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TMI Blog2020 (3) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... ore. 2. As the issues raised in these appeals are common and relates to same assessee these were heard together and are being disposed off by way of this consolidated order for sake of convenience and brevity. 3. Brief facts as culled out from the records are that the assessee is a Doctor by profession and earns income from Remuneration, House property, Share of profit and income from other sources. Survey proceedings u/s 133A of the Act was carried out at the premises of M/s Bhandari Hospital & Research Centre (In short BHRC) on 24.09.2011. During the course of survey proceedings certain discrepancies were noticed. Incriminating material in the form of Hundis were found and impounded. The assessee in his individual capacity admitted the discrepancies of un secured loan given to various persons and surrendered additional income of Rs. 7 crores for Financial Year 2011-12 relevant to Assessment Year 2012-13. Subsequently assessee e-filed return of income for Assessment Year 2012-13 on 28.03.2013 declaring income of Rs. 7,01,74,054/- which was further revised on 18.07.2013 declaring income of Rs. 7,41,07,850/- The case was selected for scrutiny and notices u/s 143(2) and 142(1) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed the Ld. A.O to pass a fresh assessment after making proper enquiries and investigation as directed in the order u/s 263 of the Act. Against the order u/s 263 assessee is in appeal before the Tribunal by way of filing ITA No.350/Ind/2017. 6. As regards ITA No.57/Ind/2017 the same is arising out of the assessment order u/s 143(3) r.w.s. 263 of the Act wherein the Ld. A.O did not made any new addition and same income of Rs. 14,75,87,000/- assessed as was assessed u/s 143(3) of the Act. Against this order also assessee went before Ld. CIT(A) but could not succeed and now the assessee is in appeal before the Tribunal vide ITA No.57/Ind/2017. The fate of this appeal will depend on the outcome of our decision to be taken in the case of ITA No.350/Ind/2017. 7. Now we first take up ITA No.350/Ind/2017 wherein the assessee has raised various grounds but the substantial issue is challenging the order issued u/s 263 of the Act passed by Ld. PCIT- 1 contending that Ld. PCIT exceeded his jurisdiction by wrongly invoking the provisions of 263 of the Act and the impugned order is bad in law and void initio. Following grounds of appeal have been raised:- THE ORDER U/S 263 DATED 30.3.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT failed to appreciate that there was no occasion for the AO to initiate penalty. 4.NO JUSTIFICATION EITHER IN LAW OR IN FACTS IN EXERCISING JURISIDCTION U/S 263 IN RESPECT OF THE FOLLOWING ITEMS SINCE THERE WAS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER AND THE ORDER IN RESPECT OF THESE ITEMS WAS PASSED AFTER DUE AND SUFFICIENT ENQUIRY AND THE SAME WAS ALREDAY TAXED :- 4.1 No justification to regard increase in income of Rs. 41,07,848 shown in the return as causing any prejudice to the Income-tax department. 4.2 No justification to ask the AO to make independent verification of certificate of done uls80G(S)(vi) and LIC receipt as these were duly and sufficiently verified by the AO and even the CIT could not point out any error in the documents filed. 4.3 No justification to ask the AO to make enquiry regarding year-wise investment made in movable and immovable properties which was already done by the AO. THAT EXTENSIVE INFORMATION WAS SOUGHT BY THE AO AND WHICH WAS DULY PRODUCED AND EXAMINED BY THE AO WHICH COVER ALL ASPECTS WHICH HAVE NOW BEEN AGAIN SET-ASIDE FOR REEXAMINATION BY THE CIT UIS 263. THUS THE PRESENT ORDER UIS 263 IS ONLY AN ATTEMPT TO MAKE FISHIN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble property and accretion in wealth was not made'. 9. On receiving the show cause notice assessee made detailed written submissions which read as follows:- 1. With reference to the show cause notice issued to us, as a general submission against all of your observations, we would like to bring to your attention that the explanation (2) to sub-section 1 of section 263 has been inserted w.e.f 1/6/2015 and is thus applicable to assessment orders passed after 1/6/2015. Consequently, the discretionary powers bestowed on you by virtue of sub-clause (a) of Explanation (2) are not applicable to the Assessment order passed in our case which was passed in January 2015 and which is subject matter, of your referred notice. Also the explanation inserted is not retrospective in nature as has been clarified / held in the following order of the Supreme court. 2. The Supreme Court in CIT v. Vatika Township P. Ltd (2014) 367 ITR 466 observed: " The fundamental rule is that no statute shall be construed to have a retrospective operation unless such a construction appears very dearly in the terms of the Act, or arises by necessary and distinct implication'. It has been consistently held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores surrendered during the Survey. From all the above it is clear that the A.D had obtained the details of all the heads of the assessment proceedings. It may kindly be noted that the amount of 41,07,848/- was higher than previous year and tax has already been paid on the above. 5.There was nothing in the impound material related to the assessee other than the documents on the basis of which surrender of Rs. 7.00 cores was made. So mere mention of test check by the AD. that impounded material does not render the order as erroneous and prejudicial to the interest of the revenue since the AO had already made unjust and high pitched order in the favour of revenue by adding the same income twice. The AO has verified the transactions from the following books a. Cash book and other books of the assessee submitted for verification on 16/03/2015 b. Capital account and Statement of affairs of the assessee c. Copies of the computation of incomes, Capital accounts of the firms where the assessee is partner. Therefore it is dear that from the books of account the AO means the books of the assessee only. From the above it is clear that both the reasons in clause C are not correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not seized by Police authorities. Further and more importantly the matter referred in which Dr. Vinod Bhandari is accused is with reference to the F.Y. 2012-13 whereas our assessment orders which are subject matter of show cause notice u/s 263 are with respect to FY 2011-12 Le. A.Y. 2012-13. Despite of above, and without bringing any evidence to the contrary and only based on pure conjecture, the A.D. has double added surrendered income as income from unknown sources alleging his involvement in Vyapam case. 8. The assessee had paid L1C premium of Rs. 1026737/- however due to error deduction was claimed only for Rs. 49,062. Copies of L1C were submitted along with submission dated 26/08/2013 and. also above fact was mentioned in letter dated 24/02/2014 Point no. 8. The certificate of 80G approval was given up to 31/03/2011 however as per CIRCULAR NO. 7/2010 [F. NO. 197/21/2010ITAI], DATED 27102010 (Copy enclosed) it is clarified by CBDT that any approval is in force as on 01/10/2009 and approvals granted thereafter shall remain in force unless approval is withdrawn. Therefore the AO had required and assessee had submitted declaration from the said institutes that there appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er making proper enquiries of investments thereby treating the assessment order issued u/s 143(3) dated 24.3.2015 as erroneous and prejudicial to the interest of revenue. Relevant extract is reproduced below:- 14. It is apparent that AD has not investigated and examined the matter properly which should have been done. 15. The Commissioner can regard the order as erroneous, on the ground that in the circumstances of the case, the Assessing Officer should have made further inquiries. It is duty of the Assessing Officer to ascertain the truth of the facts stated by the assessee. It is incumbent on the Assessing Officer to investigate the facts stated when circumstances would make such an inquiry prudent. The word "erroneous" in section includes the failure to make such an enquiry. Hence, the order becomes erroneous because such an inquiry has not been made. 16. The assessee relies upon various decisions challenging the proceedings initiated u/s 263. Assessee's contention is not acceptable. As per provisions of section 263, the Commissioner of Income tax may call for and examine the record if any proceedings and if he considers that any order passed therein by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to Assessment Year 2012-13. 12. Ld. Counsel for the assessee apart from reiterating the submissions made before Ld. A.O during the course of assessment proceedings and before Ld. PCIT during the course of proceedings u/s 263 of the Act further argued that the order u/s 143(3) of the Act is passed by Ld. A.O after making inquiries and verification which should have been made. The AO, exercising its quasi-judicial power, had issued a detailed questionnaire u/s 142(1) which was duly answered by way of various details, explanations and letters. Complete books of account supported with documentary evidences were produced and examined by the AO during the assessment proceedings. The appellant had appeared before the AO and filed replies, however, the ld. PCIT has completely ignored the detailed enquiry conducted by the AO and has, therefore, erred in exercising jurisdiction u/s 263 of the Act in respect of the issues which were already examined by the AO. 13. Relying on the decision of Apex Court in the case of Malabar Industrial Co. Ltd. V. CIT [(2000) 243 ITR 83], it is submitted that the power of CIT u/s 263 of the Act can only be exercised by the ld. PCIT when the twin condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at AO had not undertaken any inquiry, it becomes incumbent on the Ld. PCIT to conduct such enquiry. Further in the case of PCIT v. Modicare Limited [ITA No. 759/2017] Hon'ble Delhi High Court has followed its decision in Income Tax Officer v. DG Housing Projects Limited [343 ITR 329], DIT v. Jyoti Foundation [357 ITR 388] and Ld. PCIT v. Delhi Airport Metro Express Pvt. Ltd. (supra) to hold that the exercise of jurisdiction u/s 263 of the Act cannot be outsourced by the PCIT to the AO and therefore, the PCIT cannot direct the AO to provide details of the facts on the basis of which the proceedings u/s 263 of the Act could have been initiated. 16. In the instant case, the ld. PCIT, unmindful of the enquiries conducted by the AO during the assessment proceedings and submissions made by the assessee in response to notice u/s 263 of the Act, has merely observed that the assessment order was passed without making proper enquiries and it is a matter of record that Ld. PCIT has himself not undertaken any enquiry to reach a conclusion that the order is erroneous and prejudicial to the interest of revenue. Therefore, in the absence of any justification for exercise of jurisdiction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shown in the computation of income and due taxes paid therein. The surrendered income of Rs. 7 crores is the unaccounted income from profession/ business income which were invested in hundis as short term advances for earning interest and the details of such hundis which were impounded during the course of survey were available with the Ld. A.O. As regards the alleged involvement of assessee in Vyapam case it was submitted that the assessee is accused in Case No.12/13 and 14/13 with respect to PMT 2012 and PPG 2012 which happened during the financial year 2012-13 whereas the assessment of the assessee which is the subject matter of the appeal is for financial year 2011-12. He also submitted that assessee has not been named as accused in any other cases of this matter and the amount involved in the alleged case No.12/13& 14/13 referred above have already been seized from Shri Pradeep Raghuvanshi's house at Indore by the police authorities. 20. He also submitted that even though there was no matter of Vyapam scam during financial year 2011-12, the Ld. A.O during the course of assessment proceedings u/s 143(3) of the Act did not accept the submissions of assessee and made addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ukesh Sharma v. CIT 25 ITJ 341 (Indore ITAT) 22. Per contra Ld. Departmental Representative strongly supported the order u/s 263 of the Act passed by Ld. PCIT and further submitted that assessee was required to furnish complete details of the persons named in the hundis so as to prove that they were genuine advances and the cash was received on maturity of such hundis. Since no such explanation was provided by the assessee during the course of assessment proceedings and the Ld. A.O has also not examined the link of source of Rs. 7 crores surrendered and also about the mismatch in the deduction under Chapter VI-A, Ld. PCIT has rightly set aside the order of the Ld. A.O issued u/s 143(3) of the Act dated 23.3.2015 for passing a fresh assessment order after making proper enquiries and investments. 23. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments and decisions relied by the assessee. Sole issue raised in this appeal is challenging the validity of order u/s 263 of the Act by Ld. PCIT and wrongly assuming jurisdiction u/s 263 of the Act. 24. The assessee was subject to survey u/s 133A on 24.9.2011 and during the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner undersection 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine the records of any proceedings under the Act and for this purpose he/she need not to show any reason or record any reason to belief as it is required u/s 147 or 143(2) of the Act. ii. He/She may consider any order passed by the Assessing Officer as erroneous as well as prejudicial to the interest of the Revenue. This is exercised by calling for and examining the record available at this stage. iii. If after calling for and examining the records the Commissioner considers that the order of the Assessing Officer is erroneous is so far it is prejudicial to the interest of the Revenue, he is bound to give an opportunity to the assessee of being heard and after that as he/she may deem fit, pass such order thereon as the circumstances of the case may justify including an order enhancing or modifying the assessment or cancelling assessment and directing a fresh assessment or make such enquiries as he deems necessary. iv. Under the provisions of section 263 of the Act Pr. CIT/CIT can enhance or modify the assessment as a result of inquiry conducted and hearing of the assessee. 26. It is well settled law that for invoking the provisions of section 263 of the Act both the conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue and if one of them is absent, i.e., if order of Income-tax Officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1) - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue - Held, yes - Assessee-company entered into agreement for sale of estate of rubber plantation - As purchaser could not pay installments as scheduled in agreement, extension of time for payment of installments was given on condition of vendee paying damages for loss of agricultural income and assessee passed resolution to that effect - Assessee showed this receipt as agricultural income - Resolution passed by assessee was not placed before Assessing Officer - Assessing Officer accepted entry in statement of account filed by assessee and accepted same - Commissioner under section 263 held that said amount was not connected with agricultural activities and was liable to be taxed under head 'Income from other sources' - Whether, where Assessing Officer had accepted entry in statement of account file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these factors co-exist or exist simultaneously, the Commissioner cannot invoke or resort to section 263. It cannot be exercised to correct every conceivable error committed by an ITO. Before the suomoto power of revision can be exercised, the Commissioner must at least prima facie find both the requirements of section 263, namely, that the order sought to be revised is prima facie erroneous and prejudicial to the interests of the revenue. If one of the other factor was absent, the Commissioner cannot exercise the suomoto power of revision under section 263.' [emphasis supplied] 31. In the case of CIT V/s Nagesh Knitwears P. Ltd (2012) 345 ITR 135 (Delhi) the Hon'ble Delhi High Court has elucidated and explained the scope of provision of Section 263 of the Act and the same has been extracted by the Hon'ble Delhi High Court in the case of CIT V/s Goetze (India) Ltd 361 ITR 505 as under :- "Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 83(SC) held in favour of the assessee confirming the order of the Tribunal observing as follows:- 19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.8.2013 fixing the date of hearing on 26.8.2013. Correspondence between the Learned Assessing office and the Assessee can be summarized in following chart which along with enclosures were filed before the Learned PCIT. Sr. No. Correspondence Date Submissions Page no's of enclosure 1. 14/08/2013 Notice u/s 143(2) from DCIT 2(1) 1 2. 27/08/2013 Submission of documents called for vide notice u/s 143(2) dated 14/08/2013 including the following: a.) Computation and ITR-V for AY 2012-13 b.) TDS Certificates c.) SAT Challan d.) Donation Receipts claimed u/s 80G e.) LIC Premium Receipts 2-47 3. 14/02/2014 Notice U/s 142(1) with detailed questionnaire from ACIT 2(1) 48-50 4. 24/02/2014 Submission of documents called for vide Notice U/s 142(1) dated 14/02/2014 51-53 5. 22/07/2014 Notice U/s 143(2) regarding Assessment proceedings u/s 143(3) from DCIT 2(1) 54 6. 08/08/2014 Submission of the information called for vide Notice U/s 142(1) dated 14/02/2014 in connection with the Assessment proceedings 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the family members, their Pan, amount withdrawn by them for household expenses and justify the amount withdrawn by you in along with them in view of the expenses of the family. Details of the family members and amount withdrawn by them during the A.Y. 2012-13 S.NO NAME OF FAMILY MEMBERS RELATION OCCUPATION PAN AMOUNT WITHDRAWAL FOR HOUSE HOLD EXPENSES 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 appearing in the form 26as of the assessee so same can be verified from there. (Copy enclosed) 10.Please provide the copies of the Chalan of Bonus, Vat Tax, C.S.T pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st 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 Rs. 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 with interest in cash and deposited in bank. 2 Details of Donations given and corresponding bank statements where the above are reflected. Also justify that the SAIMS Indore is branch of SAIMS Bhopal by documentary evidence. Details of Donations are enclosed. Copy of Receipts are already furnished to you. Amount Particulars Mode Remark 31/05/2011 300000 SAIMST Cash Receipt already furnished 16/06/2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est amount) 05.03.2012 05.10.2011 Kishan Singh Pawar 40,00,000 +(189510 interest amount) 06.03.2012 06.10.2011 Ramesh Agrawal 25,00,000+(112195 interest amount) 08.03.2012 08.10.2011 Manoj Shrivas 50,00,000+(2,62,605 interest amount) 12.03.2012 13.08.2011 Ramesh Chand Jain 50,00,000 +262605 interest amount) 13.03.2012 13.09.2011 Suresh & Sons 50,00,000+(337810 interest amount) 19.03.2012 19.07.2011 Mangilal Motwani 40,00,000 +(2,40,658 interest amount) 24.03.2012 24.08.2011 Vijay Vargi Rathore 45,00,000 +(2,36,350 interest amount) 27.03.2012 27.09.2011 Ram Singh 2500000 +(114045 interest amount) 27.03.2012 27.10.2011 Narendra Kumawat 35,00,000 +(183822 interest amount) 28.03.2012 28.09.2011 Vallabh Chandra Mundra 50,00,000 +(2,29,315 interest amount) 28.03.2012 28.10.2011 Suraj Kulkarni 50,00,000 +(2,29,315 interest amount) 28.03.2012 28.11.2011 Rajmohan Shah 45,00,000 + (2,36,345 interest amount) 29.03.2012 29.09.2011 Now you have not given addresses and persons in reply on 16.03.2015, therefore it is not verifiable that aforesaid cash were deposited by same persons as claimed by you in order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the current previous year or otherwise, which due to personal relations or local family constraints were not clarified/ascertainable/ computable/realized / demanded in earlier years. Dr. Bhandari realised the amount in the FY 2011-12 due to his plans for construction of his own new house near SAIMS which was to be commenced in the said year and consequently the surplus liquidity was temporarily parked in HUNDIS and which was declared as Income during survey proceedings. From a source perspective they are from profession and from a year perspective they have crystallised in the current/previous year only. 3. A submission whether loans given from undisclosed income were recovered during the year, if yes please highlight such transactions in the bank statement Loans given out of the undisclosed income were duly recovered within the year under consideration. Loans were repaid in cash by the parties and thereafter deposited by the assessee in his Bank account. Copy of Cash Book and Credit entries Bank Book are enclosed in hard copy and all books in soft copy also. Receipts from such loans are highlighted in cash book. 4. Also furnish the name and address of person to whom loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to May are the period when admissions in these colleges take place. Although it is immaterial for taxation, as once an income is proved as unexplained in the hands of assessee, it is to be taxed, irrespective of the fact what the source is, but it requires some discussions in purview of background of assessee. But when assessee was asked to prove his claim by producing these persons or to provide their addresses, assessee was unable to prove 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under s. 271(1)(iii) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income." Therefore in the case of assessee 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no material evidence on record to establish bribe, he still "in the interest of revenue' made the addition of Rs. 7,34,79,097/-. We are surprised to note that even when the Ld. A.O has made the addition of Rs. 7,34,79,097/- for unexplained cash deposit how could Ld.PCIT can treat the assessment order as erroneous and prejudicial to the interest of revenue. In our considered view 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 Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the owner of any money, bullion, jewelry or other valuable article and such money, bullion, jewelry or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewelry or other valuable article, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch were relevant to subsequent year, even then Ld. A.O has issued show cause notice giving details of the hundis found asking the basis of linking the same with the cash deposit in the bank in the year under appeal during February and March,2012. Though the assessee gave the details of linking the maturity of hundis to the 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. That Hon'ble High Court has held as under (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 Rs. 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 dividen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act was not justified and valid. 45. In the light of above judgments and applying the facts of the instant case and perusal of the assessment order, paper book and the note-sheet of the assessment proceedings show that the AO has raised several queries by way of note sheet entries 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 Rs. 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 cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment so carried on the directions of Ld. PCIT- 1 vide its order u/s 263 dated 30.3.2017 to frame fresh assessment order. 48. Assessee has raised following grounds of appeal:- That on the facts and circumstances of the case, ld. Commissioner of Income-tax (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 Rs. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the amount deposited in the bank. The Ld. A.O. during the course of assessment proceedings u/s 143(3) of the Act directed the assessee to furnish the complete details of the persons named in the hundis. The assessee 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 Rs. 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 Rs. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 27.09.2011 Ram Singh 25,00,000 27.03.2012 27.09.2011 Narendra Kumawat 35,00,000 28.03.2012 28.09.2011 Vallabh Chandra Mundra 50,00,000 28.03.2012 28.10.2011 Suraj Kulkarni 50,00,000 28.03.2012 28.11.2011 Rajmohan Shah 45,00,000 29.03.2012 29.09.2011 Total 4,05,00,000 As can be seen from the above table the due dates for the hundis were in September and October, 2011 but here also the repayments are shown in February and March, 2012 and no explanation has been offered to explain the delay in repayment. Under the circumstances the Assessing Officer was justified in asking the appellant to furnish the name and addresses of the persons from whom he was claiming repayment of loan in cash. A show cause notice was issued on 18/03/2015 in response t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered during survey action by BHRC in the same F.Y. 2012-13. However, it is not submitted whether repayments of hundi loans in the case of BHRC were on the due dates or bunched in the months February and March, 2012 like in the case of the appellant. Further, as pointed out by the Assessing Officer the background of the appellant also has to be taken into consideration. Therefore, from the details on record it cannot be held that the case of appellant is identical to that of BHRC. The decision of Hon'ble Punjab and Haryana High Court relied upon by the appellant is not applicable to the facts of the case. 5.6 In view of the above the addition of Rs. 7,34,79,097/- made as unexplained cash credit u/s 68 is confirmed. Ground no.2 is dismissed' 52. Now the aggrieved assessee is in appeal before the tribunal. 53. Ld. Senior Counsel for the assessee reiterated the submissions made before Ld. CIT(A) and also mentioned that there was a direct nexus of the cash deposit in the bank account to the maturity proceeds of the hundis found during the course of survey proceedings. The unaccounted receipts in cash were used to provide short term loans and advances for earning interest in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est income by way of giving short term advance on hundis. Such hundis are normally issued through brokers. Only the name of person receiving the money, his signature, amount given as advance, rate of interest, date of entering into the hundi agreement and the maturity date of receiving the money are provided. When the assessee shows the original hundi he receives the principal and interest. The assessee had surrendered his income from other source as unexplained money which was not recorded in the books of accounts and the assessee failed to offer any explanation about the nature and source of acquisition of these unexplained money/income. The hundis were impounded during the course of survey which itself is sufficient evidence that unaccounted income has been invested. The unaccounted income has been offered to tax which is not in dispute. 56. We find that the assessee subsequently fully recovered the hundi loans in the F.Y. 2011-12 but with a delay from their due dates, on account of original receipts being in possession of the Department. Interest on the delayed period was also recovered. The total sum against loans advanced and interest thereon was recovered in cash and depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how cause notice issued by Ld. A.O which included principal and interest, they were entered in the books and the cash in hand kept on increasing. Total of principal amount is Rs. 7 crores and Rs. 34,79,097/- being the interest received on various dates and the assessee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. Ld. Senior Counsel for the assessee stated that in the scrutiny proceedings u/s 143(3) of the Act carried out in the case of BHRC for Assessment Year 2012-13 the Ld. A.O has accepted the assessee's contention that the deposit in bank 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 accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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