TMI Blog2020 (5) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the same the AO passed the assessment order. Second step for the Ld. PCIT, as per the provisions of section 263 before passing an order of modifying, enhancing or cancelling the assessment, he was supposed either to himself make or cause to make such an enquiry as he deems necessary. The words as he deems necessary , in our view, do not mean that the Ld. PCIT was left with a choice either to make or not to make an enquiry. As per the relevant provisions of section 263, it was incumbent upon the Ld. PCIT to make or cause to make an enquiry. So far as the words as he deems necessary are concerned, the said words suggest that the enquiries which are necessary to form a view as to whether the order of the AO is erroneous and prejudicial to the interest of Revenue or not? Admittedly, in this case also, the Ld. PCIT had asked the assessee to furnish the necessary details and explanations, to which the assessee had given a pointwise detailed reply. We agree with the submissions of assessee as to when there was no such issue or fact on the file regarding the source of any investment made by the assessee, where was the question of examining the issue on purely and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct,1961(in short the Act ) whereby, the Ld. PCIT has set aside the assessment order dated 23.03.2016 and restored the matter to the Assessing Officer with a direction to make assessment afresh on specific issues as mentioned in the impugned order of the PCIT. 2. The brief facts of the case are that the assessee filed return of income on 31.03.2014 declaring income from salary, house property, business and income from other sources at ₹ 8,43,730/-. The case was selected for scrutiny under CASS. The Assessing Officer (the A.O. for brevity) accepted the return of income without making any addition in this case vide order dated 23.03.2016 passed under section 143(3) of the Act. However, the Ld. PCIT after perusal of the assessment record was of the view that the assessment order was erroneous in as much as it was prejudicial to the interest of the revenue in respect of certain issues, hence, he issued show cause notice u/s 263(1) of the Act to the assessee as under: 3. As per CIB information, you made the following cash deposits in your bank accounts:- 1. 69,25,000 15.06.2012 2. 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ening debit balance of ₹ 17,67,960/, Source/Availability of funds in the hands of Sh. Ranjan Gupta had not been obtained. No interest had been charged on this debit balance. 6. You received back ₹ 8,00,000/- on 11.02.2013 and ₹ 6,55,000/- on 23.02.2013 in cash out of opening debit balance of ₹ 14,55,000/- from Sh. Kulwant Singh. Genuineness of cash receipt with PAN Identity of Sh. Kulwant Singh had not been obtained by the Assessing Officer. No interest was charged on this advance. No examination made to rule out possibility of introducing own funds by you under the grab of squaring up outstanding debit balance. Genuineness of this entry should have been examined. 7. As per details, you had given ₹ 4 Crores on 22.06.2012 by way of eight demand drafts of ₹ 50,00,000/- each on 22.06.2012 to Ms. Setu Raman, out of which four drafts of ₹ 50,00,000/- each were cancelled subsequently on 05.09.2012. These eight drafts were purchased from HDFC Account No. 123600. Huge deposits in this account had not been examined critically as per the provisions of Section 68 of the Income Tax Act, 1961 and had been presumed as genuine by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,00,000 11 Jasmeet Dhaliwal 23,55,000 12 Kamlesh Kaushal 2,75,000 13 Khushdeep Kaur 6,00,000 14 K.K. Pajni 21,77,000 15 K.L. Goyal 1,70,000 16 KS. Kang 1,00,000 17 K.S. Kang Amarjeet 1,00,000 18 Kusum Goyal 1,00,000 19 Nachhtar Singh 15,00,000 20 Narpinder Kaur 16,00,000 21 Neha 1,00,000 22 Parkash Chand Kansal 5,00,000 23 Rajesh Jain, Dehradun 20,00,000 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant submissions stated that as per CIB information regarding cash deposits in the bank account of the assessee was filed during the course of assessment proceedings. The case for the assessment year 2012-13 was also taken in scrutiny on the same fact. The assessee has been keeping cash in hand of a higher volume. The nature of business of the assessee requires cash in hand to clinch beneficial deals. However, during the course of assessment proceedings, the source of deposits in bank, copies of bank accounts, cash book and ledger were submitted before the Assessing Officer. That the case was selected on the basis of AIR information and the information was duly submitted during assessment proceedings before the AO. Various deposits mentioned were made out of cash in hand available with the assessee, which is clarified by the following chart. Sr. No. Amount Date Cash in hand 1 69,25,000 15.06.2012 92,14,330 2 30,75,000 14.06.2012 1,22,93,970 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove the source of repayment by the creditor regarding non payment of interest by Sh. Ranjan Gupta. The amount of interest of free loans is much more than the amount advanced, inter alia to Sh. Ranjan Gupta the case of the assessee is supported by decision of Punjab Haryana High Court in the case Bright Enterprises Pvt. Ltd. supra. 6. Since charging of interest on cancellation of deal was sine qua non of the transactions, non charging of interest cannot be objectionable. Further how a person arranges the funds on cancellation of a contract is not the responsibility of the assessee and hence no adverse inference may be drawn. 7. The assessee purchased eight drafts of ₹ 50,00,000/- each out of cash in hand available in the books and is quite apparent from the copy of the cash book submitted before AO during assessment proceeding. Out of these 4 drafts were cancelled and the other 4 were got encashed by the concerned person. The amount was given for arranging loans for the business. Later it was apprehended that the assessee was victim of fraud, the balance four drafts were encashed. It is not a case of accepting any deposit, there is no question of application of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been framed by the A.O. without making inquiries or verifications which should have been made and even without application of mind. He therefore, held that the assessment order passed by the A.O. was erroneous in so far as it was prejudicial to the interest of revenue. He accordingly setaside the order of the A.O. to make assessment a fresh on the issues as noted above. 5. The assessee has thus come in appeal before us contesting the above action of the Ld. PCIT. 6. At the outset, the Ld. Counsel for the assessee has invited our attention to the assessment order in question dated 23.03.2016 passed u/s 143(3) of the Act and has submitted that the return filed by the assessee was originally processed u/s 143(1) of the Act, however, the case was later selected for scrutiny under the CASS because as per CIB information, the assessee had made cash deposits in his bank account. The Ld. Counsel in this respect has submitted that the Ld. Assessing officer, therefore, had made adequate enquiries regarding the source of deposits by the assessee in his bank account, the details and explanation regarding which were duly supplied by the assessee to the Assessing officer and the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asked The A.O was seized of the matter and vide letter dated 25.06.2015 (PB page 5 Para No. 10 detail of loans and advances received / given was duly called for in reply to which copies of accounts of loans and advances were filed. The issue was again clarified vide letter dated 19.10.2015 (placed at page 18 of PB). In respect of Dr. Gulshan Gupta and Ranjan Gupta, wife and son of the assesse, their copies of account duly confirmed by them were filed giving their PAN No. 3. No interest was charged on the debit balances of Gulshan Gupta and Ranjan Gupta During the course of revision proceeding it was explained to the learned PCIT that since the capital of the assessee and amount of interest free loans was much more than the interest free advances no adverse inference could be drawn in view of the decision of the Hon'ble jurisdictional High Court in the case of Bright Enterprises Pvt. Ltd. v/s CIT (2016) 381 ITR 107 4. Receipt of 12,00,000/- from son Ranjan Gupta; 7,00,000 on 30.11.2012 and 5,00,000/- on 30.03.2013 against debit balance of ₹ 17,67,960/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it was explained that the advances to Smt. Gulshan Gupta and contribution of capital of V.K. Holdings were carried forward balances this fact was explained vide query reply to no. 13 of letter dated 4.03.2016 filed on the same day. 8. Advances against the properties received but the A.O. did not make any enquiry as to the genuineness and factual aspect of the matter. No document was obtained by the A.O. concerning the advances. No document in the nature of agreement to cell had been obtained. The nature should have been examined by obtaining complete the details from the assesse. Vide letter dated 19.10.2015 it was explained vide reply to query no. 2 that expect for loans and advances except loan /advances to Gulshan Gupta and Ranjan Gupta all other advances and loans were old. During the course of proceeding of under section 263 it was explained to the PCIT ( page 36 of the paper book) all 35 advances were against sale of plots which pertained to assessment year 2012-13 and IN ere examined during course of assessment proceeding of the year. So for as the year under appeal is concerned no advance was received hence there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of them . In the light of above discussion, the order of the ld PCIT is null and void and is, therefore, liable to be quashed. 7. The Ld. Counsel for the assessee, therefore, has submitted that Ld. PCIT totally ignored the submissions of the assessee. That the assessee had duly given explanation on each of the contention raised by the ld. PCIT. However, the Ld. PCIT proceeded to set aside the assessment order with a predetermined mind and without considering or deliberating on any of the submissions made by the assessee. 8. The Ld. DR on the other hand has placed reliance on para 4.8 of the impugned order of the PCIT to submit that the Ld. PCIT has categorically observed that the A.O. simply accepted the submissions on the assessee but failed to make the required enquiries and verifications. 9. We have considered the rival contentions made by the representatives of both the parties. A perusal of the notices issued by the A.O. and replies thereto furnished by the assessee reveal that all the queries raised by the A.O. including about the source of deposits were duly answered by the assessee supported with the documentary evidence. It has also been mentioned in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he PCIT to consider any order of the A.O. as erroneous, rather such consideration should be based upon justifiable reasons. Then at the first stage the Ld. PCIT may call upon and examine the records relating to such proceedings. In this case, the Ld. PCIT was of the view that the A.O. had not made the requisite enquiries. However, in reply to the show cause notice, when the assessee had shown from the record that the necessary enquiries were made by the AO and the AO had applied his mind and the view adopted by him was one of the possible views, then without considering the reply of the assessee and without recording his reasoned disagreement/dissatisfaction there to, it was not open to the Ld. PCIT to brand the order of the A.O. as erroneous. Admittedly, the AO asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the AO passed the assessment order. 13. Then the second step for the Ld. PCIT, as per the provisions of section 263 as enumerated above, was that after getting the reply/explanation from the assessee, the Ld. PCIT was supposed to examine the contention of the assessee in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. PCIT that the amount of capital of the assessee and the interest free funds of the assessee were much more than the interest free loans advance given to the aforesaid persons. Ld. PCIT failed to make any observation as to why he did not get satisfied from the reply of the assessee on this point. Even the Ld. DR could not convince us as to how the Ld. PCIT was justified to direct the A.O. to make the enquiry regarding the genuineness of the advance of ₹ 14,55,000/- given in earlier years. We agree with the counsel for the assessee that since the amount was not received in the year there is no question of seeking evidence in this respect. Regarding the nature of investments made by the assessee, It was explained that the assessee was partner in the firm V.K. holding and shareholder in the other two companies which did not give any dividend. The Ld. DR could not point out as to what further enquiries were required to be made by the A.O. in this respect. Further regarding advances against sale of plots ,it was explained to the Ld. PCIT that no part of the advance was received in the year under consideration. Once a point wise reply was given by the assessee, then, in ou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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