PRATAP NARAIN & OTHERS , SITAPUR V. Pr. COMMISSIONER OF INCOME TAX, BAREILLY

ITA 75/LKW/2022

AI Insights

The case involves an appeal by Pratap Narain & Others against the revisionary order of the Principal Commissioner of Income Tax, Bareilly, which set aside the original assessment order for the assessment year 2017-18. The original assessment, conducted under section 143(3) of the Income Tax Act, 1961, had accepted the assessee's returned income with minor adjustments. However, the Principal Commissioner later found the assessment to be erroneous and prejudicial to the interests of the revenue, citing lack of proper inquiries into significant cash deposits and other financial transactions during the demonetization period. The ITAT dismissed the appeal, agreeing with the Principal Commissioner's findings and emphasizing the need for thorough inquiries in such cases.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113276 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-07-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 21-04-2022
• Other Referred Cases: Malabar Industrial Co. Ltd. vs CIT, CIT vs Indo German Fabs, CIT vs Sunbeam Auto, Tara Devi Aggarwal vs CIT, Gee Vee Enterprises vs Addl. CIT, SICAL Logistics Ltd. vs Addl. CIT, Narayan Tatu Rane vs ITO, Rajgul Credit Invest P. Ltd. vs PCIT, M/S Arun Kumar Garg HUF vs PCIT, J.P. Srivastava and Sons (Kanpur) vs CIT, CIT vs Goyal Private Family Specific Trust, CIT vs Mahendra Kumar Bansal, CIT vs Max India Ltd, CIT vs Gabriel India Ltd, CIT vs Vikas Polymers, CIT vs DLF Ltd, Thalibai F. Jain vs ITO, CIT vs Amitabh Bachchan
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHEELA CHOPRA
• Keywords: Revision of order; Transfer pricing; Principle of natural justice; Question of law; Difference of opinion; Prejudicial to interest; Right to appeal; Change of opinion; Reassessment proceedings; TDS; Set aside
• Section: 147; 6; 263; 154; 143(3); 142(1); 143(2); 264; 2(A); 13; 153; 22; 92CA

Judgement Text

I.T.A. No.75/Lkw/2022 Assessment year:2017-18 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘B’, LUCKNOW BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER I.T.A. No.75/Lkw/2022 Assessment Year: 2017-18 Pratap Narain & Others, Lucknow Division, 99, Vijai Laxmi Nagar, Sitapur. PAN:AAAAP2428C Vs. Pr. C.I.T., Bareily. (Appellant) (Respondent) O R D E R PER ANADEE NATH MISSHRA:A.M. (A) This appeal has been filed by the assessee against impugned order dated 22/02/2022 (DIN & Order No.ITBA/REV/F/REV5/2020- 21/1040010337(1) of Pr. Commissioner of Income Tax, Bareilly [“Pr. CIT” for short]. The grounds of appeal are as under: “1. BECAUSE the ld. Pr. Commissioner of Income-tax has erred in law and on facts in holding that the order of Assistant Commissioner of Income-tax (A.O.) dated 24.12.2019 for A.Y.2017-18 passed in consequence to complete scrutiny under section 143(2) of the Act "is erroneous in so far as it is prejudicial to the interests of revenue as per explanation 2(a) to section 263 of the Income tax Act, 1961" on a surmise that "The Assessing Officer has passed the assessment order on 29.07.2019 u/s 143(3) of the Act without enquires on the above issues and accepted the submissions of the assessee" Appellant by None Respondent by Smt. Sheela Chopra, CIT (D.R.) I.T.A. No.75/Lkw/2022 Assessment year:2017-18 2 2. BECAUSE the ld. Pr. Commissioner of Income-tax has erred in law and on facts in holding that the A.O has not examined/enquired into the facts of the case is contrary to the facts on record that the assessment order dated 24.12.2019 was passed by A.O. after examining the books of account and all the contentions/replies of the assessee as per the queries raised under section 142(1) of the Act. 3. BECAUSE the ld. Pr. Commissioner of Income-tax has erred in law and on facts in holding that there was lack of inquiry dehors the notice u/s 142(1) of the Act dated 17.10.2019 in which the Ld. A.O has asked the assessee to furnish the details business along with the books of account, ledger account, cash flow statement and bank details with details of deposits. 4. BECAUSE the ld. Pr. Commissioner of Income-tax has erred in law and on facts in not finding any error in the notice issued by the A.O. 5. BECAUSE the ld. Pr. Commissioner of Income-tax has erred in law and on facts in making fresh allegation/issues in his order passed under section 263 of the Act which was not raised in his notice dated 27.01.2021 and is against principle of natural justice as no opportunity of being heard to the assessee to contest the facts on the basis he had exercised revisional jurisdiction. 6. BECAUSE the ld. Pr. Commissioner of Income-tax has erred in law and on facts in not appreciating that where the A.O. after detailed verification of record and making enquires had framed the assessment, under section 263 of Act, the revision powers conferred on the Pr. CIT cannot invoked only based on a change of opinion. 7. BECAUSE the ld. Pr. Commissioner of Income-tax has erred in law and on facts in wrongly holding that "the law is well settled that failure by the A.O. to make enquiries called for in the circumstances of the case renders the assessment erroneous and liable for revision u/s 263 (Rampyari Devi Sarogi v. CIT 67 ITR 84 (SC), Tara Devi Aggarwal v CIT 88 ITR 323 (SC), Gee Vee Enterprises v Addl. CIT 99 ITR 375 (Delhi)", whereas he was satisfied that there were no lapses as pointed out in the I.T.A. No.75/Lkw/2022 Assessment year:2017-18 3 show cause notice and no further show cause notice was given with regard to lack of enquiries.” (A.1) In this case assessment order dated 24/12/2019 was passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (“IT Act” for short) whereby the assessee’s total income was assessed at Rs.89,85,720/- as against returned income of Rs.87,06,920/-. Subsequently, the learned Principal Commissioner of Income Tax ("Pr. CIT" for short) issued show cause notice u/s 263 of the IT Act. Vide impugned revision order dated 22/02/2022 u/s 143(3) r.w.s. 263 of the IT Act, the learned Pr.CIT set aside the aforesaid assessment order dated 24/12/2019 and directed the Assessing Officer to frame denovo assessment order as per law keeping in view the observations made by the Pr.CIT in the aforesaid order dated 22/02/2022, after giving reasonable opportunity of being heard to the assessee. While passing the aforesaid order, the learned Pr.CIT observed that the Assessing Officer had passed the assessment order on 29/07/2019 u/s 143(3) of the IT Act without inquiries on certain issues, accepting submissions of the assessee. The relevant portion of the impugned order dated 22/02/2022 of learned Pr.CIT is reproduced as under: “The assessee deals in retail liquor business. On examination of records, it is evident that the said assessment order was passed without proper enquiry with regard to the following points: i) No enquiry made by the AO regarding genuineness of the source of cash deposit of Rs.18,00,000/- on 10.11.2016 in Bank of Baroda Account and Rs.14,86,500/- from 08.11.2016 to 17.11.2016 in Dena Bank account during demonetization period. ii) AO did not enquire about the details of license issued to him for the trading of liquor. iii) During the year, there was addition to member's capital account amounting Rs.79.10 lakhs. AO did not verify the I.T.A. No.75/Lkw/2022 Assessment year:2017-18 4 source, genuineness, creditworthiness of the partners as well as the mode of payment. iv) There were major expenses like purchases, processing fees, carriage onwards and other expenses, which were not examined by the AO neither with regard to genuineness of the expenses claimed nor whether the same were allowable as per provisions of the Act. v) During the year, the assessee has paid security deposit of Rs.40 lakhs from 04.04.2016 to 07.04.2016. The AO has not verified the source of this huge amount deposited in cash. The Assessing officer has passed the assessment order on 29.07.2019 u/s 143(3) of the Act without enquiries on the above issues and accepted submissions of the assessee.” (A.1.1) This appeal has been filed by the assessee in Income Tax Appellate Tribunal (“ITAT” for short) against the aforesaid impugned revision order dated 22/02/2022 of learned Pr.CIT. (A.2) During the pendency of the assessee’s appeal in ITAT, the assessee also approached Lucknow Bench of Hon'ble Allahabad High Court through Writ Petition (Writ Tax No. 70 of 20223). Vide order dated 24/03/2023, Lucknow Bench of Allahabad High Court directed the Assessing Officer to defer the proceedings pending before him in pursuance to the order of Pr.CIT dated 22/02/2022 for a period of three months or till the appeal of the assessee was decided by the Income Tax Appellate Tribunal, whichever was earlier. The relevant portion of the aforesaid order of Lucknow Bench of Allahabad High Court is reproduced as under: “The petitioner- assessee has filed this petition seeking writ of mandamus directing the Assessing Officer not to finalize the remand assessment proceedings in pursuance to the order dated 22.02.2022 passed u/s 263 of the Income Tax Act, 1961, which were initiated by means of a notice u/s 142(1) of the Income Tax Act dated 3.3.2023, I.T.A. No.75/Lkw/2022 Assessment year:2017-18 5 till decision of Appeal No.ITA 75/LKW/2022, which is pending before learned ITAT. The contention in nutshell is that assessment proceedings were undertaken against the petitioner u/s 143 (3) of the Income Tax Act. The orders were passed in favour of the petitioner but exercising power u/s 263 of the Income Tax Act, the Commissioner concerned set aside the assessment and remanded the matter back for re- assessment vide its order dated 22.02.2022. This order of the Principal Commissioner of Income Tax, Bareilly dated 22.02.2022 has been challenged by the petitioner before the Income Tax Appellate Tribunal by means of the Appeal No.ITA 75/LKW/2022 filed u/s 253 of the Income Tax Act. However, on account of non-availability of Bench at the ITAT, this appeal has not been heard on admission and interim relief as yet. On the other hand, the Assessing Officer after remand of the matter vide order dated 22.02.2022 is proceeding to finalize the assessment considering the time line of 31st March, 2023 by which such assessment has to be completed, otherwise it would be time barred. Therefore, he says that the petitioner finds himself in an unenviable position where on the one hand, its appeal cannot be heard before the ITAT and on the other hand, the Assessing Officer is proceeding to finalize the assessment under the very orders, which are under challenged in appeal before the ITAT, by 31st March, 2023. Hence, this petition seeking deferment of assessment proceedings. Shri Dixit, learned counsel for the Income Tax Department says that the Assessing officer is under an obligation to complete the proceedings by 31st March, 2023, lest they become time barred. However, he could not deny the fact that the appeal of the petitioner cannot be heard as of now on account of nonavailability of Members at the ITAT. At this stage, learned counsel for the petitioner invited our attention to the provisions contained in Section 153 of the Income Tax Act regarding time limit for completion of assessment proceedings, re- assessment and re-computation specially explanation-1 thereof. According to which for the purposes of this section in computing the period of limitation inter-alia the period during which assessment proceedings is stayed by an order for injunction of any Court shall be excluded. The right of appeal u/s 253 of the Income Tax Act against the order dated 22.02.2022 is a valuable right and same should not be allowed I.T.A. No.75/Lkw/2022 Assessment year:2017-18 6 to be defeated merely on account of non-availability of the Members of the ITAT specially as if re-assessment is made during pendency of the appeal it would cause unnecessary complications and possible prejudice to the petitioner. In view of the peculiar facts placed before us, taking into consideration the provisions of Section 153 of the Income Tax Act, 1961 as amended from time to time, we provide that the Assessing Officer shall defer the re-assessment proceedings pending before him in pursuance to the order of the Principal Commissioner dated 22.02.2022 for a period of three months or till the appeal of the petitioner is decided by the ITAT, whichever is earlier. Subject to result of appeal u/s 253 of the Income Tax Act i.e. if it goes against the petitioner then, it will be open for the Assessing Officer to complete the re-assessment proceedings as per law and for this purpose the period of stay of such proceedings under the order of this Court shall be excluded in view of explanation-1 of Section 153 of the Income Tax Act. In this eventuality pendency of this petition shall not come in the way of conclusion of such re-assessment proceedings.” (A.2.1) The hearings fixed in ITAT on 02/05/2023 and 29/05/2023 were adjourned on the request of learned Counsel for the assessee on stated ground of ill health of the learned Counsel for the assessee. On 22/06/2023, the case was taken up for hearing in ITAT. The hearing progressed for some time. However, while the hearing was still in progress, the learned Counsel for the assessee as well as learned CIT (DR) for Revenue requested for adjournment of hearing. During the period while the hearing progressed on 22/06/2023, the learned Counsel for the assessee admitted to certain things, which are part of the order sheet of the day. Copy of order sheet of ITAT in this case, dated 22/06/2023 is reproduced below: “This appeal has been filed by the assessee against the impugned order dated 22/02/2022 passed by learned Principal Commissioner of Income Tax, Bareilly (“PCIT” for short), u/s 263 of the Income Tax Act, 1961 (“IT Act” for short). In this case assessment order dated I.T.A. No.75/Lkw/2022 Assessment year:2017-18 7 24/11/2019 was passed by the Assessing Officer u/s 143(3) of the IT Act wherein the assessee’s total income was assessed at Rs.89,85,720/- as against returned income of Rs.87,06,920/-. Subsequently, vide aforesaid impugned order dated 22/02/2022 of the learned PCIT, the aforesaid assessment order dated 24/11/2019 was set aside and the Assessing Officer was directed to frame de novo assessment as per law. The learned PCIT was of the opinion that the Assessing Officer had not examined/enquired into the details of the facts of the case and the assessment order passed u/s 143(3) of the IT Act was erroneous in so far as prejudicial to the interest of the Revenue. In this case there are directions from Hon'ble Allahabad High Court, vide order dated 24/03/2023 in Writ Petition bearing No. 70 of 2023 which was filed by the assessee seeking writ of mandamus directing the Assessing Officer not to finalize the remand assessment proceedings in pursuance to the order dated 22/02/2022 passed u/s 263 of the IT Act which were initiated by means of a notice u/s 142(1) of the IT Act dated 03/03/2023, till decision of appeal I.T.A. No.75/Lkw/2022, pending before learned Income Tax Appellate Tribunal (“ITAT” for short). Vide aforesaid order dated 24/03/2023, Hon'ble Allahabad High Court directed the Assessing Officer to defer the reassessment proceedings pending before him in pursuance to the order of Pr. Commissioner dated 22/02/2022, for a period of three months or till the appeal of the petitioner is decided by the ITAT, whichever is earlier. Subsequent to the aforesaid directions of Hon'ble High Court, this appeal was listed for hearing on 02/05/2023. On that day, the learned Counsel for the assessee moved an adjournment application on the ground of his ill-health, informing that he was advised complete bed rest for 21 days. Accordingly, this appeal was adjourned to 29/05/2023. On 29/05/2023, another adjournment application was moved by the learned Counsel for the assessee, requesting for further adjournment on the ground of his ill health, informing that he was advised complete bed rest for a further period of 15 days. It may be mentioned that on an earlier occasion, hearing fixed on 04/08/2022 was adjourned on the basis of adjournment application dated 04/08/2022 filed by the Revenue, wherein it was stated that the learned CIT (DR) was not keeping well. Today this appeal was listed for hearing as “First on Board”. At the time of hearing learned Counsel for the assessee filed written I.T.A. No.75/Lkw/2022 Assessment year:2017-18 8 submissions running into 14 pages. In paragraph 4.1 of the written submissions it has been contended that “liquors cannot be purchased from the open market”. However, the learned Counsel for the assessee could not substantiate this contention on the basis of materials on the record of the ITAT. He sought for some more time to file materials in support of this contention. Moreover, on 15/06/2023, a paper book was filed from the assessee’s side containing 74 pages, which included copies of “purchase invoices produced before the Assessing Officer for test check” (pages 59-74 of the paper book). In the certificate, contained in the paper book, it was stated that the aforesaid purchase invoices were filed before the Assessing Officer. However, at the time of hearing today, learned Counsel for the assessee sought for brief adjournment of the hearing (for 30 minutes) for ascertaining the factual correctness of the claim that the aforesaid purchase invoices were indeed filed before the Assessing Officer during assessment proceedings. Accordingly, brief adjournment was granted by Bench. Prior to this brief adjournment, learned Counsel for the assessee admitted the following: (i) It is not the prevailing practice in ITAT to hold separate hearings for admission of the appeal or for interim relief. All matters are heard together. If either side wishes interim relief/interim order, a separate application is filed by the concerned party. In the present case, no such application was filed by either side. (ii) In this case, the appellant assessee did not approach ITAT with an application for early hearing of the appeal, and instead approached Hon'ble High Court by filing Writ Petition (Writ Tax No.70 of 2023). In case the assessee had approached ITAT with request for early hearing, it was possible to grant early hearing (through video conferencing, if required) despite non availability of Members of ITAT in Lucknow by way of physical presence. (iii) Even if the Assessing Officer passes fresh assessment order in pursuance of aforesaid order dated 22/02/2022 and learned PCIT before disposal of this appeal; the fresh assessment order would be liable to be quashed in case the aforesaid order dated 22/02/2022 of learned PCIT is quashed by ITAT while disposing off this appeal in ITAT. When the hearing resumed after the brief adjournment today, it was clarified by learned Counsel for the assessee that the aforesaid purchase invoices were not filed before the Assessing Officer during I.T.A. No.75/Lkw/2022 Assessment year:2017-18 9 the assessment proceedings. The learned Counsel for the assessee sought for time to amend the paper book and/or the certificate. In view of the foregoing, the learned Counsel for the assessee requested for adjournment of the hearing. When the hearing resumed after the aforesaid brief adjournment, the learned CIT (D.R.) for the Revenue also filed a letter seeking adjournment of hearing stating as under: “The appeal involves directions of Hon'ble High Court. Also the appellant has filed paper book and written submissions on 20/06/2023 and 22/06/2023 respectively, which needs to be thoroughly examined. In view of the above fact, your are requested to kindly adjourn above appeal to first week of july or any other date convenient to your honours.” As representatives of both sides have requested for adjournment of hearing today, the hearing is adjourned to 4th July, 2023 as first on board.” (A.2.1.1) On the request of both sides the case was adjourned to 04/07/2023. (A.2.2) On 04/07/2023, the appellant assessee was represented by none. However, letter dated 28/06/2023 was filed stating as under: “I respectfully submit that at the time of hearing i.e. 22.06.2023, the Hon'ble Bench pointed out that at Sl. No. 12 of the paper book which was filed on 15.06.2023 states that "purchase invoices were produced before the Assessing Officer for test check" whereas the certificate states that purchase invoices were filed before the Assessing Officer. The Hon'ble Bench was pleased to grant time to the assessee to amend the paper book and/or certificate. 2. Further, to substantiate the argument that liquors cannot be purchased from the open market, I am enclosing herewith copy of "The United Provinces Excise Act, 1910 (U.P. Act No. IV of 1910)" at serial no 13 of paper - book. I.T.A. No.75/Lkw/2022 Assessment year:2017-18 10 3. In view of the above, I am filing fresh paper-book with amended certificate; I want to withdraw my earlier paper book which was filed on 15.06.2023. I sincerely apologise for the inconvenience caused due to typographical error.” (A.2.2.1) Another letter, also dated 28/06/2023, was filed from the assessee’s side, relevant portion of which is reproduced as under: “1. The appellant - assessee most humbly submits that on the last date of hearing i.e. 22.06.2023, it was argued by the Ld. Counsel that 'the liquors cannot be purchased from the open market.' Since, at the time of hearing 'United Provinces Excise Act, 1910 (U.P. Act no. IV of 1910)' was not available; the Hon'ble Bench was pleased to grant time to file materials in support the contention. The appellant has filed the aforesaid 'Act' along with the paper book. It is at serial no 13 of the paper-book. 2. It is respectfully stated that sec.3 (13) defines "intoxicant" means any liquor or intoxication drug as defined by this Act. Sec. 6 provides power of the State Government to declare limit of sale by retail; and sec. 7 provides sale by whole sale. Sec.20 of this Act provides that 'Possession of intoxicants in excess of the quantity prescribed by the State Government prohibited except under permit. Sec. 21 provides sale of intoxicant without license prohibited. Further, sec. 60 of the aforesaid Act provides 'Penalty for unlawful import, export, transport, manufacture, possession, sale, etc. From the perusal of the aforesaid section, your Honour will appreciate that liquors cannot be purchased from open market without license. 3. The appellant most humbly request to the Hon'ble Bench that the case may kindly be heard on the basis of my written submission/argument, paper-book and compilation of judgments. The aforesaid case is fixed for hearing on 04.07.2023. I sincerely regret for the inconvenience caused to the Hon'ble Bench.” (A.2.2.2) The case was again adjourned for hearing to 18/07/2023 for enabling the assessee to make representation in person and for enabling learned CIT, D.R. to file status report in aforesaid Writ Petition No. 70 of 2023 filed by the assessee in Lucknow Bench of Allahabad High Court. On I.T.A. No.75/Lkw/2022 Assessment year:2017-18 11 18/07/2023, once again the assessee was represented by none. However, letter dated 12/07/2023 was filed from the assessee’s side stating as under: “We thankfully acknowledge receipt of the Notice of the date fixed for the hearing of above-mentioned Appeal on July 18, 2023. In this connection the humble appellant most humbly request the Hon'ble Bench that our Appeal (ITA No. 75/LKW/2022) may kindly be decided on the basis of our Written Submissions, Paper-Book and Compilation of Judgements already on Record, waiving of our right of personal hearing or hearing through the 'Counsel', please. We may also submit that this "WAIVER" is being made with full and conscious knowledge of the existence of our sacrosanct right.” (A.2.2.3) Learned CIT (DR) filed status report vide letter dated 04/07/2023, stating as under: “In this context, it is hereby informed that above case was listed for hearing on 03/07/2023 before the Hon'ble Allahabad High Court. Shri Kushagra Dixit, counsel for the Income Tax Department has informed that the Hon'ble Bench did not function on 03/07/2023 and further status will be informed as and when it is listed before Hon'ble Allahabad High Court.” (A.3) There is no further update on our record, received from either side regarding status of the aforesaid writ petition in Hon'ble Allahabad High Court. As far as we are aware, there are no directions from Hon'ble Allahabad High Court to Income Tax Appellate Tribunal (Lucknow Bench) in this case. (B) Vide letter dated 28/06/2023 filed in Registry on 28/06/2023, the assessee withdrew earlier paper book filed 15/06/2023 and filed a fresh paper book with amended certificate, expressing apology for the inconvenience caused due to typographical error. We accept the apology; and also accept the explanation that wrong certificate filed along with paper I.T.A. No.75/Lkw/2022 Assessment year:2017-18 12 book filed on 15/06/2023 (claiming that purchase invoices, copies whereof were placed at page No. 59-74 of aforesaid paper book filed on 15/06/2023 were produced before the Assessing Officer and are part of record in the files of Income Tax Department) was due to typographical error. This acceptance is because of bonafide conduct of learned Counsel for the assessee at the time of hearing on 22/06/2023 when he requested for beief adjournment of the hearing (for 30 minutes) for ascertaining the factual correctness of the claim; and clarified the matter when the hearing resumed after 30 minutes [copy of order sheet dated 22/06/2023 has already been reproduced in foregoing paragraph (A.2.1) of this order]. Moreover, shortly thereafter, the paper book filed on 15/06/2023 was replaced with fresh paper book filed on 28/06/2023 along with amended certificate. Relevant portion of aforesaid letter dated 28/06/2023 is reproduced below: “May it please the Hon'ble Members', I respectfully submit that at the time of hearing i.e. 22.06.2023, the Hon'ble Bench pointed out that at Sl. No. 12 of the paper book which was filed on 15.06.2023 states that "purchase invoices were produced before the Assessing Officer for test check" whereas the certificate states that purchase invoices were filed before the Assessing Officer. The Hon'ble Bench was pleased to grant time to the assessee to amend the paper book and/or certificate. 2. Further, to substantiate the argument that liquors cannot be purchased from the open market, I am enclosing herewith copy of "The United Provinces Excise Act, 1910 (U.P. Act No. IV of 1910)" at serial no 13 of paper - book. 3. In view of the above, I am filing fresh paper-book with amended certificate; I want to withdraw my earlier paper book which was filed on 15.06.2023. I sincerely apologize for the inconvenience caused due to typographical error.” (B.1) At the time of hearing before us on 18/07/2023, the appellant assessee was represented by none, which was in accordance with aforesaid I.T.A. No.75/Lkw/2022 Assessment year:2017-18 13 letters dated 28/06/2023 and 12/07/2023, referred to in foregoing paragraphs (A.2.2.1) and (A.2.2.2) of this order. Revenue was represented by learned CIT, D.R. She relied on the aforesaid impugned order dated 22/02/2022 of learned Pr.CIT. (B.1.1) In the course of appellate proceedings in ITAT, written submissions were filed from the assessee’s side vide letter dated 21/06/2023, the relevant portion of which is reproduced below: ‘May it please the Hon'ble Members', The appellant is in appeal against the order of Ld. Pr. Commissioner of Income tax, Bareilly dated 22.02.22, setting aside the order of assessment dated 24.12.2019 to be framed denovo as per law on the ground that "The Assessing officer has passed the assessment order on 29.07.2019 u/s 143(3) of the Act without enquires on the above issues and accepted submission of the assessee." Whether the AO has not examined/ enquired into the details of the facts of the case and whether the assessment order passed u/s 143(3) of the Act is erroneous? The relevant facts of the case of the assessee are as under - 2. The appellant - assessee is an AOP and engaged in the business of retail trading of liquor at various outlets. During the relevant assessment year, the appellant filed its return of income showing total income of Rs.87,06,920/-. The case was selected for 'Complete Scrutiny'. The main reason for selection of case for scrutiny was 'Large value of case deposit during demonetization period.' Notice u/s 142(1) of the Act was issued along with the questionnaire calling for details and information. In compliance to the notices, the appellant filed pointwise replies and also filed relevant information/ documents. Books of accounts alongwith AOP agreement and bills and vouchers were also produced for examination before AO at the time of assessment proceedings. The assessment was completed by making addition of Rs.60,500/- as unexplained cash credits and Rs.2,18,300/- as adhoc disallowance of expenditure shown in the I.T.A. No.75/Lkw/2022 Assessment year:2017-18 14 books of the assessee. The appellant is in appeal against the assessment order. 3. The Id. Pr. Commissioner of Income Tax (P.C.I.T) issued notice u/s 263 of the Act dated 27.01.2021 in which he has stated that "The A.O. was expected to follow the guidelines and issue specific queries to examine the source of cash deposits as well as to make relevant enquires before completion of assessment proceedings." The notice was issued on the following grounds: "1. However, the AO has not made enquiry from State Excise department regarding the purchases made by the assessee. The A.O should have examined the expenditure in Trading Account as well as in the P&L A/C on test-check basis for the year under consideration. He should have undertaken third party enquires w.r.t. major heads of Balance Sheet and P & L A/C. 2. Assessing officer has not enquired about shop-wise details of purchases and sales and expenses. 3. The assessing officer has not asked the assessee to submit the details of licence issued to him for the trading of liquor business. 4. The AO has also failed to examine the sales of liquor by the assessee with the supporting documents such as sales bills/ vouchers. 5. The AO has made addition while passing the assessment order. He was required to initiate penalty proceedings u/s 270A of the IT Act, 1961. The initiation of penalty proceeding is compulsory from A.Y. 2017-18 whenever there is addition to income." 4. From the perusal of the above grounds, the Ld. PCIT presumed that no inquiry was done by the AO and he has simply relied on the replies of the appellant - assessee. The appellant most respectfully submits that the grounds which were raised by the Ld. PCIT were either part of records with the Income-tax Department or specific queries/information was asked by the Ld. Assessing Officer. I.T.A. No.75/Lkw/2022 Assessment year:2017-18 15 4.1. The appellant most humbly submits that the first ground which was noted by the Ld. PCIT has two parts; first, the AO has not made enquiry from the State Excise Department regarding purchases; and second, the AO should have examined the expenditure in trading account as well as P & L account on test check basis. Your honour would appreciate that State Excise Department issue licence for sale of liquors to the whole seller as well as to the retailers. Whole seller purchases liquors from manufacturer and retailer purchases from whole seller. Liquors cannot be purchased from the open market. Purchases of Liquor are subject matter of TCS. Section 206C of the Act. contains the provisions of 'Tax Collected at Source' ("TCS") that typically require the seller to collect an additional sum over the sale price from the buyer and deposit to the treasury of the Government. The tax so collected and deposited is available as a credit to the buyer. Thus, the party-wise name and purchases of liquor reflecting in TCS details are on e-filling portal of Income-tax Department. The party wise details were with the department at the time assessment proceedings as well as proceedings u/s 263 of the Act. It is further submitted that at the time of assessment proceedings, produce books of accounts along with bills and vouchers which includes purchase bills too. The second part of the grounds deals with examination of expenditure of trading and P&L account of test check basis. Your honour will appreciate that at page 1 para 2 of the assessment order clearly states that "The information/documents furnished were verified and books of account produced were examined on test check basis." Further, the Ld. AO at page 3 para 5 has discussed in detail about the expenses of the assessee shown in the trading and P&L account. He has disallowed Rs.2,18,300/- on the ground that some of the vouchers were hand written, unsigned and unclear. 4.2. Ground no 2 and 4 states that the AO has not enquired about shop wise purchases and sales and expenses. The Ld. Pr. CIT completely ignored the fact that on 13.12.2019, the assessee had produced the books of accounts along with bills and vouchers for verification and were cross checked as also stated by the AO in his order. It is also pertinent to mention that purchase bills were also produced for verification. The appellant begs to submit that as states above, TCS were made on the purchases; therefore, it is available for verification on e-filing portal of Income-tax Department. So far as corresponding sales are concerned, they were credited in the trading account which was test checked during the course of assessment proceedings. I.T.A. No.75/Lkw/2022 Assessment year:2017-18 16 4.3. In ground no 3, the Ld. Pr. CIT has alleged that the AO has not asked for the details licence issued to the assessee for trading of liquor. It is respectfully stated that the appellant files its return of income on status of AOP, Pratap Narain & others, Lucknow Division. Since all the licensees as per agreement, agreed to run business under AOP M/s Pratap Narain & others Lucknow Division, therefore, all the purchases and sales are done by AOP M/s Pratap Narain & others Lucknow Division which can be verified from TCS records and book of accounts as well as purchase bills and vouchers. The Ld. Pr. CIT failed to appreciate that at the time of assessment proceedings, the Ld AO vide notice u/s 142(1) dated 24.09.2019 made a specific query relating to the business of the appellant which is at serial no 1 and 2: "1. Give a detail note on the business activities carried out during the year. 2..... Also furnish the copy of Partnership Deed." A detailed reply alongwith the relevant annexure were filed on 23.10.2019 before the Ld. A.O. All the trading were done under AOP Pratap Narain & others Lucknow Division and all the expenses were incurred by the appellant. This fact was also brought to the notice to Ld. Pr. CIT, but no comment was given by him in the regard. An enquiry was made by the AO in relation to trade/business of the appellant. It cannot be said that no enquiry was made by the AO regarding trading of Liquor. It is not a case of lack of enquiry. 4.4. The assessee humbly states that ground no 5 relate to levy of penalty u/s 270A of the Act. The PCIT stated that the AO has not levied penalty u/s 270A of the Act. He failed to appreciate that the A.O has already levied the penalty u/s 271AAC of the Act. Sub-section (2) of sec. 271AAC of the bars levy of penalty u/s 270A of the Act. 5. A point-wise reply in response to notice u/s 263 was submitted before Ld. Pr. CIT. All the relevant facts of the case were brought to his notice. The appellant would like to submit that no comments was given by the Pr. CIT on the replies of the assessee but new grounds were given for setting aside the assessment order. Therefore, it can be safely presumed that Ld. Pr. CIT has accepted that contention of the appellant. 6. The appellant begs to submit that the Ld. AO had raised detailed queries in relation to assessee's business, cash deposits, bank I.T.A. No.75/Lkw/2022 Assessment year:2017-18 17 statement, cash flow statement, sundry creditors and also asked to produce books of account along with bills and vouchers supporting its claim. The assessee responded by the replies filed of various dates. Cash Book, bank statement and Books of account were also filed/produced and which was cross verified. An enquiry was made by the assessing officer and the assessment order was passed. It was only if the Assessing Officer had not made any enquiry then it could be said that the order passed was erroneous. This is not a case of lack of enquiry. 7. Your honour will appreciate that it is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. The order which is not in accordance with law or which has been passed by the AO without making enquiries in undue haste. The order will not be erroneous and prejudicial to the interest of the Revenue if the order is passed after making inquiry. The power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Thus, this power cannot be exercised unless the PCIT is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. This is not a case of lack of inquiry. Inadequacy of the inquiry does not give jurisdiction to the PCIT to invoke the provisions of section 263. No doubt clause (a) of Explanation 2 to Section 263 deems an order to be erroneous and prejudicial to the interest of the revenue in case the order is passed without making enquiries. i) Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC), wherein it was held as under: "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 interest of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law." (page 1-6 of the compilation) ii) The Hon'ble Punjab & Haryana High Court in the case of CIT v. Indo German Fabs IT Appeal No. 248 of 2012, dated 24-12-2014, in the following words: "Section 263 of the Act confers power to examine an assessment order so as to ascertain whether it is I.T.A. No.75/Lkw/2022 Assessment year:2017-18 18 erroneous and prejudicial to the interest of the revenue but does not confer jurisdiction upon the CIT to substitute his opinion for the opinion of the Assessing Officer. The words prejudicial and erroneous have to be read in conjunction and therefore, it is not each and every error in an assessment that invites exercise of powers under Section 263 of the Act, but only orders that are erroneous and prejudicial to the interest of the revenue." (page 711 of compilation) iii) Hon'ble Delhi High Court in the case of CIT Vs Sunbeam Auto 332 ITR 167 (Del.), has held that if there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263 of the Act, merely because he has a different opinion on the matter. It is only in cases of 'lack of inquiry' that such a course of action would be open. (page 12-25 of the compilation) iv) The Hon'ble Chennai ITAT in the case of SICAL Logistics Ltd. v. Addl. CIT [2010] 127 ITD 187 held that merely because A.O. did not conduct inquiry into Books of Account in way Commissioner wanted it, it could not be treated as erroneous order. v. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016"..........we are of the view that the said Explanation cannot be said to have over ridden the law interpreted by Hon'ble Delhi High Court, referred above. (CIT Vs. Goetze (India) Ltd (361 ITR 505)) If that be the case, then the Ld Pr. CIT can find fault with each and every assessment order, without conducting any enquiry or verification in order to establish that the assessment order is not sustainable in law and order for revision. He can also force the AO to conduct the enquiries in the manner preferred by Ld Pr. CIT, thus prejudicing the independent application of mind of the AO. Definitely, that could not be the intention of the legislature in inserting Explanation 2 to sec. 263 of the Act, since it would lead to unending litigations and there would not be any point of finality in the legal proceedings. The Hon'ble Supreme Court has held in the case of Parashuram Pottery Works Co. Ltd Vs. ITO (1977) (106 ITR 1) that there must be a point of finality in all legal proceedings and the stale issues should not be reactivitated beyond a particular stage and the 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. "20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. I.T.A. No.75/Lkw/2022 Assessment year:2017-18 19 In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquires or verification that would have been carried out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant." (page 26-46 of complitation) vi) M/S Arun Kumar Garg HUF vs. PCIT, ITA No. 3391/Del/2018, dt. 08.01.2019 "5.6 Although, there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 has been inserted w.e.f. 1.6.2015 but the same does not give unfettered powers to the Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Officer to reexamine the issues already examined during the course of assessment proceedings." (page 47-51 of compilation) vii) Rajgul Credit Invest P. Ltd. Vs. PCIT, I.T.A. No. 2519/DEL/2019, dt. 19.09.2019 "We further note that Explanation to section 263 of the Act does not change the scope of section 263 of the Act, the Mumbai Tribunal in the case of Narayan Tatu Rane vs. ITO reported in 70 taxmann.com 227 has also held that in a case where learned Pr. CIT has not brought any material on record by making enquiries or verifications to substantiate his inference, the learned PCIT is not justified in holding that the impugned assessment order was erroneous. I.T.A. No.75/Lkw/2022 Assessment year:2017-18 20 5.4.1 In view of above, we note that notice u/s. 263 of the Act issued by the Pr. CIT is vague and only for making deeper enquiry and re-considering the evidences already on record duly considered during assessment proceedings based on purported proposal that fresh facts have been emerged subsequent to the order of assessment which is factually incorrect and untenable and the conditions or the factors enabling the Ld. Pr. CIT to invoke his jurisdiction uls 263 have not been satisfied." (page 52-62 of compilation) Whether an assessment order u/s 143(3) can be revised u/s 263 by PCIT without recording a finding on merit of the case? 7. Without going into merit of the case, the PCIT had wrongly set- aside the assessment order dated 25.12.2019. It may be stated that the consistent judicial view is the merely because assessment order is cryptic, it cannot be revised without going into merit of the case. a) In J.P. Srivastava and Sons (Kanpur) vs CIT 111 ITR 326, 329 (All) has held "We are, therefore, of opinion that without going into the merits of the claim of the assessee it was not possible for the Commissioner to say that the order of the Income-tax Officer had caused any prejudice to the interests of revenue and, as such, he was not competent to set aside the assessment order and remand the matter to the Income-tax Officer." (page 63-65 of compilation) b) In the case of CIT vs. Goyal Private Family Specific Trust, (1998) 171 ITR 698 (All) (page 66-69 of compliation): followed in CIT vs. Mahendra Kumar Bansal 297 ITR 99 (All, it was held that "The Commissioner having failed to point out any error, no error can be inferred from the order of the Income-tax Officer for the simple reason that they are bereft of details. If the order is not erroneous, then it cannot be prejudicial to the interest of the Revenue. There is nothing to show in the order of the Commissioner that the Income-tax Officer would have reached a different conclusion had he passed a detailed order. So the conclusion of the Commissioner that the orders of the Income- tax Officer are erroneous and prejudicial to the interest of the Revenue is based merely on suspicion and surmise in the absence of any inquiry having been made by him." (page 70-74 of compilation) I.T.A. No.75/Lkw/2022 Assessment year:2017-18 21 8. Section 263 cannot be invoked without recording finding on merit; CIT vs Gabriel India Ltd. 203 ITR 108 (Bom); CIT vs Vikas Polymers, 341 ITR 537 (Del); CIT vs. DLF Ltd 350 ITR 555 (Del). In the case of CIT vs. Max India Ltd 295 ITR 282 at page 284, Hon'ble Supreme Court has held that assessment order "cannot be treated erroneous order prejudicial to the interest of the Revenue, unless the view taken by the Income-tax Officer in unsustainable in law." (page 75-77 of compilation) Can provision of section 263 of the Act be invoked for roving and fishing enquiry or change of opinion? 9. It is humbly submitted that the order of the PCIT u/s 263 is contrary to the law as stated above, hence it is liable to be set aside. That apart, PCIT cannot initiate proceeding u/s 263 of the Act with a view to start fishing and roving inquires in the matters which had already concluded. The Ld. Pr.CIT has initiated proceedings starting a fishing and roving enquiry in the matter without bringing on record any material or evidence demonstrating that he has acted in a reasonable manner. 9.1 In case of Gabriel India Ltd.'s (supra), law on this aspect was discussed in the following manner: " From a reading 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 insofar as it is prejudicial to the interests of the revenue'. It is not an arbitrary or unchartered power. It can be exercised only on fulfillment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous insofar 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 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 I.T.A. No.75/Lkw/2022 Assessment year:2017-18 22 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]..." (page 78-85 of compilation) Whether PCIT can travel beyond the notice u/s 263 of the Act and set aside the assessment on new grounds? 10. The appellant most humbly submits that from the perusal of the notice u/s 263 of the Act, your honour will appreciate that there are five grounds/reasons stated in his notice (supra). Point wise reply was given to the Ld. Pr. CIT to the notice u/s 263. It is humbly stated that no adverse finding/observation on the point-wise reply was given by him. The Pr. CIT while setting aside the assessment, made new grounds which were not in the notice and stated in his order that "It is apparent from the submission filed by the assessee during the proceedings that the assessee has not submitted any reply with regard to specific points raised in the show cause notice issued during proceeding u/s 263, on the basis of which it was held by Pr.CIT that the assessment order has been passed by the AO without enquires on these issues during the assessment proceedings." It is de-jure in the eyes of law. The appellant most humbly states that no such points/issue was ever raised by PCIT in the notice served upon the assessee and the assessee was not even confronted by the PCIT before passing the order dated 22.02.2022. It is violation of principle of natural justice. Before the Hon'ble Bombay High Court in this case of PCIT Vs Universal Music India Pvt. Ltd Income-tax Appeal 238 of 2018, a substantial question of law has been proposed in the Appeal: "(a) Whether on the facts, in the circumstances of the case and as per law, the Hon'ble ITAT has erred in holding that in the revision proceedings the CIT cannot travel beyond the reasons given by him for revision in the show-cause notice without appreciating that the power of revision under Section 263 of the I.T. Act is not contingent on the giving of a notice to show cause?" The Hon'ble Court has held that "9. In the case at hand, there is a finding by the Tribunal, as noted earlier, that no issue was raised by the CIT in respect of particulars of payment made to persons specified under Section 40A(2)(b) of the Act and even the show cause notice is silent about that. I.T.A. No.75/Lkw/2022 Assessment year:2017-18 23 10. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law." (page 8693 of compilation) 11. The appellant respectfully submits that as per page 5 of order u/s 263 following were the grounds points which seem uncovered in original assessment hence A.O. was directed to frame assessment denovo. i) No enquiry made by the AO regarding genuineness of the source of cash deposit of Rs. 18,00,000/- on 10.11.2016 in Bank of Baroda Account and Rs. 14,86,500/- from 08.11.2016 to 17.11.2016 in Dena Bank account during demonetization period. ii) AO did not enquire about the details of license issued to him for the trading of liquor. iii) During the year, there was addition to member's capital account amounting Rs. 79.10 lakhs. AO did not verify the source, genuineness, creditworthiness of the partners as well as the mode of payment. iv) There were major expenses like purchases, processing fees, carriage onwards and other expenses, which were not examined by the AO neither with regard to genuineness of the expenses claimed nor whether the same were allowable as per provisions of the Act. v) During the year, the assessee has paid security deposit of Rs. 40 lakhs from 04.04.2016 to 07.04.2016. The AO has not verified the source of this huge amount deposited in cash. 11.1 The Appellant would like to bring kind notice to your honours that: i.) Regarding ground/point no.1 in the PCIT order, the appellant would like to draw your kind attention towards query raised on point no. 4. 5 and 6 of notice u/s 142(1) dated 17/10/2019, which A.O. specifically asked for large cash deposit & asked to submit details in I.T.A. No.75/Lkw/2022 Assessment year:2017-18 24 format provided in notice alongwith cash book & cash flow statement. Further, the Ld. A.O. vide notice u/s 142(1) dated 12/12/2019 had asked to produce books of accounts alongwith bills and vouchers and certificate from bank reflecting date wise details of SBN deposited in bank. In compliance of the same by the assessee submitted all the required documents such as charts, cash flow statement & Cash Book vide Acknowledgement Number: 04121912490473 & Acknowledgement Number: 13121912692355 respectively. ii) Regarding ground/point no. 2, it is submitted that A.O. at point no. 1 of the notice dated 17/10/2019 inquired regarding business activity, the assessee vide acknowledgment no 04121912490473, stated that we are doing business of retail trading of liquor and as commodity, it comes under state excise department, hence, licence is mandatory. Without having a valid licence liquor cannot be purchased from wholesaler. Copy of AOP agreement and copies for purchase bills were produced before the Ld. AO at the time of assessment proceedings. iii) Regarding ground/point no. 3, the Ld A.O. raised the query on point no. 12. of notice dated 17/10/2019 and notice dated 12/12/2019 of above referred notice vide regarding Capital introduction & the was complied with acknowledgment no 04121912490473 our above referred reply & A.O. also verified the same from Books of accounts produced vide Acknowledgement Number: 13121912692355. same iv) Regarding ground/point no. 4, it is stated that these expenses were verified from Books of accounts & bills & vouchers produced vide Acknowledgement Number: 13121912692355 & after verification Rs. 2,18,300/- has been disallowed. by A.O. on this very count which is evident from page 3 of assessment order (10% of expenses referred in assessment order. v) Regarding point no. 5 assessee would like to submit that A.O. raised the query on point no. 13 of notice u/s 142(1) dated 17/10/2019 regarding details of security. deposit during the year & the same has been submitted by us in our reply filed vide Acknowledgement Number: 04121912490473. I.T.A. No.75/Lkw/2022 Assessment year:2017-18 25 (B.1.1.1) Moreover, further written submissions vide separate letter dated 28/06/2023, relevant portion of which is reproduced below: “The appellant assessee most humbly submits that on the last date of hearing i.e. 22.06.2023, it was argued by the Ld. Counsel that 'the liquors cannot be purchased from the open market.' Since, at the time of hearing United Provinces Excise Act, 1910 (U.P. Act no. IV of 1910) was not available; the Hon'ble Bench was pleased to grant time to file materials in support the contention. The appellant has filed the aforesaid 'Act' along with the paper book. It is at serial no 13 of the paper-book. 2. It is respectfully stated that sec.3 (13) defines "intoxicant" means any liquor or intoxication drug as defined by this Act. Sec. 6 provides power of the State Government to declare limit of sale by retail; and sec. 7 provides sale by whole sale. Sec.20 of this Act provides that 'Possession of intoxicants in excess of the quantity prescribed by the State Government prohibited except under permit. Sec. 21 provides sale of intoxicant without license prohibited. Further, sec. 60 of the aforesaid Act provides 'Penalty for unlawful import, export, transport, manufacture, possession, sale, etc. From the perusal of the aforesaid section, your Honour will appreciate that liquors cannot be purchased from open market without license.” (B.1.2) In addition, a compilation of judgments was filed from the assessee’s side in the following cases: S.No. Particulars 1. Copy of judgment of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd vs CIT reported in 243 ITR 83 2. Copy of judgment of Hon'ble Punjab & Haryana High Court in the case of CIT vs M/s indo German Fabs ITA No. 248 of 2012 3. Copy of judgment of Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd reported in 332 ITR 167 (Del) 4. Copy of judgment of Hon'ble Income tax Appellate Tribunal, Mumbai Bench, in the case of Shri Narayan Tatu Rane vs. ITO reported in 70 Taxmann 227 (Mum) 5. Copy of judgment of Hon'ble Income tax Appellate Tribunal, Delhi Bench, in the case of M/s Arun Kumar Garg vs. Pr.CIT ITA no 3391/Del/2018 6. Copy of judgment of Hon'ble Income tax Appellate Tribunal, Delhi I.T.A. No.75/Lkw/2022 Assessment year:2017-18 26 Bench, in the case of Rajgul Credit Invest P. Ltd vs Pr. CIT, ITA No.2519/Del/2019 7. Copy of judgment of Hon'ble Allahabad High Court in the case of J.P. Srivastava & sons (Kanpur) Ltd. vs CIT reported in 111 ITR 326 (All) 8. Copy of judgment of Hon'ble Allahabad High Court in the case of CIT vs. Goyal Private Family Specific Trust reported in 171 ITR 698 (All) 9. Copy of judgment of Hon'ble Allahabad High Court in the case of CIT vs. Mahendra Kumar Bansal reported in 297 ITR 99 (All) 10. Copy of judgment of Hon'ble Supreme Court in the case of CIT (Central) vs. Max India Ltd reported in 295 ITR 282 (SC) 11. Copy of judgment of Hon'ble Bombay High Court in case of CIT vs. Gabriel India Ltd reported in 203 ITR108 (Bom) 12. Copy of judgment of Hon'ble Bombay High Court in case of Pr.CIT vs. M/s Universal Music India, ITA 238 of 2018 13. Copy of judgment of Hon'ble Income tax Appellate Tribunal, Lucknow Bench, in the case of M/s Basti Wine Co (English) vs Pr.CIT, ITA No.409/Lkw/2018 (B.2) Also, as mentioned in foregoing paragraph (A.3) of this order, a paper book earlier filed from the assessee’s side on 15/06/2023 was subsequently replaced by another paper book filed on 28/06/2023 along with amended certificate. The contents of the aforesaid paper book filed on 28/06/2023 are as under: 1. Copy of notice u/s 263 of the Act dated 27.01.2021 issued by PCIT- Bareilly 2. Copy of notice u/s 263 of the Act dated 18.11.2021 issued by PCIT- Bareilly 3. Copy of reply filed by the appellant in compliance to notice u/s 263 of the Act dated 12.02.2021 4. Copy of notice u/s 143(2) of the Act dated 24.09.2018 5. Copy of notice u/s 142(1) of the Act dated 17.10.2019 6. Copy of reply dated 23.10.2019 filed in compliance to notice dated 17.10.2019. 7. Copy of notice u/s 142(1) of the Act dated 12.12.2019 8. Copy of reply dated 13.12.2019 filed in compliance to notice dated 12.12.2019. I.T.A. No.75/Lkw/2022 Assessment year:2017-18 27 9. Copy of Form 26AS showing party-name, purchases and TCS thereon 10. Copy of AOP agreement of Pratap Narain Lucknow Division & others 11. Copy of Income-tax Return along with its relevant annexure 12. Copy of purchase invoices produced before AO for test check 13. Copy of The United Provinces Excise Act 1910 (U.P Act no 22 of 1999. (B.2.1) For ready reference, relevant parts from aforesaid paper book, as referred to at Sl. No. 5,6,7 & 8 of aforesaid paper book filed on 28/06/2023 are reproduced below: (i) Copy of notice u/s 142(1) of IT Act dated 17/10/2019 (Sl. No. 5 of aforesaid paper book) “In connection with the assessment for the assessment year 2017-18 you are required to: a) Furnish or cause to be furnished on or before 23/10/2019 at 11:53 AM the accounts and documents specified overleaf. b) Furnish and verified in the prescribed manner under Rule 14 of I.T. Rules 1962 the information called for as per annexure and on the points or matters specified therein on or before 23/10/2019 at 11:53 AM. c) The above mentioned evidence/information is to be furnished online electronically in 'E-Proceeding' facility through your account in 'e-filing' website of Income Tax Department. d) Para(s) (a) to (c) are applicable if you have an account in e-filing website of Income Tax Department. Till such an account is created by you, assessment proceedings shall be carried out either through your e-mail account or manually (if e-mail is not available). e) In cases where order has to be passed under section 153A/153C of the Income Tax Act, 1961 read with section 143(3), assessment proceedings would be conducted manually.” I.T.A. No.75/Lkw/2022 Assessment year:2017-18 28 I.T.A. No.75/Lkw/2022 Assessment year:2017-18 29 I.T.A. No.75/Lkw/2022 Assessment year:2017-18 30 I.T.A. No.75/Lkw/2022 Assessment year:2017-18 31 (ii) Copy of reply of assessee filed in response to aforesaid notice dated 17/10/2019 (Sl. No. 6 of aforesaid paper book). However, printouts of PDF attachments as per Sl.No. 2, 3 and 4 below were not provided from the assessee’s side in the course of appellate proceedings in ITAT. 1. Enclosuresofreply.pdf 2. BOB2017.pdf 3. Denabank.pdf 4. Ledgers.pdf I.T.A. No.75/Lkw/2022 Assessment year:2017-18 32 “In response to your queries, I would like to submit as under: 1. That our business is that of retail trading of liquor at various outlets of district Sitapur, Lucknow and Lakhimpur-Kheri. 2. That as required I am enclosing herewith Computation of Income and tax, Balance Sheet and Profit & Loss account along with all their annexure for A.Y. 2017-18. 3. That the detail of bank accounts in required format is given on separate sheet enclosed along with all bank statements from 01.04.2015 to 31.03.2017. 4. That the details of deposit in required format are given on separate sheet enclosed. 5. That you are requested to kindly permit to produce the books of accounts along-with vouchers manually as per provision mentioned at point no. 4 (I) of Note on E-Proceeding as they are in bulk. 6. That the cash flow statement is given on separate sheet enclosed. 7. That during the financial neither any fresh unsecured taken nor any payments made. 8. That there were no sundry creditors at the end of year. 9. That we deal in non VAT goods hence there was no need for VAT registration. 10. That all expenses are below TDS limits hence no deduction was made during the yea. 11. That the ledger account of breakage is being enclosed. 12. That the capital introduced by members was out of current year’s income as well as from past savings and withdrawal made from other joint ventures. 13. That the ledger of security deposit is being enclosed” I.T.A. No.75/Lkw/2022 Assessment year:2017-18 33 (iii) Copy of notice u/s 142(1) of IT Act dated 12/12/2019 issued by the Assessing Officer to the assessee (Sl.No. 7 of the aforesaid paper book) (iv) Copy of reply of the assessee filed in response to aforesaid notice dated 12/12/2019 (Sl.No. 8 of aforesaid paper book). However, printouts of PDF attachments as per Sl.No. 2 and 3 below were not provided from the assessee’s side in the course of appellate proceedings in ITAT. I.T.A. No.75/Lkw/2022 Assessment year:2017-18 34 1. REPLY2.pdf 2. BANKCERTIFICATES.pdf 3. CASHBOOK.pdf I.T.A. No.75/Lkw/2022 Assessment year:2017-18 35 (B.3) As can be readily seen, the assessee refrained from providing printouts of pdf files as mentioned in foregoing paragraphs (B.2.1) (ii) and (B.2.1) (iv) of this order. Moreover, in view of the letters dated 28/06/2023 and 12/07/2023 filed from the assessee’s side relevant portions of which have been reproduced in foregoing paragraphs (A.2.2.1) and (A.2.2.2) of this order, and in view of the assessee’s well considered decision to not appear in person [as referred from foregoing paragraph (B.2) of this order]; it has to be inferred that the assessee had no intention to provide printouts of the aforesaid pdf files in the course of appellate proceedings in Income Tax Appellate Tribunal. (C) As referred to in foregoing paragraph (A.1) of this order, the learned Pr. CIT has passed the aforesaid impugned revisionary order dated 22/02/2022 holding that the Assessing Officer has passed the assessment I.T.A. No.75/Lkw/2022 Assessment year:2017-18 36 order without enquiries, accepting submissions of the assessee on the following points: i) No enquiry made by the AO regarding genuineness of the source of cash deposit of Rs.18,00,000/- on 10.11.2016 in Bank of Baroda Account and Rs.14,86,500/- from 08.11.2016 to 17.11.2016 in Dena Bank account during demonetization period. ii) AO did not enquire about the details of license issued to him for the trading of liquor. iii) During the year, there was addition to member's capital account amounting Rs.79.10 lakhs. AO did not verify the source, genuineness, creditworthiness of the partners as well as the mode of payment. iv) There were major expenses like purchases, processing fees, carriage onwards and other expenses, which were not examined by the AO neither with regard to genuineness of the expenses claimed nor whether the same were allowable as per provisions of the Act. v) During the year, the assessee has paid security deposit of Rs.40 lakhs from 04.04.2016 to 07.04.2016. The AO has not verified the source of this huge amount deposited in cash. (C.1) In the written submissions dated 21/06/2023 [referred to in foregoing paragraph (B.2) of this order], the learned Counsel for the assessee disputes the aforesaid finding of learned Pr. CIT. The relevant portion of the aforesaid written submissions dated 21/06/2023 is at paragraph 11.1 of the written submissions. Regarding point No. (i), the learned Counsel for the assessee has claimed that the relevant query was raised on point number (iv), (v) and (vi) of aforesaid notices u/s 142(1) of the IT Act dated 17/10/2019 and 12/12/2019 which were complied with by the assessee through the aforesaid replies dated 23/10/2019 and 12/12/2019. However, I.T.A. No.75/Lkw/2022 Assessment year:2017-18 37 on perusal of records, we find that printout of PDF attachments of assessee’s aforesaid replies dated 23/10/2019 and 13/12/2019 have not been provided from the assessee’s side. Therefore, in view of foregoing paragraph (B.3) of this order, we hold that the assessee has failed to establish that the assessee had filed necessary materials on this point and that the Assessing Officer made necessary inquiries on this point. Further as regards the aforesaid point number (ii), it has been claimed by the learned Counsel for the assessee in aforesaid written submissions dated 21/06/2023 that without having a valid license, liquors cannot be purchased from whole sellers. However, on perusal of records we find that the assessee has not filed copy of necessary licenses issued by State Excise Department during the assessment proceedings or during proceedings u/s 263 of the IT Act before the learned Pr. CIT, or during present appellate proceedings before us in ITAT. Therefore, we hold that the assessee has failed to provide necessary details in this regard and the Assessing Officer completed the assessment without obtaining the required details and information on this point. As regards aforesaid Sl. No. (iii), the learned Counsel for the assessee has claimed that this point was raised by the Assessing Officer at Sl.No. 12 of the aforesaid notice dated 17/10/2019 and also in aforesaid notice dated 12/12/2019 and further that the point was complied with vide assessee’s aforesaid replies dated 23/10/2019 and 13/12/2019. However, we find that the assessee has not provided printout of PDF attachments of assessee’s aforesaid replies dated 23/10/2019 and 13/12/2019. Therefore, in view of foregoing paragraph (B.3) of this order, we infer that the assessee has failed to substantiate that the assessee had filed necessary details on this point and that the Assessing Officer had carried out necessary inquiries. Regarding aforesaid Sl.No. (iv), it has been claimed by learned Counsel for the assessee that this point was complied with through assessee’s reply dated 13/12/2019. However, on perusal of I.T.A. No.75/Lkw/2022 Assessment year:2017-18 38 records, we find that the assessee has not provided printouts of PDF attachments submitted along with aforesaid reply dated 13/12/2019. Therefore, in view of foregoing paragraph (B.3) of this order, we hold that the assessee has failed to prove that the necessary details were filed by the assessee before the Assessing Officer and that the Assessing Officer has completed assessment after carrying out necessary verification. As regards aforesaid Sl.No. (v), it has been submitted by the learned Counsel for the assessee in aforesaid written submissions dated 21/06/2023 that this query was raised by the Assessing Officer at Sl.No. 13 of aforesaid notice u/s 142(1) dated 17/10/2019 and that the assessee complied vide reply filed on 23/10/2019. However, on perusal of records, we find that the printout of PDF attachments of assessee’s aforesaid reply dated 23/10/2019 have not been filed from the assessee’s side. Therefore, in view of foregoing paragraph (B.3) of this order, we hold that the assessee has failed to establish that necessary details were filed by the assessee during assessment proceedings and that the Assessing Officer has completed assessment after due verification on this point. Thus, we conclude that on all the five points identified by learned Pr. CIT in his aforesaid impugned revisionary order dated 22/02/2022, the assessee, during appellate proceedings in ITAT, has failed to establish that the necessary details were filed by the assessee during assessment proceedings and that the Assessing Officer has completed the assessment after due verification on these five points. The case before us in this appeal is very clearly one in which the assessment order has been passed without making inquiries or verifications which should have been made; and is, therefore, hit by Explanations 2(a) of Section 263(1) of Income Tax Act. I.T.A. No.75/Lkw/2022 Assessment year:2017-18 39 (C.2) Section 263(1) of IT Act read with Explanation (2) is the relevant law to be considered for deciding this appeal. For ease of reference, the same is 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 1 [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being 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, 2 [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]. ........... Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 3 [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. (C.2.1) It may be added here that aforesaid Explanation (2) to Section 263(1) has been inserted by Finance Act, 2015 with effect from 01/06/2015. The relevant assessment year of the present appeal before us is 2017-18. The assessment order has been passed by the Assessing Officer on I.T.A. No.75/Lkw/2022 Assessment year:2017-18 40 24/12/2019. The aforesaid impugned revisionary order has been passed by learned Pr. CIT on 22/02/2022. The aforesaid dates of 24/12/2019 and 22/02/2022 fall after aforesaid date of 01/06/2015 and the relevant assessment year is 2017-18 in the present case. Therefore, there is no doubt about applicability of aforesaid Explanation (2) to section 263(1) of the IT Act in the present case before us. (C.3) The learned Counsel for the assessee has placed reliance on certain decisions which are referred to in aforesaid written submissions dated 21/06/2023 and in the aforesaid compilation of judgments, referred to in foregoing paragraph (B.1.2) of this order. With utmost regard to Hon'ble Supreme Court, Hon'ble High Court and various Benches of the ITAT, we may mention that the aforesaid cases vide Malabar Industrial Co. Ltd. vs. CIT (supra), CIT vs. Indo German Fabs (supra), CIT vs. Sunbeam Auto Ltd., J. P. Srivastava & Sons (Kanpur) Ltd. vs. CIT (supra), CIT vs. Goyal Family Specific Trust (supra), CIT vs. Mahendra Kumar Bansal (supra), CIT vs. MAX India Limited (supra) and CIT vs. Gabrial India Limited (supra) were passed after the aforesaid date of 01/06/2015 and therefore, have not factored in the impact of amendment to section 263(1) of the IT Act, brought into effect from 01/06/2015 by insertion of aforesaid Explanation (2) to section 263(1) of the IT Act. In the case of Basti Wine Co. (English) vs. Pr. CIT ((supra)), ITAT had, on specific facts and circumstances of that case, concluded that the Assessing Officer did carry out the necessary investigation and assessee filed the relevant replies and further that the Assessing Officer took a plausible view that is clearly distinguishable from the case before us in view of foregoing paragraph (C.1) of this order. Similarly, in the case of Shri Narayan Tatu Rane vs. Income Tax Officer (supra), in the specific facts and circumstances of that case, it was held by the ITAT in paragraph 21 of the order that it could not be held that the I.T.A. No.75/Lkw/2022 Assessment year:2017-18 41 Assessing Officer did not carry out enquiry or verification which should have been done, and further that the Assessing Officer had taken a plausible view in the facts and circumstances of the case. The present case before us is distinguishable in view of foregoing paragraph (C.1) of this order. In the case of Arun Kumar Garg HUF vs. Pr. CIT (supra), the decision was based on firstly that the provisions of section 263 do not give unfettered powers to the Commissioner to assume jurisdiction u/s 263 to revise every order of the Assessing Officer to re-examine the issues during the course of assessment proceedings; and secondly, that the assessment year being 2014-15 in that case, Explanation (2) to section 263(1) of the IT Act, brought into effect from 01/06/2015, was not applicable. The present case before us is distinguishable, as we have already held in the foregoing paragraph (C.1) that the assessee has failed to establish that the Assessing Officer has made necessary enquiries and that the assessee has filed necessary materials on this point. Moreover, in the foregoing paragraph (C.2.1) of this order, we have already observed that there is no doubt about applicability of Explanation (2) to section 263(1) of the IT Act, assessment year being 2017-18 the assessment order as well as the impugned revisionary order having been passed after aforesaid date of 01/06/2015. In the case of Rajgul Credit Invest P. Ltd. vs. Pr. CIT (supra), in paragraph 5.4 of the order the ITAT held that notice u/s 263 of the IT Act issued by the Pr. CIT, was not only vague but also only for making deeper enquiry and re-considering the evidences already on record duly considered during assessment proceedings based on purported proposal that fresh facts have been emerged subsequent to the order of assessment which is factually incorrect and untenable and the conditions or the factors enabling the Learned. Pr. CIT to invoke his jurisdiction u/s 263 have not been satisfied. However, in the present case before us, the facts clearly distinguishable in view of the foregoing paragraph number (C.1) of this order in which we have held that I.T.A. No.75/Lkw/2022 Assessment year:2017-18 42 the assessee has failed to establish that the necessary details were filed by the assessee during assessment proceedings and that the Assessing Officer has completed the assessment after due verification. In the case of Pr. CIT vs. Universal Music India Pvt. Ltd., the issue before Hon'ble High Court was whether the Commissioner can travel beyond the reasons given by him for revision in the show cause notice. In this regard, we take guidance from the well settled position, as enunciated by Hon'ble Supreme Court in the case of CIT vs. Amitabh Bachhan [2016] 384 ITR 200 in which Hon'ble Supreme Court held that there is nothing in section 263 to make the Commissioner confine himself to the terms of show cause notice, and further that power of revision u/s 263 of the IT Act is not contingent on giving of a show cause notice. (D) In view of foregoing, we come to the conclusion that the case laws, on which the assessee has placed reliance, fail to advance the case of the assessee either because of amendment to section 263 of the IT Act with effect from 01/06/2015 through insertion of Explanation (2) to section 263(1) of the ITAT; or because of clearly distinguishable facts, or because of well settled position of law as established by decision of Hon'ble Supreme Court in the case of CIT vs. Amitabh Bachhan (supra). (D.1) We take guidance from order of Hon'ble Punjab & Haryana High Court in the case of Pr. CIT vs. Venu Woollen Mills [2019] 412 ITR 188 (P&H), in which it was held by Hon'ble High Court that where Assessing Officer did not apply mind to correctness of books of account, except to note that books of account were produced and test checked, impugned revisionary order passed u/s 263 was to be upheld. Further, it was held in the case of Tara Devi Aggarwal vs. CIT [1973] 88 ITR 323 (SC) that where a stereotype order is passed, which simply accepts what the assessee has said in the I.T.A. No.75/Lkw/2022 Assessment year:2017-18 43 return of income and fails to make enquiries which are called for in the circumstances of the case, the Commissioner is justified in holding that the order is erroneous and prejudicial to the interests of the Revenue. Furthermore, in the case of CIT vs. Emery Store Mfg. Co. [1995] 213 ITR 843 (Raj), it was held by Hon'ble High Court that simply because the facts have been disclosed by the assessee, it does not give immunity from revisionary jurisdiction of the CIT. It was also held by Hon'ble High Court that allowing certain deductions without proving the claim or without proper verification or ignorance of the provisions of law are the various instances on the basis of which the order of Assessing Officer could be said right in revisionary jurisdiction. In the case of Thalibai F. Jain vs. Income Tax Officer [1975] 101 ITR 1 (Kar), it was held by Hon'ble High Court that assessments made in undue haste and without an enquiry are prejudicial to the interest of the Revenue and what is prejudicial to the interest of Revenue as held to be erroneous, though the converse may not always be true. Still furthermore, it was held in the case of Indu Fine Lands (P.) Ltd. vs. CIT [2014] 45 Taxmann.com 307 (Hyd) (Trib.) that Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error on reasoning or on law or on facts on face of it but also when it is a stereotype order which simply accepts what assessee has stated in his return of income and fails to make enquiries or examine genuineness of claim which are called for in circumstance of case. Moreover, in the case of Rajmandir Estate (P.) Ltd. vs. Pr. CIT [2017] 77 Taxmann.com 285 (SC) Hon'ble Supreme Court dismissed assessee’s SLP against order of Hon'ble High Court, holding where assessee with some amount of authorized share capital raised used from on account of premium, exercise of revisionary powers of Commissioner opinion that this could be a case of money laundering, was justified. Also in the case of Sesa Starlite Ltd. vs. CIT [2021] 123 Taxmann.com 217 (Bom), the Assessing I.T.A. No.75/Lkw/2022 Assessment year:2017-18 44 Officer sought information from the assessee; however, without considering such information produced by the assessee and without application of mind, he allowed the assessee’s claim. It was held to be a case of inadequate enquiries, and therefore, the exercise of revisional jurisdiction of Commissioner u/s 263 of the Act was held to be justified. Moreover, in the case of CIT vs. Seshasayee Paper and Powers Ltd. [2000] 108 Taxman 464 (Mad), it was held by Hon'ble Madras High Court that the powers of the Commissioner are very wide in exercising the powers of revision u/s 263 of the IT Act. It was also held that the only limitation of his power is that he must have some material which would enable him to form a prima facie opinion that the order passed by the Assessing Officer was erroneous in so far it is prejudicial to the interest of the Revenue; that once he forms such opinion, the Commissioner is empowered to pass an order as the circumstances of the case may warrant; and further that there is nothing in section 263 to show that the Commissioner should record his final conclusion on the points in controversy before him. In the case of Tarajan Tea Co. Pvt. Ltd. vs. CIT [1994] 117 CTR 179, it was held by Hon'ble Gauhati High Court that a decision taken without considering the relevant aspects of a particular point would certainly be erroneous and such decision in favour of the assessee without such consideration would be prejudicial to the interest of Revenue so as to empowering Commissioner to exercise his revisional power u/s 263 of the IT Act. It was held by Hon'ble Delhi High Court in the case of Duggal and Co. vs. CIT [1996] 220 ITR 456 that the Assessing Officer is not only an adjudicator but also an investigator; that he cannot remain passive in the case of a return which is apparently in order but calls for further enquiry; that it is incumbent upon the Assessing Officer to further investigate the facts when circumstances would make such enquiry prudent and that the order of the Assessing Officer becomes erroneous because such an enquiry has not been made and not because I.T.A. No.75/Lkw/2022 Assessment year:2017-18 45 there is nothing wrong on the order if all the facts stated therein are assumed to be correct. In the case of CIT vs. M. M. Khambhatwala [1992] 198 ITR 144 (Guj), Hon'ble Gujarat High Court held that the CIT can exercise the power of revision even in a case where the issue is debatable. (D.1.1) Although the assessee has placed reliance on the case of Malabar Industrial Co. Ltd. (supra), we find that in the facts and circumstances of the present case, this order of Hon'ble Supreme Court goes against the assessee. In the case of Malabar Industrial Co. Ltd. (supra), Hon'ble Supreme Court held that incorrect assumption of facts or incorrect application of law will satisfy the requirement of the order being erroneous. Hon'ble Supreme Court also held that an order passed without application of mind also fell in the same category. Hon'ble Supreme Court upheld the order of Hon'ble Madras High Court in the case of Malabar Industrial Co. Ltd. vs. CIT [1991] 198 ITR 611 in which Hon'ble Madras High Court has held that the words prejudicial to the interest of Revenue are of wise import; that where the Assessing Officer has failed to apply his mind to the case in all its perspective, the order could be said to be prejudicial to the interest of the Revenue, conferring a jurisdiction upon the Commissioner u/s 263. On facts of the present case before us, therefore, order of Hon'ble Supreme Court in Malabar Industrial Co. Ltd. vs. CIT 243 ITR 83 (SC) goes against the assessee. (D.1.1) Also we find that the case laws on which the learned Pr. CIT has placed reliance in his impugned revisionary order dated 22/02/2022 passed u/s 263 of the IT Act in paragraph 6 of his order are applicable to the facts and circumstances of the case before us. For ease of reference, paragraph 6 of the impugned order of Pr. CIT is reproduced as under: “6. Following judicial pronouncements are relevant to the facts of the case discussed and hence relied upon while adjudicating this case: I.T.A. No.75/Lkw/2022 Assessment year:2017-18 46 “(i) Hon'ble Jurisdictional High Court of Allahabad in the case of Meerut Roller Flour Mills Ltd. vs CIT (2013) 35 Taxmann.com 13(Allahabad) held that," Return filed by assessee was scrutinized and assessment was completed. Thereafter, Commissioner noticed that AO had not conducted proper enquiry to verify cash credit entries and trade creditors- He exercised his jurisdiction u/s 263 and remanded matter to AO- Assessee filed writ petition against the order. Records showed that AO did not verify genuineness of trade creditors and assessment order was completely silent and bereft of any discussion on material points- Whether, therefore, assessment order was erroneous and prejudicial to interest of Revenue." Held, yes. It was further held by the Hon'ble Court that: "The Commissioner may consider an order to be 'erroneous' for the purpose of section 263 even if error of law may not be apparent on the face of the order. The Commissioner may consider an order of the assessing authority to be erroneous not only if it contains some apparent error of reason or of law or of fact on the face of it but also because it is stereotype order which simply accepts what the assessee has stated in his report and fails to make inquiry which are called for in circumstances of the case." (ii) Further in the case of Ram Pyari Deri Saraogi v/s CIT (1968) 67 ITR 184, the Hon'ble Apex Court while examining the question of revisional power of the CIT under the old Act held that," where assessment was completed by the ITO with under haste, without holding necessary enquiry, it is sufficient to hold that the assessment order is erroneous." (iii) In the case of Smt Tara Devi Agarwal v/s CIT(1973) 88 ITR 323(SC), it was held by the Hon'ble Apex Court that, " even where income has not been earned and is not assessable merely because the assessee wants it to be assessed in his or her end in order to assist someone else who would have been assessed to a larger amount, the assessment to made can certainly be erroneous and prejudicial to the interest of revenue." (iv) Hon'ble Delhi High Court in the case of Gee Vee Enterprises v/s Addl. CIT (1975) 99 ITR 375(Delhi) following the aforesaid above two judgements of the Hon'ble Apex Court held that "the position and function of the Income Tax Officer is very different from that of a Civil Court. The statements made in a pleading proved by minimum amount of evidence may be accepted by Civil Court in absence of any rebuttal. The Civil Court is neutral. It simply gives decision on the basis of the pleading and evidences which comes before it." Further, it was held by the Hon'ble Court that: I.T.A. No.75/Lkw/2022 Assessment year:2017-18 47 "The Income tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparent in the order but call for further enquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an enquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of its context. It is because it is incumbent on the Income Tax officer to further investigate the facts stated in the return when circumstances would make an enquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an enquiry has not been made and not because there is anything wrong with the order if all facts stated therein are assumed to be correct." (D.2) It may be mentioned that most of the orders referred to in foregoing paragraphs (D.1) and (D.1.1) have been passed before 01.06.2015 and have not factored in the change in law brought about w.e.f. 01.06.2015 by way of Explanation 2 to Section 263(1) of I.T. Act. Now, when the aforesaid change in law w.e.f. 01.06.2015 is taken into account; the assessee’s case is hit even harder by Explanations 2(a) to Section 263(1) of I.T. Act, in view of our findings in foregoing Paragraph (C.1) of this order. (D.2.1) As regards matters pertaining to assessment of an assessee; the Assessing Officer is the first and the lowest level, among all the authorities/forums. If there are any shortcomings or deficiencies or demerits in the assessment order, there are provisions under Income Tax Act through which such shortcomings or deficiencies or demerits can be removed, in given circumstances either by the Assessing Officer himself (such as u/s. 154 or u/s. 147 of I.T. Act) or by higher authorities in their revisionary jurisdiction u/s. 263 or u/s. 264 of I.T. Act. Further, there are appellate forums such as Commissioner of Income Tax (Appeals), Joint/Additional Commissioner of Income Tax (Appeals), Income Tax Appellate Tribunal, High Court and Hon'ble Supreme Court where also the aforesaid shortcomings or deficiencies or demerits can be removed. The aforesaid shortcomings or deficiencies or demerits can arise due to many reasons, some of which may be workload pressure, limitation date pressure, lack of experience/knowledge, non-application of mind, etc. etc. Considering the foregoing, the order of Assessing Officer is not necessarily always final. The order I.T.A. No.75/Lkw/2022 Assessment year:2017-18 48 passed by Assessing Officer is not sacrosanct. In case of doubt, that view is to be preferred which favours removal of shortcomings, deficiencies or demerits in the order of the Assessing Officer, and that view should be rejected which treats the order passed by the Assessing Officer as final/sacrosanct despite shortcomings, deficiencies or demerits in the order of the Assessing Officer. In view of the foregoing, we find no merit in grounds 1-6 of appeal taken in the present appeal filed by the assessee. Therefore, grounds 1-6 of appeal are dismissed. (E) As regards, ground 7 of appeal, we take guidance from order of Hon'ble Supreme Court in the case of CIT vs. Amitabh Bachchan [2016] 384 ITR 200 in which Hon'ble Supreme Court held that there is nothing in section 263 of IT Act to make the Commissioner confine himself to the terms of show cause notice, and further that power of revision u/s 263 of IT Act is not contingent on giving of a show cause notice. Considering this well settled position, we find no merit in ground 7 of appeal. (F) In view of foregoing, all the grounds of appeal are dismissed. Accordingly, this appeal is dismissed. (G) In the result, the appeal of the assessee is dismissed. (G.1) Office is directed to forward a copy of this order to the Registry of Hon'ble Lucknow Bench of Allahabad High Court with reference to aforesaid Writ Petition number Vide Writ Tax No. 70 of 2023 filed by the assessee. (Order pronounced in the open court on 31/08/2023) Sd/. Sd/. (SUDHANSHU SRIVASTAVA) (ANADEE NATH MISSHRA) Judicial Member Accountant Member Dated: 31/08/2023 *Singh I.T.A. No.75/Lkw/2022 Assessment year:2017-18 49 Copy of the order forwarded to : 1. Registry of Hon'ble Lucknow Bench of Allahabad High Court with reference to aforesaid Writ Petition number Writ Tax No. 70 of 2023 filed by the assessee. 2. The appellant 3. The Respondent 4. Concerned CIT Assistant Registrar