Cilarchem Indutries, Ring Road, Surat V. PCIT-1, Surat

ITA 377/SRT/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0148 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-07-2024
• Assessment Year: misc
• Appeal Filed On: 03-04-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Assessee Lawyers: RASESH SHAH
• Keywords: Revision of order; Transfer pricing; Opportunity of being heard; Rule of consistency; Accommodation entries; Reason to believe; Set aside
• Section: 147; 148; 263; 143(3); 143(1); 143(2); 64; 92CA

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.377 & 378/SRT/2024 AYs: 2015-16 & 2016-17 (Physical Court Hearing) Cilarchem Industries 309, Shyam Chambers Opp.Sub Jail, Ring Road, Surat-395002 Vs. Principal Commissioner of Income Tax-1, Surat, Aayakar Bhavan, Majura Gate, Surat- 395001 èथायीलेखासं./जीआइआरसं./PAN/GIR No: AADFC 2848 P (अपीलाथŎ/Appellant) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Assessee by Shri Rasesh Shah, CA राजˢ की ओर से /Revenue by Shri Ravi Kant Gupta, CIT-DR अपील पंजीकरण/Appeal instituted on 04.04.2024 सुनवाई की तारीख/Date of Hearing 30.07.2024 उद्घोषणा की तारीख/Date of Pronouncement 13.08.2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: By way of both appeals, the assessee has challenged the correctness of the separate orders passed by Ld. Principal Commissioner of Income-tax, Surat-1 [in short, ‘PCIT’], under section 263 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 23.02.2024 for assessment years (AY) i.e., 2015-16 and 2016-17, which in turn arose out of separate assessment orders passed by National Faceless Assessment Centre, Delhi / Assessing Officer (in short, “AO”) under section 147 r.w.s. 144B of the Act on 16.02.2022 and 19.01.2022. Since the issues are common and the grounds of appeal raised by the appellant are similar and hence, the appeals were heard together and a consolidated order 2 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries is being passed for the sake of brevity and convenience. Appeal in ITA No.377/SRT/2024 for AY 2015-16 is treated as “lead” case. The assessee in its appeal has raised the following grounds of appeal:- “1. On facts and in circumstances of the case as well as law on the subject, the learned Pr.CIT has erred in passing the order us/ 263, although the assessment order passed u/s 147 r.w.s. 144B of the I.T. Act, 1961 was neither erroneous nor prejudicial to the interest of the revenue. 2. On the facts and circumstances of the case as well as law on the subject, the learned Pr.CIT has erred in giving direction to Assessing Officer in para N.6.1.2 of the revision order to make the addition of Rs.93,11,587/ by treating the same as unexplained. 3. On the facts and circumstances of the case as well as law on the subject, the learned Pr.CIT has erred in setting aside the order passed u/s. 147 r.w.s. 144B with a direction to the Assessing Officer as per para no.8 of the revision order to pass fresh assessment order after taking into consideration, the issues as maybe considered together with the issues discussed in order. Accordingly, PCIT has erred in set in aside the assessment order making it wide open instead of restricting the issues raised in show cause notice. 4. It is therefore prayed that above order passed by Pr.CIT u/s263 may please be quashed or set aside as your honours deems it proper. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 2. The facts of the case in brief are that assessee filed its return of income (ROI) for the AY 2015-16 on 29.09.2015 declaring total income of Rs.2,07,944/- . The return was processed u/s 143(1) on the same income. As per information received from Asstt. Director of Income-tax (Inv.) Unit-1(2), Ahmedabad, assessee had entered into various transactions with Sh. Chiragkumar B. Patel, 3 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries providing accommodation entries to various firms and persons, to the tune of Rs.93,11,587/-. These entities were paper concerns engaged in providing accommodation entries to various parties. The nature, purpose and source of such transactions remained unexplained. Hence, the AO obtained prior approval of the Addl. CIT, Range-1(1), Surat and initiated proceedings u/s 147 by issuing notice u/s 148 of the Act on 31.03.2021. In response, assessee filed ROI on 26.04.2021 declaring same income as was declared in its original ROI. The assessee-firm was engaged in trading of chemical for the last many years. The assessee was provided copy of reasons recorded for re-opening assessment. The assessee vide letter dated 22.10.2021 raised objection for re- opening the assessment for AY 2015-16. The AO has extracted the objection at page-2 of the assessment order. The assessee stated that assessee’s name is missing in the report of FIU-IND provided to the assessee. The assessee did not enter into any transactions with Shri Chiragkumar B Patel. After going through the details and documents submitted by the assessee and after verification of the balance-sheet, profit and loss account and bank statement, the submission of the assessee was found genuine and acceptable by the AO. He stated that Shri Chiragkumar B Patel, proprietor of M/s Mahavir Sales Corporation was not having any business with the assessee. However, assessee had carried out business activities with M/s Maruti Enterprise whose proprietor is Shri Saileshbhai Parshottambhai Patel. Considering these facts, AO completed the 4 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries assessment u/s 147 r.w.s. 144B of the Act on 16.02.2022 by accepting the returned income. 3. Subsequently, the PCIT, Surat-1, Surat examined the records and found that assessee is beneficiary of accommodation entry of Rs.93,11,587/- from Shri Saileshbhai Parshottambhai Patel, proprietor of Maruti Enterprises. Since assessee failed to prove genuineness of the above transactions by not submitting any documentary evidence, the above amount of Rs.93,11,587/- was required to be treated as unexplained income of assessee. However, the AO has not considered this point and passed the assessment order accepting the returned income of assessee. Thereafter, the Ld.PCIT issued show-cause notice u/s 263 of the Act which is at pages 4 and 5 of his order. In the said show-cause notice, the Ld.PCIT has observed that assessee is beneficiary of accommodation entry to the tune of Rs.93,11,587/- from Shir Saileshbhai P Patel, proprietor of Maruti Enterprises. Since assessee failed to prove genuineness transaction by submitting any documentary evidence, the amount of Rs.99,11,587/- was required to be treated a unexplained and it should have been added to the total income of the year under consideration. However, AO has not made the addition and accepted the returned income of Rs.2,07,944/-. The reply of the assessee to the show-cause notice is at para-4.1 of the order u/s 263 of the Act. It was submitted by assessee that the AO initiated re- assessment proceedings u/s 147 of the Act based on information from the Investigation Wing that assessee had entered into various transactions with 5 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries Shri Chiragkumar B. Patel to the tune of Rs.93,11,587/-. The assessee replied that it had not done any business with Shir Chiragkumar B. Patel but it has purchased goods of Rs.36,38,356/- from M/s Maruti Enterprise (proprietor Shri Shailashbhai P Patel). The assessee had also mentioned that it had purchased goods worth Rs.36,38,356/- from Maruti Enterprise as against the alleged amount of Rs.93,11,587/- mentioned in the show-cause notice. Thus, assessee had submitted all the details and explanations and AO passed a speaking order which is not erroneous or prejudicial to the interest of Revenue. The assessee had also relied on the decisions in cases of CIT vs. Vikash Polymers [2010] 194 Taxman.57 (Delh), Malabar Industrial Co. Ltd. vs. CIT [2000] 243 ITR 83 (SC), CIT vs. Design & Automation Engineers (Bombay) Pvt. Ltd. 323 ITR 632 (Bom) and CIT vs. Sohana Woollen Mills 296 ITR 238 (P&H). The Ld.PCIT was not satisfied with the reply of assessee and stated that assesse-company had not submitted the supporting documents/evidences during assessment proceedings. The AO has passed the assessment order without proper verification/inquiry, application of mind and law on the issue mentioned above. He failed to make the addition as per law which should have been made during re-assessment proceedings. Thereafter, Ld.PCIT has extracted Section 263 of the Act and referred to the decision of Hon’ble Supreme Court in case of Malabar Industries (supra) where it was held that twin conditions viz., (i) the order of the AO must be erroneous and (ii) it should be prejudicial to the interest of revenue should be satisfied cumulatively to revise the order 6 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries of AO u/s 263 of the Act. The Hon’ble Supreme Court held that the order can be said to be erroneous if AO passed the order on incorrect assumption of facts or incorrect application of law or AO’s order is in violation of principles of natural justice or order is passed without application of mind or the AO has not investigated the issue before him. In the present case, assessee was beneficiary of accommodation entry of Rs.93,11,587/- from Shri Saileshbhai P Patel, proprietor of Maruti Enterprises; but AO accepted the explanation though assessee failed to prove genuineness of above transactions. Regarding the second limb, the Ld.PCIT held that revenue has lost lawful tax of Rs.28,77,281/- on income of Rs.93,11,587/-. The Ld.PCIT also relied on the decision of Hon’ble Supreme Court in case of CIT vs. Paville Projects Pvt. Ltd. 149 taxmann.com 115 (SC). He has also relied on the decisions in the following cases (i) CIT vs. Nagesh Knirtwears Pvt. Ltd. and Others (2012) 345 ITR 135 (Del) (ii) ITO vs. D. G. Housing Projects Ltd. in ITA No.179/2011 dated 01.03.2012 and (iii) Gee Vee Enterprises vs. ACIT (1975) 99 ITR 375 (Del). In view of the above facts and the decisions, he held that order of the AO u/s 147 r.w.s. 144B of the Act is erroneous insofar as it is prejudicial to the interests of revenue. Accordingly, he set aside the order with a direction to AO to pass fresh assessment order after taking into consideration the issues discussed in his order. Aggrieved by the order of Ld.PCIT, the assessee has filed present appeal before the Tribunal. 7 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries 4. The Ld. AR of the assessee strongly objected the order of Ld.PCIT and submitted paper book containing pages 1 to 60. He has also filed another paper book containing various case laws. During the argument, he has also relied on two more decisions of the Hon’ble Supreme Court and ITAT Delhi. He submitted that assessment order is neither erroneous nor prejudicial to the interests of revenue because the AO has taken a possible view with respect to the alleged transaction of Rs.93,11,587/- which has escaped assessment. The Ld. AR of the assessee submitted that the AO has made inquiries during assessment proceedings by issue of notice u/s 143(2) dated 05.07.2021. The assessee has replied to the AO vide letter dated 13.07.2021, which is at pages 40 to 42 of the paper book. Subsequently, assessee filed letters to the AO on 03.09.2021 and 22.10.2021. The assessee has stated that it had not carried out any transaction with Shri Chiragkumar B Patel, proprietor M/s Mahavir Sales Corporation. The name of the assessee is missing in the table of FIU-IND report (page-5). It was also submitted that assessee had purchased good worth Rs.36,38,356/- from M/s Maruti Enterprises, proprietor of Shri Saileshbhai P Patel. There is no information as to how that Shri Shri Saileshbhai P Patel is connected with Shri Chiragkumar B Patel. Thus, it is not a case of 'no inquiry' or 'lack of inquiry.' The Ld.AR of the assessee submitted that Ld. PCIT as well as Id.CIT-DR, have emphasized that it is a case of assessment without proper inquiries/verification. But, the Ld.AR stated that AO has, in fact, applied his mind to the issue of re-opening and the action u/s 263 is not valid. He further 8 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries argued that when assessment has been reopened u/s 147 r.w.s 148 of the Act, it is not open for the AO to go beyond the issues raised in the reasons recorded for reopening the assessment. For this view, reliance was placed on cases of CIT vs. Jet Airways (I) Ltd. 239 CTR 183 (Bom), CIT vs. Mohmed Juned Dadani 84 CCH64 (Guj) and Smt. Daya Rani vs. PCIT, ITA No.402/Del/2021 (Del. Tribunal). Ld.AR of the assessee further submitted that Ld. PCIT has not made any inquiry during the proceedings u/s 263. He submitted that the Ld PCIT, before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the AO is erroneous. He submitted that even the amount stated by Ld.PCIT for transaction of assessee with Shri Sailashbhai P Patel was Rs.93,11,587/- which is factually incorrect because the assessee had transactions of Rs.36,38,356/- and Rs.9,84,089/- only for AY 2015-16 and 2016-17 respectively with M/s Maruti Enterprise, proprietor Shri Salishbhai P Patel. Hence, the Ld.PIT has not applied his mind while issuing notice u/s 263 of the Act. The AO considered the detailed reply of assessee vide letter dated 22.10.2021 and he has given detailed findings at page-3 of the assessment order. If no addition is sustainable on the basis of reasons recorded, other addition cannot be made as held by Hon’ble Bombay High Court in case of Jet Airways (supra) and Hon’ble jurisdictional High Court in case of CIT vs. Mohmed Juned Dadani 84 CCH 64 (Guj). Even otherwise, the order passed u/s 147 r.w.s. 144B of the Act is not valid because there was no nexus between the information coming to the AO and formation of belief that 9 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries income has escaped assessment. The nature and amount of transaction of assessee with Shri Shalishbhai P Patel is not indicated even in the report of FIU- IND and therefore, in the reasons recorded. For this, Ld.AR of the assessee relied on case laws: (i) Ganga Saran & Sons vs. ITO 130 ITR 1 (SC) (ii) ITO vs. Lakhmani Mewal Das 103 ITR 437 (SC) (iii) Paresh Babubhai Bhalani vs. ITO 156 taxmann.com 517 (Guj) (iv) Surani Steel Tubes Ltd. vs. ITO [2022] 136 taxmann.com 139 (Guj) and (v) Bharatkumar Nihalchand Shah vs. ACIT 128 taxmann.com 228 (Guj). He further submitted that when proceedings u/s 147 is not valid, action u/s 263 cannot be sustained for revising the invalid assessment, as held in case of Jignesh Lilachand Shah vs. PCIT ITA No.149/Ahd/2021 (Ahd). In view of above, Ld.AR prayed to quash the order passed by Ld.PCIT u/s 263 of the Act. 5. On the other hand, Ld.CIT-DR has strongly relied on the order passed by Ld.PCIT. He has stated that Ld.PCIT has called for the records and duly examined it including the assessment order passed/s 147 r.w.s. 144B of the Act. He has also referred to provisions of section 263 of the Act and stated that the present case is covered by the scope and ambit of Section 263 of the Act because the AO has not made any inquiry which should have been made to come to a proper conclusion. He stated that AO has not made necessary inquiry in respect of the transaction of assessee with Shri Shaileshbhai P Patel though it is mentioned in the FIU-IND report. He also relied upon the decisions which were referred to in the order passed u/s 263 of the Act by Ld.PCIT. 10 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries 6. We have heard rival submissions and perused materials on record. We have also deliberated upon the decisions relied upon by both parties. We have also gone through the provisions of Section 263 of the Act. We find that impugned order was passed by the AO u/s 147 r.w.s. 144B of the Act. The case was reopened based on the information received from Asstt. Director of Income-tax (Inv.) Unit-1(2), Ahmedabad. The reasons for reopening the assessment was that assessee was a beneficiary of accommodation entry of Rs.93,11,587/- from Shri Chiragkumar B Patel. Hence, notice u/s148 of the Act was issued after obtaining approval from Ld.Addl.CIT, Range-1(1), Surat. The reasons are mentioned at pages 37 and 39 of the paper book and same may be reproduced herein below for ready reference and clarity: “2. Brief details of information collected / received: There is information in respect of this assesse from Asstt. Director of Income Tax (INV), unit-1(2), Ahmedabad that the assessee is only paper entity and not doing any real or genuine business. They are providing accommodation entries to various firms/persons as per final report of FIU- IND in the case of Shri Chiragkumar B. Patel and others-STR No.10265868 from in the report it is clearly written that these entities are paper concern engaged in providing accommodation entries to various unrelated concerns. No under-lying business activities are carried out by these concerns and there are entities in the bank of respective concerns relating to various day to day expenses of the business. During the assessment year under review it has been unearthed that the impugned assessee has entered into various transactions with Shri Chiragkumr B. Patel to the tune of Rs.93,11,587/-. The nature, purpose and source of such transactions remained unexplained on part of the assessee. 3 & 4. Analysis of information collected / received & Enquiries as sequel to information collected / received: Information has been analyzed and has been consciously considered. The database of this office has also been peruse. From the information on hand, it has surfaced that keeping in view the annual income of Rs.2,07,944/- only shown by the impugned assessee raises serious questions about his creditworthiness and genuineness of the transaction involving huge amounts of Rs.93,11,587/-. Further it has also been noticed that the income shown by the assessee in his return of income for the year under consideration is very meagre and is not commensurate as compared to the hue amount involved in transactions made by the assessee during the year under consideration. 5 & 6. Findings of the AO & Basis of forming reason to believe and details of escapement of income: In view of the above that this office is of clear view that the 11 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries assessee has made the huge transactions through his undisclosed sources as the scale of amount involved in the transactions made by the assessee are in disproportion to his income declared by him in his ROI and therefore this is clear case of concealment of the income by the assessee at least to the extent of Rs.93,11,587/- in absence of creditworthiness and genuineness of the transactions transacted through its account maintained by the assessee. I have therefore reasons to believe that income of Rs.93,11,587/- has escaped assessment in this case with active intentional concealment by the assessee of his income and therefore the case of the assessee for AY 2016-17 needs to be re-opened within the meaning of section u/s 147of the I.T. Act 1961 by reason of assesseee’s planned purposeful omission to disclose fully and truly all material financial facts necessitated assessment of the same. It is, therefore, requested that necessary approval may kindly be accorded for issuing notice u/s 148 of the I.T. Act in this case.” 6.1 The assessee filed ITR in response to notice u/s148 of the Act declaring total income of Rs.1,82,390/-. Subsequently, reasons for re-opening was given to assessee and notices u/s 143(2) of the Act was issued to assessee. In response to the above notice and reasons for re-opening, assessee filed replies vide letters dated 03.9.2021 and 22.10.2021. He denied having transaction with Shri Chiragkumar B Patel. He, however, stated that he had transaction of Rs.46,22,434/-(AY 2015-16: Rs.36,38,356/- and AY 2016-17: Rs.9,84,079/-) with Maruti Enterprises (proprietor of Saileshbhai P Patel). The reply of the assessee was duly considered by the AO in his assessment order passed u/s 147 r.w.s 144B of the Act dated 16.02.2022. The same is mentioned in pages-3 and 4 of the assessment order. For appreciation, the same is reproduced below: “It is respectfully, submitted that the re-opening proceedings initiated u/s 147 r.w.s 148 of the Act are bad in law and void ab initio and liable to be quashed in view of the following reasons: (i) It is humbly submitted that the assessee had filed a true ad correct retry of income and had shown all the income from all the sources which were earned by him during the year. (ii) It is not true that the assessee has made the huge transactions through his undisclosed sources to the tune of Rs.93,11,587/- and it is also not true that the assessee has entered into such with Shri Chiragkumar B. Patel. The assessee is engaged in the business of chemical trading and shown all the 12 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries genuine transactions of sales and purchase in its books of accounts. The assesse has not carried out any business activities with Shri Chiragkumar B. Patel and has not obtained any accommodation entries from the said person. (iii) In the copy of FIU--IND report, provided to the assessee it is gathered that Shri Chiragkuamr B. Patel was the proprietor of M/s Mahavir Sales Corporation and it is evident from the name of the parties with whom the said Mahavir Sales Corporation had done business as mentioned in the report the name of the assessee proprietary concern M/s Cilarchem Industries is missing. Hence, it is clear that the assessee had not carried out any business activities with the so called Shri Chiragkumar B. Patel. On going through the details and documents provided by the assessee and after verification of balance sheet. Profit & loss account and bank details provided by the assessee the submission of the assessee found genuine and hence acceptable on the following ground: On going through the FIU-IND report it is gathered that Sh. Chirag B.Patel was the proprietor of M/s Mahavir Sales Corporation and it is evident from the name of the parties with whom the said Mahavir Sales Corporation had done business as mentioned in the report the name of the assessee proprietary concern M/s Cilarchem Industries is missing. However, the assessee firm had carried out its business activities with M/s Maruti Enterprises whose proprietor is Sh. Shaileshbhai Patel. Considering all the facts & circumstances and the details & documents filed by the assessee, assessment is completed u/s 143(3) /147 of IT act on returned income i.e., Rs.2,07,944/- as shown by the assessee in its Income Tax Return for the year under consideration.” 6.2 It is clear from the facts narrated above and the assessment order passed by the AO that the case of the assessee was reopened because of transaction with Shri Chiragkumar B Patel (Proprietor of Mahariv Sales Corporation), who was an entity provider and assessee was beneficiary of Rs.93,11,587/- from transaction with the above party. Hence, the question for decision against the above factual background before us is whether the AO passed an erroneous and prejudicial order in respect of the alleged transaction of Rs.93,11,587/- with Shri Chiragkumar B Patel within the meaning of Section 263 of the Act. We find that the AO had issued notice u/s 143(2) and had supplied reasons for re-opening to the assessee, which was duly replied by the 13 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries assessee vide replies dated 03.09.2021 and 22.10.2021. The replies are at pages 40-42, 46-48 and 49-56 of the paper book. The assessee had given explanation regarding transaction with Shri Chirakumar B Patel and Shri Sailashbhai P Patel. Being satisfied with the reply of the assessee, the AO passed order u/s 147 r.w.s 144B of the Act accepting the returned income. Thus, it can be said that the AO has examined the issue and taken a considered view on the subject issue. The AO cannot be said to have not applied his mind because in the assessment order itself he has observed that he had considered the details and documents and reply of assessee. However, the Ld.PCIT has invoked jurisdiction u/s 263 by issuing notice u/s 263 of the Act and passed an order directing the AO to pass fresh assessment order after giving opportunities of being heard to assessee. 6.3 Let us now discuss the scope and ambit of Section 263 of the Act. A bare reading of the section reveals that the Ld.PCIT can call for and examine the record of any proceedings under the Act and if he considers that any order passed by the AO is erroneous in so far as it is prejudicial to the interests of the revenue, he may after giving opportunity of hearing and after making or causing to be made such inquiry as he deems necessary, pass such order as the circumstances of the case justify. For ready reference, section 263 of the Act reproduced below: “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 14 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, [including,- (i) An order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) An order modifying the order under section 92CA; or (iii) An order cancelling the order under section 92CA and directing a fresh order under the said section]. 6.4 The Hon’ble Apex Court in case of CIT vs. Greenworld Corporation, 314 ITR 81 (SC) held that the jurisdiction u/s 263 can be exercised only when both the following conditions are satisfied i.e., (i) the order of the Assessing Officer should be erroneous and (ii) it should be prejudicial to the interests of revenue. These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible. The Hon’ble Apex Court in case of Max India Ltd. vs. CIT 295 ITR 282 (SC) held that the Commissioner has to be satisfied of the twin conditions as stated above. If one of them is absent, recourse cannot be had to Section 263 of the Act. We find that the impugned issue of transaction with Shri Charagkumar B Patel and also Shri Sailashbhai P Patel was duly considered by the AO at the time of re-assessment proceedings. He has certainly examined the issue of transactions with Shri Chiragkumar B Patel by calling for the details from the assessee and after examination he accepted the explanation given by the assessee. As stated earlier, the case was reopened on issue of transactions with Shri Chiragkumar B Patel for 93,11,587/- Therefore, the issue which requires deliberation is whether the AO duly considered the explanation of the 15 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries assessee regarding the transactions of assessee with Shri Chiragkumar B Patel. From facts narrated above, it is clear that on being satisfied with the replies of the assessee, AO has not made any addition on the impugned issue of transaction of Rs.93,11,587/- with Shri Chiragkumr B Pate because assessee had no transaction with him. It may be stated that assessee had also given reply regarding transaction with Shri Sailashbhai P Patel. Thus, the AO has duly considered the issue, applied his mind and taken a considered view. 6.5 The submission of the Revenue is that while passing the assessment order, the AO did not consider the aspect especially as to whether the assessee has explained the transaction with Shri Sailashbhai P Patel. In this regard, it may be stated that the case of assessee was reopened to examine the transaction with Shri Chiragkumar B Patel. The jurisdiction to verify and to bring to tax was in respect of transaction with Shri Chiragkumar B Patel which is evident from the reasons for reopening. The AO could not have examined the transaction with Shri Sailashbhai P Patel if no adverse view is taken on Shri Chiragkumar B Patel. As per the provisions of u/s 147 of the Act, the AO is required to assess or re-assess the income in respect of issue which escaped assessment and such issue which comes to his notice subsequently in course of the proceedings u/s 147 of the Act. The word used is “and” and not “or” Therefore, to expand the scope of inquiry and to make addition of another issue, it is necessary to make addition in respect of original issue, which is based on the reasons for reopening. The Hon’ble Bombay High Court in the 16 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries case of CIT vs. Jet Airways (I) Ltd. 331 ITR 236 (Bom) held that if no addition has been made on the issue for which the case was reopened, the AO cannot make any addition on some other issue. If he intends to do so, a fresh notice u/s 148 of the Act would be necessary. Since the AO did not make any addition in respect of transaction with Shri Chirakumar B Patel, he could not have made addition in respect of transaction with Shri Sailashbhai P Patel as suggested by the Ld.PCIT. When he is precluded from making the addition, the question of making inquiry does not arise. 6.6 In the instant case, the Assessing Officer had called for the explanation on item in question (reopening issue) from the assessee and assessee had furnished his explanation, which clearly shows that the AO had undertaken the exercise of examining as to whether the transactions with Shri Chiragkumar B Patel are duly explained. It is clear that the AO was satisfied with the assessee’s explanation and therefore he accepted same. The grievance of the Ld.PCIT is that the AO should have made further inquiry in respect of Shri Saileshbhai P Patel rather than accepting the assessee’s explanation. Therefore, it could not be said that it was the case of “lack of inquiry”. There is a distinction between “lack of inquiry” and “inadequate inquiry”. If there was any inquiry, even inadequate, that could not, by itself, give occasion to the Ld.PCIT to pass order u/s 263 of the Act merely because he has different opinion in the matter. It is only in cases of lack of inquiry that such a course of action could be opened. In the present case, the Assessing Officer has duly 17 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries examined the facts and formed an opinion that no addition is necessary in view of the reply of the assessee on the subject-issue. Therefore, the decision of Ld.PCIT that the order passed by AO was erroneous and prejudicial to the interest of revenue is not correct. Reliance for this view is based on the decision of Hon’ble Delhi High Court in case of CIT vs. Sunbean Auto Ltd. [20110] 189 Taxman 436 (Del). 6.7 The Ld.AR has relied on the decision of Delhi Tribunal in the case of Smt. Daya Rani vs. PCIT ITA No.402/Del/2021 dated 20.02.2024 where under similar facts and circumstances of the case, order of revision u/s 263 of the Act has been set aside. In above case, assessment was re-opened but no addition was made in respect of the issue on which the case was re-opened. In other words, returned income was accepted in the order u/s 147 r.w.s. 144B of the Act. The assessment was sought to be revised by the Ld.PCIT u/s 263 of the Act on a different issue on the ground that AO had not made inquiries on the same thereby making his order erroneous and prejudicial to the interest of the Revenue. The ITAT held that AO having not made any addition on issue of re- opening, he could not have made addition of some other issue. The Tribunal therefore, held that once re-assessment order per se framed by the AO is not sustainable in the eyes of law, any revision order passed thereon u/s 263 seeking to revise such unsustainable order deserves to be quashed. The Tribunal relied on the decision of Hon’ble Delhi High Court in case of CIT vs. Software Consultants in A No.914 of 2010 dated 17.01.2012. The facts of the 18 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries present case are similar to the case of Smt. Daya Rani (supra) and we find no reasons to deviate from the finding of ITAT Delhi. The order of the Ld.PCIT is not sustainable in view of the factual and legal positions stated hereinabove and the precedents cited supra. We accordingly set aside the order passed u/s 263 of the Act. This ground of assessee’s appeal is allowed. Coming to ITA No.378/SRT/2024 (AY.16-17) 7. As recorded above, the assessee in this appeal has raised similar grounds of appeal as raised in the appeal for AY 2015-16, which we have allowed. The facts as well as reason for re-opening for both years are similar. Thus, following the principle of consistency, assessee’s appeal is also allowed with similar observation as in assessee’s appeal ITA No.377/SRT/2024 for assessment year 2015-16. 8. In the result, appeal filed by the assessee is allowed. 9. In combined result, both appeals of the assessee are allowed. Registry is directed to place one copy of this order in all appeals folder / case file(s). Order is pronounced on13/08/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER स ू रत /Surat Ǒदनांक/ Date: 13/08/2024 Dkp Outsourcing Sr.PS 19 ITA No.377-378/SRT/2024 /AYs 15-16 & 16-17 Cilarchem Industries Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order Assistant Registrar/Sr. PS/PS ITAT, Surat