TMI Blog2021 (8) TMI 750X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the cash was deposited in the bank account of the assessee or not. After due satisfaction, that no cash was deposited in assessee s bank account, the assessment order was passed without making any addition. The bank was not in possession of any document like cash book, vouchers, signed vouchers of debit and credit and journal for the dates i.e. from 30.06.2010 to 10.07.2010. In the absence of these documents it cannot be assumed that any cash was deposited by the assessee either in her own account or in the account of Saradjyot singh or the amount was debited and credited in her account. In our view the whole order of the PCIT is premised on conjectures and surmises without any cogent reliable evidence. The bank had written various letters confirming that no cash was deposited in the account of the assessee at any point of time relevant to issue in hand. Therefore the invocation of power u/s 263, was without any basis. The observation on the PCIT that the documents furnished by the Bank in response to the notice of AO were not required to be corroborated with the statement of the Chief Manager for the reason that the documents issued under the Bankers Book Evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] we are of the opinion that the proceeding u/s 263 of the Act at the level of Pr. CIT were not called for and accordingly the action initiated u/s 263 was without any merit and accordingly we quash the same.Appeal of the assessee is allowed. - I.T.A. No. 703/Asr/2019 - - - Dated:- 14-7-2021 - Sh. Laliet Kumar, Judicial Member And Dr. M. L. Meena, Accountant Member For the Appellant : Sh. Surinder Mahajan, Sh. Kuldeep Bhagat, C.A. And Sh. Vikas Bhagat, Adv. For the Respondent : Sh Anupam Kant Garg CIT(DR) ORDER PER LALIET KUMAR, J.M. This appeal of the assessee is directed against the order dated 26.09.2019 passed by the Pr. Commissioner of Income Tax-1, Jalandhar in respect of A.Y. 2011-12 on the following grounds:- 1. That on the facts and circumstances of the case, Ld PCIT, Jalandhar-1 ( Ld. CIT ) has grossly erred in law in assuming jurisdiction u/s 263 of the Income Tax Act, 1961. The order passed u/s 263 of the Act directing the AO to enhance the assessee s income is illegal and bad in law. 2. That on the facts and circumstances of the case Ld PCIT, Jalandhar -1 ( Ld.CIT ) has grossly err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sharma be recorded to know the facts of the case. This has resulted in violation of principle of natural justice, which makes the order passed u/s 263 of the Act bad in law. Brief Facts 1. The Appellant filed return declaring income of ₹ 6,46,015/- on 25-09- 2011. The appellant received communication dated 14.3.2018 under section 133(6) of the Act for the verification of financial transaction pertaining to the credit entries of ₹ 4,50,00,000/- in Punjab National Bank account no 0242002101004903 and 024200PC000376 of Appellant during the financial year 2010-11 relevant to AY 2011-12. 2. The appellant had filled reply to notice u/s 133(6) of the Act vide letter dated 19.03.2018 alongwith enclosures wherein explanation for credit entry of ₹ 4.50 crores with supporting evidence was filed. (Paper Book Page No. 10 to 26). It was submitted that the entries pertained to amount advanced in bank account no 024200PC000376 (loan account) and corresponding credit given by the bank in account no 0242002101004903. The appellant had provided all information sought by the officials, including details of Pan, relevant bank statements and balance sheet to the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause notice dated 03.05.2019 and Appellant was asked to file objections to the proposal to hold assessment order for A.Y. 2010-11 u/s 147 of the Act as erroneous in so far as prejudicial to interest of the revenue. 11. In the Show cause notice u/s 263 of the it was mentioned as under u/s 263 of the Act at page 1 2 of the order. 12. That written submissions it was mentioned as under :----------- were filed vide letter dated 28.05.2019 (Paper Book Page No. 9 to 62), letter dated 01.07.2019 (Paper Book Page No. 63 to 121), letter dated 08.08.2019 (Paper Book Page No. 122 to 127), letter dated 21.08.2019 (Paper Book Page No. 128 to 183), letter dated 29.08.2019 (Paper Book Page No. 184 to 187), letter dated 11.09.2019 (Paper Book Page No. 188 to 195), letter dated 12.09.2019 (Paper Book Page No. 196 to 199) 13. That in exercise of powers u/s 263 of the Act Ld. Principal Commissioner of Income Tax-1, Jalandhar in para 9.3 of order u/s 263 of the Act has held as under:- In view of the above facts and discussion, I am satisfied that assessment order passed by the Assessing Officer on 28.12.2018 is erroneous in so far as it is prejudicial to the interest of the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax-1, Jalandhar during proceedings u/s 263 as detailed below:- I. Written Submissions dated 01.07.2019 filed before Principal Commissioner of Income Tax-1, Jalandhar wherein following documents were enclosed. a) Copy of sanction letter of working capital loan. (Paper Book Page No. 65) b) Copy of A/c No. 024200PC00037676. (Paper Book Page No. 66) c) Copy of A/c No. 0242002101004903. (Paper Book Page No. 67) d) Copy of A/c No. 0242003171104. (Paper Book Page No. 68) e) Copy of A/c No. 0242000125537289. (Paper Book Page No. 69) f) Copy of cash book of branch from 30.06.2010 to 10.07.2010. (Paper Book g) Details of FDR s in the name of Ravinder Bawa from 30.06.2010 to 10.07.2010. (Paper Book Page No. 118) h) Certificate of bank to the effect that no cash entry of ₹ 4.50 crores has been transacted in these accounts. (Paper Book Page No. 119) i) Copy of Saving Account no. 02420003000970611 from 30.06.2010 to 10.07.2010. (Paper Book Page No. 120) j) Certificate of bank to the effect that no cash entry of ₹ 4.50 crores has been transacted in any bank accounts. (Paper Book Page No. 121) II. Written Submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, as the order passed by the AO was not erroneous and prejudicial to the interest of revenue. It was further submitted that words erroneous and prejudicial to the interest of revenue have not been defined in the law. An order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes certain assessment, the same cannot be branded as erroneous simply because, the order should have been written more elaborately. Case may be visualized where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimates himself. On perusal of the records, one may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a high figurer than the one determined by the Income-tax Officer. That would not be ground to re-examine the accounts and determine the income himself at a higher figure. This is because the Income-tax Officer has exercised the quasi-jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L HIGH COURT OF ALLAHABAD (2008) 297 ITR 99 (All) ,COMMISSIONER OF INCOME TAX vs. DEEPAK MITTAL HIGH COURT OF PUNJAB AND HARYANA (2010) 37 DTR 0008, (2010) 324 ITR 0411,COMMISSIONER OF INCOME TAX vs. LEISURE WEAR EXPORTS LTD. HIGH COURT OF DELHI (2010) 46 DTR 0097, (2012) 341 ITR 0166 etc . 21. Ld AR had submitted that once assessment is framed u/s 148 of the Act after verification of reasons recorded to initiate proceedings u/s 148 of the Act Commissioner of Income Tax is not justified in exercise of power u/s 263 of the Act. Ar referred the decision in the case of PARGAT SINGH VS. ITO ITAT CHANDIGARH (2005) 95 TTJ 0295, DEWAS SILK MILLS VS CIT ITAT INDORE (2005) 92 TTJ 0481 (TM) . 22. Reliance is also placed upon the decision of the Hon ble ITAT Mumbai in the case of Narayan Tatu Rane vs. ITO [2016] 70 taxmann.com 227 (Mum) wherein it has been held section 263 could be invoked only if the assessment order has been passed without making inquiry or verification which a reasonable and prudent Officer would have carried out in such cases. Law does not provide to stretch the inquiries and verification to an extent which may tantamount to oppression and harassment of a tax pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 263 passed by the CIT setting aside the assessment order on the ground that the Assessing Officer has not made enquiries in respect of certain issues is not valid, CIT vs. Leisure Wear Exports Ltd. (2010) 46 DTR 97 (Delhi) Tribunal having found that the Assessing Officer had made reasonably detailed enquiries, collected relevant material including the seized documents, and discussed various facts of the case with the assessee s Chartered Accountants before making the assessments, there was no valid basis for the CIT to exercise jurisdiction under section 263 and to direct the Assessing Officer to make fresh assessments by going deeper in to the matter. CIT vs. Hindustan Marketing Advertising Co. Ltd. (2010) 46 DTR 109 (Delhi) . Assessment Order was set aside by Commissioner on ground, that Assessing Officer had made Assessment without making proper enquiry. Held, that when Assessing Officer has specifically mentioned in the order that books of accounts alongwith Purchase / Sales, Invoices, ledgers, Bank Accounts were examined, verified and test checked, setting aside by Commissioner, in absence of any finding that Assessing Officer s order is factually incorr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. (Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC). 22.7 The Hon ble Delhi High Court in the case of Nabha Investment Pvt. Ltd. V/s Union of India and others, 246 ITR 41 has held that : a bare reading of the section 263 makes it clear that the pre-requisites to the exercise of jurisdiction by the Commissioner under the said provision is : (i)That the order passed by Assessing Officer is erroneous, and (ii)That it is prejudicial to the interest of the revenue. 22.8 If either of the condition is missing i.e. if the order of A.O is erroneous but is not prejudicial to the interest of the revenue or if it is not erroneous but is prejudicial to the interest of the revenue, recourse cannot be had to the provision contained in section 263(1) of the Act . It is not necessary that every order passed by the A.O, which may result in loss of revenue, is to be treated as an erroneous order in as much as it is prejudicial to the interest of the revenue. An order is erroneous if the view taken by the assessing officer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiry was made by PCIT from the various persons, despite repeated requests by the assessee from Sh. R.D Sewak, Sh. R.K. Abhi, Sh. Manohar Sharma, Sh. Somnath Nagpal and Sh. Pawan Kumar Sharma officers of the bank know the about the correct facts of the case However the PCIT had rejected the request by observing at at point no. 3 page 7 of the order the production of the bank employees at this time would only delay the proceedings as they would only stand for the documents of the bank and would not have any other document/evidence in their possession to make any other claim . 24. Lastly it was submitted that in para 4.2 page 8 of the order, Ld. Principal Commissioner of Income Tax-1, Jalandhar has wrongly observed that position of law stands substantially altered with the inception of explanation 2 in section 263 by Finance Act 2015. It was submitted this explanation cannot be invoked, as the law in force at the time of cause of action is required to be applied rather than the law as available to PCIT at the time of exercising the jurisdiction is to be applied for the above it was submitted that explanation 2 in section 263 cannot be applicable retrospectively. For this pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the provisions of Section 69A of the Act in view of the scheme of those provisions. For application of Section 69A of the Act, two conditions are required to be satisfied. (1) investment/expenditure are not recorded in the books of account of assessee; (ii) The nature and source of acquisition of assets or expenditure are not explained or not explained satisfactorily; The expression nature and source used in this section should be understood to mean requirement of identification of source and its genuineness. To explain Nature it would require the assessee to explain the description of investment or expenditure and the period and the manner in which it was done. To explain the source it would require the assessee to explain the corpus or fund from where investment or expenditure has been met. 7.2. In the present case, the assessee company has routed Cash in its bank account with the connivance of the bank officials as discussed in details above. Further, the nature and source of such Deposits made in the bank accounts were not at all explained, leave alone satisfactory explanation. Further, for invoking deeming provisions under Section 69A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocation of the jurisdiction u/s 263 of the Act as has been laid down by the Hon ble Supreme Court and High Court in the following manner. 27. In our considered opinion the revenue has failed to demonstrate that the order passed by the assessing officer was erroneous and prejudicial to the interests of the revenue. Under the provisions of the Act, the PCIT may call for and examine the record of any proceeding this Act and pass an order only if the twin conditions are satisfied, namely, the order passed by the Assessing Officer is erroneous; and also prejudicial to the interest of the revenue. The Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs CIT (2000) 243 ITR 83 (supra) has held that both of the above conditions have to be satisfied. It has been held that, A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law. 30. 31. In the matter ITO v. D.G. Housing Projects Ltd. 2012 (343) ITR 329 (Delhi), wherein it has been observed as under:- 16. Thus, in cases of wrong opinion or finding on merits, the PCIT 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 of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s u/s 263 only after an enquiry by him to establish the twin conditions. 34. Further we are also the opinion that merely the assessing officer has formed an opinion which is not in line of thinking of the revisional Commissioner and there are two possible views, then also the revisional Commissioner cannot exercise the power for provision under section 263. For the above said purposes we rely upon the decision of the Bombay High Court in the matter of C.I.T. Vs. Gabriel India Ltd. 203 ITR 108 (Bom) has held that: The Income Tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, claim was allowed by the Income tax Officer on being satisfied with the explanation of the assessee. This decision of the Income tax officer could not be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard. 35. From the perusal of the record of the present case, it is apparent that before issuance of notice u/s 147 the investigation bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the act calling upon the assessee to furnish various details in respect of the cash entries, provide the bank account statements, bank certificate et cetera. This 41. The Assessing Officer during the assessment proceedings had called upon the Bank Manager to furnish the following information vide communication dated 7/8.8.2018 calling upon to provide the following information u/s 133(6) of the Act 2. In this connection you are requested to provide the voucher complete narration and if transfer the bank account please provide the name of bank, of the below noted bank accounts and date of entries. M/s Ramco Auto Industries A/c No. 0242002101004903 Date of voucher In which account transfer Amount 06.07.2010 To 3171104 4,50,00,000/- Please provide the name of bank and name of account holder of A/c no. 3171104 if the account is with your branch. Please provide the account statements for the period of 1.4.2010 to 31.3.2011. M/s Ramco Auto Industries A/c No. 024200PC00037676 Date of voucher I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der from/to whom amount transferred/received. This information is being called u/s 133(6) of the Income Tax Act, 1961, and the information must reach this office by 28.08.2018. Please note that noncompliance to this letter may attract penal action as per provision of Income Tax Act, 1961. 42. Our attention was also drawn to the another notice dated 14.12.2018 calling for further information from the branch manager of PNB bank (page 209 of the paper book) 43. The reply was given by the bank officials and the documents were provided vide reply dated 19.12.2018. For the ready reference we are reproducing herein below the reply dated 19.12.2018 (page 210) The entry dated 06.07.2010 of ₹ 4.50 crore was transferred from Ramco Auto Industries Account to sundry account (3171104) which was further debited through cash transaction on 06.07.2010. Further it appears that the same amount was credited by cash to Saadjyot Singh account 06.07.2010. The voucher is enclosed herewith (cash deposit on 06.07.2010 and transfer of same amount on 10.07.2010) Details of FDRs pledged is enclosed. Cash day book dated 06.07.2010 is enclosed. 44. From the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and ordinary course of business, and that such book is still in the custody of the bank (and where the copy was obtained by a mechanical or other process which in itself ensured the accuracy of the copy, a further certificate to that effect, but where the book from which such copy was prepared has been destroyed in the usual course of the banks business after the date on which the copy had been so prepared, a further certificate to that effect each such certificate being dated and subscribed by the principal accountant or manager of the bank with his name and official title) . 4. Mode of proof of entries in bankers books.-Subject to the provisions of this Act, a certified copy of any entry in a bankers book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every case where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise. 14. A perusal of the provisions of the Act shows that certified copy of any entry in a bankers book is to be received as prima facie evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at these are cash transactions. Letter dated 29.8.2019- this letter has been relied upon by the assessee to confirm that no cash has been credited in Saradjyot Singh A/c 0242000125537289. 50. From the perusal of the various letters written by the bank to the revenue, it is abundantly clear that no cash was deposited by the assessee in her bank account. These documents and other correspondence clearly shows that the AO had made sufficient enquiry to find out whether the cash was deposited in the bank account of the assessee or not. After due satisfaction, that no cash was deposited in assessee s bank account, the assessment order was passed without making any addition. 51. As mentioned in herein above the reopening u/s 148 was made for the reasons that there was cash deposits of ₹ 4.5 crore in the bank account of the assessee. The PCIT in paragraph 5.5 of her order as mentioned that it is true that the voucher by virtue of which cash of ₹ 4.5 crore has been deposited in the bank does not bear signatures of the assessee but the evidence is strongly against the assessee. Further the PCIT on page 13 confirms that the cash was deposited in the bank account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uchers for 30.06.2010, 06.07.2010 and 10.07.2010- Except payment voucher for 30.06.2010 none of the other vouchers were available with the bank and they did nto produce the same. The chief manager stated in response to summons u/s 131 that the original vouchers of transactions showing deposit of cash into account transfer of entry from Ramco current account to loan account for repayment, if any, transfer of entry from Saradjyot Singh account to Ramco account are not available. Non production of vouchers for the specific dates further shows connivance of the bank officials. 3. Signed voucher for debiting current A/c of the assessee and crediting loan a/c of the assessee: It was confirmed by Chief Manager PNB, Industrial Area that no such voucher is available and only a request letter dated 6.7.2010 is available and that too only a copy and not the original letter signed by the assessee. Under the circumstances it is not possible to get the letter validated even from a forensic expert. It is surprising that for debit of the assessee s bank account no signed voucher is there and a letter is sufficient. 4. Journal for all dates i.e. from 30.06.2010 to 10.07.2010 the bank prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamining the officials of the Bank to ascertain the true facts by denying the summoning of the officials of the Bank on the request of the assessee. In our considered opinion the Principle CIT had failed to bring on record any piece of evidence or documents which shows that the cash was deposited in the account of the assessee on the date mentioned in the reasons for reopening of the assessment. 61. Nonetheless, once the certified copy of the cash book, bank account, vouchers and other documents were produced before the AO and PCIT, which clearly shows that no cash was deposited in the Bank account than, in our view, the finding recorded by the Pr. CIT, was not correct as the same was not borne out of the record. 62. The PCIT had failed to establish the fulfillment of twin conditions as mentioned herein above before invoking the jurisdiction u/s 263 of the Income Tax Act. The Pr. CIT has failed to bring on record how the order passed by the Assessing Officer was prejudicial to the interest of the Revenue and further how it was erroneous. 63. Note sheet of the assessment proceeding of AO clearly shows enough evidence of making the inquiries from the assessee as w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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