TMI Blog2022 (9) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... /cheque. In this transaction no cash is paid by the seller to purchase of old gold jewellery. Now in the books of account in order to make clarity and also to make proper quantitative details the assessee categorises the Rs. 1 lakh as sales and books purchase of old jewellery at Rs. 20,000/-. Actually the assessee has not made any purchases in cash in alleged transactions and only net consideration i.e total sale value less value of old jewellery exchange is received by the assessee in cash/cheque. There is no violation of provisions of section 40A(3) of the Act in the case of assessee as alleged by Ld. PCIT in the impugned order, as there is no actual transaction of payment of cash for making purchases exceeding the limit as prescribed u/s. 40A(3) of the Act. Since there is no violation of the said provisions of section 40A(3) of the Act, no such disallowance was called for in the hands of the assessee for alleged amount mentioned in the impugned order and Ld. AO has rightly carried out the assessment proceedings. PCIT erred in not considering the facts in correct perceptive and erred in holding that the assessment order is erroneous and prejudicial to the interest of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewellery against bale of new Items to Retail Customers of Rs.2,10,38,492/- and Purchase of Old Jewellery through Bank of Rs.14,24,611/- and further with the help of documentary evidences the assessee had substantiated that there was not a single instance of cash payment during the year and thus provisions of section 40A(3) of the Act are not applicable, hence the order is neither erroneous nor prejudicial on this ground. 4. That, the appellant craves leave to alter, amend, rescind and substitute any of the above-mentioned grounds and add any further grounds before or at the time of hearing of the appeal. 3. Briefly stated the facts as culled out from records are that the assessee is an individual and carrying on his business in the name of Radheysham Jewellers. Income at Rs.97,63,350/- declared in the e-return for the AY 2017-18 filed on 21-09-2017. The case selected for scrutiny through CASS (Computer Aided Scrutiny Selection) system followed by serving of notices issued u/s. 143(2) and 142(1) of the Act. Detailed questionnaires were issued and submissions on multiple occasions were filed by the assessee. After considering the same returned income was determined as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hyam Gupta, PANADJPG3274G for the A.Y. 2017-18 should not be revised u/s 263 of the Income Tax Act, 1961 as the assessment order passed in the aforesaid case is erroneous in so far as it is prejudicial to the interest of revenue. Accordingly, your case is fixed for hearing on 11.03.2022 at 11:00 A.M. and you may appear in the chamber of the undersigned at room no. 601, Aayakar Bhawan Poorva, 110, Shantipally, Kolkata-700107 either in person or through authorized representative on the scheduled date, time, and place along with written explanation with supporting evidences. Due to outbreak of Pandemic COVID-19, you are requested to kindly note that appearing in person or through Authorized Representative is optional and you may submit your explanation/ written submission through official e-mail: kolkata.pcit9@incometax.gov.in; it will be treated as compliance to this show cause notice. Kindly note that if you fail to submit your explanation to this show-cause notice by the scheduled date, the case will be decided ex-parte without making any further correspondence with you. 5. During the course of revisionary proceedings u/s. 263 the assessee made detailed submissions with regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f old jewellery. Our attention was invited to Sheet Nos. 1 to 12 placed at pages 2-13 of P.B containing the month-wise details of sale and purchase for the of the year. It was stated that when a customer approaches to purchase new jewellery then for making payment for the sale consideration, apart from payment in cash/cheque sometimes the customer give old gold jewellery in exchange. The difference of sale price over price of old jewellery is received in cash/cheque. There is no instance where the assessee paid cash for purchasing of old jewellery. The element of purchase of old gold jewellery is shown with total purchases for proper accounting purpose. 9. The Ld. Counsel also submitted that complete details of purchase/sales were called before the Ld. AO and detailed enquiry has been conducted with regard to various financial transactions carried out during the year. Reference was made to the notices issued u/s. 143(2) 142(1) of the Act dt. 06-02- 2019 27-09-2019 and submissions filed by the assessee to these notices. It was also submitted that the case of the assessee also falls under the exceptions provided under Rule 6DD(d) of the I.T Rules, 1962, which provides that pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act as well as judicial pronouncements. 263. Revision of orders prejudicial to revenue.--(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Vide Finance Act, 2015 w.e.f 01-06-2015 a new explanation 'Explanation 2' was added to section 263 of the Act which reads as follows: Explanation 2.- For the purposes of this section, it is hereby declared that an order passed by the AO shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, (a) the order is passed without making inquiries or verification which should have been made; (b) the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the Assessee. It appears that no inquiry, as such, was undertaken by the PCIT 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 AO is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. All that PCIT has done in the impugned order is to refer to the Circular of the CBDT and conclude that in the case of the Assessee company, the AO was duty bound to calculate and allow depreciation on the BOT in conformity of the CBDT Circular 9/2014 but the AO failed to do so. Therefore, the order of the AO is erroneous insofar as prejudicial to the interest of revenue . 11. In the considered view of the Court, this can hardly constitute the reasons required to be given by the PCIT to justify the exercise of jurisdiction under Section 263 of the Act. In the context of the present case if, as urged by the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is erroneous . The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unless the view taken by the Income-tax Officer is unsustainable in law. 20. Hon ble Supreme Court in CIT v. Max India Ltd [2007] 295 ITR 0282-SC it has held that: The phrase (prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. 21. Now in light of the provisions of section 263 of the Act and judicial pronouncements refereed above, we will first examine that whether the ld.AO has conducted necessary enquiry regarding the issue raised in the Show Cause Notice and secondly, that whether the order of the ld. AO is erroneous as well as prejudicial to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 deserves to be quashed as the ld.AO has conducted adequate enquiry on the said issue. 25. Now we come to the merits of the case. After carefully considering the submissions of the assessee and perusing the material/submissions of the assessee filed before the ld.AO, we find that the assessee is in the course of its business of selling of old gold jewellery and occasionally receives old gold jewellery in exchange from the customers. The value of such old gold jewellery is calculated by the assessee as per rates of the gold/silver/diamond or other precious stones as on the date of the transaction and the same is reduced from the sale value of new jewellery purchased by such customers. 26. We can understand such transaction with the help of an example. The value of new gold jewellery is Rs. 1 lakh and customer gives old gold jewellery worth at Rs. 20,000/- to the assessee in exchange. After agreeing to the value of old jewellery the customer pays Rs. 80,000/-, which can be received in cash/cheque. In this transaction no cash is paid by the seller to purchase of old gold jewellery. Now in the books of account in order to make clarity and also to make proper quantitative details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for manufacturing new jewellery or to make certain customized changes required by customers. We are unable to accept the view of the A.O. that unless and until the sale and purchase were effected on same day, Section 40A(3) was attracted. Clause (d) of Rule 6DD which gives the alleviating circumstances where rigours of Section 40A(3) are not attracted, states as under:- where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee. 13. Thus, where the payments were effected to a customer on account of adjustment resulting out of an exchange of old jewellery with new Jewellery, then it does get covered under the exception clause (d) of Rule 6DD mentioned above. 30. Further in the case of ACIT vs Ms Kanishk Gold Pvt. Ltd in ITA 1323/Mds/2012, the co-ordinate Bench, Chennai held that, 1. The contention of the Revenue is that Rule 6DD is not applicable in a case where purchase is made from A and sale is made to B. The contention is really against the facts of the case. We are not considering a case where the assessee is purchasing old gold orna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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