SHRI PANKAJ P. KHARA, NAVI MUMBAI V. PR. CIT-7, MUMBAI

ITA 801/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9711 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-01-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 16-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIKHIL CHAUDHARY
• Keywords: Unexplained investment; Set aside
• Section: 263; 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 801/Mum/2021 (A.Y: 2016-17) Shri Pankaj P Khara, 64D,Askini, Op CHS Ltd,PlotNo.20, Secotr- 11, Behind Kanchan Junga, Koparkhairne, Navi Mumbai – 400709 Vs. Pr. CIT-27 Room No. 401, 4 th Floor, Tower No. 6, Vashi Railway Station Commercial Complex, Vashi – 400703 ./ज आइआर ./PAN/GIR No. : AKHPK0207E Appellant .. Respondent Appellant by : Ms.Hiral Sejpal.CA. DR Respondent by : Mr.Nikhil Chaudhary.DR Date of Hearing 06.01.2022 Date of Pronouncement 31.01.2022 आद श / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order passed by the Pr.Commissioner of Income Tax (PCIT)-27, Mumbai passed u/s 263 of the Act. The assessee has raised the following grounds of appeal: Ground No. 1: 1.1 On the facts and circumstances of the case and in law, the Hon'ble Principal Commissioner of Income Tax, Mumbai-27 ('the PCIT'), erred in initiating proceedings under section 263 of the Income Tax Act, 1961 ('the Act') against the Appellant. ITA No. 801/Mum/2021 Shri Pankaj P Khara, Mumbai. - 2 - 1.2 The PCIT erred in - • concluding that the assessment order passed by the Income Tax Officer, Ward 28(2)(4), Mumbai (the AO') was erroneous as the AD failed to verify the source of investment made in securities (derivates); • concluding that the assessment order passed by the AD is erroneous in so far as it is prejudicial to the interest of the revenue; • directing the AO to pass a fresh assessment order since the AO had allegedly failed to conduct proper inquiries, investigation and examination; and • ignoring the records of the assessment proceedings while passing the impugned order 1.3 The Appellant therefore prays that the order passed under section 263 of the Act be set aside since adequate verification had been undertaken by the AD and further prays that the direction to pass fresh assessment order to the AD be quashed. Ground No. 2: The Appellant craves leave to add to, alter any/ or amend the foregoing grounds of appeal. 2. The Brief facts of the case are that, the assessee is engaged in the business of grocery sales in the name and style of M/s Sejal Enterprises as a proprietary entity. The assessee also engaged in trading of shares & securities. The assessee has filed the return of income for the A.Y 2016-17 on 25.05.2016 disclosing a total income of Rs.3,38,660/-. Subsequently, the case was selected for scrutiny under the CASS and notice u/s 143(2) and 142(1) of the Act are issued. In response to the notice, the Ld. AR of the assessee has submitted the details from time to time. The Assessing Officer ITA No. 801/Mum/2021 Shri Pankaj P Khara, Mumbai. - 3 - (A.O.) found that the assessee is engaged in the business of grocery sales and sale &purchase in shares and securities. The assessee made investments in shares and securities and disclosed the long term capital gain and short term capital loss on transfer of securities. The A.O observed that it is a limited scrutiny, and the assessee case is selected for the examination of facts whether the investment income related to shares and securities (derivative) transactions are duly disclosed. Further, the A.O has called for necessary details and documents for verification. The assessee has filed the explanations mentioning that the assessee has suffered loss in the share trading and has not disclosed in the income tax return and was also on the assumption that there is no necessity to disclose the same in the Income Tax Return (ITR) schedules. Finally the A.O considering the facts and material available on the record has accepted the income as per the returned income of Rs. 3,38,660/- and passed the order u/s 143(3) of the Act on 28,.12.2018. 3. Whereas, the PCIT on perusal of the assessment record find that the order passed by the A.O on 28.12.2018 in the limited scrutiny for examination of investments and income relating to securities and derivative transactions. The assessee has invested Rs.11,28,770/- in securities/derivatives and the sources of investment made in the securities is not examined during the course of scrutiny assessment and issued notice U/sec263 of the Act. Whereas, the assessee has filed a letter dated 20.12.2018 submitting ITA No. 801/Mum/2021 Shri Pankaj P Khara, Mumbai. - 4 - the sources of funds from savings and regular income as per the bank statement, payments andreceipt to (i) Angle Broking (ii) Pinnacle Forex and (iii) Prithvi Finmart Pvt Ltd. The PrCIT found that the assessee has invested in securities (derivatives’) from the sources as explained at page 2 of the PCIT order prior to October 2015 in securities and the sources of the assessee are received in the month of October 2015 to march 2016 and treated the differential investment as a unexplained investments in Angle Broking prior to October 2015 Rs7,92,770/-. Whereas in respect of Pinnacle Forex, the PCIT observed that the differential payments made prior to October 2015 of Rs. 3,36,000/- as unexplained investment and finally Pr.CIT observed that the total unexplained investments made by the assessee which was not verified by the A.O is Rs. 11,28,770/-. 4. The findings of the PCIT are that the assessee has received the funds subsequent to October 2015, therefore the explanation of the assessee in respect of sources of funds cannot be accepted. The PCIT also observed that the A.O has not verified the details in the course of assessment proceedings and therefore the order passed by the A.O is erroneous and prejudicial to the interest of the revenue. The assessee has filed the reply to the show cause notice on 09.03.2021 mentioning the brief facts of business, the nature of investments, sources of investments and bank statements. But the PCIT has not consider these facts and is of the opinion that the A.O has not verified the details in the ITA No. 801/Mum/2021 Shri Pankaj P Khara, Mumbai. - 5 - scrutiny assessment and finally observed that as per explanation (2) of the Sec. 263 of the Act, the order of the AO order cannot be sustained and accordingly set aside the asseseement order passed u/sec143(3) of the Act on 28.12.2018 is erroneous and prejudicial to the interest of the revenue and directed the Assessing officer to pass a fresh assessment order considering the issues dealt in the revision proceedings. Aggrieved by the revision order, the assessee has filed an appeal before the Honble Tribunal. 5. At the time of hearing, the Ld. AR submitted that the revision order passed u/s 263 of the Act by the PCIT is not valid and it does not satisfy the twin conditions that (i) erroneous and (ii) prejudicial to the interest of the revenue. The Ld. Ld AR emphasized that the assessee’s case was selected for scrutiny and notice u/s 142(1) of the Act was issued for calling the details. The assessee has filed the details supporting the claims, the A.O was satisfied with the evidences and has accepted the claim of the assessee in the limited scrutiny. Further, the Ld.AR mentioned that the PrCIT has not conducted any enquiry but only directed the A.O to redo the assessment afresh and whereas in the limited scrutiny, the A.O has verified the investments relating to securities and derivatives’ transactions which the assessee has submitted. The Ld.AR has supported the submissions with the judicial decisions, factual paper book and prayed for allowing the appeal. ITA No. 801/Mum/2021 Shri Pankaj P Khara, Mumbai. - 6 - 6. Contra, the Ld.DR submitted that though the case was selected for limited scrutiny, the A.O has not conducted the enquiry on the issues and supported the order of the PCIT. 7. We heard the rival submissions and perused the material on record. The Ld. AR submitted that the sole matrix of the disputed issue that the PCIT erred in passing the revision order in directing the Assessing officer to redo the fresh assessment. The Ld. AR contentions are that the case was selected for limited scrutiny and as per the limited scrutiny guidelines the reasons were informed to the assessee. The Ld. AR has demonstrated the copy of notice issued u/s 143(2) of the Act at page 21 to 24 of the paper book The Ld. AR emphasized on the explanations filed before the A.O. by letter dated 20.12.2018 at page 4 to 19 of paper book, where the assessee has explained the sources of funds, and investments in securities and the balance of investments are out of the savings. The Ld. AR demonstrated the bank statement at page 7 of the paper book, where the assessee is a proprietor of M/s Sajel Enterprises and has been maintaining the bank balance with the HDFC Bank Ltd, APMC Branch, Navi Mumbai. The Ld. AR pin pointed the opening bank balance as on 01.04.2015 is Rs.18,65,023/- and the assessee has issued cheques to the Angle Broking and Pinnacle Finance from this account. Further the Ld. AR at page no 15 of the paper book has demonstrated the individual savings bank account of the assessee maintained ITA No. 801/Mum/2021 Shri Pankaj P Khara, Mumbai. - 7 - with the HDFC Bank , APMC, Navi Mumbai, where the bank balance as on 01.04.2015 of Rs.10,48,832/- was disclosed. 8. The Ld.AR submitted that the A.O has dealt on these facts and the information of income and the reasons for selection of limited scrutiny in respect of the investments and derivatives’ of transactions. The A.O after verifying, examination of facts and being satisfied with the information has accepted the taxable income as per the return of income filed by the assessee and the assessee has complied with the directions issued and PCIT cannot overlook these vital facts. The Ld. AR referred to the submissions made in the course of revisionary proceedings through letter dated 09.03.2021, where the assessee has informed the nature of the business operations and the transaction of sales and purchases. The assessee has highlighted the supporting the evidences disclosing the opening bank balance (Credit) available as on 1-4-2015 in the two accounts (Current &Savings) with the HDFC bank. The A.O has accepted the fact of limited scrutiny and genuineness of the case and the A.O scope is limited to the extent of reasons recorded for selection of the scrutiny and which the A.O has examined the case and the order passed by the Pr.CIT has no legs to stand. The Ld.AR supported the submissions relying on the following judicial decisions. 1. Hon’ble Bombay High Court in the case of CIT Vs. Nirav Modi [71 taxmann.com272]. ITA No. 801/Mum/2021 Shri Pankaj P Khara, Mumbai. - 8 - 2. Hon’ble Rajasthan High Court in the case of CIT Vs. Ganpat Ram Bishnoi 198 CTR 546. 3. Hon’ble Punjab and Haryana High Court in the case of CIT Vs. RK Metal Works, 112 ITR 445. 4. Hon’ble Madras High Court in the case of CIT Vs. PV Bhoopathy. 5. Hon’ble Rajasthan High Court in the case of CIT Vs. Mangilal Didwania, [2006] 286 ITR 126. 6. Hon’ble Delhi High Court in the case of CIT Vs. Bharat Aluminum Co. Ltd, 163 taxman 430. 7. Hon’ble Delhi ITAT in the case of Gupta International Vs. ITO, 2 ITR 428. 8. Hon’ble Delhi ITAT in the case of Vodafone Essar South Ltd., Vs. CIT , 12 taxmann.com 233. 9. We considering the facts, circumstances and the ratio of the judicial decisions on limited scrutiny submitted by the Ld.AR with supporting evidences are of the substantive opinion that the PCIT has not made any specific observations or enquiry though the assessee has placed on record all the details submitted in the course of assessment and the sources are explained in the assessment proceedings. The A.O. verified the facts and genuineness of the transactions and has accepted the assessee’s claim and the A.O has taken one of the possible views applicable to the asssessee case. Further as per explanation 2 to Sec. 263 of the Act, the proviso can be invoked when no verification or enquiry was conducted by the AO. Whereas, in the present case the A.O ITA No. 801/Mum/2021 Shri Pankaj P Khara, Mumbai. - 9 - has applied his mind and verified the transactions. Further mere directions are given by the Pr.CIT and it cannot be ground for proceedings u/s 263 of the Act. The Ld.AR demonstrated with the supporting evidences in respect of submission of information in response to notice u/s 142(1) of the Act and also subsequent letters where the assessee has filed the details as required under scrutiny assessment. considering the overall facts and submissions, we find that the assessee has complied diligently to the notices issued u/s 142(1) of the Act. Further, the Ld.AR submissions are realistic and substantiated with the material evidences in the paper book on the sources of funds and the bank statements which covers the investment made by the assessee is appreciated. We are of the considered view that the assessment order u/sec143(3) of the Act does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. Accordingly, we set aside the order of the Pr.CIT and allow the grounds of appeal in favour of the assessee. 10. In the result, the appeal filed by the assessee is allowed. O rder pronounced in the open court on 31.01.2022. Sd/- Sd/- (PRASHANT MAHARISHI) PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 31.01.2022 ITA No. 801/Mum/2021 Shri Pankaj P Khara, Mumbai. - 10 - KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ र आ / The CIT(A) 4. आ र आ ( ) / Concerned CIT 5. "#$ % & &' , आ र ) र*, हमद द / DR, ITAT, Mumbai 6. % -. / 0 / Guard file. ान ु सार/ BY ORDER, " & //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai