 21 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. and Books of account of the assessee are audited u/s 44AB of the Income Tax Act, 1961 and that the AO has not pointed out any defect in the books of account maintained by the assessee in the form of cash book, bank book, purchase register, sales register, ledger, journal and other supporting, except unaccounted cash sales which has been duly explained as cash deposits in the assessee’s bank account. However, the learned AO has made the addition of Rs. 1,00,00,000/- on account of unaccounted cash sales and cash credits to plug the possible leakage of revenue. 8 In compliance to the objection of the PCIT as regards to the negative stock of Gold 44.906 gm, the learned AR submitted that in the stock statement of December-2016 the purchase was less than goods return as the total purchase was 116.334 gm and the return of gold was 161.240gm and, therefore, in the observation of the PCIT he had taken into consideration the months transaction (Inward and Outward Transactions) and had not considered the opening balance of Gold of 17810.475 gm as on 01.12.2016. He has filed the copy of consolidated stock register and December-2016 stock register, (Annexure-C) is placed on record. Similarly, the cash deposited in bank from 09.11.2016 to 31.12.2016 was Rs. 3,01,84,500/- whereas the reported amount was Rs. 3,31,84,500/-. The learned AR contended that that in the reported amount the PCIT has not considered Rs. 30,00,000/- which was deposited on 08.11.2016,whereas the figures are taken from 09.11.2016 to 31.12.2016. Copy of bank statement highlighting all the 3 entries of Rs. 10,00,000/- each deposited on 08.11.2016 filed on record (Annexure-D). Thus, there was no difference. 22 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. 9. The learned counsel argued that when the trading account has been accepted, i.e. sales and purchases and GP have not been disturbed, then the Learned Assessing Officer was not justified in holding sales to the extent of Rs. 1,00,00,000/- as unexplained to plug the possible leakage of revenue. He contended that the deposit in bank has been made as a result of cash generated on account of sales conducted by the assessee with respect to goods available in the stock register. The counsel further argued that during the course of survey conducted u/s 133A on 11.11.2016 at the business premises of the assessee, no discrepancy was noticed in accounts, except shortage in stock or in cash which has been explained cash sales out of accounted purchases in the stock register. In our view, the assessment order passed by AO under section 143(3) of the income tax act 1961, on 25/12/2019 with an addition of Rs. 1,00,00,000/- after considering the replies of the assessee furnished during the enquiry proceedings carried out for the period of one year and three months in compliance to the notices issued under section 143(2) and 142 (1) for the year under consideration, cannot be said to be erroneous or prejudicial to the interests of the revenue. The PCIT was not justified in holding the assessment order passed by the AO, in routine, hurry and casual manner. 10. In the case of CIT vs. GANPAT RAM BISHNOI (Supra), the Hon’ble Rajasthan High Court has observed that on the finding of fact, no presumption can be drawn that the AO had not applied his mind to various aspects of the matter where once enquiry in fact has been conducted and the AO has reached a particular conclusion, though reference to such 23 ITA No. 119/JP/2022 Mahalaxmi Kundan Meena Diamond Jewellers Pvt. Ltd. enquiries has not been made in the order of the assessment, the invocation of jurisdiction by CIT is not sustainable. 11. In the above view, we hold that the order passed by the PCIT u/s 263 of the Act, is not sustainable and as such, quashed. Order pronounced in the open court on 01/08/2022 Sd/- Sd/- ¼MkWa- ,l-lhrky{eh ½ ¼MkWa- ,e- ,y- ehuk ½ (Dr. S. Seethalakshmi) (Dr. M.L. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 01/08/2022 *Ganesh/Santosh vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The AppellantM/s Mahalaxmi Kundan Meena Diamond Jewllers Pvt. Ltd., Jaipur. 2. izR;FkhZ@ The Respondent- Pr. Commissioner of Income Tax, Jaipur-1, Jaipur. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 119/JP/2022) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar