TMI Blog2021 (9) TMI 1133X X X X Extracts X X X X X X X X Extracts X X X X ..... reflected and accepted in the earlier years are not genuine and have to be enquired again afresh in terms of identity, creditworthiness and genuineness of their individual transactions. Where the assessee has shown recovery from old outstanding advances and debtors and provided the necessary financial and tax filing records and the Assessing officer having examined the same thoroughly, we are of the considered view that the necessary enquiries and examination as reasonably expected have been carried out by the AO in discharge of his quasi-judicial function and he has taken a prudent, judicious and reasonable view in accepting the explanation of the assessee in support of the cash deposits after considering the entire material available on record and the order so passed u/s 143(3) of the Act cannot be held as erroneous in so far as prejudicial to the interest of Revenue. The impugned order passed by the ld PCIT u/s 263 is accordingly set aside and the order of the Assessing officer is sustained. - Decided in favour of assessee. - ITA No. 10/JP/2021 - - - Dated:- 23-9-2021 - Shri Sandeep Gosain, JM And Shri Vikram Singh Yadav, AM For the Assessee : Sh. Mahendra Gargiey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subjected issues and it was nothing but a case of change of opinion and/or suspicion, based on which, assumption of jurisdiction u/s 263 is not permissible. The impugned order dt. 11.03.2021 therefore lacks valid jurisdiction u/s 263 of the Act and hence, the same kindly be quashed. 2. Briefly stated, the facts of the case are that the assessee filed his return of income on 17.03.2017 declaring total income of ₹ 5,49,620/- which was selected for scrutiny through manual scrutiny guidelines issued by the CBDT. Thereafter, notices u/s 143(2) and 142(1) were issued by the Assessing calling for necessary information and documentation. Taking into consideration the submissions and information/documentation filed by the assessee, the assessment was completed accepting the returned income vide order passed u/s 143(3) dated 10.12.2018. 3. Thereafter, the ld. Pr. CIT, Udaipur called for the assessment records and after review thereof, issued a show cause to the assessee dated 29.01.2021 the contents thereof read as under:- On examination of assessment record, it is seen that in your case, the ITR for A.Y. 2016-17 has been filed on 17.03.2017 i.e. after the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e. if the assessment order is not erroneous but it is prejudicial to the Revenue, Sec.263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous as also prejudicial to revenue s interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 21.12.2017. Notice under sub-section (1) of section 142 issued on 07.06.2018 through e-proceeding. In response to that, Shri P.Khandelwal, FCA and AR of the assessee attended the proceeding and filed written submission, which is placed on record. Later no, notice have been issued through e-proceedings portal. AR/assesse complied on e-proceedings portal and uploaded all the replies. 2.2 This is also evident from queries raised and the replies given thereto, reproduced hereunder: 2.2.1 Through the Notice/s u/s 142(1) dated 07.06.2018 (PB 10) dated 23.10.2017 (PB 03), following informations were called for: 1. Submit copies of your Capital A/C, P L A/C, and Balance Sheet. Similar queries were raised and explanation called for vide Notice u/s 142(1) dated 23.10.2017 through Pr. 12 2. Explain the credit entries and all cash deposits in the bank accounts. Explain the purpose of the debit entries and all cash withdrawals in the following format for all bank accounts: - Name of the Bank Account Number S. No. Date Amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for explanation of bank entries. 2.2.3 Reply dated 25.10.2018 submitted to the above notice/s (PB 14), was as under: 1. Computation of Income-Shri Rameshwar Pd. Shringhi, M/S RP Shringhi Sons and M/S Khandelwal Shringhi Co. for AY 2016-17. x x x x 3. A survey u/s 133A of the I.T Act, 1961 was carried out on 13/14.02.2008 No incriminating documents relating to the assesse found during the survey. Computer hard disk impounded during the survey consists of regular accounting of the assesse and his family concerns/members. 2.2.4 Reply dated 12.11.2018 submitted to the above notice/s (PB 15), was as under: 1. Scan copy of Cash Book for the year 2015-16. 2. The assesse has deposited SBN of ₹ 85,00,000/- with SBBJ Gumanpura, Kota on 16.11.2016. We further clarify that the assesse surrendered and declared income of ₹ 1,96,37,930/- during the survey proceedings on 13/02/2008. Out of such amount, ₹ 1,59,00,000/- were in the nature of Sundry Advances and Investments. Cash realization from the Advances and Investments were recorded in the cash book for the year 2015-16, hence cash in hand as on was of ₹ 85,80,796/- wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, it cannot be said that the impugned assessment order was erroneous and therefore prejudicial to the interest of the revenue, for want of enquiry by the AO. 3. Beyond the scope of enquiry contemplated u/s 263: 3.1 It is submitted that the AO raised very specific and relevant queries/called for explanation and evidences w.r.t. cash recoveries from the Sundry Advances (Debtors), to the extent he was supposed to act in law. Hence, the allegation and the expectation of the Ld. CIT from the AO acting as quasi-judicial authority, is clearly beyond the scope of S. 263, in as much as he was supposed, only to the extent of examination of the fact of availability of sufficient cash in hand lying immediately before 08.11.2016. The facts are not denied that it was an undisclosed income, offered at the time of survey, which could be available in any form, be it Cash, Sundry Advances (Debtors) or fixed Assets. The Deptt. never doubted nor rebutted the assertion of the assesse that such undisclosed income of ₹ 85.00 lacs were lying with the Sundry Advances (Debtors) and no evidence was required earlier in support thereof. No similar requirement of furnishing name and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or A.Y. 2008-09 and also again during the subjected asst. proceedings for A.Y. 2016-17. 3.2.2 Out of ₹ 1.96 Cr. surrendered and included in the return of income of A.Y.2008-09 filed at total income for ₹ 1,98,65,480/- on 30.07.2008, the assesse at the S. No. 7 in chart (PB 29) explained the utilization. Earlier, when the statements of the Appellant were recorded u/S. 133A on dated 13/14.02.2008 wherein itself, the assesse had explained the availability of such undisclosed income of ₹ 1.96 Cr. broadly specifying the form of assets viz. cash in hand, cash in bank or debtors, investment etc. vide answer to question no. 35 that the amount of ₹ 1.59 Cr. was the I made advances (to the outsiders) for purchase of lands in the name of Unexplained Investment in the name of myself or my family members in various schemes of Land/Plot etc. The relevant extracts being answered to Q. 35 is being reproduced hereunder in verbatim: However, such debtors (viz Rakesh others named in impounded paper Ann A/7 Pg 23) could not purchase/ invest hence, advance were realized when needed. Such assets kept changing its form year to year in the balance s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT did not disbelieve or did not doubt or even did not reject the same. Since, availability of the opening balance of the particular amount in the regularly maintained cashbook, which were duly and admittedly submitted before the AO in the subjected assessment proceedings, hence, there was no reason as to why the AO should have doubted. 4. Fairly speaking, from the point of a quasi-judicial authority (the AO), the past history of the case which included the fact of survey, making of surrender a larger amount of income, being utilized in the debtors or investments etc., maintaining books which were available in the Hard disk during survey and thereafter filed through balance sheet in some of the years, filing of balance sheets now, during original assessment proceedings of all the years from A.Y. 2008-09 to A.Y 2015-16, accounts not rejected and therefore, having a binding value, which included cash book in particular, furnishing of cash book of the current year with the opening balances as on 01.04.2016, predecessor AOs having accepted similar claim/s of recovery from the debtors in the past as well, there being no indication even remotely to raise a suspicion warranting an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the particular case. In the instant case, the Tribunal has held that the discretion had not been properly exercised by the ITO and the AAC in taking into account the circumstances in which the assessee was placed and the Tribunal has found that the sources of investments could not be treated as income of the assessee. The High Court has agreed with the said view of the Tribunal. There is no error in the said finding recorded by the Tribunal. There is thus no merit in these appeals and the same are accordingly dismissed.- CIT vs. Smt. P.K. Noorjehan (1980) 15 CTR (Ker) 138 : (1980) 123 ITR 3 (Ker): 42R.1622, affirmed. Thus, it was fully established beyond all reasonable doubts that there was sufficiency of cash available and in absence of any evidence of utilization thereof elsewhere, the same could be deposited in the bank. 5. Past Assessments completed - Not disturbed - Binds the parties: All the assessments of the past/intervening period starting from A.Y. 2008-09 to A.Y. 2015-16 stood completed either under scrutiny u/s 143(3) or u/s 143(1). If the Deptt. could not find any fault in the passing of the assessments orders of any of the earlier year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2 In CIT vs. Chemsworth Pvt. Ltd. (2020) 275 Taxman 408 (Kar) (DPB 64- 66), it was held that: Revision-Erroneous and prejudicial order-AO taking plausible view-AO completed the assessment without considering expenditure which was not allowable under s. 14A-CIT held that non-consideration of disallowable expenditure under s. 14A was erroneous and is prejudicial to the interest of the Revenue-Not correct-CIT has held hat the enquiry conducted by the AO was inadequate and has assumed the revisional jurisdiction- Assessee has filed all the details before the AO and AO has accepted the contention of the assessee that no expenditure was attributable to the exempt income during the relevant assessment year-Thus, while recording the said finding, the AO has taken one of the plausible views in allowing the claim of the assessee- Therefore, CIT could not have set aside the order of assessment merely on the ground of inadequacy of enquiry-Order passed by the CIT was not sustainable in law hence, the Tribunal rightly set aside the impugned order of the CIT. The ld. CIT is completely silent on this aspect. 7. Supporting Case Laws on availability of funds: The Hon ble High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s possession. The Department cannot, by merely rejecting unreasonably a good explanation, convert good proof into no proof.-Sreelekha Banerjee Ors. vs. CIT (1963) 49 ITR 112 (SC) : TC42R.1145 relied on. 7.2 In another case of PCIT vs. Dilip Kumar Swami [2019] 106 taxmann.com 59 (Raj) (DPB 5-7) it was held that Assessee filed his return declaring certain taxable income - In course of assessment, Assessing Officer noted that assessee had deposited certain amount in his bank account - On being enquired about source of said deposit, assessee explained that it represented amount received from various purchasers against sale of goods i.e., tractors and accessories thereof - Assessing Officer accepted assessee's explanation and completed assessment - Commissioner taking a view that cash deposits not being satisfactorily explained, passed a revisional order setting aside assessment - Tribunal, however, set aside revisional order so passed - It was noted that order passed by Assessing Officer that deposits stood reconciled was preceded by a proper inquiry - It was also found that assessee had produced statement of bank account, copies of bills issued to purchasers of tractors a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch-Assessee is entitled to furnish cash flow statement to explain the transactions when no books of account are maintained-In such circumstances it becomes the duty of the AO to verify the balance sheet and cash flow statement with the necessary material including the details already filed along with the returns in the past- Assessee explained that the cash found at the time of search was withdrawn from the bank some time back which was partly used for purchasing gold and part of the amount was given by the assessee to his wife-There is nothing to suggest the utilization of the withdrawal amount elsewhere-Said withdrawal is duly reflected in the cash flow statement and closing cash balance is more than the amount found at the time of search-Thus, addition cannot be sustained 7.6 Kindly refer CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj). (DPB 52-55) held that: Once Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Offer allowed the claim being satisfied with the explanation of assessee, the decision of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the bank, on the other because the law of telescoping is well established that some undisclosed income once surrendered and got taxed, the benefit of the availability (telescoping) of the same towards the other outgoing/investments/expenditure etc. must be allowed as was held long back in the case of Anantharam Veerasinghaiah co. v. CIT [1980] 123 ITR 457 (SC) (DPB 22-25) followed by Rajasthan High Court in the case of ITO v. Tyaryamal Balchand [1987] 32 Taxman 64 (Raj.) (DPB 26-30), more particularly in absence of any evidence of utilization of such income elsewhere. 9.2 AO acted as per decisions: Since this is the law laid down by Hon ble Apex Court and followed by Hon ble Rajasthan High Court and the ratio laid down therein is binding upon the subordinate authorities, the AO was fully justified in having accepted the explanation of the assesse towards the source of the cash deposits in the bank account with the help of the income surrendered in A.Y. 2008-09 (PB 20) (though, in addition there are plethora of evidences already available on record to support such contention otherwise on merit also, as submitted above). 9.3 In the case of Vinod Bhandari vs. Pr. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect in the cashbook of this year or in the books of account maintained in the previous year/s. 10.1.2 The AO being a quasi-judicial authority, is all entitled by the law to take its own decisions and cannot be guided or instructed by any superior authority as per u/s 119 of the Act. Even the Explanation to S. 263 was not applicable (as submitted later). The identity, name address etc. were already established by the assessee, when he referred to the destination of the income surrendered during survey u/s 133A on dated 13/14.08.2008 and the same is also available in the documents impounded. Unfortunately, however, despite the request of the assessee to AO vide letter dated 02.03.2021, certified copies have not been supplied although existence of the same is not denied. Thus, the AO, having the past assessment records including the survey records, was fully justified in taking a possible view. It is not the case of the CIT that some of debtor/s has denied taking any loan from the assesse, nor it his case that cash so available as on 01.04.2016 till the date of deposit stood diverted/utilized elsewhere because he neither doubted nor rejected the cashbook nor brought any contrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nized. What comes out is that Ld. CIT is ignoring the binding evidentiary value of the past completed assessments because of the simple fact that those assessments were not completed under scrutiny. Firstly, on the very face of it, this is a mis-conception and purported mis-reading and this argument is completely mis-placed in as much as firstly, it is not the choice of the assesse to get the assessment completed either under scrutiny or as a summary assessment u/s 143(1). The decision solely rests with the department only and if they chose to complete the assessment in a particular manner the fact remains is that the assessments of earlier year/s stood completed by accepting and assessing what was claimed. Such admission is not only of the income declared but also of the other facts as stated in the evidences enclosed with the ROI. Therefore, the submission that the dept. not having completed the assessments under scrutiny did not have evidentiary value is completely fallacious. Secondly, such argument may hold good in the matters of estimation of income particular from trading etc. in the cases where S.145(3) has been invoked where because of change in the facts, AO of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68, directly support the assesse. Further argument in para 6.9 is that the law does not forbid the AO to verify debtors from whom recoveries were made but then above contention adequately answers this objection also of the CIT. 10.6 Para 6.10 - The Ld. CIT again repeats the same arguments which we have already answered here and also in our detailed submissions. Thus, the AO evidently acted completely in accordance with law, duly and fully applying his mind by calling for all the relevant details and the has taken a possible view and did not find any contrary material or suspicious or anything raising his suspicion. 11. Rule of Consistency ignored: After going through the principle laid down by the Hon ble Apex High Court and other High Courts, it will be clear that the contention of the ld. CIT was completely fallacious and ignoring the rule of consistency. 11.1 Godrej Boyce Manufacturing Company Ltd. Vs. Dy. Commissioner of Income-Tax ANR. [Civil Appeal No. 7020 of 2011] 38. In the present case, we do not find any mention of the reasons which had prevailed upon the Assessing Officer, while dealing with the Assessment Year 2002-2003, to hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot have been suddenly disallowed-Revenues appeal dismissed 12. Supporting Case Laws on S. 263: 12.1 Kindly refer CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj). (DPB 52-55) held that: Once Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Offer allowed the claim being satisfied with the explanation of assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard. 12.2 In CIT v/s Ganpat Ram Bishnoi (2005) 198 CTR (Raj) 546 (DPB 56- 59) held that from the record of the proceedings, in the present case, no presumption can be drawn that the AO had not applied its mind to the various aspects of the matter. In such circumstances, without even prima facie laying foundation for holding that assessment order is erroneous and prejudicial to interest in any matter merely on spacious ground that the AO was required to make an enquiry, cannot be held to satisfy the test of existing necessary condition for invoking juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch a cause of action can be open. 12.5 In another case of Sanspareils Greenlands (P.) Ltd. v. CIT [2018] 99 taxmann.com 222 (Delhi - Trib.), it was held that Assessee-company, engaged in manufacture, purchase, sale and export of sports goods, claimed expenditure towards payments made to cricket players under head 'advertisement and publicity' - Assessing Officer, after making enquiries and considering explanation furnished by assessee allowed said expenditure - Subsequently, Commissioner, exercising power under section 263, disallowed expenditure claimed by assessee on ground that Assessing Officer had failed to make an inquiry in this regard - It was noted that it was not department's case that no information regarding payments made to cricketers was called for by Assessing Officer - Relevant details and documents were furnished by assessee during assessment proceedings which formed part of record - Hence, no inference could be drawn that Assessing Officer had not examined issue although he had not expressed it in as many terms as might be considered appropriate by Commissioner - Whether section 263 does not visualize a case of substitution of judgment of Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income of ₹ 1,96,37,930/- during the survey proceedings on 13.02.2008, an amount of ₹ 1,59,00,000/- were the advances and investment and cash realization from the advances and investment were recorded in the cash book for the year 2015-16 and hence cash in hand as on was of ₹ 85,80,796/- has merely been accepted by the AO without verifying the correctness of statement of the assessee. Rather, the AO has merely accepted this submission of the assessee without making any enquiry and verification and he has relied upon the cash book of the assessee. The existence of the debtors from whom recovery of substantial cash amounts of ₹ 85,00,000/- are claimed to have been made by the assessee has not been enquired into. The details regarding identities of the debtors i.e. the name and addresses and also the genuineness of transactions with regard to recoveries of such cash amounts of ₹ 85,00,000/- have neither been obtained by the AO from the assessee during the course of assessment proceeding nor any specific queries on this issue have been raised by him. 6.5 The fact is that the complete details of the debtors (i.e. their name and addresses) from whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances (debtors) and recoveries were made from them. As per the assessee existence of sundry advances (debtors) of ₹ 85 lacs is well established. If argument of the assessee is that there did exist the sundry advances (debtors) then it is not understandable as to why details i.e. identity of such debtors are not disclosed and details regarding creditworthiness of such debtors and genuineness of transactions are not furnished. Another argument of the assessee is that this amount of ₹ 85 lacs was an undisclosed income offered at the time of survey, this could be available in any form, be it cash, sundry advances (debtors) or fixed assets. As per the assessee the department never doubted nor rebutted the assertion of the assessee that such undisclosed income of assessee is lying in sundry advances (debtors) and no evidence was required earlier in support thereof. As per the assessee therefore, if now the assessee claims to have made recoveries in cash from those sundry advances (debtors), the AO was not supposed to make further investigation for the simple reason that even assuming that the assessee failed to furnish the same then too the AO could not have made any addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 [2000] 109 Taxman 66 (SC) Malabar Industrial Co. Ltd. vs. CIT 23-28 5 Denial Merchants P. Ltd. vs. Income Tax Officer on 29 November, 2017 25-30 7. We have heard the rival contentions and perused the material available on record. The legal proposition laid down by various Courts regarding the exercise of powers u/s 263 have to be seen in light of facts and circumstances of the present case. In this case, it is noted that the Assessing Officer had issued notice u/s 142(1) dated 23.10.2017 where, inter-alia, he had asked the assessee to furnish the details of all his bank accounts explaining the credit entries and all cash deposits as well as debit entries and all cash withdrawals along with the copy of the bank statements. In response, the assessee vide his submission dated 16.11.2017 submitted the copies of all his bank account statements as well as ledger accounts in the books of accounts maintained by him in respect of three bank accounts maintained by him during the period under consideration. It is further noted that the Assessing Officer thereafter iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of ₹ 1,96,37,930/- during the survey proceedings on 13/02/2008. Out of such amount, ₹ 1,59,00,000/- were in the nature of Sundry Advances and Investments as per Balance Sheet as at 31.03.2008. Cash hand/Sundry Advances/Investments of ₹ 85.00 Lakhs or more have been continuously appearing on assets side of the Balance Sheets from F.Y 2009 to F.Y 2015. Copies of ITR, Balance Sheet and Income Expenditure for A.Y 2009-10 to A.Y 2015-16 are enclosed herewith in support of availability of funds with the assessee which was deposited during the F.Y 2016-17. The assessee has been regularly filing Income Tax Returns since A.Y 2008-09. The assessee has already deposited tax on declared income of ₹ 1,96,37,930/- in A.Y 2008-09 and case was completely/assessed under scrutiny scheme. Copy of order has already submitted with the previous letter dated 12.11.2018. The assessee was having sufficient cash in hand with him out of which cash of ₹ 85,00,000/- was deposited in bank. 9. We therefore find that the Assessing officer has carried out exhaustive enquiries and verifications regarding source of cash deposits in the bank account during the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial statements and balance sheets for the subsequent financial years which were also placed on record and examined by the Assessing officer. If we look at the balance sheet of the financial year 2014-2015 which is the immediately preceding financial year, we note that these advances were standing in the books of assessee at ₹ 85,00,000/- which again lends credence to the explanation that out of total advances of ₹ 1,59,00,000/-, there were recovery to the extent of ₹ 74,00,000/- in the earlier years and the advances to the tune of ₹ 85,00,000/- were outstanding at the beginning of the current financial year 2015-16 out of which the advances to the tune of ₹ 75,00,000/- were recovered during the year under consideration with remaining advances of ₹ 10,00,000/- continues to remain outstanding as on the close of the current financial year 2015-16. The recovery so made from earlier advances as well as cash receipts from other activities represent cash in hand of ₹ 85,80,796/- as on the close of the current financial year which has been explained as source of cash deposits during the demonetization period in the subsequent financial ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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