SANJEEV KUMAR RANA,ROPAR V. PRINCIPAL COMMISSIONER OF INCOME TAX, CHANDIGARH

ITA 706/CHANDI/2024

AI Insights

The case revolves around an appeal by Shri Sanjeev Kumar Rana against the revisionary order passed by the Pr. CIT under section 263 of the Income Tax Act for the Assessment Year 2015-16. The Pr. CIT had flagged issues regarding unsubstantiated sales, cash payments, and unexplained capital introduction in the assessee's accounts. The Tribunal examined whether these issues warranted a revision of the original assessment order, which had been accepted by the AO after thorough examination of the assessee's books and documents. The Tribunal concluded that the AO's original assessment was neither erroneous nor prejudicial to the interests of the revenue, thus allowing the appeal and restoring the original assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 778584 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 15-06-2024
• Other Referred Cases: Malabar Industrial Co. Ltd. vs. CIT, CIT vs. Max India Ltd., Grasim Industries Ltd. vs. CIT, Gabriel India Ltd. vs. CIT, ITO vs. DG Housing Projects Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSUM BANSAL VIRTUAL LD
• Assessee Lawyers: PARIKSHIT AGGARWAL VIRTUAL LD
• Keywords: Set aside; Revision of order; FORM 26AS; Bogus
• Section: 143(3); 263

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH VIRTUAL HEARING BEFORE HON’BLE SHRI RAJPAL YADAV, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं. / ITA No.706/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2015-16) Shri Sanjeev Kumar Rana 93-Kiln Area, Nangal Ropar (Punjab) 140124. बनाम/ Vs. Pr. CIT Sector -17E Chandigarh ˕ायीलेखासं./जीआइआरसं./PAN/GIR No. AESPK-7126-B (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Shri Parikshit Aggarwal (CA)(Virtual) –Ld. AR ŮȑथŎकीओरसे/Respondent by : Smt. Kusum Bansal (CIT)(Virtual) – Ld. DR सुनवाईकीतारीख/Date of Hearing : 07-10-2025 घोषणाकीतारीख /Date of Pronouncement : 14/10/2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee assails invocation of revisionary jurisdiction u/s 263 by Ld. Pr. Commissioner of Income Tax, Chandigarh-1 (Pr. CIT) for the Assessment Year (AY) 2015-16 vide impugned order dated 10-05-2023 proposing revision of an assessment as framed by Ld. Assessing Officer [AO] u/s.143(3) of the Act on 12-10-2017. 2. Briefly stated, the assessee was assessed u/s 143(3) on 12-10-2017 wherein the income of the assessee was determined at Rs.8.79 Lacs after Printed from counselvise.com 2 addition of Rs.2.20 Lacs. The same was subjected to revision u/s 263 on 26-03-2021. The assessee assailed the revisionary order before Tribunal vide ITA No.92/Chd/2021 order dated 02-03-2023 wherein the ex-parte revisionary order was set aside and revisionary authority was directed to decide afresh. Pursuant to the same, another order has been passed u/s 263 on 10-05-2023 which is in further appeal before us. 2. The Ld. AR advanced various legal arguments and assailed proposed revision on the ground that twin conditions of Sec.263 remained to be fulfilled. Reference has been made to various case laws. The Ld. CIT-DR controverted the arguments of Ld. AR and justified revision of the order. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. 3. In the impugned revisionary order, the Ld. Pr. CIT has flagged three issues viz. (i) sales without corresponding purchases; (ii) Payment in cash for Rs.1.50 Lacs; (iii) Introduction of capital for Rs.237 Lacs. It has been observed that the assessee reflected sales of Rs.40.96 Lacs at Rajpur Bhaiyan Shop. However, there was no opening stock as well as no purchases up-to 11-04-2014 whereas the assessee carried out sales up-to that period. Thus, the sales were nothing but bogus sales which was to be added u/s 68. On the issue of payment in cash, it was observed that the assessee claimed lottery expenses of Rs.1.50 Lacs which were incurred in cash and the same, therefore, required disallowance u/s 40A(3). On the issue of introduction of capital, it was noted that the assessee introduced cash of Rs.174 Lacs in Sanjeev Kumar, Rajpur Bhaiyan as well as another capital of Rs.63 Lacs in Sanjeev Kumar, Chandigarh. The amount was Printed from counselvise.com 3 stated to be withdrawn from M/s Raman Kumar & Co., Nangal. However, this issue was not examined during assessment proceedings. Accordingly, the assessee was show-caused. 4. The assessee, vide reply dated 17-04-2023, opposed revision on any issue and filed various submissions. However, Ld. Pr. CIT held an opinion that the enquires carried out by Ld. AO were unsatisfactory and incomplete and the assessment was fit for revision. Accordingly, Ld. AO was directed to re-examine these three issues. Aggrieved as aforesaid, the assessee is in further appeal before us. 5. From assessee’s submissions to Ld. Pr. CIT (as extracted in the impugned order), it could be seen that the assessee was allotted liquor contract at Rajpur Bhaiyan as well as at Chandigarh for the first time during this year and accordingly, there was no opening stock. The liquor rates were not settled at the beginning of the year between the state excise department and distilleries which supplied the material to the assessee. The assessee lifted the material against valid liquor pass in Form L-34 as issued by the Excise & Taxation Department, Punjab and made sales of liquor. However, upon settlement of rates, the sales invoices were issued by the distilleries at a later stage which were accordingly entered into regular books of accounts. Further, the purchases as made by the assessee was subjected to TCS and all purchase transactions were reflected in Form 26AS. During assessment proceedings, the assessee duly furnished books of accounts and other documents and explained the said position. The audited books including sales and purchases were test checked by Ld. AO and after having Printed from counselvise.com 4 satisfied himself, Ld. AO accepted the same. Therefore, no case of bogus sales could be made out against the assessee. The payment of Rs.1.50 Lacs was stated to be paid to State Excise Department against lottery draw organized by them for allotting liquor vends. The payment being to state government was allowed under Rule 6DD. On the issue of capital introduction, the assessee furnished ledger accounts of firm M/s Raman Kumar & Co. to Ld. Pr. CIT from where capital was sourced. The same documents were stated to be furnished to Ld. AO. 6. After due consideration of these submissions, it could be ascertained that no case of revision of the assessment order could be made out against the assessee. Not only these issues were examined by Ld. AO during the course of assessment proceedings, but all the three issues were well explained by the assessee before Ld. Pr. CIT along with sufficient documentary evidences to substantiate the same. However, there is no finding by Ld. Pr. CIT on assessee’s submissions and no case of assessment order being erroneous and prejudicial to the interest of the revenue has been made out against the assessee. Simply because some further verification was required or simply because the verification was not done in a particular manner, the same could not justify revision of the order unless it was shown that the view of Ld. AO was erroneous or opposed to any law. 7. The Hon’ble Supreme Court in Malabar Industrial Co. Ltd. vs. CIT (243 ITR 83) has held that the phrase 'prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as consequence of an order Printed from counselvise.com 5 of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been reiterated by Hon’ble Court in its subsequent judgment titled as CIT V/s Max India Ltd. (295 ITR 282). Similar principal has been followed in Grasim Industries Ltd. V/s CIT (321 ITR 92). The ratio of all these decisions is that where two views are possible and AO has preferred one view against another view, order could not be said to be erroneous or prejudicial to the interest of the revenue. 8. In the case of Gabriel India Ltd. (203 ITR 108), Hon’ble Bombay High Court observed that from a reading of sub-section (1) of section 263, it is clear that the power of suo-motu revision can be exercised by revisionary authority only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is \"erroneous in so far as it is prejudicial to the interests of the Revenue\". However, this power is not an arbitrary or unchartered power. It could be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of revisionary authority must be based on materials on the record of the proceedings called for by him. The revisionary authority could not initiate proceedings with a view to start fishing and roving enquiries in matters or Printed from counselvise.com 6 orders which already stood concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. If Ld. AO, acting in accordance, with law makes a certain assessment, the same could not be branded as erroneous simply because, according to revisionary authority, the order should have been written more elaborately. This section does not visualize a case of substitution of the judgment of the revisionary authority for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. When the assessee filed detailed explanation which are part of the record, it could be said that Ld. AO was satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be \"erroneous\" simply because in his order he did not make an elaborate discussion in that regard. Further inquiry and / or fresh determination can be directed by revisionary authority only after coming to the conclusion that the earlier finding of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. 9. The Hon’ble Delhi High Court in the case of ITO vs. DG Housing Projects Ltd. (343 ITR 329) held that AO is both an investigator and an adjudicator. A distinction has to be drawn between a case where the AO has not conducted any enquiry or examined any evidence whatsoever (“lack of inquiry”) from one (i) where there is enquiry but the findings are erroneous; and (ii) where there is failure to make proper or full verification Printed from counselvise.com 7 or enquiry (“inadequate inquiry”). The fact that the assessment order does not give any reasons for allowing the claim is not by itself indicative of the fact that the AO has not applied his mind on the issue. All the circumstances have to be seen. A case of lack of enquiry would by itself render the order being erroneous and prejudicial to the interest of the revenue. In a case where there is inquiry by the AO, even if inadequate, the CIT would not be entitled to revise u/s 263 on the ground that he has a different opinion in the matter. Also, in a case where the AO has formed a wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry before passing the Sec. 263 order. The CIT is entitled to collect new material to show how the order of the AO is erroneous. The CIT cannot remand the matter to the AO for further enquiries or to decide whether the findings recorded are erroneous without a finding that the order is erroneous and how that is so. A mere remand to the AO implies that the CIT has not decided whether the order is erroneous but has directed the AO to decide the aspect which is not permissible. On facts, as the CIT had doubts about the valuation and sale consideration received, he ought to have examined the said aspect himself and given a finding on the merits on how the consideration was understated. The ratio of this decision squarely applies to the facts of present case before us and duly supports the case of the assessee against impugned revisionary order. Printed from counselvise.com 8 10. Therefore, on the given facts, the impugned revision of assessment order could not be sustained in law. We order so. The assessment as framed by Ld. AO stand restored back. 11. The appeal stands allowed in terms of our above order. Order pronounced on 14/10/2025 Sd/- Sd/- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 14/10/2025 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "