TMI Blog2022 (9) TMI 1443X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 2 of section 263 of the Act in the show cause notice dated 17 January 2022 about the same. Opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the course of such provisions while deciding the issue against the assessee. Secondly, PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 of the Act. We hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Appeal filed by the assessee is allowed. - ITA No. 125/Rjt/2022 - - - Dated:- 9-9-2022 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER For the Assessee : Shri R.D. Lalchandani, A.R For the Revenue : Shri Aarsi Prasad, CIT. D.R ORDER PER BENCH: The captioned appeal has been filed at the instance of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bills were issued within few hours after 8 PM dated 8 November 2016 when demonetization was announced. Many of the bills were without time stamp. Thus, it seems that the assessee has deposited its unaccounted cash in the garb of sales. ii. As such, there was huge cash available with the assessee as on 8 November 2016 but the assessee has not deposited the same in one go rather it has deposited the same during the demonetization period in various instalments, although there was no restriction/ banned from the Government or RBI for deposit of cash in the bank accounts. iii. The cash deposits during the demonetization period should have been correspondingly compared/ verified with the immediate preceding year order to find out genuineness of cash deposits against the cash sales. iv. Similarly, cash sales prior and post to demonetization period should have been verified to ascertain the genuineness of the cash sales. v. The sales has been shown less than 2 lakhs in order to avoid the applicability of the provisions of section 269ST of the Act and identity of the purchaser so as to circumvent genuineness sale and creditworthiness of the purchaser. vi. There was no signa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in accordance with any decision which is pprejudicial to the assessee. rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 13. As per the Explanation 2, the order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue if the order is passed allowing any relief without inquiring into the claim. However, the AO did not conduct any such inquiries or verification as outlined above and simply accepted the assessee's submission, in this manner the assessee s case is also covered under para 'a' of Explanation 2, of section 263{1) of I. T. Act. Therefore the order passed by the AO is erroneous and prejudicial to the interest of revenue to that extent. 14. Keeping in view these facts, I am of the considered view that this is a fit case for invoking section 263 of !.T. Act as the twin conditions namely, (i) the order of the Assessing Officer sought to be revised is erroneous: and (ii) it is prejudicial to the interests of the revenue are satisfied. The AO is directed to make fresh assessment keeping in view the observations made above, after co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash deposited by the assessee in the bank as discussed above and hence the assessment is erroneous insofar prejudicial to the interest of the Revenue and thus requiring revision by Pr. CIT u/s 263 of the Act. 7.1 An inquiry made by the Assessing Officer, considered inadequate by the Commissioner of Income Tax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer s prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon ble High Courts in this regard. 7.2 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon ble court held that where the AO has made inquiry prior to the completion of assessment, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of lack of inquiry . 7.3 The Hon ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner: The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Shree Gayatri Associates*[2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revised order after making addition to assessee's income under section 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of such on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revised order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's on-money transactions and Tribunal, thus, set aside the revised order passed by Commissioner. The Hon ble High Court upheld Tribunal's order. The Hon ble Supreme Court while dismissing the SLP filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind. 7.8 Now in the facts before us, in the case of the assessee, we find that the AO during the course of assessment proceedings, made enquiries on this issue and after consideration of written submissions filed by the assessee and documents / evidence placed on record, and then framed the assessment under section 143(3) accepting the return of income. This fact can be verified from the notice under section 142(1) of the Act by the AO and submissions of the assessee against such notice. Relevant queries raised in the notice dated 22-08-2019: 15. Please furnish the quantity wise details of closing stock and opening stock of raw material, finished goods and semi finished goods. Also file details working of cost sheet in case of rates adopted in this regard is the basis of which closing stock and opening stock is valued. Also state whether stock is inclusive of excise duty or not? 16. Please give month-wise details of purchases and sales (item wise separate details) in quantity and value in the following formar. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... June 2015 July 2015 August 2015 Sept. 2015 Oct. 2015 Nov. till 08.11.2015 24. Furnish the following information in respect of month-wise cash sales and cash deposits: Month wise Op. cash in hand Cash Sales Cash deposited bank Cash withdrawal from bank Closing cash on hand April 2016 May 2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Sales in given format is /are enclosed 23 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2015-16 in given format is enclosed herewith. 24 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2016-17 in given format is enclosed herewith. 25 VAT Audit Report or Form 205: VAT Report for the year 2016-16 in Form 205 is enclosed herewith. We have not revised return file after 08.11.2016. 26 Day wise cash book: Day wise cash book attached herewith 15 Closing Stock and Opening Stock:- Please find enclosed copy of audit report showing the same 16 Item wise Purchase and Sales:- Month wise details of Purchases and Sales as is enclosed 17 Sec.43B Copy of Chart for audit report Annexu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of cash deposited during the demonetization period with corroborative evidences: The explanation retgarding the source of cash deposited during the demonetization period with corroborative evidence is enclosed 20 Day wise Stock Register Details of Stock register enclosed 21 Information in respect of cash sales; Details of Cash receipts in given format is/are enclosed. 22 Information in respect of cash sales: Details of Cash Sales in given format is /are enclosed 23 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2015-16 in given format is enclosed herewith. 24 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2016-17 in given format is enclosed herewith. 25 VAT Audit Report or Form 205: VAT Report for the year 2016-16 in Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wise opening and closing figures. The reply made by the assessee dated 11-11-2019 12/13 Cash Deposited during demonetization: Details regarding Cash Deposited in demonetization period is already submitted along with day wise chart in our submission dated 11/10/2019 also Scan copies Sales Invoice are attached in our submission dated 30/10/2019. 114 VAT Returns: Month Wise VAT Return from April 16 to Dec. 16 is already given in our earlier submission dated 30.10.2019 Ack Receipt is attached herewith. 15 Cash Book Cash Books From 01.11.2016 to 30.12.2016 is attached herewith Relevant queries raised in the notice dated 14-11-2019: 1. Provide October 2016 sales register. The file you have submitted with title Oct sales register contains September sales register. 2. Provide copy of cash bills numbered from TRS/1111 to TRS/1137 and TRS/1027 issued for cash sales made on 07/08. 11.2016. The above numbered bills have not been submitted by you in response to earlier notice. Also submit other cash bills issued on 08.11.2016 if n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S/1111 to TRS/1137 and TRS/1027 issued for cash sales made on 07/08.11.2016 re-uploaded serially. 2. Chart showing names, detailed address of the persons who have signed on the cash bills. The reply made by the assessee dated 26-11-2019 Reference is invited to your notice U/s 142(1) vide No.ITBA/ASF/F/142(1)/ 201920/1020416785(1) dated 14/11/2019 calling us to furnish the details/information as per the notice. In continuation to our letter dated 18.11.2019 please enclosed the required details/information as called for as under: Sr.No. Particulars 5 Detailed chart of person who have signed the sale bills Relevant queries raised in the notice dated 21-11-2019: 1. Please provide details (Name, PAN, complete Address, Email) of the top 5 entities (month wise from Oct. 2016 to Dec.2016), from whom you have made purchases. 2. Details of Tops 5 Artisians in respect of JEW 22 mfg for the month of Oct. Nov. Dec. 2916(month wise) in the given format: Sr.No Name Complete Address PAN of Artisian Quantity Issued (Net Et.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... you should not be not treated as bogus and the proceeds be added back to total income. The reply made by the assessee dated 25-12-2019 Sub: SHOW CAUSE NOTICE DATED 24.12.2019 1. It has been stated that by making a mathematical calculation we took 6.44 minutes per sale. We submit that assumption on such mathematical calculation 2. We have been asked to show cause why the entire sale shown by us be not considered as bogus and the sale proceeds be not added back to income. 3. We submit that the proposed action is not justified as 3.1 We have already included this amount in the sales. Since it is included in sales it is included in profit and income. The proposed addition would lead to double taxation. A copy of the sales register has been filed 3.2 We maintain day to day stock register. The sales have been accounted for in the stock register. Copy of the stock register has been filed. Since we have a day to day stock register all the quantity are included in opening stock purchases sales and closing stock. We have filed all the details of the closing stock. It may also be seen that we have never sold more than the stock on hand. 3.3 It is very well known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest of revenue. In this regard, we make our observation that the learned PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice dated 17 January 2022 about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the course of such provisions while deciding the issue against the assessee. Secondly, the learned PCIT has also not specified the nature and the manner in which the enquiries which should have been conducted by the AO in the assessment proceedings. Thus, in the absence of any specific finding of the learned PCIT with respect to the enquiries which should have been made, we are not convinced by his order passed under section 263 of the Act. 7.11 In view of the above and after considering the facts in totality, we hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed. 8. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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