JARNAIL SINGH,BILASPUR V. PRINCIPAL COMMISSIONER OF INCOME TAX-1, CHANDIGARH

ITA 395/CHANDI/2023

AI Insights

The case involves appeals by Jarnail Singh against the orders passed by the PCIT, Chandigarh, under Section 263 of the Income Tax Act, 1961, for the assessment years 2011-12 and 2012-13. The PCIT had set aside the assessment orders passed by the Assessing Officer (AO) under Sections 143(3) r.w.s. 147, claiming they were erroneous and prejudicial to the interest of the revenue. The Tribunal examined the grounds of appeal, which included the lack of proper inquiry by the AO and the erroneous application of Section 263 by the PCIT. The Tribunal found that the AO had conducted adequate inquiries and that the PCIT's order was based on issues not initially raised in the show-cause notice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 36631 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Other Referred Cases: NTPC Limited vs. CIT, CIT vs. Suresh Paul Bansal, PCIT vs. Delhi Airport Metro Express (P.) Ltd., ITO vs. D.G. Housing Projects Ltd., Director of Income Tax Vs. Jyoti Foundation, CIT vs. Anil Kumar Sharma, CIT vs. Hindustan Marketing and Advertising Co. Ltd., Hari Iron Trading Co. vs. CIT, Malabar Industrial Co. Ltd. vs. CIT, CIT vs. Max India Ltd., CIT vs. Sunbeam Auto Ltd., Sh. Narian Singla vs. Principal Commissioner of Income Tax (Central), Ludhiana, Ganpati International Vs PCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROHIT SHARMA
• Assessee Lawyers: TEJMOHAN SINGH
• Keywords: Set aside; Business income; Reasonable cause; Unexplained investment; Salary income; Period of limitation; Capital Gains; Accommodation entries; Assessment record; Transactions in derivatives; Time period of passing order; Revision of order; Penny stocks
• Section: 148; 143(3); 142(1); 143(2); 263; 2; 2(A)

Judgement Text

"आयकर अपील य अ\u000bधकरण,च\u000fडीगढ़ \u0013यायपीठ “ए” , च\u000fडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: HYBRID MODE \u0017ी \u0018व\u001aम \u001cसंह यादव, लेखा सद#य एवं \u0017ी परेश म. जोशी, \u0013या'यक सद#य BEFORE: SHRI. VIKRAM SINGH YADAV, AM &SHRI. PARESH M. JOSHI, JM आयकर अपील सं./ ITA Nos. 394 & 395/Chd/2023 \u000eनधा\u0012रण वष\u0012 / Assessment Years : 2011-12 & 2012-13 Jarnail Singh S/o Amar Singh, Village Balgarh Tehsil: Jhandutta Dist: Bilaspur, Himachal Pradesh-174301 बनाम The Pr. CIT-1 Chandigarh \u0018थायी लेखा सं./PAN NO: AUNPS2817C अपीलाथ\u001c/Appellant \u001d\u001eयथ\u001c/Respondent \u000eनधा\u0012\u001fरती क! ओर से/Assessee by : Shri Tej Mohan Singh, Advocate राज\u0018व क! ओर से/ Revenue by : Shri Rohit Sharma, CIT DR सुनवाई क! तार&ख/Date of Hearing : 27/11/2024 उदघोषणा क! तार&ख/Date of Pronouncement : 30.01.2025 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : These are two appeals filed by the Assessee against the respective orders of Ld. PCIT, Chandigarh-1 each dt. 16/03/2021pertaining to A.Y’s 2011-12 & 2012- 13 passed under Section 263 of the Act. 2. At the outset, it is noticed that there is a delay in filing the present appeals by 193 days as pointed out by the Registry. 3. In this regard, the Ld. AR submitted that the impugned orders were passed by the Ld. PCIT, Chandigarh on 16/03/2021, however the assessee did not 2 receive the said orders and the verified copy of the said orders were received only on 10/10/2022 and thereafter, the fees for filing the appeal was deposited on 19/11/2022 and the appeal was thereafter filed on 20/06/2023 with the delay of 193 days. In this regard, the Ld. AR referred to the condonation application filed by the assessee as well as the Affidavit placed on record and it was submitted that the assessee engaged a Chartered Accountant, Shri Sanjay Mehra stationed at New Delhi for the purpose of filing the present appeal relating to order passed by the Ld. PCIT, Chandigarh under section 263 pertaining to A.Y. 2011-12 and 2012-13. Thereafter the documents for preparation of appeal were given to Shri Aniket Kumar, staff member of Shri Sanjay Mehra for preparation of the appeals. However Shri Aniket Kumar who was to prepare and file the appeals forgot to file the appeals and thereafter when the assessee inquired about filing of the appeal from the office of Shri Sanjay Mehra, he was informed that the appeals could not be filed, however the filing fees has been deposited in time. It was submitted that there was no malafide intention for the delayed filing of the present appeal and the assessee cannot be penalized for the lack of professional diligence on the part of his Counsel who was entrusted with filing of the present appeals. It was submitted that the assessee was diligent and has been regularly following up with his Counsel however he was finally informed that though appeal fee has been deposited, however the appeals could not be filed inadvertently well within time. It was submitted that Shri Sanjay Mehra has also given his Affidavit wherein he has admitted that the assessee has entrusted him with filing of the appeal, however the same could not be filed on account of lapse on the part of one of his staff member, Shir Aniket Kumar. It was accordingly submitted that delay so happened in filing the present appeals may be condoned and the appeals of the assessee be admitted for adjudication for merits. 3 4. Per contra, the Ld. CIT/DR submitted that there is a substantial delay in filing the present appeals and no reasonable cause has been shown explaining the delay so happened in filing the present appeals. 5. After hearing both the parties and considering the material available on the record, we find that the contents of the assessee’s affidavit have not been specifically rebutted by the Revenue. It is an admitted position that the assessee has engaged Shri Sanjay Mehra, C.A for the purpose of filing the present appeal and in his Affidavit, he has admitted that there was lapse on the part of one of his staff member, Shri Aniket Kumar wherein the appeal could not be filed within limitation period, at the same time, fee for filing of the appeal was deposited on 19/10/2022 within the stipulated limitation period. Further it is observed that the assessee has been regularly following with his Counsel and has been diligent enough in taking care of his tax matters and therefore on account of lapse on the part of the Counsel, the assessee cannot be penalized. We therefore find that assessee has submitted necessary explanation and the delay in filing the present appeal is sufficiently explained and the same is hereby condoned and the appeal of the assessee is admitted for adjudication. 6. Coming to the merits of the case, both the parties fairly submitted that the facts and circumstances of the case are identical in both the years. With the consent of both the parties, the case of the assessee in ITA No. 394/Chd/2023 for A.Y 2011-12 was taken as a lead case wherein the assessee has taken the following grounds of appeal: “1. That on the facts and in the circumstances of the case and in law the Ld. PCIT erred in set aside the order as passed by the assessing officer u/s 143(3) r.w.s. 147 of the Act by invoking the provision of section 263 of the Act to improvise the order, even when the order as passed by the Assessing officer was neither erroneous nor prejudicial to the interest of the Revenue. 2. On the facts and circumstances of the case and in law, the Learned Principal Commissioner of Income tax -I, Chandigarh [\"the PCIT\"] erred in invoking provisions of section 263 of the Income Tax Act, 1961 (\"the Act\") and directing revision of the assessment order passed in full scrutiny u/s. 143 (3) R/w 147 of the Act by the Income Tax Officer- Distt Bilaspur, H.P. (\"the AO\") to confirm the realities 4 of the investment and deductions actually claimed on the alleged ground that the assessment order was erroneous and prejudicial to the interest of the revenue. 3. On the facts and circumstances of the case and in law, original assessment, having been made under full scrutiny under section 143(3), could not be subject matter of revision especially since no fault has been found in the assessment except for the Commissioner's inference that further verification was necessary as ordered by him. 4. The Appellant prays that since the assessment order passed by the AO u/s. 143 (3) R/w 147 of the Act was after full application of mind & making specific and full enquiries therefore the assessment order cannot be regarded as erroneous and accordingly the action of the PCIT in invoking provisions of section 263 and revising assessment order be held ab-initio and/or otherwise void and bad-in-law. 5. That on the facts and in the circumstances of the case and in law the Ld. PCIT erred in setting aside the order as passed by the Assessing officer u/s 143(3) r.w.s. 147 of the Act by invoking the provision of section 263 of the Act, when there is no case of the PCIT that the assessment order of the AO was made without any inquiry. 6. That on the facts and in the circumstances of the case and in law the Explanation- 2 to section 263 inserted by Finance Act, 2015 w.e.f. 01.04.2015 would not impact the assessment earlier to 2014-15. 7. That the appellant reserves its right to add, alter and modify the grounds of appeal as taken.” 7. Further, the assessee has also moved a prayer for admission of the additional ground of appeal which read as under: “That the Ld. Commissioner of Income Tax has erred in law in taking a view in respect of issues not appearing in the show cause notice issued u/s 263 and thereafter passing the order under section 263 which is not permissible and as such the order passed is illegal, arbitrary, unjustified which merits annulment.” 8. The ld AR submitted that the additional ground is legal in nature and no fresh facts are to be investigated. He also submitted that the additional ground goes to the root of the matter and therefore, prayed that the same may be admitted for disposal of the appeal. He has relied upon the decision of Hon’ble Supreme Court in the case of NTPC Limited vs. CIT reported in 229 ITR 383 (SC). 9. The ld CIT/DR objected to the admission of additional grounds of appeal. 5 10. After hearing both the parties and considering the facts of the case, we are of the view that additional ground raised is purely legal in nature and goes to the root of the matter, which does not require any investigation of facts and is borne out from the order and material on record. Therefore, the same is hereby admitted for adjudication on merits. 11. Briefly the facts of the case are that during the financial year 2010-11 relevant to the impugned A.Y 2011-12, the assessee was working as an employee of a company by name of Sunglow Capital Services Limited, New Delhi. Basis information that the assessee has made transaction in commodity trading amounting to Rs. 8,29,99,66,819/- and transaction in penny scrip amounting to Rs. 1,92,325/-, reasons for escapement of income were recorded by ITO, Bilaspur and notice under section 148 was issued on 28/03/2018 after receiving necessary approval from the ld PCIT, Shimla. In response to the notice, the assessee filed his return of income on 24/08/2018 declaring salary income of Rs. 1,56,000/-. Thereafter, notice under section 143(2) and 142(1) alongwith detailed questionnaire were issued and after taking into consideration the submissions/explanation and documentation filed by the assessee from time to time, the assessment proceedings were completed u/s 147 r/w 143(3) of the Act at an assessed income of Rs. 3,48,000/- as against the returned income of Rs. 1,56,000/-. As far as the transactions relating to commodity trading was concerned, the AO didn’t draw any adverse inference, however, the explanation of the assessee regarding penny stock was not accepted and an addition of Rs. 1,92,000/- on account of unexplained investment in penny stocks was made by the AO. 12. Subsequently, the assessment records were examined by the ld. PCIT, Shimla and a show cause dt. 20/02/2021 was issued to the assessee. In the show-cause so issued, it was stated that during the FY 2010-11 relevant to AY 2011-12, Sh. Jarnail Singh made share transactions amounting to Rs. 6 8,29,99,66,819/-, thereafter, the case was reopened u/s 147 of the Income Tax Act 1961 and notice under section 148 of the I.T. Act was issued to the assessee for the A.Y. 2011-12 on 28.03.2018. In response to the said notice, the assessee e- filed his return of income on 24-08-2018 at income of Rs. 156,000/-. In his return of income, the assessee declared income of Rs. 1,56,000/- under head 'Salary and declared loss of Rs.83,14,686/- under the head “Short Term Capital Gain”. The assessment order under section 143(3) r.w.s. 147 of the I.T. Act was passed on 16.11.2018 and income of the assessee was assessed at Rs. 3,48,000/-. 13. It has been further stated in the show-cause notice that on perusal of the bank account statements of HDFC Bank (A/c No. XXXXXXX) furnished by the assessee during the assessment proceedings, it is noted that there are total credit entries in this bank account to the tune of Rs. 3,88,24,403/- Further, it is also noted from the transaction pattern that the bank accounts were used for business transactions or for providing accommodation entries. However, no business income is declared in the ITR filed by the assessee. Even, no query was made on these transactions. Thus, the AO has failed to verify and examine this issue at the time of completion of assessment proceedings. 14. It has been further stated in the show-cause that as per ITS detail, the assessee has made transaction of Rs. 8,29,99,66,819/- in penny stock during the year under consideration, whereas the assessee had shown loss of Rs. 83,14,686/- and no further enquiry was made by the AO. Thus, the AO has failed to verify and examine this issue at the time of completion of assessment proceedings. 15. It has been further stated in the show-cause notice that on perusal of certificate issued by the Jhanduta Agriculture Co-operative Service Society placed on the record, the assessee has deposited cash of Rs 3,05,000/- in the society but no enquiry regarding source of this cash deposit was made during assessment proceedings. Hence, the same remained unverified. Thus, the AO 7 has failed to verify and examine this issue at the time of completion of assessment proceedings. 16. In view of the facts stated above, the ld PCIT noted that there has been omission on the part of the A.O. to investigate the issue as mentioned in above para(s) and the order thus passed by the A.O. without making inquiries or verification which should have been made [explanation 2(a) of section 263(1) of the Income Tax Act, 1961], the order passed by the Assessing officer is erroneous in so far as it is prejudicial to the interest of the Revenue. 17. In response to the show cause, the assessee filed his submissions and thereafter, taking into consideration the submissions so filed but not finding the same acceptable, the Ld. PCIT recorded her satisfaction stating that the assessment order passed by the AO is not only erroneous but also prejudicial to the interest of the Revenue and has been passed without making proper inquiries either from the assessee or from the third party to confirm the reality of the investment actually claimed to have been made by the assessee on the basis of which the deduction has been claimed and therefore the order so passed by the AO dt. 16/11/2018 was set aside to the file of the AO to pass fresh order after making necessary inquiries / investigation in light of discussion made in the impugned order and after giving due opportunity to the assessee. 18. Against the said findings and the direction of the Ld. PCIT, the assessee is in appeal before us. 19. During the course of hearing, the ld AR submitted that the case of the assessee was reopened by issue of notice under section 148 on 28th of March 2018. It was submitted that the reason for reopening was that the assessee had made transactions in commodity trading of Rs. 8,29,99,66,819/- and penny scrips of Rs. 1,92,325/-. During the course of assessment proceedings, the assessee explanation were called in relation to commodity trading transactions vide 8 notice dated 13/09/2018. In response, the assessee appeared before the AO and he explained that he was working as an employee with Sunglow Capital Services Limited and his HDFC bank account was used by Sunglow Capital Services Limited to receive and deploy funds for commodity trading on behalf of its various clients as evident from receipts and transfer entries in the bank statement and copy of the bank account statement was submitted vide submission dated 19/09/2018 along other details as sought by the AO. The assessee also submitted commodity wise transaction report so provided by his employer to justify and corroborate the claim of loss during the course of the assessment proceedings vide submissions dated 25th of October 2018 where in details of commodity wise profit and loss account was submitted. Thereafter, another notice dated 25th of October 2018 was issued by the Assessing officer wherein the issue in respect of cash deposited in the bank account as well as trading in penny scrips was inquired from the assessee. The assessee submitted pointwise reply dated 30th of October 2018 in respect of the queries raised by the Assessing officer. The Assessing officer, thereafter, after due examination and verification of the explanation so submitted by the assessee as corroborated by the bank statement and commodity wise transaction report and after due application of mind, didn’t allow loss claimed by the assessee on commodity trading transactions apparently for the reason that the commodity trading transactions were undertaken by Sunglow capital Services on behalf of its clients using the bank account of the assessee and as a result, loss wrongly claimed by the assessee on the commodity trading transactions was disallowed and assessed income was determined at Rs. 3,48,000/- after making an addition of Rs.1,92,000/- on account of investment made in penny scrips. 20. It was submitted that subsequently, notice under section 263 dated 20th of February 2021 was issued by the Principal Commissioner of Income Tax, Chandigarh. It was noted by the ld PCIT that there were total credit entries in the bank account of Rs.3,88,24,403/-. It was also noted from transaction patterns 9 that the bank accounts were used for business transactions or for providing accommodation entries. It has further been observed that as per ITS detail, the assessee had made transactions of Rs. 829,99,66,819/- in penny stock. Lastly, the assessee had deposited Rs. 3,05,000/- in cooperative society. 21. It was submitted that the assessee filed a reply along with annexures to the show cause notice issued under section 263 which is placed in the paper book at Pages 20-33. It was explained to the ld PCIT that the assessee was working with M/s Sunglow Capital Services and his bank account has been utilized for trading in commodity by Sunglow Capital Services wherein the amount credited in the bank account to the tune of Rs 3,88,24,403/- is received from Sunglow Capital Services and its clients for trading from time to time and amount of Rs 3,84,89,005/- is transferred to the commodity broker, Sunglow Commodity from time to time and he doesn’t hold any penny out of this account and the details of bank transactions along with copy of bank statement were submitted before the ld PCIT. It was submitted that the AO has rightly disallowed the loss claimed on account of commodity trading as the same doesn’t belong to the assessee and belong to the clients of Sunglow Capital Services and thus, there was no error in the order so passed by the AO. It was submitted that the ld PCIT however failed to appreciate the submissions and documentation so submitted by the assessee and the assessment order so passed by the AO was set-aside vide the impugned order u/s 263 of the Act. 22. It was submitted that when the reasons recorded for reopening the assessment were the very same reasons for which notice u/s 263 of the Act, then invocation of section 263 of the Act is not tenable. Since the issue has been duly examined by the AO after issuance of notice u/s 148, the same cannot be again looked into in proceedings u/s 263 in as much as the approval for re- opening has also been given by Principal Commissioner of Income Tax. In support of the said proposition, reliance was placed on the decision of the 10 Hon’ble Delhi High Court in case of CIT vs. Suresh Paul Bansal 2 taxmann.com 260 (Del.) 23. It was further submitted that the ld PCIT has stated that there were total credit entries in the bank account of Rs. 3,88,24,403/- and the transaction patterns that the bank accounts were used for business transactions or for providing accommodation entries. In this regard, it was submitted that there is not an iota of evidence on record that the assessee was providing accommodation entries. It was submitted that the transactions in terms of credit and corresponding debits/transfer entries relates to commodity trading transactions undertaken by his employer along with its associated entity on behalf of their clients, that the money has been received from the clients and thereafter deployed for commodity trading by the employer entity along with its associated entity and once the assessee has explained both the credit and debit entries, the onus cast on him is duly discharged and which has been duly appreciated by the AO, however, the ld PCIT has failed to appreciate the same. 24. It was further submitted that the ld PCIT has stated that as per ITS detail, the assessee had made transactions of Rs. 8,29,99,66,819/- in penny stock. In this regard, it was submitted that the assessee did not deal in penny stocks but there were transactions of trading on the commodity exchange which has been undertaken by his employer which has resulting in overall loss as per the commodity wise statements placed on record during assessment proceedings as well as proceedings before the PCIT. It was submitted that this fact has not been rebutted and where the net result in commodity trading is a loss and which has been denied by the AO holding that such loss doesn’t belong to the assessee, how the order so passed by the AO has been held as erroneous and prejudicial to the interest of the Revenue which has not been spelt out by the ld PCIT. 11 25. It was further submitted that as per the ld PCIT, the AO failed to verify and examine the issues. It is submitted that it is not a case of no enquiry by the AO as demonstrated earlier wherein the AO has carried out necessary enquiry and verification and after due application of mind, has passed the assessment order u/s 147 r/w 143(3) of the Act. Further, no inquiry was undertaken by the PCIT on her own during the course of proceedings under section 263. The explanations rendered have not been rebutted by the ld PCIT. For the purposes of exercising jurisdiction under section 263 of the Act, the conclusion that the order of the Assessing officer is erroneous and prejudicial to the interest of revenue has to be preceded by inquiry. If the Principal Commissioner of Income Tax is of the view that the Assessing officer did not undertake inquiry, it becomes incumbent on the ld PCIT to conduct such enquiry and in support of the said proposition, reliance was placed on the following decisions: • PCIT vs. Delhi Airport Metro Express (P.) Ltd. 398 ITR 8 (Delhi) • ITO vs. D.G. Housing Projects Ltd. 343 ITR 329 (Delhi) • Director of Income Tax Vs. Jyoti Foundation 357 ITR 388 (Delhi) 26. It was further submitted that the application of mind of the AO is evident from the assessment order passed u/s 147 read with 143(3). It depicts that in respect of the major issue for which the case was re-opened i.e transactions in commodity trading, proper inquiry was made by the Assessing officer during the course of assessment proceedings in this regard. It was submitted that the ld PCIT is basically trying to substitute the plausible view with her own view without making any enquiries at her end. In any case, it is a trite law that insufficient enquiry by the Assessing officer does not entitle invocation of revisional power and in support thereof, reliance was placed on the following judgments: • CIT vs. Anil Kumar Sharma 335 ITR 83 (Del HC) • CIT vs. Hindustan Marketing and Advertising Co. Ltd. 341 ITR 180 (Del HC) • Hari Iron Trading Co. vs. CIT (2003) 263 ITR 437 (P & H) 12 • CTT vs. Gabriel (India) Ltd. (1993) 203 ITR-108 (Bom) • Malabar Industrial Co. Ltd. vs. CIT (2000) 243-ITR-83 (SC) • CIT vs. Max India Ltd. 295 ITR 282(SC) • CIT vs. Sunbeam Auto Ltd. reported in 332 ITR 16(Del) • Sh. Narian Singla vs. Principal Commissioner of Income Tax (Central), Ludhiana 62 Taxman.com 255(Chd) • Ganpati International Vs PCIT (ITA 932/Chandi/2019) 27. It was further submitted that on perusal of the order passed under section 263, the PCIT mentions in para 4.6 that the assessee had sold the penny stock of M/s Global Capital Markets Limited. She further mentions in para 4.7 that as per information available, the assessee had purchased shares of M/s Bhilwara Technical Textiles Limited of Rs. 2,87,500/- and M/s OK Play India limited for Rs.15,08,175/-. It was submitted that these matters were neither part of the initial show-cause notice nor any query was put to the assessee during the course of revisionary proceedings and in any case, no inquiry in this regard was made by the PCIT of her own. 28. In light of aforesaid submissions, it was submitted that the order so passed by the ld PCIT be set-aside and that of the AO passed u/s 147 r/w 143(3) be sustained. 29. Per contra, the Ld. CIT/DR has vehemently argued the matter and submitted that firstly, the contention of the ld AR that merely because the case of the assessee was reopened u/s 147, the ld PCIT has no power to invoke his jurisdiction u/s 263 is a fallacious proposition and which cannot be accepted. It was submitted that it depends upon the facts and circumstances of each case and there could be situations where the AO has failed to properly verify the matter/issue for which the case of the assessee was reopened and in such a situation, the ld PCIT has the requisite jurisdiction u/s 263 of the Act. 13 30. Further, the ld CIT/DR has relied on the findings of the Ld. PCIT and our reference was drawn to the Para 4 of the impugned order contents of which read as under: “4. The facts of the case are that on perusal of record, it was seen that during the FY 2010-11 relevant to AY 2011-12, Sh. Jarnail Singh made share transactions amounting to Rs. 8,29,99,66,819/-. The assessee has claimed during 263 proceedings that all these relate to clients for trading and the same has been transferred to commodity brokers. He has claimed that the total transaction in FY 2010-11 on commodity market was Buying 11539320228 Selling 11531005541 Net Loss 8314687 However, no evidence in this regard has been filed by the assessee. The Assessing officer made no verification regarding the turnover of the assessee and the applicability of the provisions of section 44AA of the Income Tax Act. 4.1 On perusal of the bank account statements of HDFC Bank (A/c No. 05988030000111) furnished by the assessee during the assessment proceedings, it is noted that there are total credit entries in this bank account of Rs. 3,88,24,403/-. Further, it is also noted from the transaction patterns that the bank accounts were used for business transactions or for providing accommodation entries. However, no business income is declared in the ITR filed by the assessee. Even, no query was made on these transactions. Thus, the AO has failed to verify and examine this issue at the time of completion of assessment proceedings. 4.2 Trading on commodity exchange was one of the reasons for initiating proceedings u/s 147 of the Income Tax Act in this case. The only source from where the transaction details could have been verified was Multi Commodity Exchange (MCX). No inquiries were made by the Assessing Officer from the MCX to verify the details of trading. 4.3 In the proceedings u/s 263 of the Act, the Assessee has claimed that he incurred net loss of Rs. 83,14,687/-. The Assessing Officer made no verification on this issue at the time of assessment proceedings. The source of payment of loss incurred in Commodity trading amounting to Rs. 83,14,687/- admitted by the assessee has not been examined. Accordingly, the source of income of Rs. 83,14,687/- to square off the loss has remained undisclosed which was not investigated by the assessing officer. 4.4 On perusal of certificate issued by the Jhanduta Agriculture Co-operative Service Society placed on the record, the assessee has deposited cash of Rs. 3,05,000/- in the society but no enquiry regarding source of this cash deposit was made during assessment proceedings. Hence, the same remained unverified. Thus, the AO has failed to verify and examine this issue at the time of completion of assessment proceedings. 14 4.5 Regarding the source of cash deposit of Rs. 3,30,000/- in the bank account No. 07670100003734 the assessee claimed that the same was deposited after withdrawal from Post Office account. The Assessing Officer made no inquiries or verification on this issue. No documentary evidence was called for to justify the claim. 4.6 As per the information available on record the assessee was beneficiary in penny stock trading. The proceedings were initiated on this also. The assessing officer made no inquiries on this issue. As per information the assessee had sold the penny stock of M/s Global Capital Markets Limited. However the assessing officer made no inquiries to ascertain the sale / purchase of shares by the assessee. 4.7 AS per ITS information, the assessee purchased share of M/s Bhilwara Technical Textiles Limited for Rs. 2,87,500/- and M/s OK Play India Ltd for Rs. 15,08,175/-. The Assessing Officer made no inquiries / investigation regarding the source of these investments. 4.8 In view of the facts stated above, it is noted that there has been omission on the part of the A.O to investigate the issue as mentioned in above para(s). The order thus passed by the A.O. without making inquiries or verification which should have been made (explanation 2(a) of section 263(1) of the Income Tax Act, 1961) the order passed by the Assessing officer is erroneous in so far as it is prejudicial to the interest of the Revenue.” It was accordingly submitted that the ld PCIT has rightly exercised her jurisdiction/s 263 of the Act as the AO has failed to carry out the enquiry and verification which should have been done and the order so passed by the ld PCIT should be sustained and the appeal of the assessee be dismissed. 31. We have heard the rival contentions and purused the material available on record. In the show-cause issued u/s 263 dated 20/02/2021, the ld PCIT has listed down three issues and has held that there has been an omission on the part of the A.O to investigate the said issues and the order passed by the A.O. u/s 147 r/w 143(3) dated 16/11/2018 is erroneous in so far as it is prejudicial to the interest of the Revenue as the same has been passed without making inquiries or verification which should have been made and explanation 2(a) of section 263(1) of the Income Tax Act, 1961 has been invoked by the ld PCIT for exercise of her jurisdiction u/s 263 of the Act. 32. The issues which have been listed in the show-cause so issued by the ld PCIT relates to transactions in the bank account maintained by the assessee 15 with HDFC Bank wherein there were credit entries of Rs 3,88,24,403/-, the transactions relating to penny stock amounting to Rs 8,29,99,66,819/- and in respect of which the assessee has claimed loss of Rs 83,14,686/-, and cash deposits of Rs 3,05,000/- with Jhanduta Agriculture Co-operative Service Society. 33. In response to the show-cause, the assessee filed his submissions and thereafter, taking into consideration the submissions so filed but not finding the same acceptable, the Ld. PCIT recorded her satisfaction in paragraph 6 of the impugned order wherein she has held as under: “6. In view of the above facts and discussions, I am satisfied that the assessment order passed by the AO on 16/11/2018 is not only erroneous it is also prejudicial to the interest of the Revenue and has been issued without making proper enquiries either from the assessee or from the third party to confirm the realities of the investment actually claimed to have been made by the assessee on the basis of which the deduction has been claimed. Therefore, the said order passed by the AO on 16/11/2018 is set aside to the file of the Assessing officer to pass fresh order after making necessary enquiries/ investigation in light of discussion made above and after giving due opportunity to the assessee.” 34. We therefore find that there is a total disconnect between the contents of the show-cause notice and the final satisfaction so recorded by the ld PCIT. The issues which have been raised in the show-cause as we have noted supra and the satisfaction so recorded by the ld PCIT while finally setting aside the assessment order are totally different and have no connection with each other. Further, as rightly pointed out by the ld AR during the course of hearing and which the ld CIT/DR couldn’t rebut except stating that the same appears to be a clerical mistake, we find that there is nothing on record either as part of the assessment records or the impugned order that the assessee has made any investments and which have been claimed as deduction while filing the return 16 of income for the impugned assessment year and which has not been examined by the Assessing officer. Therefore, we find that the satisfaction so recorded by the ld PCIT reflects a mechanical and non-judicious approach on her part and which has even no bearing on the facts of the present case and the same is clearly arbitrary and on this ground itself, the consequent direction of the ld PCIT of the setting aside the assessment order passed u/s 147 r/w 143(3) deserve to be set-aside. 35. Now, coming back to the issues which have been listed in the show-cause so issued by the ld PCIT and the findings recorded in relation thereto in paragraph 4 to 4.3 of the impugned order as so referred by the ld CIT/DR. The same relates to transactions in the bank account maintained by the assessee with HDFC Bank wherein there were credit entries of Rs 3,88,24,403/-, and the transactions relating to penny stock amounting to Rs 8,29,99,66,819/- in respect of which the assessee has claimed loss of Rs 83,14,686/- while filing the return of income in response to notice u/s 148 of the Act. 36. In this regard, with the assistance of the ld AR, we have gone through the material available on record during the course of hearing. We find that during the financial year relevant to the impugned assessment year, the assessee was working as an employee of M/s Sunglow Capital Services Limited, New Delhi and the said company was engaged in commodity trading business on behalf of its various customers through its associate company, M/s Sunglow Commodity Pvt Ltd which is a member of Multi Commodity Exchange of India Ltd. It is further noted that basis information that the assessee has undertaken transaction in commodity trading amounting to Rs. 8,29,99,66,819/-, reasons for escapement of income were recorded by ITO, Bilaspur and notice under Section 148 was issued on 28/03/2018 after receiving necessary approval from the ld PCIT, Shimla. In response to the notice so issued, the assessee filed his return of income declaring salary income of Rs 1,56,000/- from M/s Sunglow 17 Capital Services Limited, New Delhi and claimed loss of Rs 83,14,686/- under the head “short term capital gains”. During the course of assessment proceedings, the AO issued notices and called for the assessee’s explanation and documentation to substantiate the commodity trading transactions and claim of loss of Rs 83,14,686/-. In response, the assessee submitted that he is an employee of M/s Sunglow Capital Services Limited and his current bank account maintained with the HDFC bank was used by M/s Sunglow Capital Services Limited to receive and deploy funds for commodity trading on behalf of its various clients as evident from receipts and transfer entries in the bank statement and copy of the bank account statement was submitted. The assessee also submitted commodity wise transaction report so provided by his employer to justify and corroborate the claim of loss during the course of the assessment proceedings. The Assessing officer thereafter examined the submissions/explanation and the documentation so submitted by the assessee and the claim of loss of Rs 83,14,686/- in respect of commodity trading transactions as so claimed by the assessee in his return of income was not allowed. In effect, the AO held that the commodity transactions so undertaken in name of the assessee (reason for reopening the case u/s 147) and utilizing his HDFC bank account for routing the funds and transactions in the bank account didn’t belong to the assessee and consequentially, the loss so claimed in respect of such commodity transaction doesn’t belong to the assessee and the assessee was held not eligible for claiming such loss and the same was denied. The factum of not allowing the loss so claimed by the assessee cannot by any stretch of imagination be held as prejudicial to the interest of the Revenue. 37. Further, where the reason for which the case of the assessee was reopened u/s 147 and during the assessment proceedings, the AO after calling for the explanation and documentation and having satisfied himself that the commodity trading transactions didn’t belong to the assessee but belong to the various clients of his employer and its associate entity, didn’t draw any adverse 18 inference in respect of commodity trading transactions and corresponding entries in the HDFC bank account for routing the funds for such trading, the order so passed by the AO cannot be held to be an erroneous order. 38. We have also gone through the HDFC bank account statement of the assessee placed at pages 26-30 of the assessee’s paperbook and find that majority of the transactions in respect of receipt of funds and subsequent transfer entries are through banking channels and are between two entities, namely Sunglow Capital, the employer entity and Sunglow Commodity, the trading entity having membership of MCX. There are total credits of Rs. 3,88,24,403/- and total debits/transfer entries of Rs 3,84,89,005/- leaving a minuscule balance at the year end and we could see a clear pattern/nexus between the amount credited and amount debited on the same day/next day between these two entities. The bank accounts from where the funds have been received and the bank accounts where the funds have been transferred are in name of these entities, namely Sunglow Capital and Sunglow Commodity and these two entities have confirmed that the bank accounts belong to them and their confirmation has been placed on record. We therefore find that in the facts and circumstances of the case, the same corroborates the assessee’s explanation that his bank account has been utilized by his employer entity for carrying out commodity trading transactions on behalf of their clients and the AO has thus carried out the requisite enquiry and verification and has taken a plausible view by accepting the assessee’s explanation that the commodity trading transactions were undertaken in his name by his employer along with its associate entity utilizing his bank account and such a view cannot be held as erroneous and prejudicial to the interest of the Revenue. It is therefore not a case where no evidence is on record and no verification/examination has been carried out by the AO during the assessment proceedings as so held by the ld PCIT. Therefore, the findings of the ld PCIT that the AO has failed to verify the transactions in the bank account maintained by the assessee with HDFC Bank 19 and the transactions relating to commodity trading is not borne out of records and the same deserve to be set-aside. 39. At this stage, it will be relevant to refer to the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Sunbeam Auto Ltd (supra) wherein the Hon'ble High Court has held that one has to keep in mind the distinction between 'lack of inquiry' and 'inadequate inquiry' and further if there was any inquiry, even inadequate, that would not by itself give occasion to the Commissioner to pass orders u/s 263 of the Act, merely because he has a different opinion in the matter. It was further held by the Hon'ble Delhi High Court that if any Assessing officer, acting in accordance with law, makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. 40. Similar were the observation of the Hon'ble Delhi High Court in the case of ITO Vs. DG Housing Projects Ltd (supra). In this case, the Hon'ble Delhi High Court went on to observe that in case where there is in-adequate inquiry but no lack of inquiry, the CIT must give and record a finding that the order / enquiry made is erroneous and that this can happen only if an inquiry and verification is conducted by the CIT. The Hon'ble Delhi High Court in the case of ITO Vs. DG Housing Projects Ltd (supra) also held that in most cases of alleged 'inadequate inquires' it will be difficult to hold that the order of the Assessing officer, who had conducted enquiries and had acted as a Investigator, is erroneous, without the CIT conducting verification /inquiry himself. However, in the present case, we find that no such inquiry has been carried out by the Ld. PCIT and he has simply directed the Assessing officer to carry out detailed inquires. In our considered opinion, the Ld. PCIT, without making further inquiry on her own account, has simply stated in the impugned order that the Assessing officer was required to make more inquiries. The Ld. PCIT has not pointed out as to what further inquiry was the Assessing officer required to make and as to how without those inquires 20 the order of the Assessing officer was erroneous in so far as prejudicial to the interest of the Revenue. As per the provisions of section 263(1) of the Act, after getting the explanation of the assessee to the show cause notice, the Ld. PCIT is supposed to examine the contention of the assessee and before passing an order cancelling the assessment, she is supposed to conduct an inquiry or cause to make such an inquiry, as he deems fit / necessary which has apparently not happened in the instant case. 41. As far as the invocation by the Ld. PCIT of Explanation 2(a) to section 263 of the Act is concerned, the Delhi Benches of the Tribunal had an occasion to consider this aspect in the case of Amira Pure Foods Pvt. Ltd Vs. Principal CIT (2017) 51 CCH 0473 (Delhi- Tribunal) wherein, the Delhi Benches, while relying upon the judgement of the Hon'ble Delhi High Court in the case of PCIT Vs. Delhi Airport Metro Express Pvt Ltd (ITA No. 705/2017) has held that Explanation 2 cannot be stated to have overridden the law as interpreted by various High Courts, where the High Courts have held that before reaching the conclusion that the order of the Assessing officer is erroneous and prejudicial to the interest of Revenue, the Commissioner himself has to undertake some enquiry to establish that the assessment order is erroneous and prejudicial to the interest of Revenue. Similarly, the Coordinate Mumbai Benches in the case of Narayan Tatu Rane reported in TS-290-ITAT 2016 (Mumbai) has held that Explanation 2 to section 263 does not provide unfettered right to the ld PCIT to revise each and every order. It was held in the said case that it is the responsibility of the ld PCIT to show that the enquiry or verification conducted by the Assessing officer was not in accordance with the enquires or verification that would have been carried out by a prudent officer and the relevant findings therein read as under: “19. The law interpreted by the High Courts makes it clear that the Ld Pr. CIT, before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given 21 by the assessing officer is erroneous, the Ld Pr. CIT should have shown that the view taken by the AO is unsustainable in law. In the instant case, the Ld Pr. CIT has failed to do so and has simply expressed the view that the assessing officer should have conducted enquiry in a particular manner as desired by him. Such a course of action of the Ld Pr. CIT is not in accordance with the mandate of the provisions of sec. 263 of the Act. The Ld Pr. CIT has taken support of the newly inserted Explanation 2(a) to sec. 263 of the Act. Even though there is a doubt as to whether the said explanation, which was inserted by Finance Act 2015 w.e.f. 1.4.2015, would be applicable to the year under consideration, yet 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. 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. In our considered view, this 22 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 enquries 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.” 42. In the entirety of facts and circumstances of the case, it is our considered opinion that the Assessing officer, after duly calling for required information and after duly considering the explanations and evidences before him, reached a rightful conclusion that the commodity trading transactions on MCX and related entries in the bank account, though in name of the assessee, were carried out by Sunglow Capital Services along with his associated entity Sunglow Commodity on behalf of their clients and doesn’t belong to the assessee. In our view, such a view is clearly a plausible view which a reasonable and prudent officer could have taken and in absence of any further enquiry conducted by the ld PCIT, the view so taken and order so passed in consequence thereof cannot be held to be erroneous in so far as prejudicial to the interest of the 23 Revenue and the exercise of revisional jurisdiction by the Ld. PCIT on these issues is therefore without any justification and the same is hereby set-aside. 43. Now, coming to the other issue stated in the show-cause relating to cash deposits of Rs 3,05,000/- with Jhanduta Agriculture Co-operative Service Society, we find that there is nothing on record that the AO has enquired and carry out verification of source of cash deposit during the course of assessment proceedings and therefore, we agree with the findings of the ld PCIT in para 4.4 of the impugned order that in absence of carrying out the verification of source of cash deposit, it is clearly a case of no enquiry and the AO should have verified the source of such deposits during the course of assessment order and having failed to do so, the order so passed by the AO is erroneous in so far as prejudicial to the interest of Revenue. 44. Now, coming to the other three issues stated by the ld PCIT in para 4.5, 4.6 and 4.7 of the impugned order which relates to cash deposit of Rs 3,30,000/- in the saving bank account maintained with UCO Bank, Bilaspur, sale of shares of M/s Global Capital Market Limited and purchase of shares of M/s Bhilwara Technical Textiles Limited and M/s Okay Play India Ltd, we find that the said issues were not part of the initial show-cause notice so issued by the ld PCIT and even during the course of revisionary proceedings, the assessee was never confronted with the said issues and his explanation sought in this regard. In view of the same, where the assessee has not been provided an adequate opportunity to put forth his explanation and submissions in relation to these transactions, the order so passed by the ld PCIT deserve to be set-aside. 45. In light of the aforesaid discussion, we hereby sustained the order of the ld PCIT in so far as and limited to issue of cash deposits of Rs 3,05,000/- with Jhanduta Agriculture Co-operative Service Society as discussed in para 4.4 of the impugned order in respect of which the AO shall carry out the necessary verification and examination. In respect of rest all matters discussed in the 24 impugned order, we hereby set-aside the findings of the ld PCIT and the appeal of the assessee is thus partly allowed. 46. In ITA No. 395/CHD/2023 pertaining to Assessment Year 2012-13, both the parties fairly submitted that the facts and circumstances of the case are exactly identical relating to commodity trading transactions and related entries in terms of movement of funds in HDFC bank account and similar contentions as raised aforesaid in ITA No. 394/CHD/2023 may be considered. In light of submissions made by both the parties, our findings and directions contained in ITA No. 394/CHD/2023 shall apply mutatis mutandis to this matter. 47. In the result, both the appeals of the assessee are disposed off in light of aforesaid directions. Order pronounced in the open Court on 30.01.2025. Sd/- Sd/- परेश म.जोशी \u0018व\u001aम \u001cसंह यादव (PARESH M. JOSHI) ( VIKRAM SINGH YADAV) \u0013या'यक सद#य / JUDICIAL MEMBER लेखा सद#य/ ACCOUNTANT MEMBER AG आदेश क! \u001d\u000eत,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ\u001c/ The Appellant 2. \u001d\u001eयथ\u001c/ The Respondent 3. आयकर आयु/त/ CIT 4. आयकर आयु/त (अपील)/ The CIT(A) 5. -वभागीय \u001d\u000eत\u000eन4ध, आयकर अपील&य आ4धकरण, च6डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड\u0012 फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar. "