TMI Blog2023 (6) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the assessee that the AO has issued notice u/s. 142(1) for investigating the matter which were subject matter of issues selected for scrutiny under CASS and from the submissions by the assessee, the AO was satisfied. When the AO has formed one possible view, then the ld. Pr. CIT cannot exercise jurisdiction u/s. 263 of the Act. The order passed by the AO is not erroneous prejudicial to the interests of the revenue. CIT is not correct in observing that the A.O. did not conduct proper enquiry on the issues before completion of assessment. Decided in favour of assessee. - Shri George George K., Judicial Member And Shri Laxmi Prasad Sahu, Accountant Member For the Appellant : Shri S.K. Tulsiyan Ms. Bhoomija Verma, Advocates. For the Respondent : Shri Sunil Kumar Singh, CIT(DR)(ITAT), Bengaluru. ORDER PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER This appeal by the assessee is against the DIN Order No.ITBA/REV/F/REV5/2021-22/1042002761(1) dated 29.3.2022 of the Principal Commissioner of Income Tax, Hubli, [Pr.CIT] for the assessment year 2017-18. 2. There is a delay of 286 days in filing the appeal before the Tribunal. The assessee has filed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions made by the Appellant thereby violating the principles of natural justice. 5. That the PCIT has erred in the facts and circumstances of the case by passing the impugned order without following the judicial precedence on this matter. That the appellant craves leave to add to and or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing this appeal. 5. The assessee is a Co-operative Society registered under Karnataka Co-operative Society Act and carrying on activity of:- (a) processing and marketing of agricultural produce grown by its members (b) providing credit facilities to its members (c) the purchase and selling of agricultural implements, seeds or other articles intended for agriculture to its members (d) running a kiranna shop (super market) (e) running a rice mill (f) hiring of vans (g) running a boarding places (h) trading in areca nut grown by its members (i) trading in areca nut in the open market from non-members (j) manufacturing and selling of scented sweet supari 6. The assessee for A.Y. 2017-18 filed its original return of income on 31.10.2017 decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the persons from whom it received SBNs and these credits do not satisfy the test of genuineness. He also noted that the SBNs received after demonetisaton were not legal tender and do not satisfy the test of genuineness and were therefore, unexplained credits in terms of section 68 The ld. Pr.CIT passed the impugned order u/s 263 was passed on 29.03.2022 setting aside the order passed u/s 143(3) with the direction to the AO to make fresh assessment after conducting necessary inquiries in accordance with law and CBDT guidelines. 11. Before us, the ld. AR has filed written submissions and submitted that the assessee filed its reply on 14.03.2022 providing the details of cash deposits by the third parties along with the ledger of parties which is at page 143-186 of the paper book. The assessee also furnished additional reply via email on 28.03.2022 challenging why the provision of section 68 would not attract to the cash deposited during the demonetisation period which is at page 187-198 of the paper book. 12. The ld. AR further submitted that the cash deposits in SBNs were made by the trade debtors in the bank accounts of the assessee. It was not accepted by the assessee di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nak Traders AROPC3148E 50,00,000/- 3,11,92,980/- Realisation from Debtors 2 Jai Maa Enterprises BJWPS6167C - 34,16,710/- 3 Kerala Spices Nuts AGRPC9294R - 1,34,044/- 4 Sangam Trading Company AFKPM6503M - 5,34,791/- 5 Vimal Trading GIEPS5368M - 4,32,200/- 6 Yadav Trading Company ACJPY1069Q - 7,37,000/- 7 TSS Ltd, Sirsi AACAT0251D - 28,770/- 8 Marbasil Enterprises Not Available - 12,895/- 9 Rising Sun Agencies Anchatageri AALFR4574M 25,00,000/- - 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale details, debtors list, banks statement, reply furnished in relation to demonetisation and reply furnished on 28.12.2019, the ld. AR submitted that it is evident that the AO has duly verified the cash deposit in SBNs during demonetisation from trade debtors formed part of revenue from operation and therefore has not made any further disallowance in this regard. Hence the AO has duly conducted necessary enquiries for verification of cash deposit during demonetisation. As such, it cannot be said that the AO had failed to examine this issue during the assessment stage in spite of the fact that the main object of the Scrutiny was for verification of large cash deposit during demonetisation. All the above facts clearly shows that there was no lack of enquiry or inadequate of enquiry.. 18. The ld. AR further submitted that if a query has been raised at the time of assessment and the same was duly responded to by the assessee, it would not lead to the conclusion that the AO has passed the assessment order without making adequate enquiries/verification which he was required to make so as to render the assessment order erroneous and prejudicial to the interests of the revenue. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer. It is only when the assessment order is both erroneous and prejudicial to the interest of the revenue, rigors of section 263 of the Act can be invoked. 22. In the present case, even if the order is prejudicial to the interest of the revenue, the same cannot be said to be erroneous since proper enquiries were conducted by the learned AO during the course of assessment proceedings. Hence, the twin condition stipulated in section 263 of the Act is not met in the present case to warrant the initiation of proceedings u/s 263 of the Act. 23. Further, the Ld.Pr. CIT in the SCN u/s 263 of the Act as well as in the order passed u/s 263 of the Act has alleged that the Ld.AO has not added the cash deposits during the demonetisation period as unexplained cash credits u/s 68 of the Act. He referred to various CBDT SOPs/Guidelines/notifications issued for handling cases related to substantial cash deposit during the demonetisation period as under:- - Instruction No.3/2017 dated 21.02.2017 issued vide F.No. 225/100/2017 ITA-II - Instruction No.3/2017 dated 21.02.2017 issued vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tised period is in violation of law. In this regard it is submitted that the acceptance of SBNs [Rs. 500 and Rs.1000 denomination] by the assessee was not permissible as per law. However, the acceptance of cash deposit in the bank account of the assessee by third parties was permitted to the banks by GOI and RBI. Hence the contention of the ld. Pr. CIT is not correct and so the initiating of proceedings u/s 263 of the Act for invoking proviso of section 68 of the Act is bad in law. 27. A bare reading of Section 68 of the Income-tax Act, 1961, suggests that for a sum so credited to be charged to income-tax as the income of the assessee of that previous year by the AO; (i) there has to be credit of amounts in the books maintained by the assessee ; (ii) such credit has to be a sum of money during the previous year ; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. 28. Thus, it is clear from the above that in order to establish the receipt of the sum as explained cash credit, as required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the assessee has filed the reply. The assessment order was passed by the AO on 30.12.2019. The ld. Pr.CIT has set aside the assessment order as erroneous and prejudicial to the interests of the revenue because the AO did not conduct necessary enquiries as per CBDT guidelines. On going through the questionnaire issued u/s. 142(1) by the AO and reply submitted by the assessee which are placed at pg. 1 to 198 of the Paper Book (PB), we note that three questions in the questionnaire are important which are Sl.No.11, 14 19 and the assessee has filed reply on various dates. The AO further issued notice u/s. 142(1) dated 04.12.2019 calling for details of demonetisation which is at pg. 82 to 85 of PB and reproduced as under:- 32.1 From the above, it is clear that the assessee filed details of notes for different denomination giving details as required by the AO which is at pg. 86 to 128 of PB. From these details, we note that the entire cash deposits into Axis Bank account were directly made by the Debtors of the assessee and the details of cash deposits from 11 parties were furnished before the AO vide submissions dated 28.12.2019 at pg. 124 to 128 of PB which comprises t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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