Appeal Details
Counselvise Citation
[2023] 102 COUNSELVISE.COM (IT) 0185 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 5 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-11-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
07-08-2023
Assessment Year
2017-2018
Appeal Filed On
11-05-2022
Judgement Text
आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “ए” , च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH ᮰ी आकाश दीप जैन, उपा᭟यᭃ एवं ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ ITA NO. 426/Chd/2022 िनधाᭅरण वषᭅ / Assessment Year : 2017-18 M/s Bedi Trading Private Limited Opp. A Hotel. Bhai Wala Chowk Ferozepur Road, Ludhiana बनाम The Pr. CIT-1 Ludhiana ᭭थायी लेखा सं./PAN NO: AACCB2224Q अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri Ashwani Kumar, C.A राज᭭व कᳱ ओर से/ Revenue by : Shri Vivek Nangia, CIT, DR सुनवाई कᳱ तारीख/Date of Hearing : 08/08/2023 उदघोषणा कᳱ तारीख/Date of Pronouncement : 06/11/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. PCIT, Ludhiana-1 passed u/s 263 dt. 30/03/2022 pertaining to Assessment Year 2017-18. 2. In its appeal, the assessee has raised the following grounds of appeal: “1. That order passed u/s 263 of the Income Tax Act, 1961 by the Learned Principal Commissioner of Income Tax-1. Ludhiana is against law and facts on the file in as much the Learned Pr. CIT was not justified to hold that the assessment order dated 29.12.2019 passed by the Learned Assessing Officer is erroneous in as well as prejudicial to the interest of the revenue. 2. That the Learned Pr CIT was not justified to hold that the order passed by the Learned Assessing Officer is erroneous in as much as prejudicial to the interest of the Revenue because the Learned Assessing Officer did not make detailed and deep enquiries on the issue of cash deposits before accepting the claim of the appellant. 3. That the Learned Pr. CIT, while passing the order u/s 263, failed to show as to how the assessment order passed by the Learned Assessing Officer was erroneous in as much as prejudicial to the interest of the Revenue despite the fact that the detailed enquiries were conducted by the Learned Assessing Officer. 2 3. Briefly the facts of the case are that the assessee company is engaged in the business of trading of electronics goods and electrical appliances. For the year under consideration, it had filed its return of income disclosing total income of Rs. 45,43,940/- which was processed under section 143(1). Subsequently the case of the assessee was selected for complete scrutiny to examine large cash deposits during the demonetization period and notice under section 143(2) was issued. Subsequently, the notice under section 142(1) alongwith questionnaire were issued from time to time and in response, the assessee filed its reply alongwith documentary evidence through the e-filing portal from time to time and thereafter, the AO issued a final show cause on 26/12/2019 and after taking into consideration the submissions filed by the assessee, the returned income was accepted. 4. Subsequently, the assessment records were called for and examined by the Ld. Pr. CIT and he noted that during the course of assessment proceedings, the AO had raised general queries relating to cash deposits during the demonetization period. 4.1 The Ld. Pr. CIT referred to the assessee reply dt. 06/12/2019 wherein the assessee has submitted comparative month wise details of cash withdrawals, comparative month wise cash sales etc. and held that no examination or inquiries have been noted to have been carried out by the AO to verify the genuineness of the sales or any details of the buyers etc. Thus the details filed by the assessee has been accepted as such by the AO without any inquiry. 4.2 The Ld. Pr. CIT referred to the data relating to cash sales in F.Y. 2015-16 and F.Y 2016-17 and stated that in F.Y. 2015-16, the cash sales in relation to total sales were 0.94% whereas in F.Y. 2016-17 the same has jumped to 13.52%. 4.3 The Ld. Pr. CIT further referring to the data submitted by the assessee noted that in the month of November 2016 when the demonetization was 3 announced the sales have been shown at staggering figure of Rs. 2,11,16,475/- without having substantial basis or verification which suggests that the figures reported by the assessee and accepted by the AO are apparently not real and do not reflect the true state of affairs of the assessee’s business. It was stated by the Ld. Pr. CIT that the cash sales have been shown to justify the unaccounted cash lying as on 08/11/2016 from the available stock so as to deposit the cash shown as cash sales. 4.4 Further referring to the comparative figures of cash sales from 08/11/2016 to 31/12/2016 as compared to proceedings and succeeding years, the ld PCIT noted that the same shows that the cash lying outside books of accounts was adjusted through cash sales. It was noted that the total cash sales during the demonetization period has been shown at Rs. 1,93,49,476/- while total cash sales of November 2016 has been shown at Rs. 2,11,16,475/-. Thus the figure of cash sales do not commensurate with the details furnished during the course of assessment proceedings at different point of time. 4.5 Further referring to the cash withdrawal from the bank account amounting to Rs. 3,50,000/- in the month of November 2016, the Ld. Pr. CIT stated that where the assessee was having substantial cash in hand during the demonetization period then the reason as to why the cash was withdrawn from the bank was not examined by the AO. 4.6 In light of the above, it was stated by the Ld. Pr. CIT that the source of cash deposits during the demonetization period was not explained by the assessee nor examined fully by the AO and therefore the total cash deposit of Rs. 5,11,80,500/- from 08/11/2016 to 31/12/2016 remained unexplained which was the reason for selection of case under scrutiny and therefore he was of the prima facie opinion that the errors / omissions and non inquiry into the relevant facts has rendered the impugned assessment not only erroneous but also 4 prejudicial to the interest of the Revenue in terms of Section 263 r.w.s explanation 2 thereto and the assessee was given an opportunity to show cause as to why the impugned order passed under section 143(3) be not enhanced / modified / set aside under section 263 of the Act vide show cause dt. 17/02/2022. 5. In response to the show cause, assessee vide its written submission dt. 02/03/2022 submitted as under: “The case of the assessee was assessed u/s 143(2) of the income tax act 1961 and the returned income of the assessee had been accepted. The assessment order dated 29.12.2019 clearly mentions about the genuineness of the cash deposit during demonetization period and speaks as under vide Para 4 reproduced as below During the course of assessment proceedings the assessee was specifically asked to furnish the source of cash deposits during the demonetization period. The reply to the specific information as called for has been furnished by the assessee along with documentary evidences which have been downloaded from system, verified. Considered and placed on record. After verification & examination of replies submitted by the assessee the income of the assessee was assessed at the returned. Hence it is clear from the assessment order that the cash deposit during the demonetization period had duly been examined in depth and detail and no finding of any unexplained cash nor there is any error/ omission/ defects/ deformities or any non-enquiry into the relevant facts. Further in reply to the above notice we wish to clarify that the Assessing officer had duly scrutinized the records and details vide replies dated 20.12.19, 23.12.19 and 28.12.19 in respect to the cash deposit. Final show cause notice was issued on dated 26.12.19 and the same had been replied on dated 28.12.19 along with details and documents. Copy of the replies had been held on records along with supporting documents. Some of the information /documents submitted on these dates had been reproduced below for your clarification: 1. Nature of Activity :- During the year under consideration the assessee was doing the Trading of electronic goods & electrical appliances and operating at B-XIX-262/1, Dr. Sham Singh Road, Ferozepur Road, Nr. Bhai wala Chowk, Ludhiana and Godown of the company situated at #9, Gurdev Nagar, Pakhowal Road, Near Hotel Imperial, Ludhiana. Further clarified that the assessee was dealer of Blue Chip companies like Sony India Pvt. Ltd., Blue Star, Hitachi Home & Life Solution (India) Limited, IFB Industries Ltd, Panasonic India Pvt. Ltd, LG Electronics India Pvt. Ltd & Samsung India Electronics Pvt. Ltd. Etc and the entire purchase had been made from these companies. Certificate of dealership had duly been produced during the course of assessment. 5 2. During the course of assessment the company had submitted the Audited balance sheet along with annexures, Auditors report and other books of accounts. 3. During the course of assessment the company had submitted the complete list of stock along with quantity and valuation. Monthly quantitative summary of sales and purchase along with the opening and closing stock had also been submitted. 4. Further both quarterly and annual Vat returns had duly been submitted to justify the sales turnover of the company. 5. The comparative chart of sales is reproduced as under: F Y 2016-17 F Y 2015-16 Sales 220471102 169489919 Gross profit 16144230 13499146 Gp Ratio 7.32% 7.96% Net Profit 5568923 4008453 NP Ratio 2.53% 2.37% Total Cash Sales/Received from debtors 127291352 84921513 % of cash sales to total sales 57.74 50.10 Total Cash Deposit in Bank 127887000 84537000 Month wise sales Nov, Dec 52735956 30730297 Cash Sales/Received from debtors (nov, dec) 44694365 16465477 Cash deposit - Demonetizations from 9.11. to 31.12. 50930500 12591000 Cash in hand 1.11. 9952948 4840763 Diwali Date 30-Oct 11-Nov It is evident from the table above the sales of the company had increased from Rs.16.94 Cr to Rs.22.04 Cr during the current year and also the profit had been increased from 40.08 Lakhs to 55.68 Lakhs From above chart it is clear that the company has routine practice of depositing the cash in bank. The percentage of cash sales plus receipt from debtors to total sales is almost the same i.e 50.10 % in Fy 2015-16 and 57.74% in FY 2016-17. The total cash deposit in bank during FY 2016-17 is amounting to Rs.127887000/- whereas the cash deposit during FY 2015-16 is Rs.8453700, the rise in the cash deposit commensurate with the increase in sale which is increased from 16.94Q to 22.04 Cr during the year under consideration. 6. Regarding increase in cash during demonetization period it is clarified that there was no abnormal increase in cash deposit. We have already justified in the 6 table above that the sales of the assesse had increased from 16.95Cr to 22.05 Cr during the year under consideration and accordingly the cash deposit had been increased which is at par with the increase in turnover. Regarding your observation for abnormal jump in F Y 2016-17 from Oct, 2016 onward. It is clarified that the sales of the company is always higher in 1 st qtr. And in 3 rd Qtr. Which is mainly due to the fact that the 1 st Qtr. Is harvesting season and start of summer season due to which sale if Air Condition & refrigerators increases and the 3 rd Qtr. is the festival season and the companies offers mega discount schemes during the season. The increase in sales in 3 rd Qtr. Is at par with the overall increase in the turnover as compare to the last year. 7. It is further clarified that the company had received payments amounting to Rs.20231317/- from 614 number of debtors. List of the same along with complete address had duly been uploaded on e-portal under Cash Transaction 2016 vide no. 3654747655. The fact had been verified from the e portal during the course of assessment also. It is requested to make the reasonable comparison on year to year basis of Cash collected from customers plus cash sales to reach to final conclusion as the company had only two components of sources of cash- one from cash sale and other cash received from customers/debtors. Keeping in view the nature of product mere comparison of cash sales with earlier year is not justified in the present case. Hence it is clear from the facts and figures/documents presented/filed after 6.12.2019 on various dates that the genuine ness of the cash deposit had been verified by the AO. The assessment order clearly mentions about the date of hearing in this regard. Further in regard to the cash withdrawals of Rs.350000/-from the banks despite of the substantial cash in hand it is clarified that the new currency had been withdrawn to meet out day to day expenses like salaries to employees and other expenses as the old currency had not remained legal tender. Hope Your Honour will find the position of assessee fully explained, and, thus, it is prayed that the notice in question may kindly be filed, as, it is clear that the source of cash deposit during demonetization period was fully explained by assesse and examined by AO during assessment proceedings in the fact and circumstances of the case.” 6. The submissions so filed were considered by the Ld. Pr. CIT but not found acceptable and the relevant findings of the Ld. Pr. CIT are contained in para 4 & 5 of the impugned order which read as under: 7 “4. I have considered the reply of the assessee in the light of facts of the case. It has been observed that the assessee had debtors amounting to Rs. 75.72 lacs as on 01.04.2016 and up to 08.11.2016 it has claimed to realized to Rs. 234.62 lacs from debtors. The correctness of this claim was required to be examined in detail and depth by calling for the details of credit sales and recovery from these buyers. This was not done by the AO. 4.1 The cash in hand with the assessee as on 01.11.2016 was Rs. 99.53 lacs which increase to Rs. 497.70 lacs on 09.11.2016. The cash generated during these 9 days was not deposited into bank on day to day basis has neither been examined nor explained. 4.2 Some very interesting features are noticed from the F.Y. data submitted by the assessee vide para 5 of its reply dated 03.03.2022. It is observed that the sales during F.Y. 2016-17 increased by 30 percent over F.Y. 2015-16. Against this, the increase during the months of Nov-Dec is 175 %. In value terms, against increase of Rs. 5 Crores during complete year, the increase during demonetization period is Rs. 2.82 Crores. Further, the cash deposited during demonetization period increased by 300%. This abnormal increase during demonetization period should have prompted the AO to go for deeper investigation and he should have asked for appropriate action or should have taken appropriate action. Under the aforesaid circumstances, the order of the A.O. is erroneous as the AO did not enquire/verify about the complete details and documentary evidences of availability of cash for aforesaid cash deposits and also is prejudicial to the interest of the revenue being unexplained cash deposits escaped for taxation. 5. Detailed and deep enquiries were required to be made on the issue discussed above before accepting claim of the assessee. In this regard, it is worthwhile to refer to provisions of Explanation 2 to Section 263(1) of the Income Tax Act, 1961 according to which an order passed by the A.O. shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue for various reasons including the fact that if in the opinion of Principal Commissioner or Commissioner the order is passed without making any enquiry or verification which should have been done and also includes the order which is passed allowing any relief without enquired into the claim.” 7. Against the said findings and direction of the Ld. Pr. CIT, the assessee is in appeal before us. 8. During the course of hearing, the Ld. AR submitted that the main allegation of the Ld PCIT for issue of notice u/s 263 was that during the period of demonetization, the assessee company made a total cash deposit of Rs. 5,11,80,500/- from 08.11.2016 to 31.12.2016 and the same was not enquired into 8 by the AO which has rendered the impugned assessment not only erroneous but also prejudicial to the interest of revenue. 8.1 In this regard, it was submitted that detailed reply dated 02.03.2022 was filed by the assessee company before the ld PCIT and in particular, the following points were made by the assessee which are as under: (a) The assessee company had filed the audited balance sheet along with annexures and auditors report before the Learned Assessing Officer. (b) The assessee company had submitted complete list of stock along with quantity and valuation before the Learned Assessing Officer. Also were filed monthly quantitative summary of sales and purchases along with details of opening and closing stock. (c) Quarterly and annual VAT returns to justify the total turnover of the assessee company were duly submitted. (d) Copy of VAT assessment order for the relevant year has been placed on record.. (e) The comparative chart of the sales has been filed. (f) Justification of cash deposit vis-a-vis the increase in sales was duly submitted which is also placed on record. (g) The assessee company had received payments amounting to Rs. 2.02 crores from 614 numbers of debtors. List of the same along with complete addresses which was uploaded on e-portal, was also submitted and which was duly verified by the Learned Assessing Officer. (h) The Learned Assessing Officer issued several show-cause notices to the assessee company during the course of assessment proceedings. Reference is drawn to the show-cause notice dated 13.11.2019, copy of which has been placed at pages 92 to 97 of the paper book. Special mention may be made to Point No. 8 at page 96. (i) Reply dated 06.12.2019 filed before the Learned Assessing Officer placed at page 98 of the paper book gives complete details relevant to deposit of cash. (j) Another query letter dated 22.11.2019 was issued which is placed at pages 152 to 154 of the paper book. (k) Another query letter dated 17.12.2019 which has been placed at pages 185 to 187 of the paper book. In this query letter, Q. Nos. 1 and 2 are directly related to the deposit of cash. (I) Reply to these query letters dated 19.12.2019 has been placed at pages 188 to 189 of the paper book 9 (m) Another query letter dated 26.12.2019 issued by the Learned Assessing Officer vide which specific queries relating to cash deposit were made. Copy of the same is at pages 257 to 262 of the paper book. (n) Reply dated 28.12.2019, copy of which has been placed at pages 270 to 275 of the paper book was filed before the Learned Assessing Officer. (o) From perusal of all these query letters and the detailed replies filed by the assessee company, it is abundantly clear that detailed queries were made by the Learned Assessing Officer and after considering the replies/explanations of the assessee company, the Learned Assessing Officer proceeded to frame the assessment. (p) No defect was found/notice in the details furnished nor has been pointed out by the Learned Principal Commissioner of Income Tax. (q) The accounts of the assessee company are duly audited and have been duly accepted by the Learned Assessing Officer while framing assessment. Complete quantitative details have been maintained which were furnished and the closing stock for the year ending 31.03.2017 was accepted and even in the subsequent years, the same value as been taken as opening stock. 8.2 Thus, it cannot be said that the AO did not conduct adequate enquiry with respect to the deposit of cash while framing the assessment. It was submitted that the ld PCIT has failed to appreciate the aforesaid details submissions made by the assessee during the course of assessment proceedings. It was submitted that the matter relating to cash deposit during the demonization period was duly enquired into by the AO and after taking into considerations the submissions and explanations submitted by the assessee, the AO has passed a speaking order accepting the nature and source of cash deposits during the demonization period as arising out of cash sales and realization from debtors. 8.3 It was further submitted that the issues raised by the Ld. PCIT were duly examined by the Ld. AO after making necessary enquiries. Therefore, the basis that no enquiry was made is wholly illegal, unjust and highlights non-application of mind by the Ld. PCIT while assuming jurisdiction. It was submitted that there is difference between ‘no enquiry’ and ‘inadequate enquiry’ and where the Ld. 10 AO made enquiries as seems appropriate on the facts and in the circumstances of the case, assumption of jurisdiction under section 263 of the Act is not warranted. It was further submitted that the Ld. PCIT has failed to point out what further enquiries or verification the Ld. AO ought to have made. In cases where the allegation is of “proper enquiries”, the burden is on the Ld. PCIT to conduct prima facie further enquiries by himself and basis the same, arrive at a finding that the order so passed is erroneous in so far as prejudicial to the interest of Revenue and he cannot simply set aside the order of the Ld. AO for further enquiries. 8.4 In support of his aforesaid contentions, the ld AR has relied on the following decisions: CIT vs Sunbeam Auto Limited reported in 332 ITR 167 (Del HC) CIT vs Anil Kumar Sharma reported in 335 ITR 83 (Del HC) Ganpati International, Jagraon vs PCIT in ITA No. 932/Chandi/2019 (Chd Trib) Gandhi Ram vs PCIT in ITA No. 21/Chandi/2021 (Chd Trib) Suresh Chander Kapila vs PCIT in ITA No. 372/Chandi/2022 (Chd Trib) Pawan Kumar Vs. 1TO reported in 196 1TD 378 (Chd Trib) Bharat Tirtha Rice Mill Vs. PCIT reported in 36 NYPTTJ ITD 1210 (Kol Trib) 9. Per contra, the Ld. CIT DR has drawn our reference to the final show cause issued by the AO dt. 26/12/2019 wherein the AO has referred to the earlier notices issued by him and the response submitted by the assessee from time to time and has stated that the complete information as called for earlier were not furnished till date and thereafter the AO has referred to the specific discrepancy in the various submissions / documentation / information submitted by the assessee as part of its earlier submissions. It was accordingly submitted that inspite of issuance of show cause to the assessee highlighting various discrepancies, if we look at the assessment order, it shows that the submissions so filed by the assessee have been accepted at face value without detailed and 11 deeper inquiry as required in the instant case and therefore he supported the order and the findings of the Ld. Pr. CIT. 10. We have heard the rival contentions and perused the material available on record. In order to appreciate the contention advanced by the Ld. AR that the necessary inquiry have been duly conducted by the AO and after taking into consideration the information and documentation submitted by the assessee, the assessment proceedings have been completed and therefore the order so passed by the AO cannot be held has erroneous in so far as prejudicial to the interest of the Revenue, we refer to the initial notice under section 142(1) dt. 11/04/2019 issued by the AO wherein the exhaustive questionnaire has been issued by the AO and particular reference can be drawn to the information sought by the AO in terms of the turnover declared by the assessee company for the current and past two years as well as corresponding G.P. and N.P margin and the reason for fall in the G.P. margin if any. Further, the AO has specifically asked the ratios for the five years in terms of cost of sale as a percentage of sales, G.P. as a percentage of sales, Closing stock as a percentage of sales turnover, production expenses as a percentage of sales, sales and general administrative expenses as a percentage of sale, profit before interest, taxes, depreciation as a percentage of sales and current liability as a percentage of current assets. Further, the AO had asked the details of purchases above Rs. 5,00,000/- in terms of name and address of the party from whom purchases are made, product purchased, quantity, amount of purchases during the year, amount paid and balance payable; details of sales above Rs. 5,00,000/- made during the year in terms of the name and address of the party to whom sales were made, products sold, quantity, amount of sales during the year, amount received, balance receivable; details of import in terms of product, amount of purchase, mode of payment and name and address of the supplier; details of export sales and related details; month wise details of opening stock, purchase, 12 sales and closing stock of different materials including quantity available; details of sundry creditors above Rs. 1,00,000/- in specified format; details of sundry debtors above Rs. 1,00,000/- for more than one year, for less than one year in terms of name, address, amount, PAN number; quantitative details of closing stock, method of valuation of closing stock. In response, the assessee filed its submission containing necessary information, documentation vide its submission dt. 13/09/2019, 15/11/2019, 19/11/2019. 11. Thereafter, another notice under section 142(1) was issued by AO on 13/10/2019 wherein the AO asked for comparative month wise details of cash withdrawal and deposits in the books of accounts for the F.Y. 2016-17 and preceding F.Y 2015-16, comparative details of month wise cash sales and total sales and cash sales as a percentage of total sales for the F.Y. 2016-17 and 2015- 16, comparative date wise details of cash sales, quantity and quality wise for the period 08/11/2016 to 31/12/2016 and preceding period of 08/11/2015 to 31/12/2015 and subsequent period 08/11/2017 to 31/12/2017. Further the cash in hand at the beginning and end of the month for the period 2016-17 and corresponding 2015-16 were also called for. Further details of cash received from debtors in relevant months during the F.Y. 2016-17 and previous F.Y. 2015-16 were called for. Further month wise and hour wise details of cash expenses incurred pre-demonetization and post-demonetization were called for the year under consideration as well as for the preceding year. Further month wise details of stock in the specified format were called for and cash deposit during the period 09/11/2015 to 31/12/2015 and 09/11/2016 to 31/12/2016 were called for besides calling for the copy of the quarterly VAT returns for the current F.Y. as well as for the preceding F.Y. In response, the assessee filed its reply vide its submission dt. 06/12/2019 continuing the requisite information/documentation. 12. Thereafter another notice under section 142(1) dt. 22/11/2019 was issued by the AO, wherein the AO has referred to the earlier submissions filed by the 13 assessee and has called for the month wise details of opening stock, purchase, sales, closing stock of different material, quantity available and rate. In response, the assessee filed its reply vide submission dt. 27/11/2019. 13. Thereafter another notice was issued under section 142(1) dt. 17/12/2019 wherein the AO has asked the assessee to furnish date wise copy of cash in hand for F.Y. 2015-16 and 2016-17, source of cash deposit during the demonetization period alongwith supporting documents and copy of the cash book. Further referring to the comparative chart submitted earlier by the assessee, the AO observed that the cash sales has increased to Rs. 1,93,49,476/- as compared to last year and the assessee was asked to justify the increase in the cash sales. Further referring to the information submitted by the assessee, it was stated by the AO that you have submitted cash receipt from debtors but no details have been submitted by you and you are asked to submit the confirmation copy of account of sundry debtors for F.Y. 2015-16 and 2016-17. Further month wise details of cash received from the debtors were also asked to be submitted. The AO also referred to the earlier submissions filed by the assessee and noted that there is a fall in G.P from 7.96 % to 7.32 % and the assessee was asked to furnish reasons for the fall in the G.P. rate alongwith documentary evidence. In response the assessee vide its reply dt. 19/12/2019 responded to the said notice and thereafter, the AO issued another notice dt. 20/12/2019 under section 142(1) wherein the reference was drawn to the questionnaire dt. 17/12/2019 and in relation to information sought in respect of cash deposit and details of the sundry debtors and the assessee was asked to submit the necessary details. In response the assessee vide its submission dt. 23/12/2019 and 25/12/2019 filed necessary response. 14. We, thereafter, find that the AO issued a final show cause under section 142(1) dt. 26/12/2019 wherein he has referred to the earlier notices issued from time to time and the responses and the information submitted by the assessee 14 from time to time and after examination thereof the AO noted and highlighted certain issues / discrepancies in the information / documentation so submitted by the assessee and it would be appropriate to refer to the contents of the said show cause dt. 26/12/2019 which read as under: “3. Further perusal of information furnished by the assessee in response to this office notices u/s 142(1) of the IT. Act, 1961 reveals the following discrepancies:- 1. Reply alongwith documentary evidences furnished dated 06.12.2019 reveals that cash deposit in IDBI CC account during the F.Y. 2016-17, is Rs. 12,38,87,000/-, in HDFC C account deposited Rs. 40,00,000/- totaling to Rs. 12,78,87,000/-, out of which Rs. 5,09,30,500/- has been deposited during demonetization period i.e. from 08.08.2016 to 31.12.2016. During F.Y. 2015-16 total amount of Rs. 8,45,37,000/- was deposited, whereas from 09.11.2015 to 31.12.2015 only Rs. 1,25,91,000/- has been deposited. Copies of documentary evidences furnished are made part of this order as annexure-A Page No. 1 to 3. Keeping in view the above data, it is observed that there is abnormal increase in cash deposited in bank during F.Y. 2016-17 as compare to F.Y. 2015-16 and also there is abnormal increase in cash deposits during the demonetization period i.e. 09.11.2016 to 31.12.2016 with cornparison to the cash deposits of same period during F.Y. 2015-16. 1. Reply dated 06.12.2019, reveals that during the F.Y. 2016-17 total cash sales shown is Rs. 1,20,35,623/-, whereas reply dated 23.12.2019, reveals that during the F.Y. 2016-17 total cash sales shown is Rs. 2,98,24,650/-, which is self- contradictory. Surprisingly, documentary evidence attached with reply dated 06.12.2019 reveals cash sale during the demonetization period is Rs. 1,93,49,476/-, whereas total cash sale during the F.Y. 2016-17 has been shown at Rs. 1,20,35,630/-, which is beyond the rational business behavior, being the sales during demonetization period i.e. 09.11.2016 to 31.12.2016, can never exceed the total sales made during the F.Y. 2016-17 relevant to A.Y. 2017-18. (As per annexure-A page No. 4 to 6). 1. Return filed for the A.Y. 2017-18 and as per balance sheet, cash in hand as on 31.03.2017 is Rs. 2,15,338/-, whereas your reply dated reveals that cash in hand is of Rs. 2,37,646/-, which is again self-contradictory which cannot be believe and trusted. Further - more the month wise detail chart attached with your reply reveals that the amount shown in closing balance does not tally with the opening balance of next month, which doesn't seems to be realistic in normal business scenario. (As per annexure-A Page No. 6) 15 2. Perusal of reply dated 23.12.2019 in respect of cash in hand furnished and reply dated 19.12.2019 cash in hand furnished by you is totally having different figures and does not tally to each other which is reproduced as below: Closing cash in hand filed vide reply dated 19.12.2019 Closing cash in hand filed vide reply dt. 23.12.2019 Nov, 2016 1,61,763/- 42,96,743/- Dec, 2016 4,66,955/- 4,83,564/- Jan, 2017 12,54,838/- 12,55,822/- Feb, 2017 13,16,420/- 13,70,300/- Mar, 2017 2,15,338/- 2,37,646/- 1. Day wise cash in hand given vide reply dated 23.12.2019 reveals Rs. 1,11,55,228/- as on 7 th November, 2016 and immediately on next day i.e. on 8 th November, 2016 cash in hand has been shown at Rs. 4,97,70,456/-. But no documentary evidence i.e. bills/vouchers in lieu of increase in cash in hand amounting to Rs. 3,86,15,228/- in a day has been furnished by you to substantiate your claim. 4. Further it has been observed that two different list of cash received from debtors have been furnished by you with your reply dated 06.12.2019, one list shows amount of Rs. 9,74,66,702/-, whereas other detail amount received from debtors is Rs. 21,35,735/-. Various opportunities were afforded but the assessee has not submitted Name & Address and PAN No. of the debtors from whom cash has been received and from when these are outstanding and no confirmed copy of account of debtors has been filed till date. 5. On perusal of VAT-15 returns for F.Y. 2015-16 and 2016-17 furnished by you vide reply dated 06.12.2019, reveals that: F.Y. 2016-17 F.Y. 2015-16 Purchase Sale Purchase Sale 1 st Qtr. (Apr-Jun) 6,22,83,789/- 6,71,04,667/- 4,78,01,719/- 6,68,05,428/- 2 nd Qtr. (Jul-Sep) 3,26,70,542/- 208,11,111/- 2,39,41,626/- 3,17,72,501/- 3 rd Qtr. (Oct-Dec) 6,66,43,902/- 8,61,87,424/- 3,66,32,241/- 4,26,06,555/- 4 th Qtr. (Jan-Mar) 4,63,64,619/- 3,58,28,872/- 3,18,17,380/- 3,13,17,583/- Analysis of above data reveals that there is abnormal jump in sale/purchase during 3 rd Qtr. i.e. Oct-Dec, 2016. Further, you have shown abnormal increase in cash sale during demonetization period i.e; the month of Nov, 2016. In view of the above discrepancies, your books of account cannot not be accepted as true and correct. Further, keeping in view the above discrepancies/points please show cause why the cash deposits of Rs. 16 5,09,30,500/-, during the demonetization period in your bank accounts maintained with IDBI Bank and HDFC Bank may not be treated as from un- explained sources and added to your taxable income as per law. Also, please show cause as to why the books of accounts may not be rejected.” 15. Thereafter in response to the aforesaid final show cause notice, the assessee vide its submission dt. 28/12/2019 submitted its response/explanation and it would be relevant to reproduce the contents thereof as under: “ Please refer to your above mentioned show cause that why the amount of cash credit amounting to Rs.50930500/-in your bank account may not be treated as unexplained cash credit u/s 68 of the income tax act, 1961 and added to your return of income. Further the provision of Sec 68 does not apply in present case as Sec 68 considers any sum credited in the books of taxpayer in any financial year and not already offered to tax, as income of taxpayer during such financial year if the following conditions are satisfied: Taxpayer offers no explanation about the nature and source of such credit; or Explanation offered by taxpayer about the nature and source of such credit is not satisfactory in the opinion of assessing officer. Such credit is referred to as unexplained cash credit. In this regard we wish to clarify that during the course of assessment the assesse had already submitted with yourself complete details of cash deposit along with source of cash, books of accounts, month wise sale register along with other documents/details as required by you from time to time during the course of assessment. Also your notice clearly mentions that the perusal of cash book reveals that you have cash in hand amounting to Rs.49770456/- as on 08.11.2016. So it is proven fact on records that the entire cash deposit in the bank is out of the sale proceeds either in cash or received from debtors. Hence the provisions of Sec 68 could not be applied in the present case as the assessee had provided to you the complete books to accounts/details /records along with the source of cash generation and the entire cash deposit is out of the recorded cash in hand as per books of accounts. In support of our claim for the genuineness of cash transactions we wish to bring into your kind attention that 1. Nature of Activity :- During the year under consideration the assessee was doing the Trading of electronic goods & electrical appliances and operating at B-XIX-262/1, Dr. Sham Singh Road, Ferozepur Road, Nr. Bhai wala Chowk, Ludhiana and Godown of the company situated at #9, Gurdev Nagar, Pakhowal Road, Near Hotel Imperial, Ludhiana. Further clarified that the assesse was dealer of Blue Chip companies like Sony India Pvt. Ltd., Blue Star, Hitachi Home & Life Solution (India) Limited, IFB Industries Ltd, Panasonic India Pvt. Ltd, LG Electronics 17 India Pvt. Ltd & Samsung India Electronics Pvt. Ltd. Etc and the entire purchase had been made from these companies. Dealer ship certificate of some companies is attached herewith for your reference. 2. During the course of assessment the company had submitted the Audited balance sheet along with annexures, Auditors report and other books of accounts. 3. During the course of assessment the company had submitted the complete list of stock along with quantity and valuation. Monthly quantitative summary of sales and purchase along with the opening and closing stock had also been submitted. 4. Further both quarterly and annual Vat returns had duly been submitted to justify the sales turnover if the company. 5. The comparative chart of sales is reproduced as under: F Y 2016-17 F Y 2015-16 Sales 220471102 169489919 Gross profit 16144230 13499146 Gp Ratio 7.32% 7.96% Net Profit 5568923 4008453 NP Ratio 2.53% 2.37% Total Cash Sales/Received from debtors 127291352 84921513 % of cash sales to total sales 57.74 50.10 Total Cash Deposit in Bank 127887000 84537000 Month wise sales Nov, Dec 52735956 30730297 Cash Sales/Received from debtors (nov, dec) 44694365 16465477 Cash deposit - Demonetizations from 9.11. to 31.12. 50930500 12591000 Cash in hand 1.11. 9952948 4840763 Diwali Date 30-Oct 11-Nov It is evident from the table above the sales of the company had increased from Rs.16.94 Cr to Rs.22.04 Cr during the current year and also the profit had been increased from 40.08 Lakhs to 55.68 Lakhs From above chart it is clear that the company has routine practice of depositing the cash in bank. The percentage of cash sales plus receipt from debtors to total sales is almost the same i.e 50.10 % in Fy 2015-16 and 57.74% in FY 2016-17. The total cash deposit in bank during FY 2016-17 is amounting to Rs.127887000/- 18 whereas the cash deposit during FY 2015-16 is Rs.8453700, the rise in the cash deposit commensurate with the increase in sale which is increased from 16.94Cr to 22.04 Cr during the year under consideration. Now we submit the point wise reply of the show cause as under:- 1. It is respectfully submitted that the assessee company had duly replied all the questions/information called for during the course of assessment. Regarding the source of cash it is clarified that the company had only two components of sources of cash- one from cash sale and other cash received from customers/debtors. Further the assessee had already submitted the list of debtors along with the month wise sales register vide reply dated 25.12.2019 in continuation to reply dt 23.12.2019. 2. Regarding increase in cash during demonetization period it is clarified that there was no abnormal increase in cash deposit. We have already justified in the table above that the sales of the assessee had increased from 16.95Cr to 22.05 Cr during the year under consideration and accordingly the cash deposit had been increased which is at par with the increase in turnover. 3. Regarding your query for cash sale amounting to Rs.12035623/- as per page no.4 of annexure-A of the show cause notice, it reveals that page no-4 had been attached inadvertently, and does not relate to the assessee company. We have filed the comparative chart vide dated our reply dated 06.12.2019 duly uploaded e-proceedings. Copy of the chart is again submitted to you for your reference, which clearly shows that cash sales had been increased is at par with the increased in total sales. 4. Regarding difference in cash in hand with reply dated 19.12.2019, it is clarified that we have filed the information as per the Performa submitted by yourself which was dealing only with the cash expenses. Apart from the cash expenses cash out flow is also on account of building and petty repayments to the customers. Now we are submitting again a cash flow chart with additional Columns of payment other than expenses to reconcile the month wise cash in hand and assure that there is no difference in cash in hand, cash as per balance sheet and as per the statement submitted with your self. 5. From the above explanation as per point no-4, there will remain no difference in the month end cash in hand as per our reply dated 19.12.2019 & chart submitted this reply. 6. Regarding your observation for the cash in hand of Rs.49770456/-as on / 8 th nov 2016,it is clarified that the company had received payments amounting to Rs.20231317/- from 614 number of debtors. List of the same along with complete address had duly been uploaded on e-portal under Cash Transaction 2016 vide no. 3654747655. The fact can be verified from the e portal also. We can also 19 provide the copy of the same on a hearing from your good self. The balance cash is out of opening cash in hand and the cash sales which can be verified from the month wise sales register already submitted with your self. 7. We further clarify that the total cash received from the debtors during the FY 2016-17 is Rs.97466702/- the same facts can be checked from our reply dated 06.12.2019. Detail of amount received from debtors of Rs.2135735/- dose not relates to the assessee company and we have not filed/uploaded any such detail during the assessment proceeding. 8. Regarding your observation for abnormal jump in sale during 3 rd qtr. It is clarified that the sales of the company is always higher in 1 st qtr. And in 3 rd Qtr. Which is mainly due to the fact that the 1 st Qtr. Is harvesting season and start of summer season due to which sale if Air Condition & refrigerators increases and the 3 rd Qtr. Is the festival season and the companies offers mega discount schemes during the season. The increase in sales in 3 rd Qtr. Is at par with the overall increase in the turnover as compare to the last year. It is requested to make the reasonable comparison on year to year basis of Cash collected from customers plus cash sales to reach to final conclusion as the company had only two components of sources of cash- one from cash sale and other cash received from customers/debtors. Keeping in view the nature of product mere comparison of cash sales with earlier year is not justified in the present case. So keeping in view the above facts and figures you are requested not to make any addition on account of unexplained cash as the total deposit is out of the recorded cash in hand as per the books of accounts and from the valid source of generation. We hope the above explanation shall satisfy your query and request you to assess the case in the light of above facts. “ 16. Thereafter, we find that after taking into consideration the response and explanation to the show cause issued and examination thereof, the assessment proceedings have been completed by the AO vide order dt. 29/12/2019 wherein the returned income has been accepted and the source of cash deposit during the demonetization period has also been accepted. In the body of the assessment order, the AO has specifically made a mention about the fact that during the course of assessment proceedings, the assessee was specifically asked to furnish the source of cash deposits during the demonetization period 20 and the reply to the specific information as called for has been furnished by the assessee alongwith documentary evidence which have been downloaded from system, verified, considered and placed on record and after due verification / examination of the reply submitted by the assessee, the returned income filed by the assessee company is accepted as assessed income. 17. In light of aforesaid factual matrix emerging from the records before us, we are of the considered view that the matter has been duly examined by the AO regarding the source of cash deposit during the demonetization period. Detailed enquiries have been conducted and specific questions have been raised, the submissions, explanation and documentation submitted by the assessee have been purused and not fully satisfied, further notices have been issued reminding the assessee to furnish the balance information as well as pointed questions have been raised regarding the information so submitted and further explanation of the assessee has been sought and after examination thereof and due application of mind by the AO, the source of cash deposit has been accepted by the AO arising of cash sales and realization from its business debtors. It is definitely not a case where the AO has raised general queries relating to cash deposit during the demonetization period and the findings of the ld PCIT in the show-cause notice is therefore not borne out of records. In light of the same, we have no hesitation in accepting the contention advanced by the Ld. AR that the necessary inquiries have been duly conducted by the AO and after taking into consideration the information and documentation and the explanation submitted by the assessee, the assessment proceedings have been completed accepting the source of cash deposits during the demonetization period and it is therefore not a case of lack of enquiry on part of the AO and on this count, the assessment order so passed cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue. 21 18. Now, coming to the specific findings of the ld PCIT as to why he was of the opinion that the assessment order so passed cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue. 19. Firstly, the ld PCIT has stated that the correctness of assessee’s claim of realization from debtors has not been examined by the AO and this claim was required to be examined in detail and depth by calling for the details of credit sales and recovery from these buyers. In this regard, we have already referred to queries raised by the AO from time to time as well as part of the show-cause notice wherein the AO has specifically enquired about the debtors and the particulars thereof and the submissions filed by the assessee in response thereto. During the course of hearing, our specific reference was drawn to the written submissions filed before the ld PCIT wherein the assessee has submitted that it had received payments amounting to Rs.2,02,31,317/- from 614 number of debtors and list of the same along with complete address had duly been uploaded on e-portal of the Department under Cash Transaction 2016 vide no. 3654747655 and the said fact had been verified from the e-portal during the course of assessment proceeding before the AO and based on examination thereof, no adverse view has been taken by the AO. We therefore find that the findings of the ld PCIT that the AO has not enquired about the credit sales and realization from debtors and has not asked for detail information is again not borne out of records. The ld PCIT has not stated anything about the information so submitted during the course of assessment proceedings which has been duly examined by the AO and which has again been reiterated before him as part of assessee’s written submissions and has not specified what further enquiry or examination is warranted in the instant case. 20. Secondly, the ld PCIT has stated that there is a substantial increase in cash in hand with the assessee as on 09.11.2016 as compared to 01.11.2016 and the same has not been examined by the AO. As we have noted above, the said 22 findings are again not borne out of records. The AO has duly examined the increase in cash deposit during the demonetization period and has taken into consideration, the submissions and the explanation so furnished by the assessee and no adverse view has been taken by him. 21. Further, referring to data relating to increased sales and cash deposit during demonetization period, the ld PCIT has stated that the same should have prompted the AO to go for deeper investigation and he should have asked for appropriate action or should have taken appropriate action. In our view, on appreciation of records as we have noted above, the AO has already taken appropriate steps in terms of detailed enquiries in terms of sales, corresponding availability of stock, cash deposits, etc. during the course of assessment proceedings and after satisfying himself, has accepted the source of cash deposits during the demonetization period. 22. We are therefore of the view that detailed and deep enquiries as so stated by Ld. PCIT in the instant case will result in taking away a vested right of the assessee in terms of completed assessment where it has already gone through the rigorous examination by the AO and the same cannot be sustained in the eyes of law even drawing support from the explanation 2(a) to Section 263 unless it is pointed out as to what enquiry or verification was not made by the AO before passing the assessment order which is not the case before us. The Hon’ble Jurisdictional Punjab & Haryana High Court in case of Pr. CIT (Central) Vs. Kanin (India) [2022] 141 taxmann.com 83 (P&H) has similarly held and the relevant findings read as under: “9. Ld. Senior Standing Counsel is not in a position to deny the fact that prior to passing of order under section 143(3) of the Act, a questionnaire was issued by the Assessing Officer in the course of assessment proceedings to the assessee. The specific issues addressed by the appellant in the present proceedings were part of the questionnaire. It is in the backdrop of these circumstances that the Tribunal recorded the finding to the following effect :— "In the facts of the present case, the Pr. CIT has exercised the power by merely flagging certain issues extracting the Show Cause Notice, 23 extracting part of the reply of the assessee and without caring to address the same has summarily arrived at the conclusion ignoring the facts, evidences and plethora of jurisprudence available on the issue which casts responsibility on the Pr. CIT to point being out the error and not any and every error but such an error which is prejudicial to the interests of the Revenue. The twin requirements and the sine qua non for exercising the Revisionary Power cannot be left at the mercy of whims and fancies of Revisionary Authority the same should be brought out on record mere suspicions are not enough. In order to support the conclusion drawn reference may also be made to the decision of the Co-ordinate Benches in Narain Tatu Rane (supra) which clearly brings out that the explanation cannot be said to have overridden the law as incorporated by various High Courts which have consistently held that before reaching to the conclusion that the order of the AO is erroneous and prejudicial to the interests of the Revenue, the Revisionary authority itself has to undertake some enquiries to establish that the assessment order is erroneous and prejudicial to the interests of the Revenue." 10. Trite it is that in order to attract section 263 of the Act, twin conditions are to be satisfied namely :— (i) The order of the Assessing Officer sought to be revised is erroneous, and (ii) It is prejudicial to the interest of the Revenue. 11. The contention of Ld. Senior Standing Counsel that the order passed by the Assessing Officer will fall within the ambit of Explanation 2(a) appended to section 263 of the Act, cannot be accepted till it is pointed out as to which inquiry or verification was not made by the Assessing Officer before passing the order. 12. Ld. Counsel for the appellant is not in a position to point out as to what are those inquiries or verification which should have been made but have not been made by the Assessing Officer in the present case so as to make the present case fall within Explanation 2 attached to section 263 of the Act. 13. In the case of Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83 (SC) Apex Court has held that - 'The phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law.' 14. The substantial questions of law sought to be raised in Para No. 3 of the grounds of appeal are pure questions of fact which have been adequately answered by the Tribunal. 24 15. Consequently, finding no merit in the instant appeals, the same are hereby dismissed.” 23. In case of CIT vs Sunbeam Auto Limited (supra), the Hon’ble Delhi High Court held that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry" and if there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. It has been held that it is not necessary that the Commissioner is bound to arrive at a definite finding and express a final view but least that is expected from him is to record a finding that order so sought to be revised was erroneous and prejudicial to the interest of Revenue and the basis of arriving at such a prima facie finding. The relevant findings read as under: “17. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner(page 113) : ". . . From a rending of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, 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 1 . It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner 25 acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. (See Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC) at page 10) . . . From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Com missioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Com missioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion . . . There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed . . . We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. 20. Thus, even the Commissioner conceded the position that the Assessing Officer made inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquiries rather than accepting the explanation. Therefore, it cannot he said that it is a case of “lack of inquiry”. 21. Having put the record straight on this aspect, let us proceed further. Is it a case where the Commissioner has concluded that the opinion of the Assessing Officer was clearly erroneous and not warranted on the facts before him and, viz., the expenditure incurred was not revenue expenditure but should have been treated as capital expenditure? Obviously not. Even the Commissioner in his order, passed under section 263 of the Act, is not clear as to whether the expenditure can be treated as capital expenditure or it is revenue in nature. No doubt, in certain cases, it may not be possible to come to a definite finding and therefore, it is not necessary that in all cases the Commissioner is bound to express a final view, as held by this court in Gee Vee Enterprises [1975] 99 ITR 375 . But, the least that was expected was to record a finding that the order sought to be revised was 26 erroneous and prejudicial to the interest of the Revenue (see Seshasayee Paper [2000] 242 ITR 490 (Mad)). No basis for this is disclosed. In sum and substance, the accounting practice of the assessee is questioned. However, that basis of the order vanishes in thin air when we find that this very accounting practice, followed for a number of years, had the approval of the Income-tax authorities. Interestingly, even for future assessment years, the same very accounting practice is accepted. 24. In case of CIT vs Anil Kumar Sharma (supra), the Hon’ble Delhi High Court held that even if the inquiry was termed as inadequate, that would not by itself give occasion to the Commissioner to pass orders under section 263 of the said Act, merely because he has a different opinion in the matter and relevant findings read as under: “7. In view of the above discussion, it is apparent that the Tribunal arrived at a conclusive finding that, though the assessment order does not patently indicate that the issue in question had been considered by the Assessing Officer, the record showed that the Assessing Officer had applied his mind. Once such application of mind is discernible from the record, the proceedings under section 263 would fell into the area of the Commissioner having a different opinion. We are of the view that the findings of facts arrived at by the Tribunal do not warrant interference of this Court. That being the position, the present case would not be one of 'lack of inquiry' and. even if the inquiry was termed as inadequate, following the decision in Sunbeam Auto Ltd. 's case (supra), "that would not by itself give occasion to the Commissioner to pass orders under section 263 of the said Act, merely because he has a different opinion in the matter". No substantial question of law arises for our consideration. Consequently, the appeal is dismissed.” 25. In case of Ganpati International vs PCIT (supra), the Coordinate Chandigarh Benches has held that where the AO had made the enquiry and Id. PCIT is trying to substitute the plausible view taken by the Assessing Officer with his own view, the said course of action is not permissible under the revisionary provisions under section 263 of the Act and the relevant findings read as under: “29. Evidently, it is not the case of the Id. PCIT, that the Assessing Officer had not made any enquiry while accepting the unsecured loans as genuine. His case, rather, is that deep rooted enquiries were required to be made, which had not been done by the Assessing Officer. The Id. PCIT is, thereby, trying to substitute the plausible view taken by the Assessing Officer with his own view. This course of action is not permissible under the revisionary provisions under section 263 of the Act. The following decisions, amongst others, are authority for this proposition: Sr. No. Judgement 1 Braham Dev Gupta VS Pre CIT (Del)187TTJ 1 2 CIT vs Anil Kumar Sharma 335 ITR (Del) 83 3 Sir Dorabji Tata Trust Vs. DCIT (E) ITAT Mumbai "F" Bench 209 TTJ (Mumbai) 409 27 4 CIT Vs. Nirav Modi 390 ITR (Bom) 292 5 Reliance Money INF Ltd. Vs. Pr. CIT-183 TTJ (Mum)636 6 Delhi Airport Metro Express (P) Ltd., Vs Pr. CIT- 184 TTJ(Del) 32 7 Colour Publications (P) Ltd. Vs. Pr.CIT-196 TTJ (Mum)257 8 Aryan Arcade Ltd. Vs, Pr. CIT- 412 ITR (GUJ) 277 9 Meerut Roller Flour Mills (P) Ltd., Vs CIT- 420 ITR (All) 216 10 Khetawat Properties Ltd. Vs Pr. CIT-205 TTJ (Cal) 412 11 Yogesh Mavjibhai Gala Vs. Pr. CIT- 208 TTJ (Mum) 872 12 MOIL Ltd Vs. CIT- 396 ITR (Bom) 242 13 Yerram Venkata Subba Ready Vs. ACIT- 208 TTJ (Hyd) 885 14 CIT Vs Hindustan Marketing 8b Advertising Co. Ltd.-341 ITR (Del) 180 15 Infosys Technologies Ltd. Vs JCIT Asstt)-103 ITD (Bang) 399 30. In the following cases, amongst others, it has been held that insufficient enquiry by the Assessing Officer does not entitle invocation of revisional powers: 1. Kamal Kumar Gupta vs. cit, 142 TTJ Jaipur (UO) 9. 2. Nalco Company vs. cit, 210 TTJ (Pune) 369.” 26. In case of Gandi Ram vs PCIT (supra), the Coordinate Chandigarh Benches has held that the Id PCIT has to record his specific findings as to the applicability of the relevant provisions and how the explanation called for and offered by the assessee is not acceptable in the facts of the present case and where the Id PCIT himself is not clear about the applicability of relevant provisions and in the same breath holding the Assessing officer to task by not invoking the said provisions is clearly shooting in the dark which cannot be sustained in the eyes of law and the order so passed therefore cannot be held as erroneous in the eyes of law and the relevant findings read as under: “7. We have heard the rival contentions and purused the material available on record. For exercise of jurisdiction u/s 263 of the Act, the order passed by the Assessing officer should satisfy the twin tests of being erroneous as well as prejudicial to the interest of the Revenue. As per Id PCIT, the discrepancies found, confronted and accepted by the assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B & 69C and the income referred therein is chargeable to tax at rate prescribed under section 115BBE Act. As per Id PCIT, the Assessing officer has failed to enquire about the source of income in order to assess the income under the appropriate head of income or the relevant deeming provisions and accordingly, the order so passed has been held as erroneous and prejudicial to the interest of Revenue. Thereafter, the Id PCIT has 28 gone ahead and held that income of the assessee is income referred in the aforesaid deeming provisions and chargeable to tax under section 115BBE of the Act. 8. Firstly, how the Id PCIT has arrived at a conclusive finding that the discrepancies found, confronted and accepted by the assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B & 69C is not apparent from the impugned order. Merely stating that excess cash is clearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction of Shed/Godown is covered u/s 69B or 69C and advances made to Sundry Parties is covered u/s 69, 69B or 69D is like an open ended hypothesis which is not supported by any specific finding that the matter shall fall under which of the specific sections and how the conditions stated therein are satisfied before the said provisions are invoked. It is like laying a general rule, which to our mind is beyond the mandate of law, that wherever there is a survey and some income is detected or surrendered by the assessee, the deeming provisions are attracted by default and by virtue of the same, provisions of section 115BBE are attracted. The Id PCIT has to record his specific findings as to the applicability of the relevant provisions and how the explanation called for and offered by the assessee is not acceptable in the facts of the present case which is clearly absent in the instant case. Therefore, where the Id PCIT himself is not clear about the applicability of relevant provisions and in the same breath holding the Assessing officer to task by not invoking the said provisions is clearly shooting in the dark which cannot be sustained in the eyes of law and the order so passed therefore cannot be held as erroneous in the eyes of law. 9. Now, coming to the findings of Id PCIT that the Assessing officer has failed to enquire about the source of income in order to assess the income under the appropriate head of income or the relevant deeming provisions of the Act. In this regard, we find that there are documents in form of statement of the assessee recorded u/s 133A during the course of survey and the surrender letter dated 21.10.2016 submitted by the assessee at the time of survey and these documents are very much part of the records which is available at the time of assessment as well as at the time of examination by the Id PCIT. In the statement so recorded at the time of survey, the assessee was specifically asked about the source of his income and in response, he has submitted that he is getting income from Gandhi General Store and share of profit from partnership firm, M/s Gandhi Soap and Detergent Industries. Thereafter, in respect of excess cash found at the time of survey, the assessee was asked a specific question to explain the difference and in response, he has submitted that the difference or the excess cash is on account of sales realization during the previous days which he offers over and above his normal business income. Thereafter, in respect of difference in stock of Rs 25,50,000/-, he has submitted that the difference is on account of higher gross margins in the earlier period and which he surrenders in addition to his normal business income. Similar questions have been raised regarding nature and source of cost of construction of building amounting to Rs 25,00,000/- and advances given to various persons. We therefore find that the assessee has been asked specific questions regarding not just the discrepancy but the nature and source thereof during the course of survey and it is clearly emerging that the source of such income is his business income. 29 Further, the said fact is corroborated by the surrender letter dated 21.10.2016. Apparently, the Id PCIT has failed to take into consideration these documents which are very much part of the records. Following the surrender so made, the assessee has offered the additional income as business income in his return of income and paid due taxes thereon. During the course of assessment proceedings, the Assessing officer has specifically taken cognizance of these facts, as apparent on the face of the assessment order, that assessee has voluntarily surrendered Rs 1,02,00,000/- over and above the normal business income in his return of income and has accordingly not drawn any adverse inference. We therefore find that the Assessing officer has duly taken cognizance of statement of the assessee recorded during the course of survey, the surrender letter and the return of income, and after examination thereof and due application of mind has not drawn any adverse inference and income has been rightly assessed under the head "business income". In light of the same, we are of the considered view that the order so passed by the Assessing officer cannot be held as erroneous due to lack of enquiry or for that matter, requisite enquiry on the part of the Assessing officer. Where the Assessing officer after due appreciation of facts and circumstances of the case, assessed the income under the head "business income" and didn't invoke the deeming provisions as so suggested by the Id PCIT, we do not believe that there is any error on part of the Assessing officer and the order so passed by him cannot be held as erroneous. As we have stated above, the Id. PCIT without recording any specific findings as to the applicability of deeming provisions has gone ahead and held that the deeming provisions are applicable in the instant case. Even for sake of argument, where such a view is taken on face value, it would be a case where a different view has been expressed by the Id PCIT, however, the same doesn't lead to the conclusion that the view taken by the Assessing officer as erroneous as the AO has taken into consideration the entirety of facts and circumstances of the case, the explanation offered by the assessee during the course of survey regarding the source of such income and thereafter, has assessed the income under the head "business income". The view so taken by the Assessing officer is after due application of mind and therefore cannot be held as unsustainable in the eyes of law. In the facts and circumstances of the present case, where there are specific questions asked during the course of survey regarding the nature and source of income and which has been adequately responded to by the assessee and thereafter acted upon in terms of disclosing the income in the return of income under the appropriate head of income and where the same is duly examined and taken into consideration by the Assessing officer during the course of assessment proceedings, the order so passed by the Assessing officer cannot be held as erroneous in nature. 10. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, the order so passed by the Id PCIT u/s 263 cannot be sustained in the eyes of law and is hereby set-aside and that of the Assessing officer is sustained.” 27. In case of Suresh Chander Kapila vs PCIT (supra), the Coordinate Chandigarh Benches has held the Ld. PCIT has failed to point out any discrepancy in the accounts of the Assessee, but only suspected the 30 genuineness of the cash book by bifurcating the receipts between the different period of years, which, in our view, cannot be held to be justified for exercise of revisionary jurisdiction u/s 263 of the Act and thereby subjecting the Assessee to de novo assessment and the relevant findings read as under: “7. We have heard the rival submissions and have also perused the material on record. The Assessee had duly shown various receipts along with nature of receipts etc. and each and every entry of the said receipt had been furnished before the AO as well as before the PCIT. However, the Ld. PCIT further analyzing the said data observed that certain receipts during the period from 1.4.2011 to 8.11.2016, i.e during the pre-demonetization period were high, whereas, the number of entries during demonetization period were comparatively less and that the number of entries during the post-demonization period were also comparatively less. This type of analysis, in our view, does not, in any manner controvert or rebut the plea of the Assessee regarding the cash receipts and cash-in-hand before the demonetization period. It is not the case of the Revenue that Assessee has deposited such receipts in any bank account or used the same for any other purpose. The Assessee furnished the cash book and even also explained that as per the Circular / Notification issued by the Government, the Nursing Homes were authorised by the Govt, of India to accept old currency during the demonization period. The Assessee has given the details of the receipts. The Ld. PCIT has not compared such receipts with any previous year or subsequent year's receipts. The Ld. PCIT in this case has exercised his revisionary jurisdiction merely on the basis of the assumption and presumption without pointing out as to what fault or defect was there in the explanation given by the Assessee vis-a-vis the details of the receipts shown by the Assessee and the cash book maintained by the Assessee. The Assessee during the year had shown total profession receipts of approx. Rs. 3.45 crores. out of which, the Assessee has returned the income of Rs. 1.59 cores, which seems to be quite reasonable. The Ld. PCIT has failed to point out any discrepancy in the accounts of the Assessee, but only suspected the genuineness of the cash book by bifurcating the receipts between the different period of years, which, in our view, cannot be held to be justified for exercise of revisionary jurisdiction u/s 263 of the Act and thereby subjecting the Assessee to de novo assessment.” 28. In case of Bharat Tirtha Rice Mill vs PCIT (supra), the Coordinate Calcutta Benches has held that the allegation of the learned CIT that there was abnormal increase in cash deposit during demonetisation period as compared to average rate of cash deposit during other period and there is no evidence on record is factually incorrect as he himself did not analyse the details, which was extracted by him in para 4 of the impugned order. It suggests that there is no logical analysis of the record. The learned AO has made a due enquiry on 31 this issue during the assessment proceedings. The learned CIT failed to give any plausible reason as to why he did not agree with the opinion of the learned AO and as to how the assessment order is erroneous by simply observing that the assessment order is erroneous is not justifiable action. It has to be demonstrated as how it is erroneous, which has caused a prejudice to the Revenue and the relevant findings read as under: “17. We have heard the learned Representatives and with their assistance gone through the record carefully. Before we embark upon an enquiry on the facts and issues agitated before us to find out whether the action under s. 263 of the Act, deserves to be taken against the assessee or not, it is pertinent to take note of this section. It reads as under : "263(1) The CIT may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such 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.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988 by the AO shall include— (1) an order of assessment made by the Asstt. CIT or Dy. CIT or the ITO on the basis of the directions issued by the Jt. CIT under s. 144A; (ii) an order made by the Jt. CIT in exercise of the powers or in the performance of the functions of an AC) conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief CIT or Director General or CIT authorized by the Board in this behalf under s. 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 CIT: (c) where any order referred to in this sub-section and passed by the AO had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the 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. (2) No order shall be made under subs. (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-s. (2), an order in revision under this section may be passed at any time in the case of an order which has been 32 passed in consequence of, or to give effect to, any finding or direction contained in an order of the Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.—In computing the period of limitation for the purposes of sub-s. (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to s. 129 and any period during which any proceeding under this section is stayed by an order or injunction of any Court shall be excluded." 18. A bare perusal of the sub-s. (1) would reveal that powers of revision granted by s. 263 to the learned CIT have four compartments. In the first place, the learned CIT may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned CIT was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an AO on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the AO, he formed an opinion that such an order is erroneous insofar as it is prejudicial to the interests of the Revenue. By this stage the learned CIT was not required the assistance of the assessee. Thereafter the third stage would come. The learned CIT would issue a show cause notice pointing out the reasons for the formation of his belief that action under s. 263 is required on a particular order of the AO. At this stage the opportunity to the assessee would be given. The learned CIT has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned CIT may annul the order of the AO. He may enhance the assessed income by modifying the order. He may set aside the order and direct the AO to pass a fresh order. At this stage, before considering the multi-fold contentions of the learned Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken under s. 263. The Tribunal in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO (2006) 101 TTJ 1095 (Mumbai), analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC) and has propounded the following broader principle to judge the action of CIT taken under s. 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. 33 (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT. while exercising his power under s. 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrives at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 21. We have perused the impugned order. The learned CIT has assigned eight paragraphs in his finding. However, perusal of these eight paragraphs, we find that paragraphs No. 6 to 11 are just cut and paste and has no relevancy with the dispute involved in the present appeal. The only finding relating to this issue, if any, is available in paragraph No. 5 and at the cost of repetition, we take note of it again : "(5) I have considered the facts of the case and gone through submission of the assessee and details available on record. There was abnormal increase in cash deposits during demonetization period as compared to average rate of cash deposit during pre-demonetization period. There was no evidence on record where from it can be presumed that the AO had verified the issue properly. The assessee's submission in course of assessment was also incomplete and not supported by any documentary evidence. The assessment order has been passed without making inquiries or verification which should have been made. Clause (a] of Expln. 2 of s. 263 (1) is attracted in this case. Thereby the order passed by the AO in the instant case is erroneous so far as prejudicial to the interest of revenue". The allegation of the learned CIT is that there was abnormal increase in cash deposit during demonetisation period as compared to average rate of cash deposit during other period. He further recorded that there is no evidence on record, wherefrom it can be presumed that learned AO had verified the issue properly. This finding is factually incorrect. He himself did not analysis the details, which extracted by him in para 4 of the impugned order. It suggests that there is no logical analysis of the record. The case of the assessee is that it has made sufficient withdrawals starting from 19th Oct., 2016 out of its C.C. facility. The withdrawal before the demonetisation was declared was about Rs. 1,35,00,000. If it was not used in purchases, then it has to be re-deposited. The abnormal circumstance of high deposit is the reason that such currency could not be retained at home, it has to be sent to the Bank during the given period of time. This fact has not been properly taken note by the learned CIT while exercising the 34 power under s. 263 of the IT Act. The learned AO has made a due enquiry on this issue during the assessment proceedings. The learned CIT failed to give any plausible reason as to why he did not agree with the opinion of the learned AO and as to how the assessment order is erroneous by simply observing that the assessment order is erroneous is not justifiable action. It has to be demonstrated as how it is erroneous, which has caused a prejudice to the Revenue. The learned CIT totally failed in this area. Therefore, we do not have any hesitation to quash the impugned order. We allow the appeal of the assessee and quash the order of learned CIT passed under s. 263 of the IT Act. 22. In the result, the appeal of the assessee is allowed.” 29. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, the order so passed by the ld PCIT u/s 263 cannot be sustained in the eyes of law and the same is hereby set-aside and that of the AO is sustained. 30. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 06/11/2023. Sd/- Sd/- आकाश दीप जैन िवŢम िसंह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा᭟यᭃ / VICE PRESIDENT लेखा सद᭭य/ ACCOUNTANT MEMBER AG Date: 06/11/2023 आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar
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