TMI Blog2017 (10) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of law will satisfy the requirement of the order being erroneous. We further note that in the same category fall order passed without applying the principles of natural justice or without application of mind. We are of the view that it is incumbent on the officer to investigate the facts stated in the return, when circumstances would make such an enquiry prudent and the word ‘erroneous’ in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated there are assumed to be correct. - Decided against assessee. - I.T.A. No. 1094/Del/2016 - - - Dated:- 18-10-2017 - SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Assessee : SH. K.L. ANEJA, ADV. For The Revenue : SH. NAVEEN CHANDRA, CIT(DR) ORDER PER H.S. SIDHU, JM This appeal is filed by assessee against the Order dated 04.2.2016 passed by the Ld. Pr. CIT, Karnal relating to Assessment Year 2011-12 u/s. 263 of the Income Tax Act, 1961 (hereinafter referred as the Act). 2. The grounds raised by the assessee in the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, notice u/s. 263 of the I.T. Act was issued to the assessee on 28th December, 2015 on the issues discussed above. In response, the assessee/his Advocate attended the proceedings on 13th January, 20th January and 3rd February, 2016 and also filed the written submissions to support their case that the action u/s. 263 of the Act is not warranted in this case. The assessment records and the submissions filed by the assessee during assessment proceedings as well as during the proceedings u/s. 263 have been perused carefully and assessee submissions/explanation were not because the A.O. didn't make any enquiry/verification of the sources of cash deposits appearing in the bank accounts, so the assessment order passed by him has become erroneous and pre-judicial-to the interest of the Revenue. Accordingly, the Ld. Pr. CIT has set-aside the assessment order dated 12.08.2013 passed by the A.O. in this case and directs the A.O. to do the assessment afresh after considering all the facts/issues discussed above. The A.O. was also directed to allow reasonable opportunities of being heard to the assessee before passing the assessment order in this case, vide order dated 04.02.2016 passed u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot to do any HARM THE SETTLED ISSUES. to be unsettled. The Ld CIT has not been able to show as to how AO's order is erroneous in law whether no enquiries or deficiency. In either case no erroneous law has been applied by the AO which is contrary to law or coming to wrong conclusion. CIT could not interfere with the AO's order simply because he disagrees with the AO in as much as none of the two conditions that should pre-exist. The order of Ld CIT may kindly be reversed and AO's order should preexist. Submitted for Favourable consideration. 7. On the contrary, Ld. DR relied upon the order passed by the Ld. CIT dated 04.2.2016 passed under Section 263 of the I.T. Act and requested that the same may be upheld. In support of his contention, he also filed the Written Submission, the contents thereof are reproduced hereunder:- 1.1 In the present case application of mind is not demonstrated through assessment order which is very evident. 1.2 It clearly demonstrate that there is no application of mind. The ratio has been laid down by the Hon'ble SC in case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 (SC) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not start the matter afresh in a way as to question the manner of his conducting inquiries. It is not the province of the Commissioner to enter into the merits of evidence; it has only to see whether the requirements of essential inquires and of law have been duly and properly complied with by AO or not. 28.2 It is well settled that before the Commissioner can invoke his powers u/s 263, he has to arrive at a conclusion that the assessment order is erroneous in so far as it was prejudicial to the interests of the revenue. Then only the powers uls 263 can be invoked. Therefore, if AO accepts or rejects any claim of the assessee without due application of mind and if such failure causes prejudice to revenue, the Commissioner would be well within his powers uls 263 to intervene in the matter. An inquiry which is just farce or mere pretence of inquiry, cannot be said to be an inquiry at all, much less an inquiry needed to reach the level of satisfaction of the AO on the given issue. The level of satisfaction would obviously mean that he has conducted the inquiry in a manner whereby he places on record the material enough to reach the satisfaction, which a rational person, being in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction, which a rational person, being informed of the nuances of tax laws would reach after due appreciation of such material. If this component is missing, it will always be a case of lack of inquiry and not inadequate inquiry. 2.5 The right question to be asked is as to whether a normal person, leave alone ITO who is conversant with nuances of Income tax law, would be inquisitor in a given situation. 3.1 In the present case there in name of enquiry, there is just farce or mere pretence of inquiry. In the circumstances when, the case was selected under scrutiny on the ground that AO should examine genuineness of Sundry creditors . Issuing notices u/s 133(6) only in 6 cases against 22 such cases, shows no application of mind as well as just farce or mere pretence of inquiry. 3.2 The fact of accepting sundry creditors without any further enquiry in spite of showing pattern of cash payments below ₹ 20000/- on consecutive days, in such payments which is unnatural shows AO has not conducted the inquiry in a manner whereby enough material is placed on record to reach the satisfaction, which a rational person, being informed of the nuances of tax l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebut this presumption. 4.4 The Finance Act, 2015 w.e.f. 1st June, 2015, has inserted Explanation 2 to section 263 so as to provide 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. 4.5 This being an explanation is clarificatory in nature. Moreover, the language of this explanation is declaratory and has phrase' it is hereby declared'. Therefore, it only clarifies the intension of the parliament. Hence, the position of the law would be interpreted as being same, even earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te because the same are not identical to the facts of the present case. We find in this case the assessee filed its Return of income declaring an income of Rs.l,59,800/- on 26.09.2011. The case of the assessee was taken into scrutiny as there were huge cash deposits to the tune of ₹ 57.39 lacs approximately appearing in the Saving Bank Accounts of the assessee. The A.O. during the assessment proceedings noted that the assessee is an agriculturist and also has some income from sale of milk and finally the order u/s. 143(3) was passed by the A.O. on 12th August, 2013 in which he accepted the returned income of Rs. l,59,800/-. Thereafter, from the perusal of assessment records, it was noticed by the Ld. Pr. CIT that out of ₹ 57.39 lacs (approximately) cash deposited in the saving bank account of the assessee maintained with Allahabad Bank (Rs. 22.40 lacs approx.), in PNB (Rs. 18.01 lacs approximately) and in Union Bank of India (Rs. 16.98 lacs approx.). The assessee submitted that he sold agricultural land on 29.4.2010 for ₹ 12.76 lacs approximately and thereafter on 19.10.2010 for ₹ 14.54 lacs approximately. Thus, the assessee submitted some explanation for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank on 13th 30th April and on 1st May, 2010. Thus, credit for agricultural produce sale can be allowed to the tune of ₹ 3.48 lacs. Though, the dates and amount don't exactly tally with the date and amounts of the sale of agriculture produce yet a liberal view is taken and credit of ₹ 3.48 lacs on account of sale of agriculture produce is allowed to the assessee. b) If we look at the cash deposited in Saving bank accounts on different dates the following position emerges. For convenience sake cash deposit of ₹ 2 lacs and above is Amount (in lacs) and above is discussed here:- S.NO. DATE OF DEPOSIT N AME OF THE BANK AMOUNT (RS. IN LACS) 1 10.05.2010 Allahabad Bank 10.90 2 19.06.2010 Allahabad Bank 3.50 3 03.07.2010 Union Bank 5.00 4 29.07.2010 Union Bank 5.00 5 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose like purchase of property (Rs.7.25 + 7.25 lacs on 29th November, 2010), for purchase of car (Rs.4.83 lacs on 24th June, 2010), gift given to assessee's daughter-in-law (for booking a plot for ₹ 7lacs on 20th May, 2010) etc. Secondly, usually the withdrawals are not meant for depositing the same as cash in the same Bank account or in other bank accounts on the same day/other dates. Thirdly, the withdrawals have to be matched with the amount and dates, if any credit is to be allowed for such withdrawals. Thus, unless the assessee is able to co-relate the withdrawals with the cash deposits by way of matching of dates and amounts or the specific purpose for doing such acts logically, no credit can be allowed to the assessee on this account. Considering the points discussed above, it is obvious that the assessment order dated 12.08.2013 passed by the A.O. is erroneous as well as pre-judicial to the interest of the Revenue as the A.O. didn't make any verification/enquiry in respect of the sources of huge cash deposits appearing in the bank accounts of the assessee. 9.1 We further find that Ld. Pr. CIT further rightly observed that, as per the Explanation 2 to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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