AI Insights
The case involves M/s. Roy and Sahani Company appealing against the order of the Principal Commissioner of Income Tax (Pr. CIT), which was passed under section 263 of the Income-tax Act, 1961. The Pr. CIT had revised the assessment order for the Assessment Year 2017-18, claiming it was erroneous and prejudicial to the interest of the revenue due to inadequate enquiry regarding cash deposits during the demonetisation period. The Tribunal examined whether the Pr. CIT's invocation of section 263 was justified, considering the detailed enquiries already conducted by the Assessing Officer.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 132569 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 2 month(s) 1 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-06-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
22-05-2023
Assessment Year
2017-2018
Appeal Filed On
10-04-2022
Judgement Text
| आयकर अपीलीय अिधकरण ᭠यायपीठ, कोलकाता | IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI SANJAY GARG, HON’BLE JUDICIAL MEMBER & DR. MANISH BORAD, HON’BLE ACCOUNTANT MEMBER I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company Boinchee Bilsara Road Pandua Hooghly - 712134 [PAN : AAGFR6501F] Vs Income Tax Officer, Ward-24(1), Hooghly अपीलाथᱮ/ (Appellant) ᮧ᭜ यथᱮ/ (Respondent) Assessee by : Shri S.M. Surana, Advocate Revenue by : Shri Subhrajyoti Bhattacharjee, CIT D/R सुनवाई कᳱ तारीख/Date of Hearing : 23/05/2023 घोषणा कᳱ तारीख /Date of Pronouncement: 12/06/2023 आदेश/O R D E R PER DR. MANISH BORAD, ACCOUNTANT MEMBER : This is an appeal preferred by the assessee against the order of the Learned Principal Commissioner of Income Tax - 5, Kolkata (hereinafter referred to as the ld. Pr. CIT”], passed u/s 263 of the Income-tax Act, 1961 (hereinafter the ‘Act’), dated 18/02/2021 for the Assessment Year 2017-18. 2. The Registry has pointed out that there is a delay of 357 (three hundred fifty seven) days in filing the present appeal before the Tribunal. The impugned order by Ld. CIT(A) is dated 13/09/2021 which falls within the period of pandemic of Covid-19. Petition for condonation of delay is placed on record by assessee explaining the reasons for delay, owing to Pandemic of Covid-19 during that time. It is noted that the period of delay falls during the time of Pandemic of I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 2 Covid-19 which has been excluded by the Hon’ble Supreme Court in the case of suo moto Writ Petition (C) No. 3 of 2020 dated 10.01.2022 by which the period from 15.03.2020 to 28.02.2022 has been directed to be excluded for the purpose of limitation. Vide this order a further period of 90 days has been granted for providing the limitation from 01.03.2022. Accordingly, we condone the delay and proceed to admit the appeal for hearing. 3. The assessee has raised the following grounds of the appeal:- “1. For that the Ld PCIT erred in holding that the order passed by the AO was erroneous and prejudicial to the interest of revenue on the ground of no enquiry when there was no lack of enquiry and the order was passed after considering the issue, making enquiry and being satisfied in respect of the issue for which the assessment was taken up for scrutiny. 2. For that even otherwise an assessment cannot be revised on the basis of inadequate enquiry. 3. For that the Ld. PCIT erred in invoking the provisions of section 263 when all the details were also filed before him, which were not enquired by him nor there is any adverse finding of the Ld. PCIT with regard to the said details and documents when under the law the PCIT himself should have made enquiry to show that the order is erroneous and prejudicial to the interest of revenue 4. For that the order is otherwise bad in law and is not maintainable.” 4. The brief facts of the case are that the assessee is a partnership firm engaged in the business of trading operators. Income of Rs.5,00,550/- was declared in the e-return filed for Assessment Year 2017-18 on 29/10/2017. Case selected for scrutiny through CASS and assessment proceedings u/s 143(3) of the Act was carried out assessing the income of the assessee at Rs.6,63,550/-. While carrying out the assessment, the ld. Assessing Officer called for the details regarding the cash deposited in the various bank accounts held by the assessee during the demonetisation period and after examining the I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 3 details filed by the assessee made an addition of Rs.1,63,000/- being cash deposited out of the books. Subsequently, the ld. Pr. CIT called for the assessment records and while examining the records observed that the reason for selection of scrutiny was “high-value receipt of cash shown from third parties in response” and “cash deposited during the demonetisation period”. The ld. Pr. CIT further noticed that in the course of assessment proceedings assessee has filed the extract of the cash book and the same was showing opening cash on hand on 09/11/2016 at Rs.69,22,856.23/- . The ld. Pr. CIT invoked the provisions of Section 263 of the Act and issued show cause notice u/s 263 of the Act dt. 01/02/2021 and the issue mentioned in the show cause notice is as follows:- “2. From cash book, it is perused that, opening cash in hand on 09-11-2016 was 69,22,856.23. That opening balance of cash was not verified with reference to purchase/sale/Books. During the demonetization (specially in the month of November, 2016), cash received of Rs. 20,000/- and above from numerous person, which were doubtful, not verified by A.O. in the assessment proceedings. Also cash received during demonetization in SBN or legal tender was not verified. Before passing order, the above verification should have been made. Hence, the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue.” 5. In response to the show cause notice the assessee filed a written submission stating that the ld. Assessing Officer has thoroughly examined the cash book for the year, opening cash balance as on the close of 08/11/2016 and has also examined the details of the cash deposit during the demonetization period. He also submitted that debtors have repaid the outstanding mostly in the old notes of 1000 and 500 and they cautioned the assessee that if they will not accept I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 4 1000 and 500 notes, then they may not be able to pay the outstanding amount and for these purposes cash was received during the demonetisation period and the same was deposited in the bank account and all these details were submitted before the assessing officer who had examined the same and had also made an addition on this issue. However, the ld. Pr. CIT, was not satisfied and he held the order of the assessing officer to be erroneous and prejudicial to the interest of the revenue referring to various judicial pronouncements and observing as under:- “5. I have carefully considered the facts and circumstances of the case and submission filed by the assessee via-email. It is seen that, the material facts have not been properly examined by the AO and has not applied his/her mind. It is the responsibility of any taxing authority to ensure correct and proper total income is determined and due tax is realized. The impugned assessment order passed u/s. 143(3) of the Act dated 24.05.2019 was passed without examination of the source of cash deposits during demonetisation period. The Assessing officer should have called for information/summon u/s.133(6) and 131 of the Act respectively to verify the genuineness and creditworthiness of the depositors. However, the AO had failed to do so. In this regard, on perusal of CASS Selection Reason and Issue, it is seen that, the underlying information Elements has stated that, loans received in cash, Loan repayment in cash, Receipt of gift in cash, Other receipt in cash as per Response Data-of online responses filed after demonetisation. The rationale on this issue is that, assessee was given an option to explain the reason of substantial cash deposit on e-filing. The Tax payer in its response submitted that it receipt cash from third parties (example loans received in cash, loan repayment received in cash, receipt of gift in cash, etc. On perusal of the assessment order, it is seen that, the material facts have not been properly examined by the AO and has not applied his/her mind, while accepting the cash deposits during demonetisation period. The AO has simply accepted the explanation of the assessee without examining the veracity of the source of huge cash deposit. Therefore, the assessment order passed by the AO appears to be erroneous and prejudicial to the interest of the revenue.” 6. Aggrieved the assessee is now in appeal before the Tribunal. 7. The ld. Counsel for the assessee vehemently argued referring to the written submissions filed before the ld. Pr. CIT. It is further I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 5 submitted that during the course of assessment proceedings all the details relevant to the cash in hand at the close of announcement of demonetisation period and also the details of cash received during the demonetisation period were filed before the ld. Assessing Officer and who after conducting a thorough enquiry, had made an addition on this issue. It was further submitted that it has been held by the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT reported in [2000] 243 ITR 83 (SC) that for holding the assessment order as erroneous and prejudicial to the interest of the revenue both the conditions should be satisfied and in absence of any one of the two conditions recourse cannot be taken under section 263 of the Act. Further the Honourable Court held that if there are two permissible views under the act and the assessing officer has taken one of the view which may be prejudicial to the interest of revenue, the same cannot be the basis to carry out revisionary proceedings. 7.1. The ld. D/R, on the other hand, vehemently argued supporting the order of the lower authorities. 8. We have heard rival contentions and perused the material placed before us. With the assistance of ld. representatives, we have gone through the record. Section 263 has a direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under:- "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 6 order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1 st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1 st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation- In computing the period of limitation for the purposes of sub- section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 9. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 7 was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4 th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the ld. Pr. CIT taken u/s 263. I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 8 10. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following ratio with regard to provisions of section 263 of the Act: “There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)”.[Emphasis Supplied] 11. Hon’ble Apex Court in the case of CIT vs. Max India Limited as reported in 295 ITR 0282 has held that: “ 2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the Revenue" under s. 263 has to be read in conjunction with the expression "erroneous" order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, when the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law.” 12. Hon'ble Madhya Pradesh High court in the case of CIT vs. Associated Food Products (P) Ltd as reported in 280 ITR 0377 has held that: 10. In view of the aforesaid pronouncement of law and taking into consideration the language employed under s. 263 of the Act, it is clear as crystal that before exercise of powers two requisites are imperative to be present. In the absence of such foundation exercise of a suomoto power is impermissible. It should not be presumed that initiation of power under suomoto revision is merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the AO is erroneous as well as prejudicial to the interests of the Revenue. The concept of "prejudicial to the interests of the Revenue" has to be correctly and soundly understood. It precisely means an order which has not been passed in consonance with the principles of law which has in ultimate eventuate affected realization of lawful revenue either by the State has I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 9 not been realized or it has gone beyond realization. These two basic ingredients have to be satisfied as sine qua non for exercise of such power. On a perusal of the material brought on record and the order passed by the CIT it is perceptible that the said authority has not kept in view the requirement of s. 263 of the Act inasmuch as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AO is wrong. That may be so but that is not enough. What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT. [Emphasis supplied] 13. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay). 14. This view is further supported by the decision of the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri in Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon'ble I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 10 Gujarat High Court was seized with the following substantial question of law:- "Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT." 15. We find that the Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar reported in 335 ITR 83 has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Relevant observation of the High Court reads as under: "63. We find the Hon'ble Delhi High Court in the case of Vikas Polymer reported in 341 ITR 537 has held as under: “We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to: (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfillment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were I.T. I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 11 assessees and the unsecured loan taken from M/s Stutee Chit & Finance (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee.” 64. Since in the instant case the A.O. after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O., he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O. has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case could have been investigated/ probed in a particular manner, he cannot assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed." 16. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263: “(i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.” I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 12 17. Apart from above stated broader principles, one more principle needs to be added in view of the judgment of Hon’ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) that the ld. CIT has to examine and verify the issue himself and give a finding on merits and form an opinion on merits that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue. Relevant extract is reproduced below: “In the present case, the findings recorded by the Tribunal are correct as the CIT 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 CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT 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 respondent’s computation figures but he had reservations. The CIT in the order has recorded that the consideration 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 CIT 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 the Revenue. In latter cases, the CIT 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 an 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, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.” 18. In the light of the above, we would like to examine the fact of the case. First we notice that that the case of the assessee was selected for scrutiny under CASS for the reason “high-value receipt of cash shown from third parties in response” and “cash deposited during the demonetisation period”. So these are the two specific reasons for which the assessee’s case was selected for scrutiny and these are the only issue which the ld. Pr. CIT has referred in the showcause notice I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 13 u/s 263 of the Act along with an observation that the assessing officer has not examined the opening cash in hand as on 09/11/2016. 19. We observe that the assessing officer after selecting the case for scrutiny under CASS issued notice u/s 142(1) of the Act on 11/10/2018 asking the assessee to furnish the details of cash deposited during the demonetisation period and also the high-value of cash shown from the third parties. We observe that the assessee who was engaged in the business of trading of potato, submitted its trading profit and loss account and balance sheet. The purchases during the financial year 2016-17 relevant to assessment year 2017-18 was Rs.7,24,93,982/- and sales were Rs.9,05,06,670/-. Further, the assessing officer called for the bank statement by issue notice u/s 133(6) of the Act to the respective branches of the bank wherein assessee was holding bank accounts. The Assessing Officer has also enquired about the cash deposits during the demonetisation period and a summary of the said details has also been incorporated in the body of the assessment order:- SI. No. Name of the Bank & Branch Account No. Amount deposited during demonetisation period Total amount deposited during F.Y. 2016-17 1. Axis Bank, Memari Branch 915030035877039 97,79,000 5,11,29,687 2. Allahabad Bank, Berela Br. 21646863886 0 22,61,000 3. State Bank of India, Boinchee Br. 11308305538 4,15,000 2,21,600 Total 1,01,94,000 5,36,12,287 20. Further, assessing officer noticed that in one of the bank account held with Axis Bank, Memari Branch, in the books, cash was deposited to the tune of Rs.96,16,000/- but as per the bank statement the amount I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 14 of deposit during the demonetisation period was Rs.97,79,000/-. So there was a difference of Rs.1,63,000/- which the assessing officer added to the income of the assessee. As far the remaining bank accounts were concerned, assessing officer after going through the cash book and bank statement was satisfied that there was complete explanation from the side of the assessee about the source of the cash deposited during the demonetisation. 21. We also notice that the assessing officer has conducted detailed enquiry and has merely not accepted the written submissions and passed the assessment order. He has made proper application of mind by going through the details of cash deposits during the demonstration period and the source of such cash deposit which obviously also included the opening cash in hand appearing in the books as on 09/11/ 2016. The assessing officer has also examined the purchases and sales during the year, the cash transactions with the buyers and their effect on the cash book prior to the demonetisation period. The following observations of the assessing officer appearing in the assessment order in itself proves that a detailed enquiry has been conducted on the reasons for which the case of the assessee was selected for scrutiny:- “The assessee served a show cause letter with respect to the selection of the assessment which is "IT IS SEEN FROM DATABASE THAT YOU WERE GIVEN AN OPTION TO EXPLAIN THE REASON OFSUBSTANTIAL CASH DEPOSIT ON E-Filing. IN RESPONSE TO THE SAID LETTER YOU SUBMITTED THAT THE RECEIPTS OF CASH WAS FROM THIRD PARTIES (EXAMPLE LOANS -RECEIVED IN CASH, LOAN REPAYMENTS RECEIVED IN CASH RECEIPT OF GIFT IN CASH, OTHER RECEIPTS IN CASH AS PER RESPONSE DATA OF ONLINE RESPONSE FILED AFTER DEMONETISATION). Please explain the same with supporting evidences on or I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 15 before 18.03.2019. You are also requested to submit computation of tax along with interest account showing payment of interest & interest earned." The A.R. also submitted copy of ledgers & cash book which is placed in the folder. The AR also stated that the deposits were made from cash collection from various customers and filed the details thereof.” 22. Going through the above observations regarding the enquiries conducted by the assessing officer and observations made in the assessment order, we notice that all these details which have already been examined have again been directed by the ld. Pr. CIT to be examined, which means that the issues for which a detailed enquiry has already been conducted by the assessing officer and the permissible view under the law has been taken and additions have been made, through this revisionary order the ld. Pr. CIT is directing the assessing officer to again conduct enquiry of the same issues which in our humble understanding and in view of the settled judicial precedents is beyond the scope of Section 263 of the Act. Further we would like to observe the in view of the judgment of the Hon’ble Delhi High Court in the case of D.G. Housing Projects Ltd. (supra) and considering the facts of the instant case, we notice that the ld. Pr. CIT has not carried out any independent enquiry or investigation before coming to a conclusion that the assessment proceedings are erroneous and prejudicial to the interest of the revenue because, the issue raised in the showcause notice is the same issue for which the case of the assessee was scrutinised and since the ld. Pr. CIT has not made any such enquiry except giving direction to the Assessing Officer, such revisionary proceedings carried out are uncalled for and bad in law. I.T.A. No. 169/Kol/2022 Assessment Year: 2017-18 M/s. Roy and Sahani Company 16 Therefore, for the reasons mentioned in the show cause notice, once an enquiry has been conducted by the assessing officer extensively while completing the assessment, the invoking of jurisdiction u/s 263 of the Act, is bad in law. We thus, quash the impugned order passed u/s 263 of the Act and restore the assessment order dt. 24/05/2019. 23. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 12 th June, 2023 at Kolkata. Sd/- Sd/- (SANJAY GARG) (DR. MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated 12/06/2023 *SC SrPs आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant 2. ᮧ᭜यथᱮ / The Respondent 3. संबंिधत आयकर आयुᲦ / Concerned Pr. CIT 4. आयकर आयुᲦ)अपील (/ The CIT(A)- 5. िवभागीय ᮧितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाडᭅ फाई/ Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Kolkata
Other Referred Cases
Malabar Industrial Co. Ltd. vs. CIT, CIT vs. Max India Limited, CIT vs. Associated Food Products (P) Ltd, CIT vs. Anil Kumar, Mrs. Khatiza S. Oomerbhoy vs. ITO, Mumbai, D.G. Housing Projects Ltd. vs. ITO
Laws Referred To
Income-tax Act, 1961
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