TMI Blog2020 (3) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... and the assessment order was passed after making detailed inquiry and application of mind. Hon ble High Court of Delhi in the case of CIT vs. DLF Ltd. [ 2012 (9) TMI 626 - DELHI HIGH COURT] laid down the ratio that it is not mere prejudice to the Revenue or a mere erroneous view which can be revised u/s 263 of the Act but also there should be the element of unsustainability in the order of the assessing officer, which empowers the commissioner to issue notice and to proceed to pass an appropriate order. In ARVIND JEWELLERS. [ 2002 (7) TMI 50 - GUJARAT HIGH COURT] when the assessee had produced relevant material and offered explanation in pursuance of notices u/s 143(2) and 142(1) of the Act and after considering the material and explanations, the AO had come to a definite conclusion. Their Lordship further held that in this situation, since the material was there on record and the said material was considered by the AO and a particular view was taken, the mere fact that a different view can be taken should not be the basis for a valid action u/s 263 of the Act and therefore, dismissing the appeal of the revenue the Hon ble High Court held that the order u/s 263 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee that the source of cash deposits is the maturity proceeds of hundis during the year which were made out of the unaccounted surrendered income offered to tax in the return of income for Assessment Year 2012-13. We therefore set aside the finding of Ld. CIT(A) and find no justification in the action of the Ld. A.O making addition u/s 68 of the Act for unexplained cash credit. We accordingly delete the addition and allow the sole ground No.2 raised by the assessee. - ITA No.350/Ind/2017, ITA No.66/Ind/2017, ITA No.57/Ind/2019 - - - Dated:- 20-3-2020 - Shri Kul Bharat, Judicial Member And Shri Manish Borad, Accountant Member For the Appellant : S/Shri Sumit Nema, Gagan Tiwari Ayush Gupta, ARs For the Revenue : Shri S.S.Mantri, CIT- DR ORDER PER MANISH BORAD, AM. The above captioned appeals are filed at the instance of assessee pertaining to the Assessment Year 2012-13. ITA No.350/Ind/2017 is directed against the order of Ld. Pr. Commissioner of Income Tax-1 dated 30.03.2017 passed u/s 263 of the Act. ITA No.57/Ind/2017 is directed against the order of Ld. Commissioner of Income Tax-1, Indore dated 22.11.2018 which is arising out of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd March. Assessee claimed that the surrendered income of ₹ 7 crores which was invested in the form of hundi matured during the year and the money so received (Principal and Interest) was deposited in the bank account and the same were duly recorded in regular books. However Ld. A.O in view of Vyapam scam which involved the allegation of bribe of illegal money for admission in medical colleges in Madhya Pradesh, took a view that the assessee being unable to explain the source of cash deposited in bank account by not providing the information about the persons named in the hundi found during the course of survey, did not accept the source of cash explained by the assessee thus the alleged cash deposit of ₹ 7,34,79,097/- was treated as unaccounted income earned from Vyapam scam and made addition thereof. Accordingly income assessed at ₹ 14,75,87,000/-. Against the addition made by the Ld. A.O assessee filed appeal before Ld. CIT(A) who did not give any relief to the assessee against which the assessee is in appeal before the Tribunal vide ITA No.66/Ind/2017 which will be dealt by us in the subsequent paras. 5. Subsequent to the assessment order for Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ld. CIT also failed to appreciate that, u/ s 263 of the Act, an order of assessment cannot be set-aside to AO to simply to make further enquiries on already taxed income and thereafter pass fresh order of assessment. Therefore, and as such, impugned order and directions issued u/s 263 are untenable, contrary to law unsustainable. 2.NO JUSTIFICATION EITHER IN LAW OR ON FACTS FOR THE CIT TO INVOKE HIS POWERS U/S 263 ON THE ALREADY TAXED INCOME. 2.1 The powers under section 263 cannot be invoked to ask the AO to tarnish the image of the assessee and thus the following directions made by the CIT in his order deserve to be quashed i)The AO has accepted surrender of ₹ 7 crore as income from other sources without examining the real source of such income. No conclusive inquiry regarding the source of such income was made. ii) The AO was required to examine the impounded material properly to assess the correct income of the assessee but the AO has not done the same. iii) The AO has not examined the source of ₹ 7 crore surrendered with the Vypam case as to whether this is income generated by contravening the established law. iv) The AO should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... break-up of income of ₹ 41,07,848/- (excluding 7 Crores surrendered), while in earlier Year income was only ₹ 6,37,300/- .The AO has also accepted surrender of ₹ 7 crores represented by Hundis as 'income from other sources' without examining the real sources of said income. The AO herself has mentioned in page 5 that assessee is involved in Vyapam case and sources of these funds should have been examined. C. The AO has mentioned that impounded material l was verified on test check basis which is not proper as it has be complete check in respect of impounded material. The AO has not mentioned as to' from which books of account said verification was carried out. D. The AO, has not examined the link of Sources of ₹ 7 Crores surrendered with the Vyapam case as per which money Was illegally Obtained for admissions etc in the medical college controlled by assessee. In that case it will be income generated by the assessee by contravening the established law. E. The AO has not collected information from various agencies involved in investigation of Vyapam case i.e. Police Enforcement Directorate and other law enforcement agencies to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income. Assessee had already paid the applicable taxes on the above before filing the revised return. Therefore it cannot also be said that there was anything prejudicial to the interest of the Revenue. Further mere non initiation of penalty u/s 271(1)(c) cannot be considered a good ground for invoking section 263 Master Vijay Oswal ITO [2003] 87 ITO 95 (Rajkot)(Trib). 4. Total income of the assessee was ₹ 7,41,07,848 including surrender income. It is incorrect to say that the AD has not obtained the break-up of income of ₹ 41,07,848/- (excluding 7 crores surrendered) 1. AO had obtained a. Copies of return of income with detailed computation of income b. Capltal account, Statement of affairs with (submission dt. 27/08/2013) c. Revised return of income with complete breakup of ₹ 7,41,07,848/- (Submission dated 08/08/2014) 2. AO had enquired the following vide his (Notice dt.14/02/2014 and reply dt. 24th Feb 2014) a. Details of sources of income b. Details of expenses above ₹ 5,OOO/- c. Details of declared incomes during survey d. Evidences of Deductions claimed under chapter VI-A 3. Agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of hearing. It is not clear what has not been examined here, when she already has added the above amount and also initiated penalty on the above. 7. The above is grossly incorrect with the same argument as against the D. Though the A.O. is not expected to. or required to collect information from various agencies involved in the investigation since she was aware that nothing had been proved against the assessee in court of law and not even charge sheet was filed against the assessee till the date of passing the order by her. Assessee was mere suspect and nothing had been proved in the court of law against the assessee till the date of order. Regarding Dr. Bhandari's linkage with Vyapam case the following are the related facts of the case as per FIR's/ Challans filed before the relevant authorities. That Dr. Vinod Bhandari was named as an accused in case no.12/13.and case no.14/13. The case no. 12/13 is with respect to PMT 2012 and case no.14/13 is with respect to PPG 2012 both of which happened in the financial year 2012-13, whereas the assessment of the assesse which is the subject matter here is for the financial-year 2011-12 (Copy of FIR of both the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfaction is not an evidence or does not leads to the proposition that he did not make any enquiry on this matter which would trigger 263 on the specific issue. Manish Kumar vs CIT (2012) 134 ITD 27 (Indore Trib), and also 323 ITR 632 and Maithan International vs ACIT 134 ITD 393). 2. Merely because from a perfectionist point of view, it is felt that some more enquiries and verifications could have been made by the Assessing Officer while making assessment/assessment order cannot be declared to be erroneous and prejudicial to the interest of revenue. (Salora Cloth v. ACIT [2006J 991TD 300 (Chennai) (Trib.) 10. In the light of the above submissions against your observations in the referred show cause notice, we trust that you can observe based on our submissions that the assessment completed u/s 143(3) and JCIT's order u/s 144(A) are not erroneous and prejudicial to revenue. Consequently the twin pre-conditions of re-opening u/s 263 of the referred assessments as elaborated under Malabar Industrial Co. Limited vs CIT (243 ITR 83) (SC)are not met. We submit that in view of the same the proceedings u/s 263 may be dropped. 10. After considering the submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properly by the Assessing Officer. In this regard, Explanation-2 of the section 263 is produced as under :- For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer 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 Commissioner or Commissioner (a) The order is passed without making enquiries or verification which should have been made. (b) The order is passed allowing any relief without inquiring the claim; (c) The order has not been made in accordance with any order, direction of instruction issued by the Board under section 119; The above explanation is clarificatory in nature. Even before it the orders made without proper enquiry were were liable to be revised u/s 263 of I.T.Act. Further this explanation exists on the date on which proceedings u/s 263 have been undertaken and is existing law as on date. So it will be applicable in present proceedings. It is immaterial that order was passed u/s 143(3) earlier to 01.06.2015 18. As discussed the proper enquiry has not been made which ought to have been made by AO and AO di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiry and not in the case of inadequate inquiry or lack of inquiry whereas the case of the assessee is not even a case of lack of inquiry. 14. It is submitted that under the jurisdiction u/s 263 of the Act, the Ld. PCIT has initiated revision proceedings in order to carry out fishing and roving enquiries in the matters which are already concluded by the AO and therefore the exercise of jurisdiction u/s 263 of the Act is bad in law. The Ld. PCIT has erred in exercising jurisdiction u/s 263 of the Act when the issues raised therein were already enquired into by the AO during the assessment proceedings. The AO had passed the assessment order only after conducting detailed enquiry on various issues appearing in the show cause notice issued u/s 263 of the Act. The assessment order is passed after due application of mind, therefore, the impugned notice and order u/s 263 of the Act alleging that proper and adequate enquiry was not made, rendering the Assessment Order erroneous and prejudicial to the interest of revenue, is arbitrary based on conjecture and surmises. 15. The Ld. PCIT has not given any finding as to how and in what manner the order of the AO on the various issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that would not by itself, give occasion to the Ld. PCIT to pass order u/s 263 of the Act, merely because the Ld. PCIT has a different opinion in the matter and that only in cases where there is no enquiry, the power u/s 263 of the Act can be exercised. The ld. PCIT cannot pass the order u/s 263 of the Act on the ground that further/thorough enquiry should have been made by AO. 18. The ld. counsel for the assessee submitted that even though there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 is inserted, w.e.f. 01.06.2015 but the same does not give unfettered powers to the Commissioner to assume jurisdiction u/s 263 of the Act to revise every order of the AO to re-examine the issues already examined during the course of assessment proceedings. The Hon'ble Mumbai ITAT has dealt with Explanation 2 as inserted by the Finance Act, 2015 in the case of Narayan Tatu Rane v. Income Tax Officer [(2016) 70 taxmann.com 227] to hold that the said Explanation cannot be said to have overridden the law as interpreted by the Hon'ble Delhi High Court, according to which the Ld. PCIT has to conduct an enquiry and verification to establish and sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax V Jyoti Foundation (2013) 357 ITR 388 (Delhi) (v) Commissioner of Income Tax V/s Ratlam Coal Ash. Co (1988) 171 ITR 141 (MP) (vi) Commissioner of Income Tax V/s Mehrotra Brothers (2004) 270 ITR 157 M.P (vii) Commissioner of Income Tax, Delhi v/s International Travel House Ltd (2012) ITR 554 (Delhi) (viii) Income Tax Officer V/s D.G Housing Projects Ltd (2002) 343 ITR 329 Delhi (ix) M/s Amira Pure Foods Pvt. Ltd (ITAT Bench Delhi) (x) M/s Narayan Tatu Rane (ITAT Mumbai Delhi) 21. Reliance is also placed on the following decisions :- a. CIT v/s. Software Consultants 341 ITR 240 (Del.) b. CIT v/s. Anil Corporation 213 Taxmann 19 c. CIT v/s. Sunbeam Auto Ltd. 332 ITR 167 (Del.) d. CIT v/s. Makal Suta Cotton Co. P. Ltd. 275 ITR 54(M.P) e. CIT v/s R.K. Construction Co., 313 ITR 65 (Guj.) f. CIT v/s Max India, 295 ITR 282 (SC) g. CIT v/s Ratlam Coal Ash Co., 171 ITR 141 (M.P) h. CIT v/s Arvind Jewellers, 259 ITR 502 (Guj.) i. CIT v/s Vodafone Essar South Ltd, 212 Taxmann 184 (Del.) j. CIT v/s Mehrotra Brothers, 270 ITR 157 (M.P) k. CIT v/s Shri Govindram Seksariya Cahrity Trust, 166 ITR 580 (M.P) l. Hari Iron Trading Co. v/s C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from undisclosed professional income and other sources. The assessee has disclosed the surrendered income in the return of income and offered it to tax. As regards cash deposited in the bank account during the financial year 2011-12 at ₹ 7,34,79,097/- the assessee claimed that he received amount on maturity of hundis during the year along with interest the details of which are also available with the Ld. A.O and the principal amount and interest received there on was sufficient enough to explain the cash deposited in the bank account. The Ld. A.O was not satisfied with this submission. Even though the details of hundis with specific interest amount were available on record but Ld. A.O rather than linking the source of cash deposited from hundis treated it as unaccounted income from Vyapam scam allegedly linking with the assessee and treated it as receipt of illegal money as bribe for admission in medical colleges in M.P and accordingly made the addition of ₹ 7,34,79,097/-. In this way as against the return of income at ₹ 7,01,74,054/-, Ld. A.O assessed income at ₹ 14,75,87,000/- and the additions included the addition made for alleged income from Vyapam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner or] Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 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 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. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first argument, viz., that an assessment order without compliance with the procedure laid down in section 144B is erroneous but not prejudicial to the interests of the revenue conferring revisional jurisdiction on the Commissioner under section 263(1), has force. Under section 263(1) two pre-requisites must be present before the Commissioner can exercise the revisional jurisdiction conferred on him. First is that the order passed by the ITO must be erroneous. Second is that the error must be such that it is prejudicial to the interests of the revenue. If the order is erroneous but it is not prejudicial to the interests of the revenue, the Commissioner can not exercise the revisional jurisdiction under section 263(1) ..There cannot be any prejudice to the revenue on account of the ITO's failure to follow the procedure prescribed under section 144B, and unless the prejudice to the interests of the revenue is shown, the jurisdiction under section 263(1) cannot be exercised by the Commissioner, even though the order is erroneous. The argument that such an order may possibly be challenged in appeal by the assessee, and for this reason it is prejudicial to the interests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that the well-settled principle in considering the question as to whether an order is prejudicial to the interests of the revenue or not is to address oneself to the question whether the legitimate revenue due to the exchequer has been realised or not or can be realised or not if his orders under consideration are allowed to stand. For arriving at this conclusion, it becomes necessary and relevant to consider whether the income in respect of which tax is to be realised, has been subjected to tax or not or if it is subjected to tax, whether it has been subjected to tax at a rate at which it could yield the maximum revenue in accordance with law or not. If income in question has been taxed and legitimate revenue due in respect of that income had been realised, though as a result of erroneous order having been made in that respect, in our opinion, the Commissioner cannot exercise powers for revising the order under section 263 merely on the basis that the order under consideration is erroneous. If the material in that regard is available on the record of the assessee concerned, the Commissioner cannot exercise his powers by ignoring that material which links the income concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unsusstainable in law. In some cases possibly though rarely, the Commissioner of Income tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner of Income tax has not examined and decided whether or not the order is erroneous but has direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. The CIT is patently wrong in mentioning and stating that Schedule III to the Wealth Tax Act, 1957 was not applicable but, the Assessing Officer should have adopted the said formula/method. The aforesaid reasoning cannot be accepted and does not show or establish that the assessment order was erroneous. In view of the aforesaid reasoning, the question of law is answered in favour of respondent assessee and against the Revenue and the appeal is accordingly dismissed. No costs. 33. Now let us examine the facts in the light of above judgments so as to find that whether the assessment order passed u/s 143(3) is erroneous in so far as it is prejudicial to the interest of revenue. Ld. PCIT in the show cause notice dated 15.3.2017 has raised following issues referring to the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings for the A.Y. 2012-13and hearing dated 24/02/2014 including a.) Copy of Revised return, b.) Copy of Order U/s 80G(5)(vi) of the Income Tax Act, 1961 for Sri Aurobindo Institute of Medical Sciences and Sri Aurobindo Institute of Management Sciences Technology c.) Other documents. 55-92 7. 20/08/2014 Submission of the information called for vide notice u/s 142(1). 93-94 8. 08/09/2014 Notice u/s 143(2) from DCIT 2 (1) 95-96 9. 23/09/2014 Submission of documents called for vide Notice u/s 143(2) dated 08/09/2014 97 10. 16/03/2015 Submission of the information called for vide notice u/s 142(1)including the following: a.) Confirmation from Sri Aurobindo Institute of Management Science Technology Sri Aurobindo Institute of Medical Sciences that approval u/s 80G is not cancelled. b.) Sources of Undisclosed Income surrendered during the survey proceedings. c.) Other docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Dr. Manjushree Bhandari Wife Practicing Doctor ABNPB6251C 401302 2 Dr. Mohit Bhandari Son Practicing Doctor AFAPB0534R 209332 3 Dr. Mahak Bhandari Son Student AHLPB9367P 211372 4 Smt. Usha Bhandari Mother Pensioner AEUPB0914J 60000 5 Dr. Vinod Bhandari Self Working Partner ABNPB6240M ABNPB6240M TOTAL 1241782 9.Please produce the original copies of the TDS certificates, Advance Tax and Self Assessment tax Challan Copies of TDS certificates, Self Assessment tax Challan already submitted on 2ih Aug 2013, enclosed again now. Further the tax is already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... U/s 80G Donations given during the year. (Page 20-21) Copy of Order U/s 80G(5)(vi) of the LT. Act 1961 enclosed herewith for i. Sri Aurobindo Institute of Medical Sciences ii. Sri Aurobindo Institute of Management Sciences Technology 4 Copy of Statement recorded during Survey Proceedings enclosed (Page 22-29) 5 Copy of Wealth Tax Return for AY 2012-13 enclosed (Page30-34) 6 Disallowance of Excess interest claimed u/s 57 in the Return of Income (Page 35-38) Sir, the assessee had in original return claimed full interest by error which was already rectified by revised return filed by the assessee where interest claimed U/s 57 has been restricted to interest earned during the year. A copy of revised return is enclosed herewith. Copy of letter dated 20.8.2014 With reference to above, and further to our hearing held on 8th Aug 2014 we are submitting the following pending documents for your kind perusal:- 1 Details of Income Declared as to how it is incorporated in the Capital account Undisclosed income of ₹ 7.00 Crores represents various cash loans granted by the assessee. The Loans were recorded in the books on 24/09/2011 and amount later realized wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in table below]. These deposits as claimed by you were out of repayment of loans given by you from undisclosed income of ₹ 7,OO,OO,OOO/- during survey action u/s 133A in September 2011. Most of these deposits in cash book are reflecting in month of February to March. However as per copies of hundis the name of these persons are mentioned impounded the survey operation due date are maximum upto October. The description of cash deposit is as below: Name Amount in Rs. Date of deposit Due date Bhavarlal Mahendra Kumar 50,00,000 + (150410 Interest amount) 23.10.2011 23.07.2011 Vijay Dhakad 25,00,000 +(113425 Interest amount) 19.02.2012 19.09.2011 Surendra Kothari 30,00,000 + (136110 interest amount) 20.02.2012 20.09.2011 Hukumchand Lodhi 50,00,000+ (2,26,850 interest amount) 23.02.2012 23.09.2011 Vijay Dhakad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of these cash deposits? 2. You are also required to furnish the information about the source of immovable property purchased by you 37. The assessee duly replied to the above show cause notice dated 16.3.15 giving complete details about the information called for in the show cause notice and the same is extracted below:- With reference to above, and further to our hearing held on 09/03/2015 we are submitting the following pending documents for your kind perusal:- 1. Credit entries and cash deposited in the bank accounts to be explained. Asseseee has duly maintained his books of account. All the credit entries in bank account are duly entered by the name of person from whom amount was received. As regards to the Cash deposited in the bank account which was deposited out of the cash balance available at the hand of the assessee at particular point of time during the year. We have enclosed the explanations of all the credit entries in all the bank accounts and also cash book of the assessee for the relevant year. [Page 1 to 22] 2. Source of undisclosed income surrendered during the survey proceedings Dr. Vinod Bhandari i.e. assessee is renowned doctor of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Bhavarlal Mahendra Kumar 5000000 2 Hukam Chand Lodhi 5000000 3 Kishan Singh Pawar 4000000 4 Mangilal Motwani 4000000 5 Manoj Shrivas 5000000 6 Narendra Kumavat 3500000 7 Rajmohan Shah 4500000 8 Ram Singh 2500000 9 Ramesh Agrawal 2500000 10 Ramesh Chand Jain 5000000 11 Suraj Kulkarni 5000000 12 Surendra Kothari 3000000 13 Suresh And Sons 5000000 14 Vallabh Chand Mundra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the identity and genuineness of source of cash deposits Therefore the source of these deposits is not established and knowing the background of assessee s activities accepting his argument only on the basis of entries in books becomes difficult. It is to be emphasized that assessee was asked to justify and prove the claim that the cash deposits in his bank account were deposited by the persons from whom it is claiming so. As assessee has failed in discharging his onus hence the amount is to be treated his unexplained income. The source of which is unexplained to the department, drawing conjectures whether its source and nature is related to illegal admissions in colleges or any other unexplained income is neither required for taxation purpose nor is possible at this stage, but it is equally important looking to the background of the case, that such entries in his books must have supporting proofs. As the assessee has failed to explain the source of deposit of cash, the amount of ₹ 7,34,79,097/- is being added to total income of assessee as unexplained cash deposits. I am satisfied that assessee has concealed particulars of his income and has furnished in accurate part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee the Ld. A.O was justified in not initiating the penalty u/s 271(1)(c) of the Act. (b) As regards the break up of income of ₹ 41,07,848/-, complete details were filed before the Ld. A.O with the computation of income. In the show cause notice issued by Ld. A.O he himself has referred to the interest income received by the assessee on the hundis which form part of show cause notice dated 18.3.2015. Therefore the issue raised in Clause B of the show cause notice issued u/s 263 of the Act also do not stand for. (c) As regards type of books of accounts verified during the course of assessment proceedings it has been specifically mentioned in the assessment order that representatives of the assessee namely CA Manish Mittal and CA Sanjay Mehta appeared from time to time. He also mentioned that books of accounts along with bills and vouchers which were checked on random basis. This is a general method adopted by the Assessing Officers during the course of assessment proceedings and there seems no logic in naming the type of books and amount verified because books of accounts itself cover up the financial details maintained by the assessee for the concerned year. Clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew the issue raised in Clause- D of the show cause notice also did not stand for so as to be taken as a basis to invoke the provisions of section 263 of the Act. (e) As regards Clause-E of the show cause notice where Ld. PCIT alleged that the Ld. A.O has not collected the information from various agencies involved in investigation of Vyapam case, we find that the Ld. A.O has to complete the assessment u/s 143(3) of the Act i.e. within the frame work of provision provided under Income Tax Act. The Ld. A.O is an officer working under the Income Tax Department. His duties are casted upon him under the Income Tax Act. He cannot exceed his jurisdiction and work in the manner provided for other departments which in this case are Police, Enforcement Department and other law enforcing agencies. Under the Income Tax Act if the assessee do not credit any income in the books of accounts maintained by it or has not recorded investments in the books or is found to be the owner of money, bullion, jewellery or other valuable articles or any other unexplained expenditure and is unable to provide explanation about the nature and source of such income then Section 68 to 69C of the Act comes into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewelry or other valuable article may be deemed to be the income of the assessee for such financial year. Section 69B (Amount of investment etc not fully disclosed in books of accounts) Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewelry or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewelry or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. Section 69C (Unexplained expenditure) Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cash deposited in the bank but Ld. A.O acted extremely in the interest of revenue and made the addition for the unexplained cash deposited. In our view the Ld. A.O conducted necessary enquiry about the issue of source of surrendered income and after discussing about the Vyapam scam in the body of the assessment order made the additions of ₹ 7,34,79,097/-. The Clause-E of the show cause notice u/s 263 of the Act therefore did not stand for as a basis for invoking of provisions of Section 263 o f the Act. Even otherwise in the assessment proceedings carried in pursuance to the order of Section 263 of the Act which were completed on 27.12.2017, same income as was assessed u/s 143(3) of the Act stands assessed in the assessment proceedings carried u/s 143(3) r.w.s. 263 of the Act. In the assessment order dated 27.12.2017 u/s 143(3) r.w.s. 263 of the Act the Ld. A.O has considered the fact that on 23.11.2017 the Central Bureau of Investigation has filed the charge sheet in the registered case No.12/13 but as stated by Ld. Senior Counsel for the assessee neither the name of the assessee nor any official of the institution or medical college having connection with the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder (at page 562) : In this case, the record reveals that the Assessing Officer had issued notice, and held proceedings on several dates (of hearing) before proceeding to frame the assessment. He added nearly ₹ 2 crores to the income at that time. The Commissioner took the view that the assessment order disclosed an error, in that the deduction under section14 A had not been made. Now, while the statutory direction to the Assessing Officer to calculate, proportionately, the expenditure which an assessee may incur to obtain the dividend income, for purposes of disallowance, cannot be lost sight of, equally, such a requirement has to be viewed in the context and circumstances of each given case. In the present case, it was repeatedly emphasized that the assessee s dividend income was confined to what it received from investment made in a sister concern, and that only one dividend warrant was received. These facts, in the opinion of this court, were material, and had been given weightage by the Tribunal in its impugned order. There is no dispute that the investment to the sister concern, was not questioned; even the Commissioner has not sought to undermine this aspect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and notices. The assessee submitted various relevant documents. It is also pertinent to note that the AO adjudicated the issue of queries and replies in regard to said claim by passing a detailed order. Further the note sheet entries clearly shows the deliberations between the AO and the assessee company on all the issues and adjudication by the AO which was further guided by order u/s 144A. Therefore in view of the above facts and circumstances, details submitted before Ld. A.O, enquiries conducted by the Ld. A.O, issuing various notices, conducting enquiry about the linkage of the surrendered income of ₹ 7 crores, considering all the details of hundis found during the course of survey, alleged additions made by linking the cash deposited with the unexplained income from Vyapam scam even though the assessee is having sufficient cash in hand in the books of accounts, we in view of judgment in the case of Malabar Industrial Co. (supra) as per which before invoking the provisions of Section 263 of the Act Ld. PCIT should have satisfied the twin conditions, namely order of the Ld. A.O stated to be erroneous and secondly it is prejudicial to the interest of revenue. But in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) was not justified in making an ex-parte order and the same is bad in law, arbitrary and in breach of principle of justice. That ld. Commissioner of Income-tax (Appeals) erred in passing exparte order and the same is illegal and arbitrary and the appeal has been disposed off on mechanical basis without proper adjudication of various grounds on merits. The LD AO erred in adding the unexplained cash deposit of ₹ 7,34,79,097 u/s 68 of the Act and not accepting the assesee s explanation that these cash deposits were out of hundi loans already surrendered as income in return. The ld. Assessing Officer erred in initiating the penalty under section 271(1)(c) of in respect to excess interest although the same was voluntarily rectified by filing revised return computation during the assessment proceedings That the assessment order dated 27/12/2017 passed u/s 143(3) r/w 263 is without jurisdiction, illegal and bad in law as the order is passed in pursuant to order passed u/s 263 which is subject matter of Appeal before this tribunal. The Appellant humbly craves leave to add, alter , and or supplement any ground or grounds, if necessary, at any time du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee failed to provide the details except the name, amount, date of making the hundi and due date of payment. In absence of ID proof and address, Ld. A.O added ₹ 7,34,79,097/- as unexplained cash credit u/s 68 of the Act thereby not allowing assessee s claim of giving telescoping benefit of the amount surrendered to the amount deposited in the bank account. Aggrieved assessee filed appeal before Ld. CIT(A) but failed to succeed who confirmed the addition observing as follows:- 5.1 I have gone through the appellant s contentions, the verbal submissions made during the appellate proceedings and the assessment order. The appellant had submitted during the assessment proceedings that the cash deposits made in the bank were out of the repayment of the Hundis which were impounded during the survey action on account of which income of ₹ 7,00,00,000/- had been disclosed. The survey was conducted in Sep 2011 and most of the Hundis were to mature in 2-3 months. As most of the cash deposits were in the month of February and March 2012 the Assessing Officer asked the appellant to furnish the name and addresses of the persons from whom repayment of hundis was being claimed. As the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Motwani 40,00,000 24.03.2012 24.08.2011 Total 2,95,00,000 No explanation has been given as to why the amounts were not received on the due date. In all except the first hundi the deposits in the bank account are in the month of February and March 2012. 5.3 The due dates for the remaining hundis are as under Name Amount in Rs. Date of deposit Due date Hukum Chand Lodhi 50,00,000 23.02.2012 23.09.2011 Vijay Dhakad 40,00,000 05.03.2012 05.10.2011 Kishan Singh Pawar 40,00,000 06.03.2012 06.10.2011 Ramesh Agrawal 25,00,000 08.03.2012 08.10.2011 Vijay Vargi Rathore 45,00,000 27.03.2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aspect and without appreciating the facts merely mentioned that M/s Deepak Security is registered with SEBI and others that only proves the identity and not the nature of transaction as has been pointed out by the A.O. The Hon'ble Madras High Court in the case of CIT vs. Krishnaveni Ammal 158 ITR 826 (Mad) has held that the law of evidence mandates that if the best evidence is not placed before the Court, an adverse inference can be drawn against the persons who ought to have produced it. In that case, there were crossed cheques but they were not produced. Similarly, in the case under consideration , we asked the assessee to furnish copies of Bank accounts but the same were not produced. In the light of the facts of the case and failure on the part of the assessee, the addition made by the A.O while making assessment under section 153A is correct and in accordance with law. 5.5 The appellant has also pointed out that in the case of the firm BHRC it has been accepted that the deposits in the bank account came out of the cash in hand as per the books of account of BHRC in the scrutiny proceedings u/s 143(3) for A.Y. 2012-13. The cash in hand was built up on account of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k account held in the name of the assessee during February, 2012 and March, 2012. Ld. A.O refused to accept the contention of the assessee that source of cash deposited is the maturity proceeds of the hundis i.e. short term advances for which investment was made from unaccounted income surrendered during the course of survey and offered to tax in the return of income. Ld. A.O made the addition for unexplained cash deposit merely in order to prove that since the assessee is accused in Vyapam case cash so deposited should have been from the income earned from alleged bribe received for admission in medical colleges. In the preceding paras we have observed that the proceeding initiated against the assessee under the Vyapam case fall in financial year 2012-13 i.e. subsequent year whereas cash was deposited during Financial Year 2011-12. There is no evidence on the record to substantiate this fact that assessee received any unaccounted income in the form of bribe for admission in medical college during financial year 2011-12. It seems that Ld. A.O merely on the basis of surmises and conjectures have taken this view. He ignored the fact that the assessee has surrendered ₹ 7 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BHAVARLAL MAHENDRA KUMAR 5000000 150410 5150410 23-Jul-11 23-Oct-11 2 HUKAM CHAND LODHI 5000000 226850 5226850 23-Sep-11 23-Feb-12 3 KISHAN SINGH PAWAR 4000000 189510 4189510 06-Oct-11 06-Mar-12 4 MANGILAL MOTWANI 4000000 240658 4240658 24-Aug-11 24-Mar-12 5 MANOJ SHRIVAS 5000000 300822 5300822 13-Aug-11 12-Mar-12 6 NARENDRA KUMAVAT 3500000 183822 3683822 28-Sep-11 28-Mar-12 7 RAJMOHAN SHAH 4500000 236345 4736345 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had this amount as cash in hand which was deposited in the bank on various dates in February 2012 and March, 2012. Apparently there is a direct nexus of the cash so received on maturity of hundis with the cash deposited in the bank account. Whether the assessee is entitled to the telescoping benefit of the surrendered income with the cash deposited in the bank account needs to be analysed in light of following judicial pronouncements :- a. In Veerasinhaiah co vs CIT (1980) 123 ITR 457 (SC), the Supreme court has clearly held that Secret profit/ Undisclosed income of an Appellant earned may constitute a fund, even thouqh concealed from which the Appellant may draw subsequently... b. In CIT V.s. K.S.M. Guruswamy Nadar Sons (1984) 149 ITR 127 (Madras) it was held that In this case, in addition to the Bogus cash credit there is an addition towards the Suppression of profit, 171 such a case as this When there are two additions it is always open to the Assessee to explain that the suppressed profit during the year has been brought in as cash credits and therefore one has to be telescoped into the other and there can be only one addition . c. In Addl CIT Vs. Dharamd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk account of BHRC are out of the cash in hand as per the books of accounts of BHRC which in turn was built up on account of recovery of amount advanced as hundi loans against which income was surrendered during survey action. Hon ble High Court of Punjab Haryana in the case of Jaswant Rai (1977) 107 ITR 477 has held that it was not open to department to adopt different yard sticks in the case of different assesses where the issue of addition to wealth pertained to the same common asset . Accordingly here also the hundi which were seized in one common survey account of one common parties office location i.e. in the case of assessee as well as BHRC of which the assessee is the partner the department should not have taken a different view. We, therefore respectfully following above decisions are of the confirmed view that assessee is entitled for the telescoping benefit of the income surrendered during the year to the cash deposited in the bank account and thus find merit in the contention of the Ld. Senior Counsel for the assessee that the source of cash deposits of ₹ 7,34,79,097/- is the maturity proceeds of hundis during the year which were made out of the unaccounted sur ..... 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