SHRI. T.S.KUMARASAMY PROP.CHRISTY FRIEDGRAM INDUSTRY, NAMAKKAL TRIUCHENGODE V. PRINCPLE COMMISSIONER OF INCOME TAX,CNETRAL-2, , CHENNAI

ITA 314/CHNY/2023

AI Insights

The case revolves around the revision order passed by the Principal Commissioner of Income Tax (Central-2), Chennai, under section 263 of the Income-tax Act, 1961, concerning the assessment year 2017-18. The PCIT sought to revise the assessment order, alleging it was erroneous and prejudicial to the interest of the revenue, particularly concerning a cash receipt of Rs. 237 crores from Smt. V.K. Sasikala during the demonetization period. The assessee contested the revision, highlighting that the issue had been previously addressed by the CIT(A), who found no conclusive evidence to support the allegations. The Tribunal, after examining the submissions and relevant legal provisions, concluded that the PCIT exceeded his jurisdiction by revising an issue already decided by the CIT(A), leading to the quashing of the revision order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135195 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-04-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 12-03-2023
• Other Referred Cases: CIT v. Nirbheram Deluram [1997] 91 Taxman 181, CIT Vs Rai Bahadhur Motilal Chamaria [1967] 66 ITR 443, CIT vs Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC), CIT vs Farida Prime Tannery [259 ITR 342 (Madras High Court)], Renuka Philip vs ITO [409 ITR 0567 (Madras High Court)], CIT vs Shalimar Housing & Finance Ltd [320 ITR 157 (Madhya Pradesh High Court)], CIT vs Mehsana District Cooperative Milk Producers Union Ltd [263 ITR 645], CIT vs VAM Resorts & Hotels Pvt. Ltd [418 ITR 723], R.M. Tradelink ITA No. 68/Rjt/2022 (ITAT Rajkot), CIT (E) Vs Slum Rehabilitation Authority [Income Tax Appeal No. 1359 of 2016- Bombay High Court], CIT vs Kanpur Coal Syndicate [53 ITR 225], Jute Corporation of India vs CIT [187 ITR 688], CIT vs Toyota Motor Corporation [2008] 174 Taxmann 395 Delhi, CIT vs Toyota Motor Corporation [2008] 173 Taxmane 458(SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R. GOPALAKRISHNAN; V R SURESH
• Keywords: Sale consideration of property below Jantri Value; Revision of order; Transfer pricing; Income from undisclosed sources; Document seized; Source of fund; Corroborative evidences; Assessment record; Retraction; Documents seized; Set aside
• Section: 263; 132; 2; 143(3); 153A; 250; 251; 69A

Judgement Text

आयकर अपीलीय अिधकरण, ‘सी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI ᮰ी वी दुगाᭅ राव, ᭠याियक सद᭭य एवं ᮰ी मंजुनाथ. जी, लेखा सद᭭य के समᭃ BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER AND SHRI MANJUNATHA. G, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 314/Chny/2023 िनधाᭅरण वषᭅ / Assessment Year: 2017-18 Shri. T.S. Kumarasamy, Prop. M/s. Christy Friedgram Industry, A2 & A3, SIDCO Industrial Estates, Andipalayam, Namakkal, Tiruchengode – 637 214 [PAN: ADOPK-5292-P] v. Principle Commissioner of Income Tax, Central-2, Chennai – 600 034. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri. D. Anand, Advocate & Mr. R. Gopalakrishnan, Advocate & Mr. V R Suresh, FCA ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri. M. Rajan, CIT-DR सुनवाई कᳱ तारीख/Date of Hearing : 10.04.2023 घोषणा कᳱ तारीख/Date of Pronouncement : 07.07.2023 आदेश /O R D E R PER BENCH: This appeal filed by the assessee is directed against the order of the learned Principle Commissioner of Income Tax (Central), Chennai-2, passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), dated 01.03.2023 and pertains to assessment year 2017-18. :-2-: ITA. No: 314/Chny/2023 2. The assessee has raised the following grounds of appeal: “1. The order of the learned Principal Commissioner of Income tax, (Central-2), Chennai is wrong, illegal and is opposed to law and facts of the case. 2. The learned Principal Commissioner of Income Tax-Central-2 Chennai erred in assuming jurisdiction u/ s 263 of the Act to adjudicate the order of the first appellate authority and to enquire the issue of Rs.237 crores decided in the appeal u/s 250 of the Act. 2.1 The learned Principal Commissioner of Income Tax-Central-2 Chennai erred in ignoring the decision of the apex court in CIT v. Nirbheram Deluram [1997] 91 Taxman 181, wherein, it was held that the powers of CIT(A) are not confined 'only to matter which had been considered by the AO. 3. The learned Principal Commissioner of Income Tax-Central-2 Chennai erred in ignoring the fact that the enquiries and verifications carried out on the issue of Rs 237 crores by the CIT(A) during first appellate proceedings were 'record' within the meaning of Explanation 2 to section 263 of the Act. 3.1 The learned Principal Commissioner of Income tax-Central-2 Chennai ought to have seen that there is a distinction between lack of enquiry and inadequate enquiry. The learned PCIT ought to have seen that if there was any enquiry, even inadequate that would not by itself give occasion to Ld. Pr. CIT to pass orders u/ s 263, merely because he has different opinion in the matter. It is only in cases of "lack of enquiry" that such a course of action would be open for the Ld. Pr. CIT. 4. The learned Principal Commissioner of Income Tax-Central-2 Chennai erred in failing to appreciate the legal position that where the Assessing Officer has not recorded his agreement and there is no elaborate discussion on an issue in an assessment order passed u/ s. 143(3) r.w.s.153A r.w.s. 153D of the Act, it cannot be said that the AO has not carried out enquiries and verifications before passing the assessment order. 5. The learned Principal Commissioner Of Income tax, Central-2, Chennai, ought to have seen that the order of assessment is neither erroneous nor prejudicial to the interest of the revenue and that the learned CIT can assume jurisdiction under section 263 only if the twin condition of the assessment order being erroneous and pre-judicial to the interest of the revenue is satisfied. :-3-: ITA. No: 314/Chny/2023 5.1 The learned Principal Commissioner of Income Tax-Central-2 Chennai erred in holding that the order of assessment passed u/ s 153A r.w 143(3) of the Act is erroneous and prejudicial to the interest of the revenue with respect to the issue of Rs. 237 crores stated to be received by the assessee, by holding a different view when the learned CIT(A) has held that there is no conclusive or clinching evidence to establish that the assessee received cash of Rs.237 crores from Smt.V. K. Sasikala, and in any case, the said amount cannot be taxed in the hands of the assessee. 6. The learned Principle Commissioner of Income tax ought to have seen that impugned assessment order for the AY:2017-18, dated 09.08.2021 was subjected to appeal before the first appellate authority and that the learned first appellate authority vide its order dated 03.09.2022 has disposed of the said appeal. Aggrieved by the orders of the 1st appellate authority the department has preferred an appeal before the Hon'ble IT AT and the same is pending adjudication. The learned PCIT ought to have seen that it cannot assume valid jurisdiction under section 263 to revise an assessment order which has already been merged with the orders of the first appellate authority. 7. The appellant craves leave to add, amend, alter and withdraw any ground of appeal. For these and other grounds that may be rendered at the time of hearing it is most humbly prayed that the Hon'ble Tribunal may be pleased to quash the order u/ s 263 of Act the dated 01.03.2023 by allowing the appellants appeal and thus render justice.” 3. The brief facts of the case are that, a search u/s. 132 of the Income Tax Act, 1961 was conducted on 09.11.2017 at the residence of V S Sivakumar, a close relative of late M Natarajan (husband of Smt. V.K. Sasikala) at Abhiramapuram, Chennai, as a part of search operations conducted in the group case of M/s. Midas Golden Distilleries Pvt. Ltd and V.K. Sasikala. During the course of search, from the statement recorded from V S Sivakumar, it has been observed that the assessee T S :-4-: ITA. No: 314/Chny/2023 Kumarasamy, received a sum of Rs. 237 crores from Smt. V.K. Sasikala in specified bank notes during demonetized period. Subsequently, a search u/s. 132 of the Act, was carried out in the group case of T.S. Kumarasamy on 05.07.2018. During the course of search, it was observed that the assessee had deposited huge cash into bank account during demonetized period in specified bank notes. A statement u/s. 132(4) of the Act was recorded from Shri. Thirupathi, wherein he, has admitted that he helped to mobilize specified bank notes from V S Sivakumar under the instructions from T.S. Kumarasamy along with one Shri. Valeeswaran. In a statement recorded u/s. 132(4) of the Act, Shri Valeeswaran, has explained that he maintained a diary which reflects the actual cash balance of M/s Christy Friedgram Industry and other group companies. A statement was recorded from assessee u/s. 132(4) of the Act on 11.12.2018, where he has stated that he has deposited a sum of Rs. 237 crores to bank account of M/s. Christy Fried Grams Industry Pvt Ltd and M/s. Suvarnabhoomi Enterprises Pvt. Ltd. under PMGKY scheme. Consequent to search u/s. 132 of the Act, the assessment has been completed u/s. 143(3) r.w.s. 153A of the Act for the assessment year 2017-18 on 09.08.2021 and determined total income of Rs. 288,92,40,385/-, after obtaining necessary approval u/s. 153D of the Act. 4. The assessee has preferred an appeal before the ld. CIT(A) against the assessment order. The ld. CIT(A) vide their order dated 03.09.2022 allowed substantial relief to the assessee. The ld. CIT(A), while adjudicating the appeal for assessment year 2017-18, has issued enhancement notice u/s. 251(1) of the Act :-5-: ITA. No: 314/Chny/2023 and proposed to assess alleged cash received by the assessee from V K Sasikala amounting to Rs. 237 crores u/s. 56(2)(vii)(a) of the Act on the basis of appellant proceedings in the case of Smt. V.K. Sasikala for assessment year 2017-18 pending for adjudication before the ld. CIT(A). The assessee has raised his objections for proposed enhancement on legality and also on merits and contested that there is no evidence to prove that the assessee has received a sum of Rs. 237 crores from V.K. Sasikala in specified bank notes during demonetized period and deposited into his bank account, except a piece of paper where “Tirupati- 7.4” was recorded without any reference to the name of the assessee. The assessee further contended that the sole basis for the AO to make additions towards purported cash payments u/s. 69A of the Act in the hands of V K Sasikala is statement of Shri. V S Sivakumar and Shri Tirupathi, a relative of assessee. However, those two statements have been subsequently retracted by the parties with a sworn affidavit and thus, those statements cannot be relied upon to draw an adverse inference against the assessee. It was further argued that neither Smt. V K Sasikala admitted to have given cash to assessee, nor the assessee has admitted to have received cash from V.K. Sasikala. No documentary evidence was with the Department to justify that the cash was given to the assessee during demonetization period. 5. The ld. First appellate authority vide their order dated 03.09.2022 for the reasons stated in their appellate order dropped proposed enhancement after considering the objections filed by the appellant on the ground that there is no conclusive or clinching evidence to establish that the appellant had received :-6-: ITA. No: 314/Chny/2023 Rs.237 crores from V K Sasikala during demonetization period in specified bank notes. Therefore, the first appellate authority held that the provisions of section 56(2)(vii)(a) of the Act are not attracted to the facts of the assesse’s case and it was held that the proposed enhancement during the course of appellate proceedings on this issue is not warranted. Against the order of the first appellate authority both the assessee and revenue preferred an appeal before the Income Tax Appellate Tribunal and the revenue has challenged the findings of the AO in dealing with the issue in light of provisions of section 56(2)(vii)(a) of the Act. 6. The case has been, subsequently taken up for revision proceedings by the PCIT (Central), Chennai and issued show cause notice u/s. 263 of the Act dated 23.12.2022 and called upon the assessee to explain as to why the assessment order passed by the AO shall not be revised under the provisions of section 263 of the Act. In the said show cause notice, the PCIT was of the opinion that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the revenue, because the Assessing officer has failed to examine the issue of cash deposit and make necessary enquiries and verification even though search conducted in the case of V K Sasikala and assessee clearly establish the fact that the assessee has received a sum of Rs. 237 crores from V K Sasikala in specified bank notes during demonetized period and thus, called upon the assessee to file his objections if any, for proposed revision. :-7-: ITA. No: 314/Chny/2023 7. In response to show-cause notice u/s 263 of the Act, the assessee filed a detailed written submission on the issue on 25.12.2022 and argued that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the revenue, because the issue has been considered and verified by the AO during assessment proceedings which is evident from fact that statement recorded from employees of assessee and relevant incriminating material found during the course of search was very much available with the Assessing Officer. The assessee further contended that exercise of powers by the PCIT u/s. 263 of the Act in respect of purported cash received from V K Sasikala is incorrect, because as per provisions of section 263(1) Explanation (1)(c), the powers of PCIT or CIT 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. Since, the CIT(A) had considered and decided the issue of cash deposits into bank account and source for cash deposits in light of search conducted in the case of V K Sasikala and group companies and statement recorded from certain employees and decided that there is no evidence to prove that the assessee has received cash from VK Sasikala and provisions of section 56(2)(viia) of the Act cannot be invoked, there is no power to PCIT to revise the assessment order u/s 263 of the Act. 8. The ld. PCIT, after considering relevant submissions of the assessee and also by relied upon certain judicial precedents, observed that the assessment order passed by the AO u/s. 143(3) r.w.s. 153A dated 09.08.2021 suffered from several acts of omission despite abundant materials available on record on the :-8-: ITA. No: 314/Chny/2023 issue of cash received by the assessee from Smt. V.K. Sashikala during demonetization, but the Assessing Officer omitted to make enquiry and necessary verification regarding the facts and circumstances related to Rs. 237 crores stated to be received by the assessee. The PCIT, further observed that although the first appellate authority had considered and decided the issue, by exercising his powers conferred u/s. 251(1) of the Act by proposing enhancement of assessment, but act remain that the CIT(A) travelled beyond his jurisdiction, because the issue is neither arising out of return of income filed by the assessee nor from the assessment order passed by the AO and thus, the first appellate authority cannot issue an enhancement notice on this issue and consider and decide the issue. Therefore, the PCIT opined that the issue decided by the CIT(A) in appellate proceedings cannot be considered as subject matter of appeal within the meaning of clause (c) of Explanation (1) to section 263 of the Act. Therefore, the PCIT opined that the enhancement notice issued by the CIT(A) is ab intio, void, and subsequent conclusion in favour of the assessee is not valid in the eyes of law. Thus, the PCIT observed that notice issued u/s. 263 of the Act cannot be hit by the provisions of clause (c) and Explanation (1) to section 263 of the Act. The PCIT had also rejected the arguments of the assessee that there is no material evidence to conclude that the assessee is in receipt of sum of Rs. 237 crores from V.K. Sasikala by holding that the search conducted in the case of V S Sivakumar and statement recorded from VS Sivakumar clearly established the fact of cash payment to T.S. Kumarasamy during demonetization period. Further, search conducted in the case of the assessee and statement recorded :-9-: ITA. No: 314/Chny/2023 from Shri Tirupathi and Shri. Valeeshwaran also established the fact that the assessee has received a sum of Rs. 237 crores from V.K Sasikala. Further, cash book maintained by Valeeshwaran also suggests that he has received cash from T S Kumarasamy. Therefore, the PCIT opined that there is enough material in the possession of the Assessing Officer to examine the issue in light of provisions of section 56(2)(vii((a) of the Act. But, the AO has failed to verify the issue, he ought to have verified in the given facts and circumstances of the case. Since, the AO has failed to verify the issue in light of relevant provisions of the Act to bring into tax, amount of cash received from V.K. Sasikala u/s. 56(2)(vii)(a) of the Act, the assessment order passed by the AO becomes erroneous and prejudicial to the interest of the revenue. Thus, rejected arguments of the assessee and modified the order passed by the AO dated 09.08.2021 to that extent, with the directions to the Assessing Officer to examine and decide the issue of taxability of cash receipts of Rs. 237 crores after making necessary inquiries and examination of all evidence collected during search and sworn statement recorded from various persons during search. The relevant findings of the PCIT are as under: 5. I have carefully examined and considered the assessee's submissions and averments made in letters dated 25/12/2022, 04/01/2023 and 20.02.2023. The assessee's major objections to initiation of proceedings u/s.263 and the issue involved are as follows: 1) Validity of jurisdiction u/s.263 in view of Clause (c) of Explanation 1 of Sec 263 (ie) the matter had already been decided by CIT(A) 2) The PCIT's averment that the order of the AO is erroneous and prejudicial to the interest of revenue is not legally correct :-10-: ITA. No: 314/Chny/2023 3) Order passed by AO with the approval of the Addl.CIT u/s.153D can not be revised u/s.263 in view of Explanation 1(a)(0) of Sec.263(1) of the Act. 4) Objections to averments that Rs.237 Crores were received from Smt.V.K. Sasikala by questioning facts on record and inquiries conducted by investigation wing. 6. The objections raised by the assessee in his submission dated 25/12/2022 and 04/01/2023 are dealt with in the following paragraphs. 6.1 The assessee stated in para 2 that the AO had neither omitted to consider the issue of cash receipt of Rs.237 Crores from Smt.Sasikala, nor had failed to examine the issue of cash receipt by not making necessary enquiries or verification despite having material in possession relating thereto. 6.1.1 On examination of the assessment records, it was found that the AO has not examined the issue of receipt of Rs.237 Crores and also not made necessary enquiries, even though the above issue has been found in the seized materials and dealt by the Investigation wing. The Chain of events with reference to seized materials and subsequent sworn statements established that the demonetized from Smt.V.K.Sasikala was routed through the business accounts managed by Shri.T. Kumarasmy. 6.2 In Paras 3, 4, 5,6, 10(v) to 10(xv), 10(xix to xx), the assessee has relied upon the order u/s.250 passed by CIT(A) on 03/09/2022 (ie) the issues raised in the enhancement notice and submissions made by the assessee and grounds of appeal raised by AO in the appeal filed before ITAT against the order of CIT(A). The assessee stated that by bare reading of the grounds of appeal the issue upon which proceedings initiated is one and the same which has been already considered and decided in appeal by the CIT (A)- 19. Further, it has been contented that the jurisdiction to revise the assessment order passed by the AO u/s. 263 of the Act does not extent to such cases in view of the provision of clause c of Explanation -1, to Section 263 of the Act. The assessee submitted that the CIT(A) had considered the issue of cash receipt of Rs.237 crores in the appellate order and concluded that there is no conclusive or clinching evidence to establish that the assessee received cash of Rs.237 Crores from Smt.Sasikala during the demonetization period for conversion of the cash in old currency into new currencies. 6.2.1 In this regard, it is found that the CIT(A) had travelled beyond his jurisdiction for the reason that the issue neither arises out of the :-11-: ITA. No: 314/Chny/2023 return of income filed by the assessee nor from the assessment order. Hence, this issue cannot be considered as subject matter of appeal within the meaning of Clause (c) of Explanation 1 of Sec.263. 6.2.2 The Hon'ble Supreme Court in the case of CIT Vs Rai Bahadhur Motilal Chamaria reported in (1967) 66 ITR 443 held that AAC had no jurisdiction under section 31(3) of 1922 Act ( Corresponding to Sec.251of Incometax Act, 1961) to assess a source of income which had not been processed by ITO and which was not disclosed either in return filed by assessee or in assessment order referring its earlier decision in the case of Commissioner of Income-tax v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC) wherein it was held that in an appeal filed by the assessee the Appellate Assistant Commissioner has no power to enhance the assessment by discovering new sources of income not mentioned in the return of the assessee or considered by the Income-tax Officer in the order appealed against. 6.2.3 The relevant observation of Supreme court in the case of CIT Vs Rai Bahadhur Motilal Chamaria Supra is reproduced below: "As we have already stated, it is not open to the Appellate Assistant Commissioner to travel outside the record, i.e., the return made by the assessee or the assessment order of the Income-tax Officer with a view to find out new sources of income and the power of enhancement under section 31(3) of the Act is restricted to the sources of income which have been the subject-matter of consideration by the Income-tax Officer from the point of view of taxability. In this context "consideration" does not mean "incidental" or "collateral" examination of any matter by the Income-tax Officer in the process of assessment. There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non taxability and not to any incidental connection. In the present case, it is manifest that the Income-tax Officer has not considered the entry of Rs. 5,85,000/- from the point view of its taxability and, therefore, the Appellate Assistant Commissioner had no jurisdiction, in an appeal under section 31 of the Act, to enhance the assessment" 6.2.4 Relying on the ratio laid down by Supreme Court in the above decision, it is clear that in the instant case, the CIT(A) had travelled outside the jurisdiction. Since the issue of cash receipt of 237 Crores is not reflected in the return of income and the assessing officer had also not examined its taxability in the assessment order. Therefore, :-12-: ITA. No: 314/Chny/2023 the CIT(A) has no jurisdiction u/s.251 of the Act to enhance the assessment. In the absence of Jurisdiction to enhance the assessment, the enhancement notice issued by CIT(A) itself is ab- initio void and subsequent conclusion in favour of the assessee is not valid in the eyes of law. 6.2.5 In view of the above, the Notice u/s.263 cannot be said to be hit by the provisions of Clause (c) of Explantion 1 of Sec.263 of the Act. As the AO had not examined the issue in the assessment order, then the said issue could not have been considered as subject matter of appeal, by Ld.CIT(A). Hence, the assessee's objection to the assumption of jurisdiction on this ground is not acceptable and liable to be rejected. 6.3 In Paras 7 & 8, the assessee stated that there is no material available in the assessment record to hold that the assessment order is erroneous and prejudicial to the interest of revenue. The assessment order was passed after raising various queries by A0, appearance by assessee number of times, with the approval of Addl CIT u/s.153D and after considering the findings made by Investigation wing. 6.3.1 The assessee's contention is not correct. Even though the issue of cash receipt of Rs.237 Crores in demonetized currency is evident from the seized materials, the assessing officer has not made any enquiries or verification in this regard. On observing that the assessing officer had not examined this issue, the CiIT(A) proposed enhancement on this issue. It is therefore evident that the assessing officer had not made any enquiries with regard to cash receipt of Rs.237 Crores. However in the absence of Jurisdiction to enhance the assessment as discussed in rebuttal given to para 3 & 4, the enhancement notice issued by CIT(A) itself is ab-initio void and subsequent conclusion in favour of the assessee is not valid in the eyes of law. It is noticed from the assessment orders that the AO has discussed the issue of under reporting of income by inflation of purchases through bogus bought notes and dummy entities, on money payment for purchase of Muttukkadu property through group concern, Disallowance of interest on diversion of funds, unaccounted cash and Gold, unaccounted expenditure by application of unaccounted income generated. On examination of records, it is noticed that the AO neither discussed the findings of Investigation wing with reference to seized materials on the issue of cash receipt of Rs.237 Crores from Smt.V.K.Sasikala and nor made any enquiries/verification on seized materials/statements recorded by Investigation wing with the assessee/concerned persons, on this issue of cash receipt of 237 Crores from Smt.V.K.Sasikala in :-13-: ITA. No: 314/Chny/2023 demonetized currency. Hence, in order to redress the erroneous and prejudicial order passed by the assessing officer, Proceedings u/s.263 have to be initiated. 6.4 In Paras 9() and (ii) the assessee refers to Internal correspondence of AO confirming that all seized materials was verified and all statement were handed over 6.4.1 With reference to the assessee's submission, it is reiterated that the reason for initiation of proceedings u/s.263 itself is the failure on the part of assessing officer to make necessary inquiries/verification on this issue even after verification of seized materials and sworn statements referred by the Investigation wing. 6.5 In Paras 9 (i), (iv) & (), the assessee submits that Inquiries or verifications were conducted by the investigation wing on the issue recording the statement of Shri.V.S.Sivakumar, Shri.R. Tirupathi, Shri.Valeeshwaran and the assessee by asking specific questions on facilitating Rs.237 Crores of demonetized currency. 6.5.1 In all these paras, the assessee himself has stated that inquiries were conducted by the investigation wing by recording statements from concerned persons including assessee. The main reason for initiation of proceedings u/s. 263 is that despite seized material being available on this issue, the assessing officer had not made any enquiries or verification which ought to have been made. This act of ommission to conduct enquiries renders the order erroneous and prejudicial to the interest of revenue. Enquiries by any other authority is not necessarily binding on the assessing officer. It is open for the assessing officer to accept or reject the findings of such enquiries after judicious consideration. Examination of records shows omission by AO to consider the entire gamut of material unearthed by search and other enquiries. It must be evident from the record the reasons which prompted the AO to accept or reject an enquiry and why a detailed enquiry was considered not necessary. As a revisioning authority, I find that the reasons or rejection of finding of investigation wing and not conducting any fresh enquiry is not evident from the record. Absence of such reasoning renders the order erroneous and prejudicial to the interest of revenue as held in the case of CIT Vs. Toyota Motor Corporation (2008] 174 Taxmann 395 Delhi, which is affirmed by the Supreme Court in (2008) 173 Taxmane 458(SC) as follows: "10. It is also necessary for the parties to know the reasons that have weighed with the Adjudicating Authority in coming to a conclusion. The order passed by the Assessing Officer should :-14-: ITA. No: 314/Chny/2023 be a self-contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law. 11. We find that the order passed by the Assessing Officer is cryptic to say the least, and it cannot be sustained" 6.6 The assessee in the paras no.9 (vi) & (vii) refers to the entry "Tirupathi-7.40" found in the loose sheet seized from the premises of M/s.Namadhu M.G.R. Except this noting of loose sheet "Tirupathi- 7.40 on the loose sheet found with VS.Shivakumar and stated that there was nothing to establish the cash receipt transaction. 6.6.1 The claim of the assessee is totally incorrect. Evidences were collected and sworn statements were recorded from the competent persons disclosing the fact about the payment of Rs. 237 crores by Smt. V.K. Sasikala to the assessee. Further on verification of the unaccounted parallel cash book seized, incriminating evidence supporting the transaction is avalable. An excel sheet titled "Party Payments" and a subsheet by name "Siva Bricks". Here Siva refers to Shri.V.S.Sivakumar (coded). The sheet is as under: Siva Bricks Received for units Nos. Siva Trip 1 I Trip 137.50 4.00 2 II Trip 112.00 2.50 249.50 0.90 Less Trip Mistakes 8.27 7.40 Driver Mistake Siva 4.00 237.23 6.6.2 A reference to the seized material says Trip-l and Trip-l which means 2 trips of delivering cash. This exactly Tallies with the statement given by Shri.V.S.Sivakumar that demonetized currency was delivered in 2 trips (Q.No.36 of the his sworn statement recorded u/s.132(4) of Income tax Act 1961 on 11.11.2017). Further Mr.V.S.Sivakumar was asked to clarify how an odd amount of 1 26.02.17 First Due 3.00 2 27.02.17 Second Due 2.00 3 28.08.17 Third Due 2.00 4 5 7.00 Trip Pending Balance 230.23 :-15-: ITA. No: 314/Chny/2023 Rs.237crores was arrived at (Q.No.36 of the his sworn statement recorded u/s.132(4) of Income tax Act 1961 on 11.11.2017), wherein he has stated that the amount meant for facilitation is Rs.240 crores however upon delivery Shri.T.S.Kumarasamy confirmed the money is only Rs.237crores.On comparison of this fact with the notings found in the seized material noted as less trip mistakes/ Driver Siva mistake and arriving Rs.237.23crores clearly establishes the fact that the amount was Rs.237crores. Further based on incriminating materials seized, Mr.V.S.Sivakumar in his sworn statement stated that Mr.T.S.Kumarasamy promised him a commission of Rs.7.40crores. On examination of the extract of the seized material the notings "Siva Trip" 7.4 clearly establishes this fact that it is the 7.4 crores commission amount which is collaborated by the statement of Shri.V.S.Sivakumar recorded on 11.11.2017 6.6.3 The proposed revision is valid because despite the availability of such material, the Assessing Officer did not initiate any action on the above. Section 132(4A) stipulates that "(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true;" Therefore, as per the express provisions of the statute the above documents recovered during the course of search are to be considered true and correct unless proved otherwise by the assessee. The Assessing Officer failed to put the assessee to the test and hence, the order is patently erroneous and requires revision u/s.263 6.7 In the para no.9(vii), The assessee has argued that the AO is aware of the retraction of the statement given by Shri. V.S. Sivakumar and reliance placed on the retracted statement is not valid. 6.7.1 No doubt the AO is aware of the retraction statement given by Shri. V.S. Shivakumar during the course of search conducted on 09.11.2017. The opinion of the undersigned u/s. 263 of the Act is that the evidences were collected during the course of the search on 05.07.2018 and the AO did not reconcile properly evidences collected :-16-: ITA. No: 314/Chny/2023 during the course of search on 09.11.2017 with due examination and thereby failed to make any findings upon it. Further the receipt of the Rs.237 Crores was based on the incriminating material seized in two searches and not merely based on the statement of Shri.V.S.Shivakumar. Also Shri.V.S.Shivakumar has retracted the statement without any valid grounds. I have gone through the facts on record. The statement was recorded from Shri.V.Shivakumar over a period of 3 days, allowing him sufficient time to sleep, eat and recover. The claim that he was coerced into making the statement is an after thought. In view of this the claim of the assessee that the AO is aware of the retraction statement of Shri V.S. Sivakumar will in no way make a difference. 6.8 The assessee in Para Nos. 9(ix), (x).(xi) (xii) (xii) submitted that the enhancement to the assessment order was proposed by CIT(A) based on the addition made in the hands of Smt.V.K.Sasikala towards unexplained money represented by cash of Rs.237 Crores, based on enguiries/verification conducted by the Investigation Wing/AO 6.8.1 The enhancement notice issued by CIT(A) itself is void ab initio. The issue here is that the assessing officer has not examined taxability of this issue correspondingly in the hands of the assessee. The CIT(A), as in the previous paras, had travelled beyond his jurisdiction by issuing enhancement notice and finally decided the issue against the revenue 6.9 In paragraphs 9 (Xiv) to (xix) the assessee submitted that the entries relating to introduction of cash as noted is the seized TTD diary on five dates from 01/12/2016 to 05/12/2016, were not found to be incriminating by the investigation wing after questioning Shri.Valleeshwaran and the said cash was found to be deposited on in the bank accounts of Christy Friedgram Industry and Suvarnabhoomi Enterprises Pvt Ltd under the PMGKY Scheme. The AO has considered the cash deposit under the said scheme vide para 15.6.5 of the order. No incriminating material was found and seized with regard to the receipt of demonetized currency from Smt.V.K.Sasikala. Smt.Sasikala and assessee denied the said transaction. Source for the amount offered in PMGKY cannot be questioned in the present proceedings. 6.9.1 In the para 15.6.5 of the assessment order, the AO speaks about the application of unaccounted income. In this context, the AO has stated that the assessee and group concerns admitted unaccounted income amounting to Rs.261.29 Crores generated over the years under PMGKY and IDS scheme. The assessing officer did not make any reference to the amount received from Smt.V.K.Sasikala neither in the para 15.6.5 nor with the amount :-17-: ITA. No: 314/Chny/2023 offered under PMGKY. The assessing officer also did not question the source for amount offered under PMGKY Scheme. Here the reference of seized material in the assessee's case is an excel sheet titled "Party Payments" and a subsheet by name "Siva Bricks". Here Siva refers to Shri.V.S.Sivakumar (coded), from which it is unearthed that the transport of 237 Crores by two trips, Trip-l and Trip-l. This exactly tallies with statement of Shri.V.S.Shivakumar that demonetized currency was delivered in two trips. Hence, the assessee's contention that no incriminating material was found and seized with regard to receipt of demonetized currency from Smt.V.K.Sasikala is not correct. 6.10 In Para Nos.9 (Xx) to (Xxi) , the assessee submits that the observation of PCIT in the notice that the cash of Rs.237 Crores received from Smt.Sasikala was utilized by depositing the same in bank accounts of Christy Fried gram Industry and Suvarnabhoomi Enterprises Pvt Ltd under PMGKY Scheme is contrary to another observation in the same notice that the said cash was the same observation in Shri.S.K.Venkatachalam through three entities in Bangalore (ie) Mangala Foods, M/s.Moogambiga foods and Samundeswari Foods. There is no material evidence to establish that the receipt of cash from Smt.Sasikala is established by the subsequent transfer of said funds to Mr.S.K.Venkatachalam through three entities in Bangalore. The observation of PCIT that the AO has not considered the issue of receipt of Rs.237 Crores from Smt Sasikala is not supported by the facts on records since the AO has considered the amount offered under PMGKY Scheme. 6.10.1 In this regard, it is seen that there are twO searches one is relating to the case of Smt. V.K Sasikala on 09.11.2017 and another in the case of Christy Fried Grams Industries on 05.07.2018. During the course of both searches number of incriminating materials were seized and sworn statement was recorded wherein it has been proved that Smt. V.K Sasikala had given a sum of Rs. 237 crores to Shri.T.S. Kumarasamy the assessee herein, in the form of demonetized currency notes. Prima facie it appears that the amount received by T.S. Kumarasamy was deposited in the bank accounts of Christy groups of concerns and subsequently transferred through the banks accounts of entities such as M/s. Mangala Foods and others and finaly reached to Shri S.K. Ventachalam. The AO in the assessment order, even though there are multiple evidences available before him, has failed to make any detailed enquiry and examine the issue and thereby erred to make any findings in the assessment order. n the assessment order, the Assessing Officer has treated the amount of Rs. 261.29 Crores offered under PMGKY and IDS schemes as :-18-: ITA. No: 314/Chny/2023 unaccounted income generated over the years. The assessing officer did not make any reference to the amount received from V.K.Sasikala as offered by the assessee under PMGKY scheme nor can such inference readily deduced from the assessment order. 6.11 In Para Nos.10,11 & 12 the assessee contended that the clause (a) of Explanation 2 to Sec.263 is not applicable since the inquires and verification were carried out on the issue for which notice has been issued. There is no justification to issue notice to invoke provisions u/s.263. 6.11.1 There was a search finding that the assessee was in receipt of demonetized currency amounting to Rs.237 Crores from Smt.V.K.Sasikala based on the seized materials and sworn statements recorded u/s.132(4) from persons involved. The assessee objected to the issue raised in the show cause notice that the AO had omitted to consider the issue of receipt of Rs.237 Crores in the assessment order, relying on the AO's remarks considering the declaration of Rs.109.75 Crores in PMGKY by the assessee and Rs.136.50 Crores by M/s.Suvarnabhoomi Enterprises Pvt Ltd in para 15.6.5 that "the unaccounted cash generated over the years have been offered during the scheme". 6.11.2 The AO has not discussed in the assessment order that the amount offered under PMGKY is the amount received from V.K. Sasikala nor has he given any factual finding to that effect. Further the assessee himself offered the said amount under PMGKY as unaccounted cash generated from his own business. Hence, the discussion of AO about the declaration made by assessee under PMGKY does not lead to the conclusion that the AO had examined this issue. 6.11.3 Examination of relevant records indicates that though there were sufficient materials in the form of seized documents and sworn statements, the AO has made no enquiries or verification. As per Clause (a) of Explanation (2) of Sec.263 of the Act, the order passed by the assessing officer shall be deemed to be erroneous and prejudicial to the interest of revenue if in the opinion of PCIT, the order is passed without making inquiries or verification which should have been made. Hence, the order passed by the assessing officer without making enquiries/verification on the issue of cash receipt of Rs.237 Crores from V.K.Sasikala shall be deemed to be erroneous and prejudicial to the interests of revenue in view of Clause (a) of Explanation (2) of Sec.263. 6.12 In the para No.10(xvi), the assessee submits that by making averments in the showcause notice that the assessee and his :-19-: ITA. No: 314/Chny/2023 concerns being Govt contractors, all receipts would have been only by cheques and there was no scope for cash generation, the PCIT indirectly questioning the source for amount offered under PMGKY. 6.12.1 The assessee's contention is factually incorrect. Neither the assessing officer nor the PCIT has questioned the source for amount offered under PMGKY. Here the issue is the receipt of Rs.237 Crores by the assessee from Smt.V.K.Sasikala, which was unearthed during the course of search conducted in the case of Smt.V.K.Sasikala and the The AO has referred the amount offered under PMGKY as assessee. unaccounted business income generated over the years. The issue of receipt of demonetized currency has not been dealt with by the assessing officer during the assessment proceedings and requires a proper enquiry. It is open for the assessee to prove his claim by leading proper evidence. 6.13 In Para No.10(xvii), the assessee contends that there is no material evidence that the money received from Smt.V.K.Sasikala subsequently transferred to Shri.Shri.S.K.Venkatachalam. 6.13.1 The assessee has submitted that the observation made that the said cash was routed through the three entities to S.K. Venkatachalam is not supported by any evidences . Prima facie, material is available on record, to contemplate such an inference and it is my considered opinion that the AO ought to have followed up with the money trail and made necessary enquiries. However the Assessing officer has not carried out any enquiry to verify the cash being routed through three entities to Shri. S.K.Venkatachalam. This act of omission is another factor in rendering the order erroneous and prejudicial to the interest of revenue. Notwithstanding the above it is worth stating that the routing of the cash to Shri.S.K Venkatachalam is immaterial in the taxability of the receipt of Rs.237 crores from Ms. V.K.Sasikala . 6.14 In para 10(xviii), the assessee has contended that, the AO has considered the declaration of Rs. 109.75 Crores and Rs.136.50Crores by the assessee and M/s Swarnabhoomi enterprises Pvt Ltd and observed that the same was unaccounted cash generated over a period of time and have been offered during the scheme and futher claimed that the CIT(A) has made a finding about the non-existence of evidences. 6.14.1 It is reiterated that AO has made the observation in respect of the amount deposited under the scheme as the unaccounted cash generated over a period of time and nowhere has made any specific observation that the amount was received from Smt. Sasikala. The amount deposited under the scheme is entirely different and is in no :-20-: ITA. No: 314/Chny/2023 way being enquired into. In respect of the finding made by the ClT(A) about the evidences it is considered opinion of the undersigned that the CIT(A) decision on the issue is based on the invalid enhancement notice and therefore is not acceptable 6.15 Vide submissions dated 0401/2023, the assessee raised objection that the order passed by AO with the approval of the Addl.CIT u/s.153D cannot be revised u/s.263 in view of Explanation 1(a)()G) of Sec.263(1) of the Act is baseless and legally not correct. 6.15.1 The Explanation 1(a)(i)(i) has to be read with sec. 263(1) in holistic manner. 263. (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner) or] 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 [or the Transfer Pricing Officer, as the case may be,] 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.. ........ Clause a to Explanation 1 to Sec.263(1) [Explanation 1] For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, (an order passed [on or before or after the 1st day of June, 1988] by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall include (i) an order of assessment made by the Assistant Commissioner [or the Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the 97 [Joint) Commissioner under section 144A; an order made by the 9[Joint) Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer b9a[or the Transfer Pricing Officer, as the case may be,] conferred on, or assigned to, him under the orders or directions issued (ii) by the Board or by the 92 (Principal Chief Commissioner or] Chief Commissioner or 92(Principal Director General or] Director General or 92(Principal Commissioner or] Commissioner authorised by the Board in this behalf under section 120; Sec.263(1) clearly mentions that any order passed by the assessing officer can be subjected to revision. Further Explanation 1 starts with the words "For removal of doubts" which is clarificatory explanation :-21-: ITA. No: 314/Chny/2023 that even the orders passed on the basis of directions issued by JCIT u/s.144A or passed by JCIT himself are covered by this section. Further in the clause (a) the phrase mentioned "Shall include" supports the legal contention that any order, including the orders mentioned in the a(i) and a(i) can be subjected to Revision by PCIT. Hence the assessee's objection that the order passed by the AO with the approval of Addl.CIT u/s.153D is not included under Explanation 1(a)(i)(ii) of Sec.263(1) does not hold good, and the same is rejected. 6.16 The assessee vide submission on 20.02.2023 had relied on the decision of the Hon'ble Apex Court in the case of Commissioner of Income-tax v. Shri Arbuda Mills Ltd [1998] 98 Taxman 457 (SC) for its cause. 6.16.1 On examination, it is found that the facts of that case is entirely distinguishable from the instant case of the assessee and will not support the assessee's case. 7. In the given conspectus and concatenation of facts on record and after judicious consideration of the submissions of the assessee, it is evident that the impugned order of assessing officer dated 09/08/2021 for AY 2017-18 suffers from several acts of omission. Despite abundant materials available on record, the assessing officer omitted to make enquiries and necessary verifications regarding the facts and circumstances related to Rs.237 Crores stated to be received by the assessee. Nor does the evidence on record indicate as to whether the AO applied his mind to the issue under contention. Hence it is held that the said order is erroneous and prejudicial to the interest of revenue as laid down in Sec.263 of the IT Act, 1961 and as held by various judicial decisions such as Malabar Industrial Corporation and Toyota Motor Corporation Supra. Accordingly, in exercise of powers conferred u/s.263(1) of the Act, do hereby modify the order passed u/s.143(3) r.w.s. 153A dated 09/08/2021 to that extent, with a direction to the assessing officer to examine and decide the issue of taxability of cash receipt of Rs.237 Crores, after making necessary inquiries and examination of all evidences collected during search and sworn statements recorded during and after search.” 9. The ld. Counsel for the assessee, Shri. D. Anand, Advocate, submits that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the revenue, because :-22-: ITA. No: 314/Chny/2023 the so called material including incriminating document found during the course of search and statement recorded from various persons was part of assessment records, during assessment proceedings and thus, it cannot be said that the AO is not aware of those documents and also the issue and further he did not verify the issue of taxability of cash received from V.K. Sasikala. The ld. Counsel for the assessee, further submits that assuming for a moment the AO did not verify the issue in light of relevant provisions of the Act during assessment proceedings, but fact remains that the very same issue was subject matter of appellate proceedings before the first appellate authority and the ld.CIT(A) considered and decided the issue of taxability of alleged cash Rs. 237 crores received from VK Sasikala. The ld. CIT(A), after considering relevant facts and submissions of the assessee observed that, there is no clinching evidence to establish that the appellant received cash of Rs. 237 crores from Smt. V.K. Sasikala during demonetization period in specified bank notes. The ld. Counsel for the assessee, referring to the provisions of section 251 and Explanation provided therein, submits that in disposing of an appeal, the Commissioner of Income Tax (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that said matter was not raised before the Commissioner (Appeals) by the appellant. The ld. Counsel for the assessee, further referring to the provisions of section 263(1) Explanation (1) submits that as per said provision, where any order referred to in this sub-section and passed by the Assessing officer had been the subject matter of any appeal filed, the power of the PCIT or Commissioner under this sub-section shall extend and shall be :-23-: ITA. No: 314/Chny/2023 deemed always to have extended to such matters as had not been considered and decided to such appeal. In the present case, the CIT(A) had taken up the issue of cash received by the assessee from Smt. V.K. Sasikala on the basis of material available with him and issued enhancement proposal. The ld. CIT(A) after considering relevant submissions of the assessee dropped enhancement proposal by holding that there is no evidence to prove that the assessee has received cash of Rs. 237 crores from V.K. Sasikala. Since, the ld. CIT(A) had considered and decided the issue, the powers of PCIT u/s. 263 of the Act on the very same issue cannot be exercised. In this regard, he relied upon various judicial precedents, including the decision of Hon’ble Supreme Court in the case of Kanpur Coal Syndicate reported in 53 ITR 225, on the powers of first appellate authority u/s. 251(1)(a) of the Act and submits that the powers of first appellate authority is conterminous with the powers of the AO and that he can do what the ITO can do and also direct him to do what he has failed to do. The Counsel for the assessee further referring to the decision of Hon’ble High Court of Bombay in the case of Ranka Jewellers vs ACIT [2010] 328 ITR 148, submits that the Hon’ble High Court on the powers of PCIT u/s. 263 of the Act has held that under Explanation (c) to the provisions of section 263(1), the PCIT does not have any power to revise assessment order on the issue which has been considered and decided by the first appellate authority. Since, the ld. CIT(A) has decided the issue, there is no scope for the PCIT to assume jurisdiction on this issue and set aside the assessment order. In this regard, he relied upon the following judicial precedents: :-24-: ITA. No: 314/Chny/2023 1. COMMISSIONER OF INCOME TAX vs. FARIDA PRIME TANNERY HIGH COURT OF MADRAS: 259 ITR 0 342 (Madras High Court). 2. RENUKA PHILIP vs. INCOME TAX OFFICER-409 ITR 0567 (Madras High Court). 3. RANKA JEWELLERS vs. ADDITIONAL COMMISSIONER OF INCOME TAX-328 ITR0148 4. COMMISSIONER OF INCOME TAX Vs. SHALIMAR HOUSING & FINANCE LTD-320 ITRO 157- Madhya Pradesh High Court. 5. COMMISSIONER OF INCOME TAX vs. MEHSANA DISTRICT CO OPERATIVE MILK PRODUCERS UNION LTD. 263 ITR 645. 6. COMMISSIONER OF INCOME TAX vs. VAM RESORT S & HOTELS PVT. LTD. 418 ITR 723. 7. R.M. Tradelink ITA No. 68/Rjt/2022 (ITAT Rajkot). 8. CIT (E) Vs Slum Rehabilitation Authority INCOME TAX APPEAL NO. 1359 OF 2016- Bombay High Court. 10. The ld. CIT-DR, Shri. M. Rajan, supporting the order of PCIT submits that the PCIT had given enough reasons to come to the conclusion that enhancement notice issued by the CIT(A) on the issue of taxability of cash receipt of Rs. 237 crores is void ab inito and illegal and consequent proceedings is also illegal. Therefore, it cannot be said that the issue is subject matter of appeal before the first appellate authority and the CIT(A) had considered and decided the issue to exclude said issue from the purview of provisions of section 263 of the Act. The CIT-DR further submits that the CIT(A) has travelled beyond his power which is evident from the appellate order passed by the authority, because the issue of cash deposit was neither emanating from the return of income filed by the assessee nor the AO has considered the issue in the assessment proceedings. Since, the issue is not subject matter of appeal before the first appellate authority, the powers of PCIT extends to those issues which has not been considered and decided in the first appeal proceeding. Therefore, he submitted that there is no error in the reasons given by the PCIT :-25-: ITA. No: 314/Chny/2023 to revise the assessment order passed by the AO u/s. 143(3) r.w.s. 153A dated 09.08.2021 and their order should be upheld. 11. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The factual matrix of the impugned dispute are that during the course of search in the case of V.K. Sasikala, a statement u/s. 132(4) of the Act, was recorded from V.S. Sivakumar, where he has stated that he had paid a sum of Rs. 237 crores to Shri. Tirupathi to handover to Shri. T S Kumarasamy. Further, during the course of search on 05.07.2018 in the case of assessee, a statement u/s. 132(4) of the Act was recorded from Shri. Tirupathi, wherein he has admitted that he helped to mobilize specified bank notes from V.S. Sivakumar under the instructions from T S Kumarasamy, along with the help of Shri Valeeswaran. Admittedly, Shri V.S. Sivakumar, Shri Tirupathi and Shri Valeeswaran, all three have retracted from their statement by a sworn affidavit and stated that those statements were obtained under coercion and undue influence and there is no supporting evidence to suggest that cash of Rs. 237 crores was exchanged between assessee and V.K Sasikala. It was also an admitted fact that Smt. V.K. Sasikala has also denied having paid cash in specified bank notes to T.S. Kumarasamy, the appellant and the appellant had also denied having received cash from V.K. Sasikala. The so called incriminating material considered by the Department does not show any light including any reference to the name of the appellant to suggest that cash payment of Rs. 237 crores by V.K. Sasikala and received by the appellant. Further, it is also admitted fact that this issue has been considered and decided by :-26-: ITA. No: 314/Chny/2023 the CIT(A) in their appellate order dated 03.09.2022, by way of enhancement proposal and after considering relevant facts and submissions of the assessee dropped proposed enhancement with the observation that there is no evidence to establish that the appellant had received cash of Rs. 237 crores from Smt. V.K. Sasikala, in specified bank notes and that the provisions of section 56(2)(viia) of the Act cannot be invoked in the given facts and circumstances of this case. Therefore, it is necessary to decide the jurisdictional powers of the PCIT conferred u/s. 263 of the Act, in light of above facts and circumstances of the case. 12. The PCIT can exercise powers u/s. 263(1) of the Act, if he is considers that an order passed by the AO is erroneous in so far as it is prejudicial to the interest of the revenue. Explanation (c) to section 263(1) of the Act, provides that where any order referred to in this sub-section (1) and passed by the AO has been made a subject matter on any appeal, the powers of the PCIT under this sub-section shall extend to such matters as had not been considered and decided in such appeal. In other words, the powers u/s. 263(1) of the Act is in respect of an order passed by the AO, where the order as regarded has being erroneous and prejudicial to the interests of the revenue. But, said powers is limited to the issues which has not been considered and decided in the appeal. For better understanding, the relevant provisions of section 263(1) of the Act and Explanation (1) are reproduced below: “Under 263. (1) of the Income Tax Act, 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 Income-tax 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 :-27-: ITA. No: 314/Chny/2023 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 1 st day of June, 1 988 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 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 1 st day of June, 1988, the powers of the Principal Commissioner or 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.” 13. For better understanding and interpretation of provisions of section 263(1) and Explanation provided therein, it would be relevant to look into the clause of notes on Finance Bill, 1988 relating to the amendment u/s. 263 of the Act by the Finance Act, 1988 and Memorandum to Finance Bill, 1988 explaining the purpose of amendment to sub section. For better understanding notes on clause (c) of Finance Bill 1988 and Memorandum to Finance Bill, 1988 are reproduced as under: :-28-: ITA. No: 314/Chny/2023 "Notes on Clauses to Finance Bill 1988 "Clause (c) of the Explanation clarifies that where any order passed by the Assessing Officer has merger with the order of Commissioner (Appeals) or the Appellate Tribunal, the Commissioner may revise that part of the order which has not been considered and pronounced upon by the appellate authority." Memorandum to Finance Bill 1988 48(b) Regarding the circumstances under which order of an Assessing Officer merges with that of an appellate authority: Here again, there have been conflicting decisions on the question as to whether the entire order of assessment passed by an Assessing Officer merges with the order of the first appellate authority or the merger is only with respect to that part of the order of the Assessing Officer which relates to the matters considered and decided by the appellate authority. Some High Courts have held that there is complete merger once an appeal is decided against an order even on one or two points alone, while a number of High Courts have held that there is only partial merger and not the merger of the whole order in case where only one or some particular aspects have been contested. To eliminate litigation and to clarify the legislative intent in respect of the provisions in the three Direct Tax Acts, it is proposed to clarify the legal position in this regard in the Explanation to the relevant sections. The proposed amendments are intended to make it clear that "record" would include all records relating to any proceedings under the concerned direct tax laws available at the time of examination by the Commissioner. Further, as held by several High Courts, the Commissioner will be competent to revise an order of assessment passed by an Assessing Officer on all matter except those that have been considered and decided in appeal." 14. From plain reading of provisions of section 263(1) of the Act and Explanation (1)(c) provided therein and also notes on clause to Finance Bill, 1988 and Memorandum to Finance Bill, 1988, it is evident that the Powers of PCIT u/s. 263 extends to such matters which had not been considered and decided in such appeal. The use of the word “considered and decided” makes it clear and unambiguous that if some issue is decided by CIT(A) in an appeal against the assessment order, then that issues cannot be subject matter of revision proceedings u/s. 263 of the Act. In :-29-: ITA. No: 314/Chny/2023 our considered view, Explanation (1)(c) provided u/s. 263 of the Act is based on the Doctrine of Merger and according to which there cannot be more than one operative order governing the same subject matter at a given point of time. In the instant case, it is undisputed that the issue which is considered by the PCIT in the impugned order, which is under challenge, has been considered and decided by the appellate authority namely, CIT(A)-19, vide their order dated 03.11.2022. Therefore, in our considered view, the ld. PCIT in terms of Explanation (1) to section 263 of the Act, cannot assume a valid jurisdiction to revise an order which has been considered and decided by the CIT(A) and therefore, on this account itself, order passed by the PCIT u/s. 263 of the Act cannot be sustained and liable to be quashed. 15. This principle is supported by the decisions of various courts, including the Hon’ble High Court of Madras in the case of CIT vs Farida Prime Tannery, 259 ITR 342 (Mad) and also in the case of Renuka Philip vs ITO 409 ITR 567. A very similar issue has been considered by the Hon’ble Madhya Pradesh High Court in the case of CIT vs Shalimar Housing & Finance Ltd 320 ITR 157. At this stage, it is relevant to consider the decision of Hon’ble High Court of Bombay in the case of Ranka Jewellers vs ACIT [2010] 328 ITR 148, where the Hon’ble High Court under identical set of facts and in light of powers of CIT and PCIT u/s. 263 of the Act, held that once the issue has been considered and decided in the appeal then there is no scope for the PCIT to invoke his jurisdiction u/s. 263 of the Act on said issue and set aside the assessment order. The relevant findings of the Hon’ble High Court are as under: :-30-: ITA. No: 314/Chny/2023 “17. The power under Section 263(1) can be exercised by the Commissioner where he considers that any order passed by the 3 (2000) 243 ITR 83 4 (2007) 295 ITR 282 Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. Explanation (c) to the provision provides that where any order referred to in Sub-section (1) and passed by the Assessing Officer has been made a subject matter of any appeal, the powers of the Commissioner under the sub-section shall extend to such matters as had not been "considered and decided" in the appeal. In other words, the exercise of power under Section 263(1) is in respect of an order passed by the Assessing Officer, where the order is regarded as being erroneous and prejudicial to the interest of the Revenue. Where an order passed by the Assessing Officer is subject to an appeal that has been filed, the power of the Commissioner to invoke his revisional jurisdiction under Section 263 can only extend to such matters which have not been considered and decided in the appeal. The words which have been used in Explanation (c) to Sub-section (1) of Section 263 are "considered and decided". In other words, it is not merely a consideration that disables, but the matter has to be considered and decided in the appeal. The submission of Counsel appearing on behalf of the Revenue that the CIT(A) has not decided the issue, while dealing with the question of enhancement, cannot be accepted. The submission which has been urged on behalf of the Revenue is that the CIT(A) was requested to exercise his power of enhancement in pursuance of the request made by the Additional Commissioner of Income Tax on 20th May 2005 and that the request which was made was to carry out an estimation of the initial investment for the first year of the block period. Now, the power of the CIT(A) is structured by the provisions of Section 251. Section 251 inter alia provides that in disposing of an appeal the Commissioner of Income Tax (Appeals) shall have the power in an appeal against an order of assessment to confirm, reduce, enhance or annul the assessment. Consequently, when a request for enhancement was made to the Commissioner of Income Tax (Appeals), he had the jurisdiction, in terms of Section 251, to confirm, reduce, enhance or annul the assessment. A reading of the order passed by the CIT(A), particularly paragraph 16.5 of the order, would lead to the conclusion that the Commissioner of Income Tax (Appeals) had considered and decided the issue. Once the issue was considered and decided by the Commissioner of Income Tax (Appeals), the remedy of the Revenue cannot lie in the invocation of the jurisdiction under Section 263. The Revenue has already invoked its remedy in the form of a substantive appeal before the Tribunal which will be decided in accordance with law. The observations in this order are confined to determining whether the invocation of jurisdiction under Section 263 was valid. These observations will not :-31-: ITA. No: 314/Chny/2023 affect the determination of the issues which are raised in the appeal to the Tribunal.” 16. The Hon’ble High Court of Bombay in the case of CIT vs Slum Rehabilitation Authority, Income Tax Appeal No. 1359 of 2016 by considering identical issue in light of clause (c) of Explanation (1) to section 263 of the Act, held that clause (c) of Explanation (1) may be worded in a manner as suggesting the extent of the powers of the Commissioner for taking an order in revision, its effect is of circumscribing such powers in cases where the order passed by the Assessing Officer has been subject matter of any appeal and such subject matter has been considered and decided in such appeal. This provision thus statutorily recognizes the principle of merger and avoids any conflict of opinion between two quasi judicial authorities of the same rank. The sum and substance of ratio laid down by various courts including Hon’ble High Court of Madras in the case of CIT vs Farida Prime Tannery (Supra), was that the powers of the PCIT u/s. 263 of the Act are limited to those issues which has not been considered and decided in the appeal by the first appellate authority. Once, the issue has been considered and decided by first appellate authority, and then there is no scope for the PCIT to assume his jurisdiction u/s. 263 of the Act on said issue. 17. It is pertinent to note other important aspect in this case is, the revenue has challenged the findings of the CIT(A) in an appeal before the Tribunal and raised various issues including the powers of the CIT(A) in exercising suo-moto enhancement where the issue was not subject matter of appeal before the CIT(A). We find that the issue in which the PCIT seeks to revise the :-32-: ITA. No: 314/Chny/2023 assessment order is the very same issue in which the revenue is on appeal before the ITAT. Before perusal of the current appeal filed before the ITAT, it can be seen that the revenue has agreed that the order of the CIT(A) is on the very same issue and has preferred an appeal on the very same issue. Therefore, in our considered view, when revenue has challenged the order of the CIT(A) on the very same issue before the ITAT, then the PCIT is precluded from invoking his revisionary powers u/s. 263(1) of the Act, because Explanation (1)(c) which is based on the principle of Doctrine of Merger, precludes revision powers of the PCIT on very same issue, because there can be no more than one order governing the same subject matter at a given point of time. Therefore, we are of the considered view that unless the ITAT decides the issue raised by the revenue in their appeal on the issue of the CIT(A) in considering and deciding the issue of taxability of alleged cash receipt, there is no scope for the PCIT to assume his jurisdiction on the very same issue because if you go by the logic of the PCIT, then it very much possible for the Assessing Officer who is below the rank of CIT(A) can verify and examine the conclusion drawn by the CIT(A) on the issue which is in our considered view is not in right interest. 18. The sole basis for the PCIT to invoke his jurisdiction u/s. 263(1) of the Act, ignoring Explanation (1)(c) provided therein, is the suomoto enhancement proposal issued by the CIT(A) and later dropped on the basis of submissions of the assessee is illegal, void ab initio, because the issue is neither arising from the return of income filed by the assessee for the relevant assessment year nor subject matter of assessment proceedings before the :-33-: ITA. No: 314/Chny/2023 Assessing Officer. The PCIT, further noted that neither the Assessing Officer has considered said issue nor the assessee has challenged the issue before the ld. CIT(A). Unless the issue is before the CIT(A), the first appellate authority cannot take up the issue in suomoto enhancement proposal and decide. Therefore, the PCIT was of the opinion that it may not be said that the issue considered and decided by the CIT(A) is a subject matter of appeal within the meaning of Clause (c) of Explanation (1) of section 263 of the Act. In the process, the PCIT had also considered the decision of Hon’ble Supreme Court in the case of CIT vs Rai Bahadhur Motilal Chamaria reported in [1967] 66 ITR 443, on the powers of AAC and also the decision in the case of CIT vs Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC), wherein it was held that in an appeal filed by the assessee the Appellate Assistant Commissioner has no power to enhance the assessment by discovering new sources of income not mentioned in the return of the assessee or considered by the Income-tax Officer in the order appealed against. 19. We have given our thoughtful consideration to the reasons given by the PCIT, in light of provisions of section 251(1)(a) and Explanation provided therein, and we find that as per Explanation to section 251 of the Act, in disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant. From the plain reading of provisions of section 251(1) and Explanation provided therein, it is abundantly clear that in any appellant :-34-: ITA. No: 314/Chny/2023 proceeding pending before the first appellate authority, the CIT(A) can very well take up any other issues which come to his knowledge during appellant proceedings either on the basis of assessment order passed by the Assessing Officer or records and materials available with him. Therefore, the argument of the revenue in light of the decisions of Hon’ble Supreme Court is devoid of merits. In the present case, the CIT(A) issued enhancement proposal on the basis of appellate proceedings pending before him in the case of V.K. Sasikala, where the Assessing Officer has made additions towards alleged cash payments to assessee u/s. 69A of the Act and relevant statements recorded from employees of V.K. Sasikala and linked those statements to the appellate proceedings of the assessee, where it was noticed that during the course of search, a statement from Shri. Thirupathi, an employee of assessee was recorded, wherein the issue has been examined and verified by the Department in light of incriminating material found during the course of search. The CIT(A), on the basis of statement of employees and incriminating material available in the appellant folder issued enhancement proposal and called upon the assessee to explain as to why sum of Rs. 237 crores cannot be assessed as per the provisions of section 56(2)(vii((a) of the Act. We further noted that the CIT(A), after considering relevant submissions of the assessee and also taken note of various facts, for the reasons stated in their appellate order, observed that there is no clinching evidences to establish that the assessee has received a sum of Rs. 237 crores cash in specified bank notes from V.K. Sasikala and the same can be assessed u/s. 56(2)(vii)(a) of the Act. From the above, it is very clear that there is enough material evidence with :-35-: ITA. No: 314/Chny/2023 the CIT(A) during appellant proceedings and on the basis of said evidence, the CIT(A) has taken suomoto enhancement proposal to consider and decide the issue, which is in our considered view is in accordance with the Explanation to section 251(1) of the Act and thus, the PCIT justification for invoking his jurisdictional powers u/s. 263 of the Act and to pass orders u/s. 263, dehors the limitation under Clause (c) to Explanation (1) of section 263 of the Act is incorrect. 20. We further noted that it is a very well established principle of law by the decisions of various courts, including the Hon’ble Apex Court in the case of CIT vs Kanpur Coal Syndicate, reported in 53 ITR 225, where the Hon’ble Apex Court has observed that u/s. 251(1)(a) of the Act, the powers of AAC is coterminous with the powers of Assessing Officer and that he can do what the ITO can do and also direct him to do what he has failed to do. The Apex Court further observed that in absence of any statutory provisions, the appellate authority is vested with all plenary powers, which the subordinate authority may have in the matter. The Hon’ble Apex Court in the case of Jute Corporation of India vs CIT reported in 187 ITR 688, while examining the powers of AAC u/s. 251(1)(a) of the Act has considered the decision of ITO vs Shapoorji Pallonji Mistry reported in 44 ITR 891 (SC), and held that the powers of first appellate authority is conterminous with the powers of Assessing Officer and appellate authority can consider the issue which has not been considered by the Assessing Officer during assessment proceedings. In our considered view, the PCIT justifying and assuming jurisdiction u/s. 263 of the Act by determining the powers of CIT(A) on an :-36-: ITA. No: 314/Chny/2023 enhancement issue which is subject matter of appeal before the ITAT, on an appeal preferred by the revenue, is an act which is ultra virus in nature and requires to be quashed at its very threshold, because the principle of jurisdiction very clearly suggests that there cannot be more than one order on very same issue at any given point of time. In this case, if you go by logic of PCIT in justifying and assuming his jurisdiction u/s. 263 of the Act, he had questioned powers of the CIT(A) given u/s. 251(1) of the Act and Explanation provided therein and observed that the CIT(A) travelled beyond his powers given in the statue ignoring the fact that the CIT(A) is very much empowered to take up enhancement proposal suomoto during appellate proceedings in disposing of an appeal. In our considered view, the enhancement proposal issued by the CIT(A) and later dropped after considering relevant facts and submissions of the assessee is in accordance with provisions of section 251(1) and Explanation provided therein and thus, we are of the considered view that observation of the PCIT that the CIT(A) is travelled beyond his powers is devoid of merits. 21. Coming back to the issue on hand. The sole basis for the PCIT to assume revisionary jurisdiction u/s. 263 of the Act, is search conducted in the case of V.K. Sasikala and group companies on 09.11.2017 and search conducted in the case of assessee on 05.07.2018. During the course of search, in the case of V.K. Sasikala on 09.11.2017, an Excel sheet titled ‘party payments’ and sub-sheet by name ‘Shiva Bricks’ was found and seized, which contains some entries. On the basis of said documents, a statement was recorded from V S Sivakumar, where :-37-: ITA. No: 314/Chny/2023 he admitted that he is facilitating moment of cash of Rs. 237 crores to T.S. Kumarasamy. Further, in search proceedings in the case of assessee on 05.07.2018, a statement u/s 132(4) was recorded from Shri. Thriupathi and also from Shri Valeeswaran on the basis of cash book maintained by him and both admitted to have facilitated moment of cash from V.K. Sasikala to assessee during demonetization period. Further, said statements and so called incriminating material found during the course of search were part of assessment proceedings. In fact, the internal correspondence dated 09.08.2021 submitted by the Assessing Officer confirms that all seized material was verified and action was taken wherever warranted. From the above, it is very clear that the alleged cash payment issue was very much in the knowledge of the Assessing Officer during the course of assessment proceedings. In fact, the PCIT in their order at para 6.7.1 admitted that the Assessing Officer is aware of the retraction statement given by V.S. Shivakumar. In fact, V.S. Shivakumar and other parties have retracted the statement on the ground that the said statement was obtained under coerced and undue influence. Therefore, relying upon very same statement to draw adverse inference against the assesse, that to without any evidence to suggest that cash has been received by the assessee in specified bank notes during demonetization period and same is without any consideration which can be taxed u/s. 56(2)(vii((a) of the Act is highly improper and incorrect. Further, the CIT(A) in their order very categorically admitted that the revenue fails to bring on record any evidence to establish that the appellant has received a sum of Rs. 237 crores cash from V.K. Sasikala during demonetization period. We further noted that :-38-: ITA. No: 314/Chny/2023 neither V.K. Sasikala admitted to have paid cash to assessee nor the appellant had admitted to have received cash from V.K. Sasikala. The so called incriminating material relied upon by the PCIT also does not show any light on cash admitted to have paid by V.K. Sasikala and received by the assessee. From the above, it is very clear that there is no evidence with the Department to allege that the assessee has received a sum of Rs. 237 crores cash from V.K. Sasikala without any consideration which can be taxable u/s. 56(2)(vii)(a) of the Act. Therefore, on this issue also assumption of jurisdiction by the PCIT u/s. 263 of the Act fails. 22. In this view of the matter and considering facts and circumstances of this case, we are of the considered view that the PCIT is completely erred in assuming jurisdiction u/s. 263(1) of the Act on revised the assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. 153A of the Act dated 09.08.2021, and thus, we quash revision order passed by the PCIT u/s. 263 of the Act. 23. In the result, appeal filed by the assessee is allowed. Order pronounced in the court on 07 th July, 2023 at Chennai. Sd/- (वी दुगाᭅ राव) (V. DURGA RAO) ᭠याियकसद᭭य/Judicial Member Sd/- (मंजुनाथ. जी) (MANJUNATHA. G) लेखासद᭭य/Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated: 07 th July, 2023 JP Vani आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ/CIT 4. िवभागीय ᮧितिनिध/DR 5. गाडᭅ फाईल/GF