TMI Blog2022 (2) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... party verifications, examination of the creditors, etc. and after inquiries necessary additions to be made as per law. The order of the Ld. Pr. CIT on this count is, thus, cryptic, vague and contradictory. No effort has been made to spell out as to in what manner there was lack of enquiry by the AO in the order of assessment vis- -vis the trading results declared by the assessee. Assessing Officer had made adequate inquiries as is evident from the order of assessment as well as from the replies furnished - Thus, in view of the documentary evidences, as called for and examined by the Assessing Officer, it is very much evident that the Assessing Officer had duly applied his mind to the issue of trading results and it was only thereafter that he had estimated income of the assessee. As far as the issue of investment in construction of house is concerned, the same is apparently misconceived, as it is not arising from assessment records. As far addition on account of fixed assets is concerned, the same stands separately added as part of the income declared during the course of survey by the assessee. Therefore, we can safely conclude that proper inquiries had been made by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the separate orders dated 30.3.2021 passed u/s. 263 of the Income Tax Act, 1961 (hereinafter called 'the Act') by the Ld. Pr. Commissioner of Income Tax (Pr. CIT) for Assessment Year (AY) 2016-17. Since common issues have been raised in all these appeals, therefore, they were heard together and are being disposed of by this common order. 2. The grounds raised in the appeals are as under: 1. ITA No. 149/Chd/2021: 1. That order dated 30.3.2021 u/s. 263 of the Act by learned Principal Commissioner of Income Tax, Rohtak has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2. That the conclusion of learned Principal Commissioner of Income Tax that the AO has passed the order dated 29.12.2018 in a very casual manner without due diligence and without conducting any worthwhile enquiries. Therefore, it is very clear that assessment proceedings completed u/s. 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me surrendered in the course of survey on account of excess cash, unexplained investment, unexplained expenditure and unsecured loans have been separately brought to tax then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view. 2.3 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of lack of enquiry and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s. 263 of the Act. 2.4 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act the learned Principal Commission of Income Tax cannot travel beyond the show cause notice and therefore findings and observation and also the material relied upon not referred in the show cause notice but made part of the order could neither in law and nor on fact be made a basis to assume jurisdiction u/s. 263 of the Act; and thus order on this ground alone deserve to be quashed as such. 4. That finding and conclusion of the learned Principal Commissioner of Income Tax. that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue on the following basis is based on fundamental misconception of facts and provisions of law and hence untenable. a) That since during the assessment proceedings the AO had issued letters to creditors and they were either returned back unserved or were not replied to which led to the conclusion by the AO himself that assessee had bogus creditors and therefore addition on this account was required to be made however no such addition was made by the AO; b) That since the assessee has shown bogus creditors the purchases remained unverified. The AO was required to disallow the purchases however no su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore prayed that, impugned order dated 30.3.2021 under section 263 of the Act be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. 3. ITA No. 151/Chd/2021: 1. That order dated 30.3.2021 u/s. 263 of the Act by learned Principal Commissioner of Income Tax, Rohtak has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2. That the conclusion of learned Principal Commissioner of Income Tax that the AO has passed the order dated 29.12.2018 in a very casual manner without due diligence and without conducting any worthwhile enquiries. Therefore, it is very clear that assessment proceedings completed u/s. 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015 is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable. 2.1 That the finding of learned Principal Commissioner of Income Tax that or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer was an impossible or unsustainable view. 2.3 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of lack of enquiry and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s. 263 of the Act. 2.4 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view. 2.5 That the learned Pr. Commissioner of Income Tax has also failed to appreciate that, u/s. 263 of the Act, an order of assessment cannot be set-aside to simply to make further enquiries and thereafter pass fres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer is erroneous and prejudicial to the interest of revenue on the following basis is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable: a) That since during the assessment proceedings the AO had issued letter to creditors and debtors and they were either returned back unserved or were not replied to which led to the conclusion by the AO himself that assessee had bogus creditors and debtors and therefore addition on this account was required to be made however no such addition was made by the AO; b) That since the assessee has shown bogus creditors the purchases remained unverified. The AO was required to disallow the purchases however no such addition was made by the AO; c) That the Assessing officer conducted no enquiry regarding the purchases and sales made by the assessee; d) That there is clear lack of inquiry regarding purchase of fixed assets. 2.2 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act the learned Principal Commission of Income Tax cannot travel beyond the show cause notice and therefore findings and observation and also the material relied upon not referred in the show cause notice but made part of the order could neither in law and nor on fact be made a basis to assume jurisdiction u/s. 263 of the Act; and thus order on this ground alone deserve to be quashed as such. 2.8 That various other adverse findings recorded in the notice u/s. 263 of the Act and, also in impugned order are factually incorrect, vague, legally misconceived and untenable. 3. That the learned Principal Commissioner of Income Tax has framed the impugned order without granting sufficient opportunity to the appellant and therefore the order made is illegal, invalid and, vitiated order Prayer - It is therefore prayed that, impugned order dated 30.3.2021 under section 263 of the Act be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. 5. ITA No. 154/Chd/2021: 1. That order dated 30.3.2021 u/s. 263 of the Act by learned Principal Commissioner of Income Tax, Rohtak has been made without satisfying the statutory pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had made additions by rejecting the books of accounts u/s. 145 of the Act and estimating the profits and further also made disallowance of expenses and therefore computed the net profit which estimation and computation have neither been rejected nor raised, in such circumstances the order of revision is perse misconceived, misplaced and untenable, more particularly when income surrendered in the course of survey on account of excess cash, unexplained investment, unexplained expenditure and unsecured loans have been separately brought to tax then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view. 2.3 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of lack of enquiry and, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 021: 1. That order dated 30.3.2021 u/s. 263 of the Act by learned Principal Commissioner of Income Tax, Rohtak has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2. That the conclusion of learned Principal Commissioner of Income Tax that the AO has passed the order dated 29.12.2018 in a very casual manner without due diligence and without conducting any worthwhile enquiries. Therefore, it is very clear that assessment proceedings completed u/s. 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015 is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable. 2.1 That the finding of learned Principal Commissioner of Income Tax that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue on the following basis is factually incorrect, legally misconceived, contrary to evidence on record; and in any c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view. 2.3 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of lack of enquiry and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s. 263 of the Act. 2.4 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view. 2.5 That the learned Pr. Commissioner of Income Tax has also failed to appreciate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the business premises on 10.9.2015. During the course of survey, some excess cash, unaccounted loans and advances to various parties, unexplained investment in furniture and fixtures were found. The assessee voluntarily offered surrender of additional income of ₹ 31,00,000/- (Rupees Thirty-one lakh) over and above the normal business income for the assessment year 2016-17. From a perusal of the Income Tax return and audit report for the year under consideration, it was noticed by the Assessing Officer (AO) that the assessee had shown its business turnover at ₹ 2,30,72,738/- and shown gross loss of ₹ 23,44,693/- which was (-) 0.16% of the total turnover. In order to verify the genuineness of the assessee's return of income, the assessee was required by the AO to provide complete addresses and furnish confirmed copies of accounts of all the sundry creditors. The assessee furnished unconfirmed copies of accounts in respect of sundry creditors/debtors. In some of the cases, addresses of the creditors were not provided. In cases, where addresses had been provided, information was called in 17 cases u/s. 133(6) of the Act and the sundry debtors and creditors wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance @ 80% of the total expenses claimed was made which worked out at ₹ 5,09,790/-. Thus, total disallowance out of expenses claimed by the assessee was made at ₹ 6,29,790/- (₹ 5,09,790/- + 1,20,000). The net income from business was, thus, computed at (2,64,182-7,57,238+6,29,790) ₹ 1,36,734/-. The additional income surrendered by the assessee on account of unaccounted loans and advances at ₹ 11,00,000/-, unexplained investment in furniture and fixture at ₹ 12,00,000/- was assessed u/s. 69 of the Act and ₹ 8,00,000/- on account of unexplained cash was assessed u/s. 69A of the Act. The assessment was completed under section 143(3) of the Act vide order dated 30.12.2018 at an income of ₹ 32,36,730/-. 4.3. Subsequently, a notice was issued u/s. 263 of the Act on 18.3.2021 by the Ld. Pr. CIT mentioning instances of failure on the part of the AO and the assessee was required to show cause as to why the assessment proceedings for A.Y. 2016-17, vide order dated 30.12.2018 u/s. 143(3) should not be cancelled by invoking the provisions of section 263 of the Act. For the sake of ready reference, the relevant portion of the notice ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee had shown unsecured loans from Sh. Mohit Mehta and Smt. Satya Devi. Neither the assessee had filed copy of accounts and confirmation of the lender nor the AO had called for the same. Therefore the genuineness of transaction and creditworthiness of the lender could not be established. Since the AO conducted no enquiry on the issue the order of the A.O. was erroneous and prejudicial to the interest of Revenue. The AO is directed to conduct detailed enquiries regarding the purchases and sales made by the assessee by conducting third party verifications. The creditors should also be examined since the SO has himself stated in the assessment order that the inquiry letters sent to the creditors either remained unserved or were returned back. This indicates that the creditors are bogus. After inquiries necessary action should be taken as per law and necessary additions should be made. There is a clear lack of inquiry regarding purchase of fixed assets. The AO should examine this issue by way of inquiry supported by documentary evidences. Purchase vouchers should be examined. Regarding the issue of investment made in construction of house the AO should conduct inquiries made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer and profit has been computed on the basis of estimation and as such the same books of accounts could not be relied upon for making a further addition to income by invoking provisions of section 68 of the Act. It was submitted that once the AO has made the addition of ₹ 31,00,000/- on account of income surrendered at the time of survey by observing that it has not been clarified that from where this income has been earned , then the alleged suppressed profits have already been factored in such surrender and that the alleged unexplained cash credits and one have to be telescoped into the other resulting only in one addition. 5.3. The Ld. AR also submitted that, admittedly, there is no material available with learned Pr. CIT that unsecured loans were unexplained cash credits u/s. 68 of the Act. It was also submitted that the bank account does not constitute books of account of the assessee, as has been held in following cases: i) 113 TTJ 178 (Del) Mayawati vs. DCIT Affirmed by Hon'ble High Court of Delhi in the case of CIT vs. Mayawati reported in 338 ITR 563 ii) 171 ITR 532 (P H) Shanta Devi vs. CIT iii) 291 ITR 232 (Mad) CIT vs. Taj Borewells i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT v. Vikas Polymers ii) 332 ITR 16 (Del) CIT v. Sunbeam Auto Ltd. iii) 343 ITR 329 (Del) ITO v. D.G. Housing Projects Ltd. 5.7. It was submitted that section 263 does not permit revision of an order on the basis of suspicion, conjectures and surmises. Reliance was placed on the following judicial pronouncements: i) 296 IR 238 (P H) CIT v. Sohana Woolen Mills ii) ITA No. 690/Chd/2010 A.Y. 2005-06 dated 9.3.2012 Sh. Jaswinder Singh v. CIT iii) ITA NO. 367/Chd/2012 AY 2007-08 dated 7.3.2013 Aarti International v. CIT 5.8. It was submitted by the Ld. AR that section 263 of the Act cannot be invoked to make a deeper enquiry. Reliance was placed on the judgment in the case of CIT v. Leisure Wear Exports Ltd. reported in 341 ITR 166. It was also submitted that for holding that the assessment order passed by the AO is not only prejudicial to the interest of revenue but is also erroneous, the action of the Ld. Pr. CIT has to be preceded by some minimal enquiry. It was submitted that mere issuance of a show cause notice dated 18.3.2021 and, thereafter, mechanical passing of the order does not qualify as minimal enquiry u/s. 263 of the Act. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, etc. and after inquiries necessary additions to be made as per law. The order of the Ld. Pr. CIT on this count is, thus, cryptic, vague and contradictory. No effort has been made to spell out as to in what manner there was lack of enquiry by the AO in the order of assessment vis- -vis the trading results declared by the assessee. The Assessing Officer had made adequate inquiries as is evident from the order of assessment as well as from the replies furnished (which have been placed in the Paper Book filed by the assessee before us). Thus, in view of the documentary evidences, as called for and examined by the Assessing Officer, it is very much evident that the Assessing Officer had duly applied his mind to the issue of trading results and it was only thereafter that he had estimated income of the assessee. As far as the issue of investment in construction of house is concerned, the same is apparently misconceived, as it is not arising from assessment records. As far addition on account of fixed assets is concerned, the same stands separately added as part of the income declared during the course of survey by the assessee. Therefore, we can safely conclude that proper inquiries h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Principal Commissioner of Income-tax to come to the conclusion that the original assessment order was erroneous and prejudicial to the interests of the Revenue. 10. For the purposes of exercising jurisdiction under section 263 of the Act, the conclusion that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the Principal Commissioner of Income-tax is of the view that the Assessing Officer did not undertake any inquiry, it becomes incumbent on the Principal Commissioner of Income-tax to conduct such inquiry. All that the Principal Commissioner of Income-tax has done in the impugned order is to refer to the circular of the Central Board of Direct Taxes and conclude that in the case of the assessee-company, the Assessing Officer was duty-bound to calculate and allow depreciation on the BOT in conformity of the Central Board of Direct Taxes Circular No. 9 of 2014 but the Assessing Officer failed to do so. Therefore, the order of the Assessing Officer is erroneous insofar as prejudicial to the interests of the Revenue . 11. In the considered view of the court, this can ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfaction which is required under the law. The Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Sunbeam Auto Ltd. reported in (2010) reported in 332 ITR 167(Delhi) has held that if there was any inquiry, even inadequate, that would by itself not give occasion to the Commissioner to pass order u/s. 263 of the Act merely because the Commissioner had a different opinion in the matter. It is a settled law that the Ld. Pr. CIT cannot pass the order u/s. 263 on the ground that thorough inquiry should have been made by the Assessing Officer. 5.6 Although, there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 has been inserted w.e.f. 1.6.2015 but the same does not give unfettered powers to the Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Officer to re-examine the issues already examined during the course of assessment proceedings. The Mumbai ITAT Bench has dealt with Explanation 2 as inserted by Finance Act, 2015 in the case of Narayan Tatu Rane vs. ITO reported in (2016) 70 taxman.com 227 to hold that the said Explanation cannot be said to have overridden the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results declared by assessee and we have no option but to hold the same as being bad in law. 8.5. However, in so far as loans raised from Shri Mohit Mehta and Smt. Satya Devi are concerned, we are in complete agreement with the conclusion of Ld. Pr. CIT that the Assessing officer had conducted no enquiry on this issue and the order was, thus, erroneous and prejudicial to interest of revenue. Thus, we concur with the stand of the Ld. Pr. CIT on the issue of unsecured loans and, therefore, uphold the 263 proceedings in respect of loans raised from Shri Mohit Mehta and Smt. Satya Devi and direct the AO to pass an order afresh on the said issue in accordance with law after affording reasonable opportunity of being heard to the assessee. Accordingly, the impugned order in ITA No. 150/Chd/2021 for A.Y. 2016-17 in the case of M/s. Pardeep Ispat (P) Ltd. stands modified in terms of our observations above and the 263 proceedings are partly upheld and partly quashed. It is so ordered accordingly. Grounds 1 to 9, thus, stand partly allowed. 9. In the remaining five appeals viz. ITA Nos. 149/Chd/2021 A.Y. 2016-17, 151/Chd/2021 AY 2016-17, 152/Chd/2021 AY 2016-17, 154/Chd/2017 and 157/Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 35,75,000/- and in respect of addition to fixed assets in construction of shop to the tune of ₹ 20,58,525/-. It is seen that the amount of ₹ 35,75,000/- pertaining to the construction of house had already been surrendered by the assessee during the course of survey proceedings as the survey team had noticed some discrepancies. Therefore, it cannot be said that the order of the AO was erroneous and/or prejudicial to the interest of revenue in so far as this issue is concerned. However, as far as the issue of investment in fixed assets in construction of shop to the tune of ₹ 20,58,525/- is concerned, a perusal of the record shows that this allegation of the Ld. Pr. CIT is correct in so far as no query has been raised by the AO on this issue and neither has the assessee made any submissions either before the AO or even before the Ld. PR. CIT on this issue even when the said issue was duly mentioned in the show cause notice issued u/s. 263 of the Act. Accordingly, we have no option but to uphold the impugned order u/s. 263 of the Act on the issue. The remaining other issue in the impugned order is the non-acceptance of the trading results by the Ld. Pr. CIT. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the issue of VAT penalty to the tune of ₹ 34,08,016/- has apparently not been enquired into by the AO. It has been mentioned by the Ld. Pr. CIT in the impugned order itself that the said amount has been shown under the Assets side of the Balance Sheet. It has not been pointed out by the Ld. Pr. CIT as to how the said payment of penalty, which has not been claimed as expenditure, has harmed the interest of the Revenue being erroneous and prejudicial to the interest of Revenue. Therefore, we are not inclined to uphold the proceedings u/s. 263 on this issue. Further, the other issue is the non-acceptance of the trading results by the Ld. Pr. CIT and the same is also not upheld in view of our detailed observations and findings in ITA No. 150/Chd/2021 for A.Y. 2016-17 in the case of M/s. Pardeep Ispat (P) Ltd. which has identical facts. Therefore, the proceedings u/s. 263 of the Act are quashed in ITA No. 154/Chd/2021 in the case of Shri Parshotam Goyal and the appeal of the assessee is allowed. 9.5. In ITA 157/Chd/2021 in the case of Shri Tarsem Goyal, the only issue raised by the Ld. Pr. CIT is the issue of trading results and this issue stands squarely covered in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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