Shri Champakbhai D. Patel, Bardoli V. Commissioner of Income Tax (IT & TP), Ahmedabad

ITA 15/SRT/2023

AI Insights

The case involves M/s. Champakbhai D. Patel, who appealed against the order passed by the Learned Principal Commissioner of Income Tax (PCIT), Valsad under section 263 of the Income Tax Act, 1961. The PCIT had deemed the earlier assessment order as erroneous and prejudicial to the interest of the Revenue, leading to a revision under section 263. The primary contention was regarding the source of substantial cash deposits in the assessee's bank account, which were initially unexplained. The Assessing Officer had reopened the case under section 147 and issued a notice under section 148, to which the assessee responded with detailed explanations and documents. The Tribunal, after reviewing the submissions and the actions taken by the Assessing Officer, concluded that the necessary inquiries were made and the subsequent order by the PCIT was not justified.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301790 (ITAT-SURAT)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-09-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 03-01-2023
• Other Referred Cases: CIT v. Nirma Chemical Works Pvt. Ltd., JRD Tata Trust v. DCIT, Gee Vee Enterprises v. Addl CIT, Ranka Jewellers vs. Addl. CIT, Malabar Industrial Co. Ltd. vs. CIT, CIT vs. Max India Ltd., Smt Juthika Kar vs. ITO, CIT vs. J.L. Morrison (India) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Revision of order; Period of limitation; Reassessment proceedings
• Section: 147; 148; 263; 143(3); 142(1); 2(A)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.15/SRT/2023 Assessment Year: (2013-14) (Physical Hearing) M/s. Champakbhai D. Patel, Mota Sardar Chowk, Bardoli, Surat - 395007 Vs. The CIT(IT & TP), Ahmedabad èथायीलेखासं./जीआइआरसं./PAN/GIR No.: ATLPP0997K (Appellant) (Respondent) Appellant by Shri Rasesh Shah, CA Respondent by Shri S. M. Keshkamat, CIT(DR) Date of Hearing 13/09/2023 Date of Pronouncement 25/09/2023 आदेश / O R D E R PER DR. A. L. SAINI, AM: By way of this appeal, the assessee has challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax, Valsad [in short ‘the Ld. PCIT’], dated 29.12.2022, under section 263 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year (AY) 2013-14. 2. The grievances raised by the assessee are interconnected and mix, which will be taken together, are as follows: “I. Validity of order u/s 263: (1) The Ld. Commissioner of Income tax (IT & TP), has grossly erred in law and on facts in assuming jurisdiction u/s.263 of the Act on the ground that the impugned assessment order is erroneous in so far as it is prejudicial to the interest of the revenue. (2) The Ld. Commissioner of Income tax (IT & TP), has erred in not appreciating the facts, that the Ld. assessing officer has re-opened and completed the assessment u/s 147 of the Act for sole reason and for that he 2 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel had made the complete inquiries and verification of the facts and recorded his satisfaction in the assessment order itself and therefore, the Ld. Commissioner of Income tax (IT & TP) has no jurisdiction to invoke the revisionary power u/s 263 of the Act. (3) Moreover, Ld. Commissioner of Income tax (IT & TP), Ahmedabad has erred in passing the order u/s 263 of the act without considering the submissions made by the appellant before him during the proceedings u/s 263 of the Act. (4) Therefore, the Ld. Commissioner of Income tax (IT & TP), Ahmedabad At SRT, has erred in law and facts by passing order u/s.263 of the Act and therefore, the appellant prays to quash the order passed u/s.263 of the Act. II. Miscellaneous:- (1) The appellant craves leave to add, alter or vary any of the grounds of appeal.” 3. The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is an individual and filed return of income for assessment year (A.Y.) 2013-14 on 23.03.2014, declaring total income of Rs.2,69,660/- and agriculture income of Rs.4,01,777/-. Subsequently, based on information available on record that the assessee had deposited cash amounting to Rs.90,00,000/- in the joint bank account maintained with Kotak Mahindra Bank Ltd, Nirman Branch, Mumbai, during the financial year ( F.Y.) 2012-13 relevant to assessment year (A.Y.) 2013-14, the case of the assessee was reopened u/s 147 of the Act, for assessment year (A.Y.) 2013-14 and notice u/s 148 of the Act was issued on 31.03.2021. In response to the notice u/s 148 of the Act, the assessee filed return of income on 30.04.2021, declaring total income at Rs.18,460/-. During the course of reassessment proceedings before the assessing officer, the assessee contended regarding the source of the aforesaid cash deposits that he had received cash from two parties as advance against an agreement to sale of land i.e. Satakhat. The cash so received was deposited in bank account. Further, the assessee 3 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel submitted that the two parties withdrawn the cash from their bank account and was given to the assessee. The then assessing officer considered the reply of the assessee and therefore the assessment was finalized u/s. 143(3) r.w.s. 147 of the Act on 04.02.2022 determining total income at Rs.2,69,660/- and agriculture income at Rs.4,01,777/-. 4. Later on, Learned Principal Commissioner of Income Tax,( in brief ‘ld PCIT’) has exercised his jurisdiction under section 263 of the Income Tax Act, 1961. The assessee`s case was selected for review of assessment as per the Board's extant Instruction and ld PCIT found on perusal of case records and reply of the assessee that the assessee had submitted altogether different explanation for source of cash during the assessment proceedings than the explanation submitted before the ITO (I & CI), Surat. The PCIT noted that the assessee even did not furnish any copy of land ownership documents. Therefore, in view of the above facts, the assessee's submission that said cash receipt being advances received from the prospective buyers of the land against an agreement appears to be an afterthought. The ld PCIT also noted that while finalizing the assessment, the assessing officer failed to consider the verification report of the ITO (I&CI), Surat, wherein the assessee had never contented about any other source of cash deposits in bank account except the sale of sugarcane. The Assessing Officer should have made necessary inquiry or verification in this regard. However, the assessing officer has passed the order without making any inquiry or verification in this case. Therefore, the order passed u/s 143(3) r.w.s 147 of the Act dated 04.02.2022 was treated by ld PCIT as erroneous and prejudicial to the interest of the Revenue. 4 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel 5. Therefore, ld PCIT issued a show cause notice u/s 263 of the I.T. Act dated 12/08/2022 which was issued and served to the assessee to show cause as to why appropriate order u/s 263 of the Act should not be passed, the said show cause notice is reproduced by ld PCIT in his revision order, (vide page no.3 to 5). In response to the above notice, the assessee filed a request letter for adjournment before the ld. PCIT. The ld PCIT noted that assessee has not filed the reply on time, therefore ld PCIT, based on the facts available before him noted that the ITO (I&CI), Surat had carried out verification of the said cash deposits and during the course of proceedings before him, the assessee had contended that the source of the said cash deposits was from sale of Sugarcane to Sugarcane Manufacturers Co-operative Society (SMCS). The assessing officer has failed to obtain any copy of land ownership documents and sale receipts/proof of sale to SMCS in support of assessee's contention regarding sale of sugarcane. Further, during the proceedings before the ITO (I&CI), the assessee had not contended about any other sources for cash deposits in the bank account except the sale of sugarcane. The assessing officer therefore, should have made necessary inquiry or verification regarding an altogether different explanation for source of cash i.e. advance received from two parties. Further, the assessing officer failed to verify the reasons for withdrawal of huge cash by Smt. Sadhnaben A. Patel and Shri Sumanbhai Desai who are shown to have given cash to the assessee out of the withdrawal from their bank accounts despite the fact that assessee was having a bank account. Therefore, ld PCIT held that assessment order dated 04.02.2022, as passed by the assessing officer u/s 143(3) r.w.s.147 of the Act, is erroneous and prejudicial to the interest of revenue and the same has been passed 5 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel without application of mind. Therefore the assessing Officer was directed by ld PCIT to make a fresh assessment. 6. Aggrieved by the order of ld. PCIT, the assessee is in appeal before us. 7. Shri Rasesh Shah, Learned Counsel for the assessee, argued that assessee’s case was reopened under section 147 of the Act and in response to notice under section 148 of the Act, the assessee filed the return of income. During the reassessment proceedings, the assessee submitted bank statement, confirmation of parties and also submitted the reply of the notice issued by the Assessing Officer under section 142(1) of the Act. Therefore, assessing officer made adequate enquiry about the issue raised by ld PCIT, hence order passed by the assessing officer should not be erroneous. 8. The ld. Counsel further submitted that in this case both the parties have been taxed by the Income Tax Department, that is, giver of the amount and receiver of the amount in cash. Both the parties, that is, (giver of the amount and receiver of the amount in cash) have filed the return of income and in both the cases, the assessment have been completed. During the assessment proceedings, the Assessing Officer issued notice under section 142(1) of the Act, which is placed at paper book page no.26, and in this notice the Assessing Officer raised the issue which is also raised by the ld. PCIT under section 263 of the Act. The assessee has submitted its reply before the Assessing Officer in respect to the notice under section 142(1) of the Act. The assessing officer has examined the issue raised by the ld. PCIT, which is placed at paper book page nos. 27 to 28, therefore Assessing Officer 6 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel having examined the issue, passed the assessment order, hence order passed by the assessing officer is neither erroneous nor prejudicial to the interest of Revenue, therefore order of ld PCIT may be quashed. 9. The ld. Counsel also submitted that reasons recorded by the assessing officer under section 147/148 of the Act are bad in law and defective. On such defective reassessment, the PCIT should not have exercised his jurisdiction under section 263 of the Act. 10. On the other hand, Learned Departmental Representative (ld. DR) for the Revenue submitted that Assessing Officer has not conducted the further enquiry. No doubt, the Assessing Officer has issued the notice under section 142(1) of the Act, wherein he has asked the assessee to provide the explanation about the cash deposited in the bank account. The assessee submitted its reply before the assessing officer. The Assessing Officer after getting the reply from the assessee, has not conducted further enquiry therefore assessment order passed by the assessing officer is erroneous and prejudicial to the interest of Revenue and therefore order of ld PCIT may be upheld. 11. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. PCIT and other material brought on record. We note that assessing officer has examined the issue raised by ld PCIT during the assessment proceedings. The assessing officer has reproduced the reply made by the assessee during the assessment proceedings in the assessment order itself, which is reproduced below for ready reference: 7 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel “4. The assessee has given reply vide letter dated 20.01.2022, which was received in this on 31.01.2022 in response to notice u/s 142(1) of the I.T. Act dated 23.11.2021. The relevant portion is reproduced under: “Assessee is in receipt of your notice u/s.142(1) of the Act vide notice no. ITBA/COM/F/17/2021-22/1037160732(1). In this regard, the assessee states as under: 1. Assessee has duly filed return of income in response to the notice u/s 148 of the Act for the AY.2013-14. 2. Copy of Acknowledgment of return of income filed for the AY.2013-14 alongwith the initiation that ITR-V is received at CPC is attached herewith for your kind reference. 3. Sir, as regard the cash deposited in the bank account maintained with Kotak Mahendra Bank for the year under consideration, the source of cash deposited is explained as under: i. During the year under consideration, the assessee had received cash from two party as advance against the land. The assessee had entered into agreement for sale of the land i.e. satakhat, with these party. Copy of satakhat is attached herewith. ii. The amount, which was received by the assessee, is deposited in the bank account. Copy of bank statement and cash book is submitted herewith for your ready reference. iii. As regard, the source of the cash given by above party, it has been stated that the cash has been withdrawn by then form the bank account and given to the assessee. Copy or confirmations of these party, received by the assessee, is also submitted herewith alongwith copy of bank statement of those party. I hope above will meet with your requirements and in case your honour requires any further details kindly let us know.” 12. From the above reply of the assessee, it is abundantly clear that assessing officer was very much aware about the reply, explanation and documents submitted by the assessee during the assessment proceedings. The assessing officer examined the documents and evidences submitted by the assessee along with reply and having examined all the documents and evidences, the assessing officer 8 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel framed the assessment order, therefore such order should not be erroneous. 13. We note that during the assessment proceedings, the assessing officer has issued notice under section 142(1) of the Act, which is placed at page no.26 of the paper book. In response to notice under section 142(1) of the Act, the assessee has filed its reply, which is placed at page no.27 to 28 of the paper book. Before the Assessing Officer, the assessee has submitted further reply in respect of the issue raised by ld PCIT, which is placed at page nos. 29 to 30 of the paper book. The assessee also submitted reply, in respect of the issue raised by ld PCIT, which is placed at page no.39 of the paper book. During the assessment proceedings, the assessee submitted extract of 7/12 which is placed at page no.48 of the paper book. The assessee also submitted the Satakhat Agreement between Sumanbhai R. Desai, Sadhnaben A. Patel and Champakbhai D. Patel, which is placed at page no.49 of the paper book. The assessee submitted agreement of cancellation of sale, which is placed at page no.54 to 58 of the paper book. The assessee also submitted copy of passport, which is placed at page no.59 to 63 of the paper book. The copy of power of attorney in favour of Bhaveshbhai N. Patel which is placed at page no.64 to 66 of paper book. The assessee submitted the bank statement of Kotak Mahindra Bank bearing A/c. No.08171050000674, which is placed at page no.67 to 68 of the paper book. 14. In respect of Sumanbhai R. Desai, the assessee submitted the following documents and evidences before the Assessing Officer: (i) Contra ledger confirmation (vide Pb.71) 9 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel (ii) Acknowledgment of Return of Income along with the Computation of Total Income (vide Pb.72 to 73) (iii) Surat Nagrik Sahakari Bank Statement with A/c. No.CA01429 (vide Pb.74) 15. In respect of Sadhanaben Ashokbhai Patel, the assessee submitted the following documents and evidences: (i) Contra ledger confirmation (vide Pb.75) (ii) Acknowledgement of Return of Income along with the Computation of Total Income for AY.2012-13 & 2013- 14 (vide Pb.76 to 80) (iii) Bank of Baroda statement with A/c. No.38510200000063 (vide Pb.81 to 82) 16. Therefore, by submitting these documents and evidences, as noted above, before the assessing officer, the ld. Counsel contended that the issue raised by the ld PCIT under section 263 of the Act, have been examined by the Assessing Officer thoroughly and fully and therefore, we note that it is not a case of no enquiry. That is assessing officer conducted sufficient enquiry. We note that further enquiry may be conducted by the Assessing Officer, if he thinks fit that results of the first enquiry are not sufficient. Therefore, after conducting proper enquiry, if the assessing officer passed order in brief, that does not mean that assessing officer has not conducted enquiry. For that reliance can be placed on the judgment of Hon'ble Gujarat High Court in the case of CIT v. Nirma Chemical Works Pvt. Ltd., 309 ITR 67 (Guj.), wherein it was held as follows: “The contention on behalf of the revenue, that the assessment order did not reflect any application of mind as to the eligibility or otherwise under section 80-I, was also required to be rejected. An assessment order cannot 10 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he carries and the period of limitation within which an order is required to be made; and, secondly, the order is an appealable order. An appeal lies and would be filed only against disallowances for which an assessee feels aggrieved with. [Para 22]” 17. We note that main grievance of ld DR for the Revenue was that assessing officer has not conducted further enquiry. As we have noted earlier that it is the domain of the assessing officer to decide, based on the facts and circumstances that a further enquiry is needed or not. For that reliance can be placed on the judgment of Co-ordinate Bench of ITAT, Mumbai in the case of JRD Tata Trust v. DCIT, 122 taxmann.com 275 wherein it was held as follows: “The true test for finding out whether Explanation 2(a) has been rightly invoked or not is, therefore, not simply existence of the view, as professed by the Commissioner, about the lack of necessary inquiries and verifications, but an objective finding that the Assessing Officer has not conducted, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant that the Assessing Officer is expected to be. [Para 20] That brings one to next question, and that is what a prudent, judicious, and responsible Assessing Officer is to do in the course of his assessment proceedings. Is he to doubt or test every proposition put forward by the assessee and investigate all the claims made in the income tax return as deep as he can? The answer has to be emphatically in negative because, if he is to do so, the line of demarcation between scrutiny and investigation will get blurred, and, on a more practical note, it will be practically impossible to complete all the assessments allotted to him within no matter how liberal a time limit is framed. In scrutiny assessment proceedings, all that is required to be done is to examine the income tax return and claims made therein as to whether these are prima facie in accordance with the law and where one has any reasons to doubt the correctness of a claim made in the income tax return, probe into the matter deeper in detail. He need not look at everything with suspicion and investigate each and every claim made in the income tax return; a reasonable prima facie scrutiny of all the claims will be in order, and then take a call, in the light of his expert knowledge and experience, which are as, if at all any, required to be critically examined by a thorough probe. While it is true that an Assessing Officer is not only an adjudicator but also an investigator and 11 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel he cannot remain passive in the face of a return which is apparently in order but calls for further inquiry but, as observed by Delhi High Court in the case of Gee Vee Enterprises v. Addl CIT [1995] 99 ITR 375], "it is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is, therefore, obvious that when the circumstances are not such as to provoke an inquiry, he need not put every proposition to the test and probe everything stated in the income tax return. In a way, his role in the scrutiny assessment proceedings is somewhat akin to a conventional statutory auditor in real life situations. Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedings. When the facts as emerging out of the scrutiny are apparently in order, and no further inquiry is warranted in his bona fide opinion, he need not conduct further inquiries just because it is lawful to make further inquiries in the matter. [Para 21]” 18. We note that the Ld. Pr. C.I.T. by invoking his jurisdiction u/s. 263 of the Act is giving another opportunity to the Ld. A.O., which is not permissible. Hon’ble Bombay High Court in the case of Ranka Jewellers vs. Addl. CIT (328 ITR 148) relying on the decisions of Hon’ble Supreme Court in the cases of Malabar Industrial Co. Ltd. vs. CIT and CIT vs. Max India Ltd. [(2007) 295 ITR 282 (SC)], has held that once the issue was considered by the A.O., the remedy of the revenue could not lie in invoking of the jurisdiction u/s. 263 of the Act. Therefore, the order of the Ld. C.I.T. was definitely outside the purview of section 263 of the Act. As noted above, the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi-judicial functions vis-a-vis passing the assessment order u/s.143(3) of the Act. Therefore, certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. However, what is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive 12 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel domain of the Assessing Officer, and even if Ld. Pr. Commissioner does not agree with the results of such enquiries, the resultant order cannot be subjected to revision proceedings. For that we rely on the decision of the Coordinate Bench of I.T.A.T., Kolkata in the case of Smt Juthika Kar vs. ITO [I.T.A. No.1128/Kol/2009, dated 16.5.2012], wherein it has been held as under (relevant portion):- “8......However, what is opinion formed as a result of these enquiries is something which is in exclusive domain of the Assessing Officer, and even if Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceedings. The conclusions arrived at as a result of enquiries cannot be tinkered with in the revision proceedings. The conclusions being drawn up as a result of enquiry is a highly subjective exercise and as to what is appropriate conclusion is something on which perceptions vary from person to persons. These variations in the perceptions of the Assessing Officer vis-a-vis that of the Commissioner, cannot render an order erroneous and prejudicial to the interest of the revenue.” 19. The aforesaid position gets further strength from the decision of Hon’ble High Court in the case of CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (Cal), the relevant finding of which is applicable to the facts of the present assessee is quoted below : “85. Whether the assessment order dated March 28, 2008, was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order- sheets go to show that heard from time to time. In deciding the question the court has to bear in mind the presumption in law laid down in Section 114 clause (e) of the Evidence Act: “that judicial and official acts have been regularly performed. 86. Therefore, the court has to start with the presumption that the assessment order dated March 28, 2008, was regularly passed. There is evidence to show that the Assessing Officer had required the assessee to answer 17 questions and to file documents in regard thereto. If the Assessing Officer cannot be shown to have violated any form prescribed 13 ITA No.15/SRT/2023/AY.2013-14 M/s. Champakbhai D. Patel for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind. ” [Emphasis given]” 20. It is a settled position in law that provisions of section 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the Ld. Pr. C.I.T. cannot be sustained on the principle of ‘erroneous’ nature of the order of the A.O., as it is not erroneous. Therefore, based on these facts and circumstances, we quash the order of ld PCIT. 21. In the result, appeal filed by the assessee is allowed. Order is pronounced on 25/09/2023 in the open court. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 25/09/2023 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat