TMI Blog2023 (1) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... k of inquiry and inadequate inquiry. The Hon ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. As decided in Shree Gayatri Associates [ 2019 (6) TMI 888 - SC ORDER] Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Principle which emerges is 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. In the present case it is not the case that the AO has not made any enquiry. Indeed, the ld. Pr. CIT initiated proceedings under section 263 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verified during the assessment proceedings by the AO. Accordingly, the PCIT initiated the proceedings under section 263 of the Act vide show cause notice dated 27 January 2021. 3.1 The assessee in response to such show cause notice submitted that he is the second account holder of the bank account and his son is the 1st account holder. During the year under consideration, his son has deposited cash in joint bank account. Such bank account was duly reflected in balance sheet of his Son (Saral Kothari). 3.2 Further, assessee explained the source of cash deposit as detailed under: Particular Amount Cash withdrawal 17,30,360/- Opening cash balance 2,69,742/- Misc cash receipt 1,57,298/- Total 21,57,400/- 3.3 Assessee also submitted that the AO has properly verified the cash deposit in bank by calling information through notice u/s 142(1) of the Act. Therefore, the AO has made appropriate inquiries regarding the cash deposit. The AO based on such enquiry admitted the genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned assessment order is set aside for fresh assessment only to the extent of the issues discussed supra. 13. In view of the above facts, I consider that the assessment order passed by the AO u/s. 143(3} r.w.s. 147 on 23-10-2018 as erroneous in so far as it is prejudicial to the interests of revenue and therefore, by virtue of section 263 of the I. T. Act 1961, the same is hereby set-aside. The AO is directed to make a fresh assessment only to the extent of the issues discussed supra, considering the observation and findings given above, making necessary interpretations and inquires and after allowing adequate opportunity of being heard to the assessee. The AO shall verify the issues as discussed above and pass a reasoned order accordingly. 5. Being aggrieved by the order of the learned PCIT, the assessee is in appeal before us. 6. The learned AR before us filed two paper books running from pages 1 to 29 and pages 1 to 150 and contended that all the necessary details about the source of deposits in cash were filed during the assessment proceedings. The learned AR in support of his contention drew our attention on pages 16 of paper book no. 1 where the balance sheet of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 8.2 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 same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. The relevant observation of Hon ble Delhi High Court reads as under: 12. .. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 (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 could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 8.4 The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer 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 the Department held as under:- We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. No question of law arises. Tax Appeal is dismissed 8.6 The Supreme Court in the another recent case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to Rs. 21,57,400/- was deposited by the assessee in his savings bank account with Kotak Mahindrta Bnak wherein the assessee is a join holder with his son Saral Kothari. The assessee has informed that his son has deposited cash of Rs. 21,57,400/- in kotak Mahindra Bank savings bank account wherein the assessee is joint holder. He has further submitted that the source of cash deposited in savings bank account with Kotak Mahindra Bank are cash withdrawals of Rs. 2,69,742/- and other cash receipts of Rs. 1,57,298/- The Plea of the assessee that the amount of Rs. 17,30,360/- withdrawn from Kotak Mahindra Bank of various dates, was again deposited in Kotak Mahindra Bank seems to be after cook story. The assessee has not given any valid reason for said withdrawal and then depositing the same in the savings bank account again. It cannot be accepted that on various dates money is withdrawn and then the same is deposited again in the bank account. Hence, the cash amounting to Rs. 21,57,400/- deposited by the assessee in his savings bank with Kotyak Mahindra Bank remains unexplained. In view of the above, I have reason to believe that the amount of Rs. 21,57,400/- in the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear under consideration. It is not the case of the ld. Pr. CIT that the Ld. AO did not apply his mind to the issue on hand or he had omitted to make enquiries altogether. In the instant set of facts, the AO had made enquiries and after consideration of materials placed on record accepted the genuineness of the claim of the assessee. 8.10 At this juncture, it is also important to note that the learned PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue. In this regard, we note that the learned PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice dated 24 February 2021 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 provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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