TMI Blog2022 (10) TMI 823X X X X Extracts X X X X X X X X Extracts X X X X ..... that the foregoing unaccounted sum deserves to be added in any other head of income. Faced with this situation, we hold that the Assessing Officer took one of the two possible views in invoking section 69A of the Act whilst dealing with assessee s cash deposit which could hardly be taken as an instance of the impugned assessment as erroneous causing prejudice to interest of revenue, simultaneously, as per their lordships landmark decision in Malabar Industrial Co. (supra). We thus reverse the PCIT s revisional directions in issue. Assessee appeal allowed. - I.T.A. No. 395/PUN/2019 - - - Dated:- 10-10-2022 - SHRI S. S. GODARA , JM AND SHRI G. D. PADMAHSHALI , AM Appellant by : Shri M. K. Kulkarni Respondent by : Shri Sardar Singh Meena ORDER PER SHRI S. S. GODARA , JUDICIAL MEMBER ; This assessee s appeal for A.Y. 2013-14 arises against the Pr. CIT-3 s order No. Pn/Pr.CIT/263/MBR/2017-18/5000 dated 06-03-2018, in proceedings u/s 263 of Income-tax Act, 1961 (hereinafter referred to as the Act ). Heard both the parties. Case file perused. 2. We note at the outset that the relevant factual matrix regarding assessee s sole substantive ground here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase bills etc. which should co-relate with every cash deposit as well as expenses. The Assessing Officer did not examine whether there are corresponding expenses from the said bank account. The Assessing Officer did not examine whether there are violations of sec. 40A(3) (cash expenses) or 40(a)(ia) (TDS applicability). The Assessing Officer accepted whatever assessee stated without enquiring into glaring contradictory facts which require detailed enquiry and application of mind in correct manner having regard to statutory provisions invogue. All these facts, as a whole, clearly establish that neither there was any examination of any books of accounts nor any enquiry on essential and vital points by the Assessing Officer. It is a case of gross and grave negligence and inadequate enquiry. The Assessing Officer should have enquired into the into the root reason for which case was selected for scrutiny under CASS i.e. to say deposits in saving bank accounts. The Assessing Officer should e examined the applicability of provisions of sec.. 68 or 69 or 69A, as the case may be as well as sec. 40A(3), 40(a)(ia), sec. 37 etc. The Assessing Officer erroneously and negligently treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch goes to the root of the matter and not carrying it further is a case of nonenquiry, if the query is not otherwise satisfied while responding to another query- Revision by CIT was therefore sustainable. 4.1 Similarly Hon ble High Court of Kolkata upheld the action u/s 263 of the Act in the case of CIT Vs. Maithan International (56 taxmann.com 283) holding that Assessing Officer could not accept genuineness of loan taken by the assessee from various creditors merely on the basis of their bank statements and letter of confirmation as he was required to examine creditworthiness of the said creditors as well. In the recent, Hon'ble High Court of Rajasthan in the case of CIT Vs. Bhawal Synthetics (India), Udaipur (81 taxmann.com 478) (Date of order 05.05.2007) upheld the action u/s 263 for arty inadequate inquiry by the Assessing Officer where the Assessing Officer had merely accepted the explanation furnished by the Kolkata had upheld action u/s 263 for lack of proper inquiry in the case of success Tours Travels (P.) Ltd. Vs. ITO, Kolkata (80 taxmann.com 262) on the issue of share capital/ share premium. For ease of reference, relevant caption note is reproduced as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrote to AO that due to inadvertence it had not disclosed receipt of a sum of Rs.61,000 on account of consultancy fees - AO completed assessment without holding requisite investigation except for calling for records - Commissioner passed order under section 263 and opined that this was or could be a case of money laundering which went undetected due to lack of requisite enquiry into increase of share capital including premium received by assessee and non-application of mind - He thus held that assessment order passed u/s 143(3)/ 147 was erroneous and prejudicial to interest of revenue and therefore, set aside same and issued directions for a thorough enquiry - Whether where assessee with an authorized share capital of Rs.1.36 crores raised nearly a sum of Rs.32 crores on account of premium and chose not to go in for increase of authorized share capital merely to avoid payment of statutory fees was an important pointer necessitating investigation - Held, yes - Whether however, AO did not hold requisite investigation except for calling for records, he also did not interrogate persons behind assessee company and persons behind subscribing companies which was essential to unearth trut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order as erroneous on the ground that in the circumstances of the case the ITO should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the ITO is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The ITO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word 'erroneous' in section 263 emerges out of this context. It is because it is incumbent on the ITO further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word 'erroneous' in section 263 includes the failure to make such an inqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h investigator as well as adjudicator wherein he is supposed to proceed with detailed enquiry in light of Gee Vee Enterprise s case 99 ITR 375 (Delhi). And also that the impugned assessment nowhere indicates such detailed inquiry by the Assessing Officer which renders the impugned regular assessment as erroneous as well as prejudicial one to the interest of revenue as held in the case of Malabar Industrial Co. Ltd. Vs. CIT (109 taxman 66). All these Revenue s arguments fail to evoke our concurrence. We make it clear that the sole issue therein is assessee s cash deposit in bank account of Rs. 52,48,000/- out of which he could only explain the recorded sales turnover of Rs. 14,72,581/-. It is in this factual backdrop that the Assessing Officer had accepted the source of foregoing cash deposit to the extent of recorded sales turnover and treated the remaining amount of Rs. 41,76,530/- as unexplained u/s 69A of the Act. Meaning thereby that the Assessing Officer had already assessed the assessee u/s 69A. And there is nothing more left to conclude that the foregoing unaccounted sum deserves to be added in any other head of income. Faced with this situation, we hold that the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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