TMI Blog2022 (7) TMI 1422X X X X Extracts X X X X X X X X Extracts X X X X ..... of SBN received post demonetization and proper enquiries ought to have been made by the AO which is clearly a difference of opinion which cannot be a reason for revision u/s. 263. As decided in Gabriel India Ltd [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] Commissioner before holding an order to be erroneous should have conducted necessary enquiries or verification in order to show that the findings of the AO is erroneous and unsustainable in law. In the present case, the PCIT has not done so and simply expressed a view based on his inference that the AO should have conducted enquiry. Such course of action by the PCIT is not in accordance with the mandate of law - Decided in favour of assessee. - ITA No. 454/Bang/2022 - - - Dated:- 27-7-2022 - SHRI N.V. VASUDEVAN, VICE PRESEIDENT AND SHRI PADMAVATHY S, ACCOUNTANT MEMBER For the Appellant : Shri Ravi Shankar, Advocate For the Respondent : Smt. Susan Dolores George CIT(OSD) 27.07.2022 ORDER Per Padmavathy S., Accountant Member This appeal by the assessee is directed against the order of the Principal Commissioner of Income-tax, Hubli, [PCIT] dated 29.03.2022 for the assessment year 2017-18 on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hearing of the appeal the Appellant prays that the appeal be allowed in the interest of equity and justice. 2. The assessee is a co-operative society in the business of offering banking services to its members. The assessee filed the return of income on 31.10.2017 declaring NIL income after claiming a deduction of Rs. 37,83,283 u/s. 80P of the Act. The case was selected for scrutiny under CASS and a notice u/s. 143(2) was issued. During the course of assessment, the AO called for various details pertaining to cash deposited during demonetization period, large deduction claimed u/s. 80P and interest income from investments. The assessee furnished the details called for on the basis of which the AO completed the assessment u/s. 143(3) of the Act by disallowing the deduction u/s. 80P. 3. The PCIT issued a proposal notice u/s. 263 of the Act seeking to revise the assessment order on the premise that the cash deposited by the assessee was not verified properly and thus the order passed u/s. 143(3) was erroneous and prejudicial to the interests of the revenue. The assessee submitted before the PCIT that the AO has conducted enquiries pertaining to the cash deposits and the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiness is proven, these credits did not satisfy the test of genuineness and are therefore, liable to be added as unexplained credits u/s. 68. 4. Aggrieved, the assessee is in appeal before the Tribunal. 5. The ld. AR submitted that the order passed must be both erroneous and prejudicial to the interest of revenue. The learned PCIT in the order passed under section 263 of the Act, has held primarily that:- i. The assessing officer has not made enquiries if the opening cash was genuine. ii. If the cash was unexplained, the same was to be added U/s 68 and the AO has not made additions required as per law. 6. The ld. AR further submitted PCIT has proceeded on the premise that the assessing officer has not made an enquiry into the source of the cash deposits, which in the belief of the PCIT was presumably unexplained. The PCIT, has also inferred that the cash deposits if unexplained, the same ought to have been added as unexplained income by invoking section 68 of the Act. 7. It was submitted that the assessee has in the revision proceedings filed details of queries made by the assessing officer and also submissions made in the assessment proceedings, along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and that the AO has not done any examination of the same which justifies the revision order of the PCIT. 12. In rebuttal, the ld. AR submitted that the receipts are from the members of the assessee and hence there cannot be any unaccounted entries. He also relied on the following decisions:- CIT v. Max India Ltd. (2007) 295 ITR 282 (SC) CIT v. Sunbeam Auto Ltd. (2010) 332 ITR 167 (Del) CIT v. Cyber Park Development Construction Ltd. (2020) 121 taxmann.com 172 (Karn.) CIT v. Anil Kumar Sharma (2011) 335 ITR 83 (Delhi) Anantpur Kalpana v. ITO, ITA No. 541/Bang/2021 for AY 2017-18 decided on 13.12.2021. (Bangalore-Trib.) ITO v. Sri Tatiparti Satyanarayana, ITA No. 76/Viz/2021 or AY 2017-18 decided on 16.03.2022. (VisakhapatnamTrib.) 13. We have considered the rival submissions and perused the material on record. The PCIT has set aside the order u/s. 143(3) mainly on the premise that the assessee has not established that Specified Bank Notes (SBNs) deposited were out of receipts prior to demonetization and therefore an adverse inference was drawn that the receipts/SBNs were received after demonitisation which is contrary to public p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO s order. Given this, we see no merit in the inference of the PCIT that the deposits are made out of SBN received post demonitisation and that the AO has not verified these details. 15. The Karnataka High Court in the case of Cyber Park Development Construction Ltd. (supra) has held that 4. We have considered the submissions made by learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take note of the relevant extract of section 263 of the Act, which reads as under: 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. 5. Thus, from close scru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional powers in the light of Explanation 2 to section 263 has made the following observations:- 17 We thus find merit in the plea of the assessee that the Revisional Commissioner is expected show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action as interpreted by the Revisional Commissioner in the light of the Explanation 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to section 263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression prejudicial to the interests of the Revenue , the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) : 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 Incometax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion .. There must be some prima facie material on record to show that the 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. 20. The law laid down by the Bombay High Court makes it clear that the Commissioner before holding an order to be erroneous should have conducted necessary enquiries or verification in order to show that the findings of the AO is erroneous and unsustainable in law. In the present case, the PCIT has not done so and simply expressed a view based on his inference that the AO should have conducted enquiry. Such course of action by the PCIT is not in accordance with the mandate of the provisions of section 263 of the Act. Further, the PCIT has treated the assessment order to be prejudicial to the interests of the revenue based on the same inference that the source of SBN deposit was not satisfactorily explained and addition ought to have been made u/s. 68 of the Act. The PCIT has not brought out any corroborative material on record to show that the cash deposits are unexplained and therefore, in our consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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