Sh. Amit Kumar Agarwal, Firozabad V. Pr. CIT.-1, Agra

ITA 19/AGR/2021

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7756 (ITAT-AGRA)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-04-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 08-04-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Period of limitation; Set aside
• Section: 263; 143(3); 142(1); 80IB; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE: SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER AND SHRI P.C. YADAV, JUDICIAL MEMBER ITA No. 19/Agr/2021 Assessment Year: 2016-17 Amit Kumar Agarwal, 207, Agra Road, Durga Nagar, Firozabad. PAN: AFXPA8719G Versus The Pr. C.I.T.-1, Agra. (Appellant) (Respondent) Assessee by : Sh. Rahul Agarwal, Adv. Revenue by : Sh. Surendra Pal, CIT/DR Date of hearing : 16.04.2024 Date of pronouncement: 22.04.2024 ORDER PER P.C. YADAV, JM: Present appeal of the assessee is arising from the order of learned Principal Commissioner of Income Tax-1, Agra dated 31.03.2021. 2. Facts of the case are that the assessee is an individual. He filed his return of income on 06.10.2016 declaring an income of Rs.4,00,480/-. Case of the assessee was selected for limited scrutiny under CASS with the direction to examine “whether the cash deposit ITA No. 19/Agr/2021 2 has been made from disclosed sources”. The Assessing Officer issued questionnaire u/s. 142(1) on 22.01.2018 and also on 09.05.2018. In response to the questionnaire, the assessee filed replies. Thereafter, assessment was completed on the returned income vide order dated 14.06.2018. Subsequently, learned PCIT-1 Agra called for the assessment records and observed that cash of Rs.13,39,75,217/- was deposited in the bank accounts of the assessee. The assessee in assessment proceedings claimed that the said deposits were received from the customers for purchasing glass bangles in Firozabad Market and the assessee had only charged commission at the rate of Rs.500/- per lac. The learned PCIT observed that during the course of assessment proceedings, no enquiry was made by the Assessing Officer in respect of the cash deposits. Accordingly, learned PCIT show caused as to why the assessment order could not be declared as erroneous insofar as prejudicial to the interests of Revenue, as the Assessing Officer failed to conduct any enquiry in respect of cash amounting to Rs. 13,39,75,217/- deposited in the bank account of the assessee. 3. In response to the show cause notice, the assessee filed its submission dated 12.03.2021 before the learned PCIT. After ITA No. 19/Agr/2021 3 considering the submissions of learned counsel of the assessee, learned PCIT held that the order of the Assessing Officer is erroneous and prejudicial to the interests of revenue and hence, he set aside the order of the Assessing Officer in terms of powers vested to learned PCIT under section 263 of the Act. 4. Aggrieved by the order of the learned PCIT-1, Agra, the assessee preferred appeal before us and raised following grounds : “ 1 Because, the order passed by Ld. Pr. Commissioner of Income Tax, hereinafter referred to as “Ld. PCIT” is contrary to the established judicial principles. The order passed, without referring to any discrepancy necessary for holding the order as erroneous as well as prejudicial to the interest of revenue is wholly arbitrary and against the well established principles of law. 2 Because, the Ld. Assessing Officer, having taken conscious decision, after examining necessary evidence and prevailing nature of business activity in the City for the past several years. In the absence of any incriminating material having been found by the Assessing Officer, the order passed by the Assessing Officer cannot be held as erroneous or prejudicial to the interest of revenue in view of established judicial pronouncements. In the absence of any law, prescribing the manner in which enquiry is to be conducted and failure thereof will hold the assessment as erroneous or prejudicial to the interest of revenue or not in accordance with law, the satisfaction arrived at by Ld. PCIT for setting aside the Assessment order is wholly unjustified, illegal and against well established principle of law. 3 Because, the reliance on judicial case laws placed by Ld. PCIT cannot supersede the law laid down by Hon’ble Apex court in the case of The Malabar Industrial Co. Ltd. Vs CIT (2000) 243 ITR 83(SC) and as such her consideration is wholly illegal. ITA No. 19/Agr/2021 4 4 Because the order is against the law and facts. 5. Before us, learned counsel for the assessee has assailed the order of learned PCIT-1, Agra and also filed a written synopsis, which reads as under : “May it pleases your honours:- The captioned appeal is against the order passed U/s 263 by Ld. Pr. CIT whereby the order passed by Ld. Assessing Officer has been cancelled for the reason given in para 8 of her order. 1. in this connection, it is humbly submitted that the order of Ld. Pr. CIT is not sustainable in law as she failed to appreciate that proper enquiries from the assessee were made during the course of assessment proceedings. The appellant filed written submission in which the nature of business activities which the appellant is carrying out for the last several years. Copy of the written submissions filed before the Ld. Assessing Officer are placed in the Paper Book at page 4 to 9. During the course of assessment proceedings, the submission were considered and examined as is evident from the assessment order. The statute does not provide the manner in which the enquiries are to be conducted by the Ld. Assessing Officer while framing assessment order. Merely because the Ld. Pr. CIT was not satisfied with the manner of enquiry, the assessment order cannot be treated as erroneous or prejudicial to the interest of the revenue unless the view taken by the Ld. Assessing Officer is unsustainable in law. In support, the appellant has filed copy of order of the Hon’ble High Court, Allahabad in the case of CIT Vs Bharat Explosive Limited [ ITA No. 182 of 2010 dt. 16.02.2017, which is placed at Judicial Index Paper Book Page No. 10-12. 2. The Ld. Assessing Officer has specifically stated in the assessment order that the case was discussed with Authorized Representative of the assessee from time to time as per guidelines of limited scrutiny. Thus the assessment having been passed after discussion with representative of the assessee and conclusion arrived at by the Ld. Assessing ITA No. 19/Agr/2021 5 Officer, the provision of Sec. 263 can not be invoked. In support, the appellant has filed copy of order of the Hon’ble High Court, Allahabad in the case of CIT Vs Goyal Private Family Specific Trust [(1988) 171 ITR 698 ] , which is placed at Judicial Index Paper Book Page No. 6-9. 3. The appellant filed written submission with necessary documents in support of the modus operand! of business and detailed account in respect of financial transaction. The reply along with the documents submitted before Ld. Pr. CIT are placed in the index of paper book at page no. 12 - 412, which may kindly be considered before adjudicating the appeal. 4. The appellant begs to place reliance on the judgments refer to in the submissions filed before Pr. CIT ( Page 13 of the index of the paper book) and also the following judgments : (i) Mahesh Kumar & Ors Vs CIT (ITA No. 1303,1307,1309,1310,1312,1313 and 136 / Koi (2019) dt. 29.11.2019 (ii) Shri Narayan Tatu Rane Vs ITO [2016] 70 Taxmann.com 227 (Mumabi ITAT) (iii) Torrent Pharmaceutical Ltd. Vs DCIT [2018] 173 ITD 130 ( Ahd ITAT) (iv) M/s Arun Kumar Garg HUF Vs Pr. CIT ( ITA No. 3391 of 2018, Delhi ITAT dt. 08.01.2019) Copy of which are placed in the Judicial Index Paper Book Page No. 13 - 89 . 5. In view of the facts, modus operandi of the business and the appellant being a person of small means, the order passed by the Ld. Pr. CIT may kindly be set aside and that the order passed by the Ld. Assessing Officer may kindly be restored.” ITA No. 19/Agr/2021 6 6. During the course of hearing, the Bench raised a query to learned counsel for the assessee as to whether any details of the parties from whom cash was said to have been received, have been filed before the Assessing Officer during the course of assessment proceedings. The counsel for the assessee categorically denied about the availability of any such details. In fact, the learned counsel himself admitted that the Assessing Officer has not made any enquiry in this regard. Learned counsel of the assessee has argued that the assessee is in possession of the details of the parties to whom the payments were made. He drew the attention of this Bench towards page No. 363 to 412 of the paper book, which are the ledger accounts of those parties to whom the payments were alleged to have been made. After seeing these details, the Bench has again asked from the counsel of the assessee as to whether any query from these parties to whom payments were made on behalf of the depositors, had ever been made by the Assessing Officer during the course of assessment proceedings. The learned counsel of the assessee candidly denied of any such enquiries. 7. The learned counsel for the assessee placed reliance on the decision in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 ITA No. 19/Agr/2021 7 for the proposition that for invoking the powers under section 263, the order of Assessing Officer must be erroneous insofar as prejudicial to the interests of revenue. He contended that twin conditions, i.e., order must be erroneous and prejudicial to the interests of revenue should be satisfied in a given case and then only 263 can be sustainable. 8. Learned counsel for the assessee also relied upon the judgments of ITAT, Mumbai Bench in the cases of The Manjari Stud Farm Pvt. Ltd. vs. ACIT (ITA No. 1106/Mum/2022 dated 09.08.2023 and Small Wonder Industries vs. CIT (ITA No. 2464/Mum/2013 dated 24.02.2017. 9. Lastly, the counsel for the assessee has drawn attention of the Bench to the order of assessment for assessment year 2014-15 and argued that in that year also, the assessment u/s. 143(3) was framed and no addition qua the cash deposits from customers has been made. 10. On the other hand, learned CIT/DR has raised a preliminary objection stating that the present appeal is not maintainable because fresh assessment in compliance to the directions of learned PCIT u/s. 263 has already been framed and the assessee has already challenged that fresh assessment before the learned CIT(Appeals) ITA No. 19/Agr/2021 8 and therefore, the assessee cannot challenge the action u/s. 263 on merits of the case. 11. Now, on merits, learned CIT/DR relied upon the order of learned PCIT and thrust upon the fact that no details of the parties from whom cash was received by the assessee has been brought on record by the Assessing Officer during the course of original assessment proceedings and hence, it is a case of lack of enquiry on the part of the AO due to which Revenue has suffered loss. Hence, the order of the Assessing Officer is erroneous and prejudicial to the interest of revenue. In nutshell, learned DR argued that there was complete inaction on the part of the AO. 12. We have considered the rival submissions and perused the records. We find that the limited issue in this case is whether the action of 263 as invoked by PCIT is justifiable in law or not. 13. Section 263 of the Act has a purpose to keep test check on the orders passed by Assessing Officer(s). This section has been enacted to safeguard the interest of Government of India. It is settled position of law that a State cannot be run on charity and hence, State has right to collect legitimate taxes from its people. 14. Provision of section 263 are reproduced hereunder : ITA No. 19/Agr/2021 9 “Revision of orders prejudicial to revenue. 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceedings 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 interests 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 order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation 1.]—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 1st day of June, 1988] by the Assessing Officer shall include— (i) an order of assessment made by the Assistant Commissioner 20[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 [Principal Chief Commissioner or] Chief Commissioner or [Principal Director General or] Director General or [Principal Commissioner or] Commissioner authorised 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 [Principal Commissioner or] 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 1st day of June, 198824], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend 25[and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] [Explanation 2.—For the purposes of this section, it is hereby declared that ar. order passed by the Assessing Officer shall be ITA No. 19/Agr/2021 10 deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] (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 rehear; 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 shah be excluded.” 15. Perusal of above provisions would show that PCIT or CIT may call for the records of any proceedings under the Act and after examining such records, if he considers that any order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue, ITA No. 19/Agr/2021 11 he may enhance, modify, cancel such order after providing an opportunity of being heard to the assessee. The phrase ‘erroneous in so far as prejudicial to the interest of revenue’ has been subject matter of many decisions. The landmark judgment in this regard is of Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. Vs. CIT, 243 ITR 83 (SC). 16. It is settled position of law that while framing an assessment, the AO has dual role, i.e., he is an investigator and also an adjudicator of the matter. If the AO failed to carry out the investigation, vis-a-vis, the facts of the case, then such is a case of lack of enquiry and the order of the AO can be termed as erroneous. 17. While acting as an adjudicator, if the AO took some view which is contrary to law or the AO failed to consider the provisions of law of income tax, then also such an order is erroneous. 18. If the assessment proceedings are erroneously conducted and the revenue is suffering loss then such an order falls under the ambit of the provisions of section 263. Similarly, if the AO failed to consider the provisions of Income-tax or formed a view which is contrary to law, then such an order also falls under the ambit of section 263. ITA No. 19/Agr/2021 12 19. When we analyse the facts of the present case in the light of above principles of law, then we are of the firm view that it is a case where the order of AO is erroneous in so far as prejudicial to the interest of revenue. 20. In the present case, certain facts are very strange such as the assessee does not even know the name and contact details of the persons who have deposited cash in his saving bank account. The assessee has also denied about the details of goods purchased for customers and sent to customers. The AR of assessee has shown his inability to provide the details such as invoices of goods, transport bilties etc. Therefore, it is a clear cut case of lack of enquiry. There was complete inaction on the part of the AO and hence, the order of assessment is erroneous in so far as prejudicial to the interest of revenue. 21. In this era of digitalization, where even a vegetable vender is using digital mode of payment, huge cash transaction creates doubt in the mind of a person of common prudence. However, a suspicion, howsoever, is strong, cannot partake the character of evidence and hence, solely on the basis of suspicion, an action cannot be justified. But in the circumstances of the present case, the AO has failed to ITA No. 19/Agr/2021 13 conduct any enquiry to dislodge the suspicious cash transactions. The AO is duty bound to carry out proper investigation of facts and then to form a plausible view on such facts. Moreover, the assessee would get full opportunity in set aside assessment proceedings to justify the receipt of cash from depositors in the light of provisions of section 68. Judgments relied on by the learned AR of assessee. 22. The first judgment which has been relied upon by the AR of the assessee is the case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83(SC). In this case, the Hon’ble Apex Court has laid down the important principle of laws which are applicable in 263 case. The Apex Court held as under : “A bare reading of this provision makes it clear that the prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous ; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent—if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue—recourse cannot be had to section 263(1) 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 ITA No. 19/Agr/2021 14 applying the principles of natural justice or without application of mind.” “The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. 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 Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue ; or where two views are possible and the Income-tax Officer 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 Income-tax Officer is unsustainable in law.” 23. There is no quarrel on the proposition of law as propounded by the Apex Court in the case of Malabar Industrial Co. Ltd. (supra). We are fully in agreement with principle of laws laid down by Apex Court. However, it is also settled position of law that every precedent has to be understood in the light of facts of each case. There is no straight light jacket formula to apply every precedent in every case. The case, which is before us has peculiar facts as discussed above. Therefore, the law laid down by the Apex Court in above mentioned case would be of no help to the present assessee. 24. Second judgment which is relied upon by the counsel of assessee is of the Mumbai Bench of ITAT. That was a case where ITA No. 19/Agr/2021 15 assessee had claimed deduction of 24(b). Section 24(b) of the IT Act would provide deduction of interest paid by an assessee on the sum borrowed for construction/acquisition of such property whose rental income has been assessed under income from house property. In that case, AO allowed the deduction of 24(b) to assessee. CIT revised the order of AO on the ground that AO has wrongly allowed the deduction. While revising the order of AO, the CIT misinterpreted the purport of 3 rd proviso of section 24(b). Before ITAT, assessee argued that 3 rd proviso of section 24(b) is to read with 1 st and 2 nd proviso and hence, the rigors of this are not applicable to corporate entity rather applicable to individuals. After considering rival submissions, the coordinate Bench of Mumbai Tribunal has held that the Assessing Officer’s view was a plausible view because the rigors of third proviso provided in section 24(b) are not applicable to those assessees who borrow capital for the purpose of earning income by letting out the property under the head ‘income from house property’. It has further been observed by the coordinate Bench that though the order of AO was erroneous, as the AO in that case has not verified the information provided by the assessee, yet the order of the AO was not prejudicial to the interest of revenue. In view of these facts, ITA No. 19/Agr/2021 16 the coordinate Bench of the Tribunal has held that provision of section 263 was wrongly invoked by the Commissioner because twin conditions, i.e., the assessee order being erroneous as well as prejudicial to the interest of revenue, were not satisfied. However, as we have already discussed hereinabove, here is the case where facts are peculiar and the AO has not conducted any enquiry, due to which, the order of AO is prejudicial to the interest of revenue. Therefore, the case law of Manjari Stud Farm Pvt. Ltd. Vs. ACIT (supra) is of no help to the assessee. 25. The last case law, which is relied upon by the counsel of the assessee was Small Wonder Industries vs. CIT (ITA No. 2464/Mum/2013. In that case also, the issue was of correctness of the claim of the assessee vis-a-vis deduction under section 80IB. In that case, the Assessing Officer has made elaborate discussion in respect of deduction under section 80IB as well as disallowance of interest u/s. 36(1)(iii) of the Act. In this case, the coordinate Bench in para 2.4 has categorically observed that the assessment was framed after thorough enquiries and due deliberations on the issues therein and in this backdrop, the coordinate Bench held that it may be a case of inadequate enquiry, but cannot be a case of lack of enquiry and ITA No. 19/Agr/2021 17 hence, the action u/s. 263 was not sustainable. The facts of the present case are completely different because here it is a case of lack of enquiry. Therefore, this case is also of no help to the assessee. 26. So far as the contention of the assessee that for the assessment year 2014-15, the assessee was also assessed u/s. 143(3) and no revision has been made in that case by the Revenue, though the modus operandi of the assessee in that year was the same, is concerned, this contention of the assessee is of no relevance because it is settled position of law that principle of res judicata is not applicable to the Income-tax proceedings and each year is a separate year. Hon’ble Supreme Court in the case of Distributors (Baroda) Pvt. Ltd., 155 ITR 120 (SC) has held that to perpetuate an error is not heroism. 27. In the light of above facts and circumstances and principles of law laid down by various courts, we are of the firm view that it is a case of lack of enquiry on the part of the AO and hence, PCIT has correctly exercised his jurisdiction u/s. 263 of the Act. 28. In view of what has been discussed above, we dismiss the present appeal of the assessee with a rider that observations made ITA No. 19/Agr/2021 18 herein above would not prejudice the assessment proceedings and the right of assessee to prove the identity, creditworthiness of depositors and genuineness of the transactions. 29 . In the result, appeal is dismissed. Order pronounced in the open court on 22.04.2024 at Agra, U.P. Sd/- Sd/- (RAMIT KOCHAR) (P.C. YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 22.04.2024 *aks/-