TMI Blog2023 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the business of selling gold, the quantity sold often did not vary, and therefore, the amounts shown in the invoice were also similar. This was a plausible explanation which found favour with the AO. The respondent/assessee, in support of the plea that the cash sales were the source of the deposits found credited in the subject bank account, had concededly submitted relevant material, which the AO examined in the course of the assessment proceedings. AO, having been satisfied with the explanation given, chose not to make any addition with regard to the cash deposit. PCIT on the other hand, without making any enquiry at his end, chose to cancel the assessment order with a direction to pass a fresh assessment order. PCIT had to reach a conclusion in the fact situation obtaining in the instant case, that the assessment order was erroneous by conducting an enquiry before passing an order u/s 263. PCIT, in our opinion, took the easy route by cancelling the impugned order and remanding the matter for a fresh assessment to the AO. While exercising powers under Section 263 of the Act, the concerned officer is entitled to examine the entire record, which includes not only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding gold. In the AY in issue, the respondent/assessee filed its Return of Income (RoI) on 28.09.2013. The income declared in the RoI by the respondent/assessee was Rs. 59,99,560/-. The income declared comprised earnings from business amounting to Rs. 12,88,981/-. The remaining amount, i.e., Rs. 47,10,582/-, was disclosed as income from other sources. 3. On 25.04.2014, a search and seizure action was conducted against the Dua Group . The respondent/assessee, concededly, belongs to the Dua Group. The search and seizure action also brought the respondent/assessee within its sway. 4. The record shows that a centralisation order under Section 127 of the Act was passed on 04.03.2015. The centralisation order was followed by the respondent/assessee being issued a notice dated 16.05.2016 under Section 153A of the Act. 5. With this, the AO commenced his inquisition by issuing notices under Section 142(1) of the Act. These notices are dated 01.06.2016 and 25.07.2016. Significantly, a questionnaire accompanied the notice dated 01.06.2016. 5.1 In the interregnum, the respondent/assessee filed its RoI as per the directions contained in the 153A notice via the e-filing system on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference was made to Note 18, incorporated in the profit and loss account. In support of this plea, a copy of the cashbook reflecting the cash sales transaction and cash deposited against the same was also enclosed with the reply. 9. It is against this backdrop that the AO passed the original assessment order dated 30.12.2016 under Section 153A read with 143(3) of the Act. It is important to note that the AO accepted the returned income, as disclosed by the respondent/assessee. 10. The record shows that on 05.09.2017, the PCIT issued a show cause notice proposing the exercise of revisionary power under Section 263 of the Act. Although the appellant/revenue has failed to file a copy of the show cause notice, it is common ground that it adverted to the proposed addition concerning unexplained cash deposits. 11. Via the said show cause notice, the respondent/assessee was called upon to file its objection, if any, on or before 14.09.2017. A reply qua the same was filed by the respondent/assessee on 14.09.2017. The PCIT discussed the case with the Chartered Accountant (CA) appointed by the respondent/assessee as its authorised representative and director, Mr Rajesh Dua. The di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paraphrased as follows: 18.1 The PCIT had set aside the order, as according to him, the original assessment order dated 30.12.2016 was both erroneous and prejudicial to the interest of the appellant/revenue. [ See Malabar Industrial Company Ltd. v. CIT, (2000) 243 ITR 83 (SC)] In support of this submission, reliance was placed on the order dated 11.10.2017 passed by the PCIT. It was emphasised that the PCIT had exercised his powers under Section 263 of the Act as the respondent/ assessee had furnished inadequate evidence to justify the nature and source of cash deposited in the concerned bank accounts. 18.2 It was also sought to be highlighted that the respondent/assessee had failed to produce its books of accounts both during the search as well as in the post-search proceedings. The cashbook submitted during the assessment proceedings was nothing but computer-generated papers. 19. Furthermore, the following discrepancies noticed by the PCIT were emphasised by Mr Chandra to support the conclusion that no enquiry was made with regard to the unexplained cash deposits: (i) Since several invoices bearing the same amount were issued on a single day, it was improbable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded that no additions were required to be made to the income declared by the respondent/assessee. In this context, inter alia, reliance was placed on the questionnaire dated 19.12.2016 and the reply dated 23.12.2016 filed by the respondent/assessee. (iii) The fact that an enquiry was made is also demonstrable from a perusal of the order sheets of the AO placed before the Court. Therefore, the observation made by the PCIT in paragraph 6 of the order dated 11.10.2017 that no enquiry or investigation was made by the AO concerning cash deposits was incorrect. (iv) Although the PCIT has laid great emphasis on the fact that the respondent/assessee has not produced his books of accounts during the search carried out at its registered office or thereafter in the post-search proceedings, what was lost sight of was that the AO issued the show cause notice for precisely this reason. (v) Inadequacy of the enquiry conducted by an AO as against no enquiry cannot form a basis for setting aside an assessment order. In such cases, the PCIT should conduct an enquiry and after that return unambiguous findings in the matter. In the instant case, the PCIT, without conducting an enqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t hand boils down to whether or not the AO, before passing the original assessment order dated 30.12.2016, had made inquiries concerning the cash deposits made by the respondent/assessee in the subject bank accounts maintained with Axis Bank and Kotak Mahindra Bank. The sum deposited in Axis Bank was Rs. 2.03 crores, while in Kotak Mahindra Bank Ltd., cash amounting to Rs. 1.30 crores was deposited. 21.1 The clue to this issue is contained in the order sheets, the questionnaire dated 19.12.2016, and the response dated 23.12.2016 submitted by the respondent/assessee, qua the said questionnaire. 21.2 For convenience, the orders passed by the AO during the assessment proceedings are set forth hereafter, as they provide a pen picture of how the assessment proceedings were conducted. 01.06.2016 Notice u/s 142(1) alongwith questionnaire issued and fixed the case for hearing on 09.06.2016. 09.06.2016 The assessee vide letter dated 09.06.2016 furnish Power of Attorney and requested for adjournment. 25.07.2016 Notice u/s 142(1) of the Income Tax Act, 1961 issued and fixed the case for hearing on 08.08.2016. 08.08.2016 The assessee vide letter dated 27.07.2016, rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 910020034501397 1.94 crore Kotak Mahindra Bank 1922010000134 1.30 crore In this regard, you are required to explain the source of these cash deposits with corroborative evidence and justify as to why the same should not be treated as unexplained specifically in view of the fact that neither any books of account were found at the registered address of the company during search nor the same were produced thereafter during the course of post search proceedings. You are requested to attend the assessment proceedings either in person or through your authorised representative duly authorised in this behalf or make written submissions on queries and details called for as above on 23.12.2016 at 3.30 pm positively. A formal notice u/s 142(1) is enclosed herewith. The relevant extract of the response dated 23.12.2016 With reference to above and in continuation to my earlier submissions we are hereby further submit, in response to the notice no. 2513 dated 19.12.2016 regarding cash deposit of Rs. 1.94 Crore in Axis Bank and Rs. 1.30 Crore in Kotak Mahindra Bank, we he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee filed a response giving its explanation concerning the cash deposits made in the subject bank accounts. The response dated 23.12.2016, as noticed above, carried with it the relevant material and evidence which, according to the respondent/assessee, would establish that the source of the money was the cash sale transactions entered into between the respondent/assessee and its customers. In the reply, the respondent/assessee had categorically stated that if further information /documents were required, it should be given an opportunity in that behalf. Given this position, the observation made in paragraph 6 of the order dated 11.10.2017 passed by the PCIT is clearly contrary to the record. For convenience, the contents of the said paragraph are referred to hereafter: 6. Further, there has been no inquiry or investigation made by the Assessing Officer on account of unexplained cash deposits, the assessment order passed by the Assessing Officer is held to be erroneous and prejudicial to the interest of revenue and, accordingly, the assessment order is hereby cancelled to the extent of unexplained cash deposit in the bank a/c. The AO is directed to decide the issue afresh and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , while concluding that the cash sale transactions, according to him, had not been duly verified, chose not to carry out any enquiry on his own before cancelling the original assessment order dated 30.12.2016 and directing a fresh assessment to be made in the matter. The PCIT, in our view, wrongly equated a case of no enquiry with what he construed as inadequate enquiry . The respondent/assessee had offered an explanation with regard to cash deposits. In the course of the assessment proceedings, the AO had accepted the explanation given by the respondent/assessee that the source of the cash deposits was cash sales. The respondent/assessee had also explained why several invoices were issued on the same date bearing the same amount. It was the respondent/assessee's submission that since it was in the business of selling gold, the quantity sold often did not vary, and therefore, the amounts shown in the invoice were also similar. This was a plausible explanation which found favour with the AO. The respondent/assessee, in support of the plea that the cash sales were the source of the deposits found credited in the subject bank account, had concededly submitted relevant material, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): . . . From a rending of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue?. It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub-section (1). 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 jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be erroneous? simply because in his order he did not make an elaborate discussion in that regard. 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l (2009) 1 AT taxmann. 623 Delhi and CIT v. Sunbeam Auto Ltd. (2011) 332 ITR 167]. 27. This brings us to the judgments cited by Mr Chandra on behalf of the appellant/revenue in the course of the hearing. 27.1 The principle of law enunciated by the Supreme Court in Malabar Industrial Co. Ltd. has set up a standard concerning the width and amplitude of power vested for exercising revisionary jurisdiction under Section 263 of the Act. While exercising power under the said provision, the concerned officer has to be satisfied that the twin conditions provided therein stand fulfilled, i.e., the order passed by the AO, which is sought to be revised, is erroneous and is also prejudicial to the interest of the revenue. In other words, if one of the two conditions is not satisfied, the revisionary power under the said provision cannot be invoked. One cannot quibble with the principle of law in the said case. However, on facts, the Court sustained the exercise of power by the Commissioner under Section 263 of the Act, as the AO had made no inquiry with regard to the additional sum received by the assessee on the sale of agricultural land on account of delay in paying the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no one's case that the respondent/assessee had kept back any information or material sought by the AO. In our opinion, the decision in Ankit s case turned on the facts obtaining in that case. 30. Before we conclude, it is essential for us to note that what we were called upon to test was the legal tenability of the impugned order dated 27.01.2020 passed by the Tribunal, which examined the viability of the decision dated 11.10.2017 rendered by the PCIT concerning the original assessment order dated 30.12.2016. Although Mr Chandra had feebly attempted to draw the Court into examining the contents of the fresh assessment order dated 19.11.2018 which, as noticed above, was passed during the pendency of the appeal before the Tribunal, he eschewed that path having realised that the scope of the appeal was restricted to what was before the Tribunal, which did not include fresh assessment order dated 19.11.2018. Conclusion : 31. Thus, for the foregoing reasons, we are not inclined to interfere with the impugned order dated 27.01.2020 passed by the Tribunal. 32. In our view, no substantial question of law arises for our consideration. 33. The appeal is accordingly d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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