M/s Prince Poultry Farm, Naraingarh V. Pr.CIT, Panchkula

ITA 139/CHANDI/2021

AI Insights

The case involves an appeal by M/s Prince Poultry Farm against the order of the PCIT, Panchkula, which set aside the assessment order passed by the AO for the assessment year 2014-15. The PCIT had held the assessment order to be erroneous and prejudicial to the interest of the Revenue, primarily based on an audit objection. The Tribunal examined whether the AO had conducted adequate inquiries regarding the source of cash deposits and other financial matters of the assessee. After a detailed examination of the submissions, documents, and the actions taken by both the AO and the PCIT, the Tribunal concluded that the AO had indeed conducted a thorough investigation and the PCIT's order was not justified.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127788 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 06-06-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 03-06-2021
• Other Referred Cases: PCIT Vs. Delhi Airport Metro Express (P) Ltd., I.T.O. Vs. D.G. Housing Projects Ltd., DIT Vs. Jyoti Foundation, Shri Abhimanyu Gupta Vs. PCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revision of order; Depreciation; Audit objection; Assessment record; Set aside
• Section: 147; 148; 263; 143(3); 142(1); 133(6); 143(2); 139(1); 48

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश द प जैन, उपा य! एवं ी %व&म (संह यादव, लेखा सद-य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ ITA NO. 139/Chd/ 2021 नधा रण वष / Assessment Year : 2014-15 M/s Prince Poultry Farm, C/o Shri Nitin Bhasin, Advocate # 3320, Sector 27D, Chandigarh बनाम The Pr. CIT Panchkula थायी लेखा सं./PAN NO: AAPFP9506R अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : Shri Tejmohan Singh, Advocate राज व क! ओर से/ Revenue by : Shri Sarabjeet Singh, CIT, DR स ु नवाई क! तार&ख/Date of Hearing : 07/06/2023 उदघोषणा क! तार&ख/Date of Pronouncement : 25/07/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. PCIT, Panchkula dt. 19/03/2021 passed under section 263 of the Income Tax Act, 1961, pertaining to A.Y. 2014-15 wherein the Assessee has taken the following grounds of appeal: “1. That the Ld. Principal Commissioner of Income Tax has wrongly assumed jurisdiction under section 263 of the Act to set-aside the assessment order dated 25.12.2018 passed by the Assessing Officer in as much as the order is neither erroneous nor prejudicial to the interest of Revenue and as such the assumption of jurisdiction under section 263 of the Act is beyond his competence. 2. That the Ld. Principal Commissioner of Income Tax has erred in law in issuing notice and thereafter passing the order under section 263 of the Act only on the basis of an audit objection which is not permissible and as such the order passed is illegal, arbitrary, unjustified which merits annulment. 3. That the Ld. Principal Commissioner of Income Tax has erred in failing to consider the various replies and submissions placed on record in proceedings before him in the correct perspective which is arbitrary and unjustified. 2 4. That the assessment order having been passed by the Assessing Officer after due application of mind and taking into consideration the various replies and material on record, the action resorted to by the Principal Commissioner of Income Tax is unwarranted and uncalled for. 5. That the order of Commissioner of Income Tax is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law. “ 2. At the outset, it is noticed that there is a delay in filing the present appeal by five days as pointed out by the Registry. After considering the application seeking condonation of delay alongwith Affidavit placed on record and hearing both the parties, we find that there was a reasonable cause for the delayed filing of the present appeal due to COVID-19 Pandemic and related personal health issues faced by the Counsel of the assessee. In view of the same, the delay is hereby condoned and the appeal of the assessee is admitted for adjudication. 3. Briefly stated, the facts of the case are that the AO was in receipt of certain information that the assessee firm had deposited a sum of Rs. 3,88,15,830/- in its bank account maintained with State Bank of India and thereafter reasons were recorded and notice under section 148 was issued and served on assessee. In response to the notice, the assessee filed its return of income on 09/02/2018 declaring total income of Rs. 2,36,480/- and thereafter notices under section 143(2) and 142(1) alongwith detailed questionnaire were issued and after taking into consideration the information/documents submitted by the assessee, the assessment proceedings were completed by passing the order under section 147 r.w.s 143(3) dated 25/12/2018 wherein the assessed income was determined by the AO at Rs. 3,36,480/- as against the returned income of Rs. 2,36,480/-. 4. Subsequently, the assessment records were called for and examined by the Ld. PCIT and a show cause notice under section 263 was issued on 08/02/2021 and thereafter, taking into consideration the submission filed by the 3 assessee but not finding the same acceptable, the assessment order was held to be erroneous in so far as prejudicial to the interest of the Revenue and same was set aside to the file of the AO to pass the assessment order afresh in accordance with law keeping in view the observation made in the impugned order. 5. Against the said findings and the order of the Ld. PCIT, the assessee is in appeal before us. 6. During the course of hearing, the Ld. AR taken us through the reasons recorded by the AO prior to the issuance of notice under section 148 of the Act. In the reasons so recorded, it was stated that as per the AIR information available with the AO, the assessee firm has been maintaining bank account with SBI wherein cash to the tune of Rs. 3,88,15,830/- had been deposited and in response to the notice issued to the assessee, the Ld. Counsel for the Assessee has stated that the said cash transaction of Rs. 3,88,15,830/- relates to cash sales of the assessee firm. However, going through the ITD system, it was noticed by the AO that the assessee firm has not filed any return of income u/s 139(1) and it was accordingly held that the whole of the amount of Rs. 3,88,15,830/- has escaped assessment by reasons of failure on the part of the assessee to furnish return of income under section 139(1) of the Act. 7. It was submitted that in response to the notice under section 148, the assessee firm filed its return of income declaring total income of Rs. 2,36,480/- and thereafter, notices were issued on 07/09/2018 and thereafter on 20/09/2018 alongwith detailed questionnaire. In this regard, our reference was drawn to the notice dt. 20/09/2018 alongwith detailed questionnaire wherein the AO has sought information and the explanation from the assessee in terms of certified copy of the partnership deed of the firm, copy of the capital account of partners alongwith supporting evidence regarding addition in capital by the partners if any, copies of the bank statement, loan account etc. for the period 4 01/04/2013 to 31/03/2014, complete name & address & PAN number of the persons from whom purchases and sales have been made exceeding Rs. 5 lacs, details of opening stock, purchases and closing stock in terms of quantity and value and also method and basis of valuing the closing stock alongwith documentary evidence, copy of the accounts including address and PAN number of the sundry creditors shown at Rs. 43,58,037/-, details of payments made to persons covered under section 40(A)2(b) of the Act, comparative chart of gross profit / net profit with the preceding two years, the reasons as to why the audit report is belatedly signed on 24/01/2018 and the reasons thereof, and also to explain the source of cash deposit amounting to Rs. 3,88,15,830/- in the bank account maintained with SBI alongwith documentary evidence. 8. It was submitted that in response to the said notice, the assessee firm filed its submissions alongwith necessary documentation as called for in terms of copy of the partnership deed, details of the partner’s capital accounts and it was also explained that there are no addition in the capital account during the year under consideration, copy of bank account statement, list of purchasers and sellers and their addresses were submitted, copy of trading and profit/loss account along with stock statement detailing the position of stock in terms of bird stock, feed stock, egg tray, medicine stock, egg stock, manour stock, gunnies stock was submitted, comparative chart and trading/business results for the year under consideration and the previous assessment year 2013-14 was submitted and also the reasons for delayed filing of the audit report due to fraud committed by earlier Chartered Accountant wherein the audit report and return of income was not filed, subsequent compliant against the audit firm, and engagement of another CA to file audit report and return of income was submitted. It was also submitted that the source of the cash deposited amounting to Rs. 3,88,15,830/- is from the cash sales relating to poultry farm run by the assessee firm and which was later on, deposited from time to time in the bank account maintained with SBI by the assessee firm. In this regard, our 5 reference was also drawn to the partnership deed, copy of the bank account statement, copy of the list of purchasers and sellers, copy of the trading and profit/loss account, stock statements which were submitted during the course of assessment proceedings and which are placed as part of the assessee’s paper book before us at APB Pages 7-28. 9. Referring to the another submission filed by the assessee before the AO during the course of assessment proceedings placed at APB Page 29-47, it was submitted that in the said submission, the assessee has again explained that the main source of its income is from poultry farming and there is no other source of income. Further copy of the Income Tax Return, Balance Sheet, P&L Account, Audit Report and copy of the Bank Statement were also submitted for necessary examination and verification by the AO. 10. It was further submitted that during the course of assessment proceedings, the AO also called for the books of accounts and the assessee has thereafter duly produced its audited books of accounts for necessary verification before the AO and after verification thereof, the books of accounts have been returned back to the assessee. In this regard, our reference was drawn to the order sheet entry dt. 20/12/2018 wherein the AO has stated that Shri Nitin Bhasin, Advocate attended the proceeding, books of account produced and returned back, information filed and case discussed. 11. It was further submitted that the AO has also called for information from the SBI u/s 133(6) of the Act to independently verify various banking transactions and other filings with the bank to avail the term loan and OD limit and as part of that, copy of audited financial statements for the financial year ended 31/03/2013 were made available by the bank and which is also part of assessment records as evident from APB Pages 48-60. 6 12. It was submitted that after taking into consideration the information and documents filed by the assessee, carrying out the independent verification and after due application of mind, the AO has completed the assessment proceedings. 13. In this regard, our reference was drawn to the assessment order passed under section 147 r.w.s 143(3) dt. 25/12/2018 wherein the AO has clearly stated that the assessee’s main source of income was from poultry farming and the Ld. AR attended the proceedings and filed information / documents from time to time and the books of accounts/vouchers were produced and which have been test checked. Further, our reference was drawn to the para 2 of the assessment order wherein the AO has recorded his specific findings stating that the ld AR of the assessee was asked to explain the source of cash deposit amounting to Rs. 3,88,15,830/- and in response, it has been submitted that the amount deposited in cash was out of the sale of the business. Thereafter, the AO has stated that the assessee has shown total sales amounting to Rs. 9.5 Crores during the year under consideration and copy of the bank account alongwith narration of entries have been furnished by the AR of the assessee, copy of the audited balance sheet, P&L Account also furnished and duly examined. 14. It was accordingly, submitted that the matter relating to the source of cash deposit has been duly examined by the AO during the course of assessment proceedings and therefore it is factually incorrect on the part of the Ld. PCIT to hold that the AO has not carried out necessary verification as far as the source of cash deposits of Rs. 3,88,15,830/- is concerned. 15. It was further submitted that without prejudice to the aforesaid fact where necessary verification regarding cash deposit has been done by the AO, in the show cause notice issued by the Ld. PCIT, though there is a narration recorded regarding the cash deposits amounting to Rs. 3,88,15,830/- and also a narration regarding the submissions filed by the assessee during the assessment 7 proceedings, however there is no specific show cause regarding cash deposits which is apparent from the language of the notice issued by the ld PCIT and therefore the subsequent findings which have been recorded by the ld PCIT regarding lack of examination of the cash deposits amounting to Rs. 3,88,15,830/- is clearly beyond the scope of Section 263 of the Act as the assessee has been denied an opportunity to respond to the same in absence of any specific show cause issued by the Ld. PCIT either at the time of initiation of the revisionary proceedings or even during the course of the revisionary proceedings before passing of the impugned order. 16. Regarding the findings of the Ld. PCIT regarding non- verification of partner’s capital account amounting to Rs. 2,72,63,568/- unsecured loans amounting to Rs. 26,00,000/-, stock amounting to Rs. 2,24,90,295/-, it was submitted that these matters were not part of the reasons for which the case of the assessee was reopened u/s 147 of the Act and therefore, where the ld PCIT talks about these matters, it is clearly beyond the scope of his jurisdiction u/s 263 of the Act. It was further submitted that all these balances are opening balances which are being carried forward from the previous audited balance sheet and the P&L Account for the F.Y. 2012-13 relevant to A.Y. 2013-14. It was submitted that it was brought to the notice of the Ld. PCIT that the AO has infact verified and scrutinized the audited balance sheet and the P&L Account for the previous F.Y. 2012-13 relevant to A.Y. 2013-14 and has independently called for the information from SBI u/s 133(6) of the Act. It was further submitted that in any case, these opening balances are being carried forward from the earlier financial year and thus no cause of action lies for the impugned assessment year. 17. It was submitted that inspite of assessee bringing the aforesaid facts to the notice of the Ld. PCIT during the course of revisionary proceedings, if we look at the contents of the show cause notice and the subsequent findings recorded by 8 the Ld. PCIT, they are exactly verbatim and thus, it is apparent that he has failed to take into consideration the submission so filed by the assessee and has even failed to take into consideration the audited balance sheet for the previous F.Y. 2012-13 relevant to the Assessment Year 2013-14 which is very much part of the assessment records and a copy thereof has also been placed on record at page no. 48 to 60 of the assessee’s paper book. 18. It was accordingly submitted that there is clear lack of application of mind on the part of the Ld. PCIT and it appears from both the contents of the show cause notices as well as findings so recorded by the ld PCIT that he was apparently guided by certain audit objection. It was submitted that merely certain audit objection doesn’t authorize the ld PCIT to acquire jurisdiction u/s 263 of the Act and even where there is an audit objection, the ld PCIT has to apply his mind and has to arrive at a prima facie finding that the order so passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue. It was submitted that even though the assessee has taken a specific ground of appeal regarding the audit objection however given the overwhelming evidence on record that the matter has been duly examined by the AO during the course of assessment proceedings, the assessee does not wish to press the said ground of appeal but at the same time, it is apparent that there is clearly non application of mind on part of the Ld. PCIT while initiating the revisionary proceeding as well as by recording the findings in the impugned order. 19. It was further submitted that it is clearly not a case where there is a lack of inquiry on the part of the AO and therefore where the Ld. PCIT held that the order so passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue, it is incumbent on the Ld. PCIT to carry out certain basic inquiries to came to a prima-facie findings that the order so passed is erroneous in so far as prejudicial to the interest of the Revenue. It was submitted that the said 9 preposition has been laid down by the Courts and has been reiterated from time to time and in this regard, our reference was drawn to the Hon’ble Delhi High Court decision in case of PCIT Vs. Delhi Airport Metro Express (P) Ltd. 398 ITR 8 (Del), I.T.O. Vs. D.G. Housing Projects Ltd. 343 ITR 329 (Del), DIT Vs. Jyoti Foundation 357 ITR 388 (Delhi) and Coordinate Chandigarh Benches decision in case of Shri Abhimanyu Gupta Vs. PCIT in ITA No. 771/Chd/2017. 20. It was accordingly submitted that in light of aforesaid submissions, the order so passed by the ld PCIT be set-aside and that of the AO be sustained and necessary relief be provided to the assessee. 21. Per contra, the Ld. CIT DR submitted that it is a case where the assessee has not filed any original return of income and only in response to notice under section 148, the assessee had come forward and filed its return of income. It was accordingly, submitted that the proceedings were initiated under section 148 of the Act and it was not a case of limited scrutiny and therefore the AO was required to examine the matter in respect of which the reasons have been recorded before issuance of notice under section 148 of the Act and also any other matter which are apparent from the record. Where the AO has failed to carry out the requisite enquiry, the ld PCIT was well within jurisdiction and power to acquire jurisdiction u/s 263 of the Act. It was submitted that there were certain matters which were apparent from the record wherein the original return filed by the assessee was found to be invalid as per the IT system and wherein there were no balances reflected in respect of partners share capital, secured loans and stock of goods. Similarly, there is no return of income filed for the previous assessment year 2013-14 therefore it was incumbent on the part of the AO to not just verify the transactions pertaining to the year under consideration but also transaction in respect of the opening balances which are likely to have impact on the taxability of income for the year under consideration. It was submitted that this material defects were observed by the Ld. PCIT while 10 examining the assessment records/I.T System and therefore, he was very much empowered to acquire jurisdiction under section 263 of the Act as far as the impugned assessment year is concerned and therefore, the contentions advanced by the ld AR in this regard cannot be accepted. 22. Further reliance was placed on the findings of the Ld. PCIT wherein he has clearly stated that the reply filed during the course of assessment proceedings were merely placed on record by the AO and the AO has failed to make any independent inquiry to verify the matters relating to cash deposit and balances in the partners capital account, unsecured loans and stock, and therefore, it is a clear cut case of lack of inquiry on the part of the AO and therefore the order so passed by the Ld. AO was rightly held to be erroneous in so far as prejudicial to the interest of the Revenue. It was submitted that where there is lack of enquiry on part of the AO, the legal proposition laid down by the various decisions as relied upon by the ld AR doesn’t apply in the facts of the present case. It was accordingly submitted that there is no infirminity in the order so passed by the ld PCIT and the assessment order has been rightly held to be erroneous in so far as prejudicial to the interest of Revenue and the appeal so filed by the assessee thus deserves to be dismissed. 23. We have heard the rival contentions and purused the material available on record. Firstly, we refer to the contention advanced by the ld AR on behalf of the assessee that it is not a case of lack of enquiry on part of the AO and the AO has carried out requisite enquiries. It has been submitted that the AO has called for necessary information/documentation, and after due verification and due application of mind, has passed a speaking order accepting the source of cash deposits, the reason for which the case was re-opened u/s 147 and has also called for and examined the audited financial statements for the year under consideration as well as for previous financial year and issued specific queries and thereafter, has accepted the opening balances regarding partner’s capital 11 account, unsecured loans and stock. It was accordingly submitted that it is not a case of lack of enquiry as so held by the ld PCIT. 24. It has been further contended that where the AO has conducted the necessary enquiries and the ld PCIT still holds the order as erroneous in so far as prejudicial to the interest of Revenue, the ld PCIT has to carry out certain basic enquiries to come to prima-facie findings that the order so passed is erroneous in so far as prejudicial to the interest of the Revenue and thus, merely stating that the AO should conduct detailed enquiries doesn’t empower the ld PCIT to set- aside the assessment order. 25. In this regard, our reference was drawn to decision of the Hon’ble Delhi High Court in case of PCIT Vs. Delhi Airport Metro Express (P) Ltd. (Supra). Briefly the facts of the case are that the assessee was a concessionaire of the Airport Metro Express Project of the Delhi Metro Rail Corporation Ltd. (DMRC) under a Build-Operate-Transfer (BOT) Scheme. The assessee had accepted the concession for a period of 30 years. During the assessment year in question, the assessee claimed depreciation on fixed assets at 50 per cent of the eligible depreciation rates since, during the assessment year in question, the assets were used for less than 180 days. The Assessing Officer allowed claim of depreciation. The Commissioner in exercise of power under section 263 set aside assessment order on ground that the assessee had claimed excess depreciation than what was allowable in terms of CBDT Circular No. 9 of 2014, dated 23-4-2014. The order of the Pr. CIT passed under section 263 was set aside by the Tribunal and against the said findings, the Revenue was in appeal before the Hon’ble Delhi High Court. It was held by the Hon’ble High Court that for the purpose of exercising jurisdiction under section 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interest of the Revenue has to be preceded by some minimal inquiry. It was held that where the Pr. CIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the 12 Pr. CIT to conduct such inquiry. In the instant case, it was held that all that Pr. CIT has done is that he has referred to a Circular issued by CBDT and in the considered opinion of this Court, this can hardly constitute the reasons to justify the exercise of jurisdiction under section 263 of the Act. It was held that where the assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the Pr. CIT to undertake the inquiry as regards which of the assets were purchased and installed by the assessee out of its own funds and which were those assets that were handed over to it by DMRC and this basic exercise has not been undertaken by the Pr. CIT. It was further held by the Hon’ble High Court that setting aside the entire matter to the file of the AO for a fresh assessment can be exercise only after the Pr. CIT undertakes an inquiry himself and not otherwise and accordingly the Hon’ble High Court held that Tribunal has not committed any error in setting aside the order of the Pr. CIT and appeal of the Revenue was dismissed. 26. Similarly, in case of I.T.O. Vs. D.G. Housing Projects Ltd. (Supra), the Hon’ble Delhi High Court has held as under: “Section 263 has been enacted to empower the Commissioner to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the revenue. The expression 'prejudicial to the interest of the revenue' is of wide import and is not confined to merely loss of tax. The term 'erroneous' means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. [Para 10] The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officials fails to conduct the said investigation, he commits an error and the word 'erroneous' includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. [Para 11] In cases of wrong opinion or finding on merits, the Commissioner has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 13 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. The Commissioner cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the Commissioner can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. [Para 16] This distinction must be kept in mind by the Commissioner while exercising jurisdiction under section 263 and in the absence of the finding that the order is erroneous and prejudicial to the interest of revenue, exercise oj jurisdiction under section 263 is not sustainable. In most cases of alleged 'inadequate investigation', it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without Commissioner conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. Commissioner cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the Commissioner to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the Commissioner hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore, the Commissioner must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the Commissioner must come to the conclusion that the order is erroneous and is unsustainable in law. It may be noticed that the material which the Commissioner can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record. Nothing bars/prohibits the Commissioner for collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. [Para 17] In the instant case, the findings recorded by the Tribunal are correct as the Commissioner has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the Commissioner is that 'order passed by Assessing Officer may be erroneous'. The Commissioner had doubts about the valuation and sale consideration received but the Commissioner should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the assessee computation figures but he had reservations. The Commissioner in the order has recorded that the consideration 14 receivable was examined by the Assessing Officer but was not properly examined and, therefore, the assessment order is 'erroneous'. The said finding will be correct, if the Commissioner had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of revenue. In latter cases, the Commissioner has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form am opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. [Para 19] 27. Similarly, in case of DIT Vs. Jyoti Foundation (Supra), following the decision in case of D.G Housing Projects Ltd, it was held by the Hon’ble Delhi High Court that Revisionary power under section 263 is conferred by the Act on the Commissioner/Director of Income- tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the revenue, but orders which are passed after inquiry/investigation on the question /issue are not per se or normally treated as erroneous and prejudicial to the interest of the revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. It was further held that in the instant case, inquiries were certainly conducted by the Assessing Officer. It is not a case of no inquiry. The order under Section 263 itself records that the Director felt that the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of ITO v. D.G. Housing Projects Ltd, the inquiry should have been conducted by the Commissioner or Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the said inquiry. 15 28. There is thus no dispute that where the ld PCIT seeks to invoke his jurisdiction u/s 263 of the Act, both the conditions so envisaged in terms of the order so passed by the AO being erroneous as well as prejudicial to the interest of the Revenue needs to be satisfied. Further, where the AO has conducted certain enquiries and the ld PCIT still hold the order so passed as erroneous, it is a settled legal proposition that the ld PCIT is required to conduct further enquiries to reach some prima facie conclusion that the enquiries so conducted by the AO are insufficient or inadequate and thus, the order so passed is erroneous in nature. 29. In the instant case, in respect of matters relating to source of cash deposits in the bank account, and opening balances of partner’s capital account, unsecured loans and stock at the beginning of the year as well as remuneration paid to the partners of the firm, the order so passed by the AO has been held by the ld PCIT to be erroneous as well as prejudicial to the interest of the Revenue. In order to examine the rival contentions, each of these matters are examined in the following pargraphs. 30. Firstly, regarding matter relating to examination of source of cash deposits in the bank account maintained by the assessee, we find that the case of the assessee was reopened precisely for the reason that the assessee has not filed any original return of income and there were cash deposits in the bank account maintained by the assessee and the AO recorded the reasons holding that he has reason to believe that income chargeable to tax to the tune of Rs 3,88,15,830/- being the cash deposits has escaped assessment within the meaning of section 147 of the Act. Subsequently, notices were issued during the course of assessment proceedings wherein the AO has specifically enquired about the source of said cash deposits in the bank account maintained with SBI alongwith documentary evidence. In response to the notices, the assessee has submitted that cash deposit of Rs 3,88,15,830/- relates to cash sales arising out of 16 its poultry farming business which has been deposited from time to time in the bank account maintained with SBI and in support, has submitted its stock statement detailing the opening stock, purchases during the year, sales during the year and closing stock, list of purchasers and sellers exceeding Rs 5 lacs as called for by the AO, copy of the bank statement reflecting the deposits of cash sales made during the financial year, comparative gross profit position reflecting turnover of Rs 9,53,56,752/- during the current financial year and corresponding turnover of Rs 8,96,17,135/- in the previous financial year and audited trading and profit/loss account for the year under consideration. 31. The AO thereafter has examined the submissions and supporting documentation so submitted by the assessee and has recorded a specific finding in the assessment order that the assessee’s source of income is from poultry farming business and audited financial statements, books of accounts, bank statement and explanation called for from the assessee regarding source of cash deposit has been duly examined and thereafter, no adverse finding has been recorded. 32. We therefore find that the matter relating to source of cash deposits has been duly examined during the course of assessment proceedings and it is clearly not a case of lack of enquiry as so held by the ld PCIT. There is no finding recorded by the ld PCIT as to how the enquiry conducted by the AO is erroneous or for that matter, any further enquiry being conducted by the ld PCIT which can demonstrate that the order so passed by the AO is erroneous in nature and thus, the findings of the ld PCIT in this regard are not borne out of records and thus, deserve to be set-aside. 33. Now, coming to matter relating to balances of partner’s capital account, unsecured loans and stock at the beginning of the year, the ld PCIT has recorded a finding that the same has not verified by the AO during the course of assessment proceedings. In this regard, we find that the basis of arriving at 17 such finding by the ld PCIT was that the original return filed by the assessee was treated as invalid and even the return of income filed for the earlier assessment year 2013-14 was treated as invalid. Thus, due to non-filing/invalid treatment of original return of income for the impugned assessment year and of the previous assessment year, these opening balances are not verifiable and basis the same, it has been held that the AO has failed to verify these opening balances. 34. As far as non-filing of the original return of income, we find that the present proceedings were initiated precisely for the reason that the original return of income was not filed and therefore, what is relevant to examine is the return of income filed pursuant to notice u/s 148 and subsequent assessment proceedings so conducted by the AO and the order passed u/s 147 r/w 143(3) which has been made subject matter of the revisionary proceedings. Once the original return of income has been treated as invalid return of income, what has been reflected or not reflected in the said return of income has no bearing on the proceedings initiated u/s 147 and consequent proceedings u/s 263 of the Act. 35. Further, there is no dispute that where the assessee has filed its return of income for the earlier assessment year 2013-14, the opening balances which are carried forward from the said assessment year to the year under consideration are easily verifiable. At the same time, in the instant case, we find that the AO has called for and examined the audited financial statements for the previous financial year relevant to earlier assessment year 2013-14 and thus, where the audited financial statements for the previous financial year are on record and the same has been examined by the AO, the findings of the ld PCIT holding the order so passed by the AO erroneous in nature due to non-examination of the opening balances is clearly not borne out of records. 36. Now coming specific to matter relating to opening stock, as we have noted above, the assessee has submitted its stock statement giving breakup of 18 the opening stock (Rs 2,24,90,295), purchases(Rs 8,36,67,077), sales(Rs 9,53,56,752) and closing stock (Rs 1,93,94,525) and the AO has examined the same and accepted the turnover and closing stock as well as trading results and gross profit (Rs 528,635) declared by the assessee. Thus, where stock statement has been verified and book results have been accepted and no adverse finding has been recorded by the AO as well as by ld PCIT, the order so passed by the AO cannot be held as erroneous in nature as well as prejudicial to the interest of the Revenue. 37. Regarding the findings of the Ld. PCIT recorded non-verification of partner’s capital account amounting to Rs. 2,72,63,568/- and unsecured loans amounting to Rs. 26,00,000/-, we find that these are again opening balances which are carried forward from the earlier assessment year as apparent from the audited financial statements for the earlier assessment year which is available on record and duly examined by the AO. Further, during the course of assessment proceedings, the AO has called for and examined the partnership deed and it has also been submitted by the assessee that there is no addition to the capital account during the year. We thus, find that where the balances are carried forward from the earlier assessment year and there are no movements in these accounts during the year, it is a revenue neutral exercise and thus, there is no prejudice which is caused to the Revenue and in any case, the matter has been examined by the AO and no further enquiries have been conducted by the ld PCIT. Thus, the findings of the ld PCIT in this regard that the order so passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue are again not borne out of records and thus deserve to be set-aside. 38. In light of aforesaid discussions, we are of the considered opinion that the matter has been duly examined by the AO and nothing has been brought on record in terms of any further enquiries conducted by the ld PCIT so as to reach a prima facie finding that the order so passed is erroneous in so far as prejudicial 19 to the interest of the Revenue. The legal proposition so laid down by the Hon’ble High Courts as referred supra squarely applies in the instant case. In the entirety of facts and circumstances of the case, we are of the considered opinion that there is no basis for setting aside the assessment order and that too, a speaking order, thus, the order so passed by the ld PCIT u/s 263 is hereby set- aside and that of the AO is sustained. 39. In view of the aforesaid discussions having decided on the merit of the matter, other contentions raised by the ld AR challenging the jurisdiction of ld PCIT u/s 263 are not adjudicated upon and are left open. 40. Further, the AR during the course of hearing submitted that the assessee doesn’t want to press Ground No. 2 of its appeal relating to audit objection, hence, the same is dismissed as not pressed. 41. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 25/07/2023 Sd/- Sd/- आकाश द प जैन %व&म (संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य! / VICE PRESIDENT लेखा सद-य/ ACCOUNTANT MEMBER AG Date: 25/07/2023 आदेश क! त,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु /त/ CIT 4. आयकर आय ु /त (अपील)/ The CIT(A) 5. -वभागीय त न4ध, आयकर अपील&य आ4धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar