TMI Blog2024 (2) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... red view accepting the said transactions and resultant profit has been brought to tax, the ld PCIT cannot be permitted to invoke his jurisdiction merely because he believes that there are certain deficiency in the documentation so maintained and furnished by the assessee and therefore, the order so passed is erroneous as the same require further examination and verification. There was proper application of mind on the part of the AO and the matter has been duly examined by the AO during the course of assessment proceedings. It is not a case where necessary inquiries have not been carried out by the AO, and in such cases, it is important that for holding the order so passed by the AO as erroneous and prejudicial to the interest of the Revenue, certain further verification and inquiries should have been conducted by the Ld. Pr. CIT which has not happened in the present case and therefore the basic condition for invoking the provision of Section 263 are not satisfied in the instant case. Merely stating that detailed and deep enquiries are required in the instant case will result in taking away a vested right of the assessee in terms of completed assessment where it has already g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT has revised the order of the A.O. u/s 263 only on the basis of the Audit objection hence passing the revisionary order u/s 263 on the basis of Audit objection is illegal and bad in the eyes of law. 4. The Ld. PCIT has not considered or has not uttered a single word on the Audit objection which violates the Principles of Natural justice, hence the order passed by PCIT u/s 263 of the Income Tax Act, 1961 should be set aside. 5. That in the show cause notice the words erroneous and prejudice to the interest of revenue has not been mentioned and are missing hence initiating proceedings u/s 263 of the Income Tax Act, 1961 is illegal and uncalled for. 6. The assessee craves to leave, amend, alter or take additional grounds of appeal before or at the time of hearing. 3. Briefly the facts of the case are that the assessee filed its return of income declaring total income of Rs. 3,44,820/- on 30/12/2017 which was selected for complete scrutiny and notice under section 143(2) and 142(1) along with questionnaire were issued. Thereafter taking into consideration the submission filed by the assessee, the return of income was accepted. 4. The assessment records were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n various dates through E-filing Portal have been perused and after perusal no adverse inference has been drawn. Therefore, the returned income at Rs. 3,44,820/- is accepted. 7. It was further submitted that during the course of assessment proceedings, the AO issued necessary queries and which were duly responded to by the assessee and the same are summarized as under: Particulars of the queries raised by the AO Reply furnished by the assessee during the original assessment proceedings 1. Month-wise details of the cash deposited by the assessee during the AY 2017-18 and AY 2016-17 - Question 6 of the notice dated 20.05.2019- Page 15 of the Pb. Reply filed during the course of the assessment proceedings wherein month-wise cash deposit is disclosed and enclosed in the paperbook at page 19. 2. The copy of the bank account statement Question 7 of the notice dated 20.05.2019- Page 15 of the Pb. Reply filed during the course of the assessment proceedings and enclosed in the paper book at page 19 and the copy of the bank account statement enclosed at page 22 which dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank account statement already filed. 9. Details of cash deposited during the demonetization period-Refer notice dated 24.05.2019- Page 24 of the Pb. The reply has been filed vide Point No. 9 was of the reply dated 30.05.2019 explaining the source of the cash deposits and thus the AO applied his mind on the said issue. 10. Confirmed copy of account of the supplier Refer notice dated 24.05.2019- Page 24 of the Pb. The confirmed copy of account of the supplier has been filed vide reply dated 30.05.2019 and enclosed in the paper book at page 27 of pb. 11. The copy of the cash book- Refer notice dated 24.05.2019-Page 24 of the Pb. The cash book has been filed vide reply dated 30.05.2019 and the same is enclosed in the paper book at pages-38-56. The said cash book duly depicts the sources of cash deposit and no adverse inference has been drawn by the Ld. AO regarding the same. 12. Month-wise cash deposit along with comparison with last year- Refer notice dated 24.05.2019- Page 24 of the Pb. It has been submitted vide reply dated 30.05.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mind. The same has been filed via reply dated 30.05.2022. b. Further, the copy of the cash book duly reflects the bill wise details of the sales made by the assessee along with the Bill Numbers. c. On merits it is submitted that there is no mandatory provision in the Act which mandates the assessee to maintain the details of the customers moreover, when the same has already been offered to tax in the form of sales and reliance in this regard is being placed on the following judgments:- (i) The judgement of Hon'ble High Court of Bombay in the case of R.B. Jessaram Fatehchand (Sugar Dept.) v. CIT reported at [1970] 75 ITR 33 (BOM.) There is no necessity for assessee to maintain the addresses of customers and failure to maintain the same or to supply them as and when called for cannot give rise to suspicion with regard to genuineness of transactions (ii) The Hon'ble High Court of Kerala reported at [1972] 83 ITR 484 (Kerala): M. Durai Raj v. CIT. (iii) M/s Asian Consolidated Industries Limited vs ITO in ITA No. 4873/Del/1998 order dated 05.10.2018 (Del Bench) (iv) ITO vs M/s Sunny Jewellery House in ITA No.196/Chd/2014 order dated 06.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to take care that how the bills of the suppliers are made and furthermore, it is very much understandable that a knitted cloth is of many different types and the rates of such different quality varies a lot. The same quality goods are further sold by the assessee and that too at profit and thus, when the sales of the same along with its profit has been booked by the assessee then the allegation made by the PCIT is without any basis. 4 That the sales bills exceeds Rs.20000 and that the knitted cloth is only purchased by manufacturer or trader not by any individual/final consumer and thus, it is not a usual thing as the same would be violation of provisions of section 40A(3) It is submitted that it is not a valid allegation as the goods could be purchased by many small time traders who does not usually maintain their books of accounts on a regular basis and for the said kind of traders who usually comes 2-3 times for the purchase of small quantity of knitted cloth it is not possible for them to come again and again and furthermore, the provisions of section 40A(3) are not applicable when the return of income is being file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash, depositing no amount in the bank till demonetization took place, making no payment to the creditors during this period are strange and unusual factors and are not noticed in any kind of business. As claimed by the assessee, he has traded in knitted cloths. It was submitted that a perusal of the details produced / filed by the assessee during the proceedings before the undersigned show that total purchases are on 10 bills only and on each bill 2 to 3 different purchases of cloth have been made by the assessee at different rates without there being any description. The bills of purchase mention only cloth and per Kg rates vary from Rs. 200/- and odd to Rs. 400/- odd and even somewhere Rs. 700/- odd, however no quality or description of Cloth is mentioned. All these show that the records maintained by the assessee are not real and the apparent is not real which should have been tested on the human probability test by conducting proper inquiries and verifications. 13. It was submitted that the assessee, apparently, was totally new in the business and despite that the alleged seller of cloth gave him credit of Rs. 40,00,000/- for about two months. This important aspect has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rency notes during the period of demonization and during the course of assessment proceedings, the assessee was asked to explain the source of cash deposit and in response, the assessee submitted that the source of cash deposit was out of the sale proceeds from trading in knitted cloth. Thereafter, the ld PCIT has stated that to substantiate the claim of cash sales, no supporting documentation has been furnished by the assessee and further, other than the period of demonization, no cash was deposited in the bank account and basis the same, the show-cause was issued by the ld PCIT. 17. We therefore find that it is an admitted fact that the AO did carry out the enquiry during the course of assessment proceedings, explanation regarding cash deposit during the demonization period was called for and the assessee in response filed its submissions. The same is also evident from the assessment order where the AO has held that the assessee was engaged in seasonal trading of cloth every year and during the year under consideration, the purchases were made from M/s Vinay Knitwears Pvt Ltd and in that regard, copy of purchase bills, copy of purchase account, mode of payment and the confirma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les made by the assessee. Regarding sales in cash and that too for a month, the ld AR has submitted that the said fact has been duly noted by the AO that the assessee was engaged in seasonal trade activity of hosiery items and there is no bar under law to undertake cash sales. Further, there are certain observations regarding purchase bills, sales bills and credit availed by the assessee which we find has been suitably explained by the assessee. 20. Here, it is relevant to note that besides the normal notion of business in terms of regularity of purchases and sales and continuity over a period of time, a solitary activity or an adventure in the nature of trade equally qualifies as business where it satisfies the necessary attributes of purchase and sale supported by appropriate documentation. In the instant case, where the assessee has carried out seasonal trade in hosiery items duly supported by documentary evidence, the AO having examined the same and having formed a considered view accepting the said transactions and resultant profit has been brought to tax, the ld PCIT cannot be permitted to invoke his jurisdiction merely because he believes that there are certain deficiency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is prejudicial to the interests of the Revenue. The twin requirements and the sine qua non for exercising the Revisionary Power cannot be left at the mercy of whims and fancies of Revisionary Authority the same should be brought out on record mere suspicions are not enough. In order to support the conclusion drawn reference may also be made to the decision of the Co-ordinate Benches in Narain Tatu Rane (supra) which clearly brings out that the explanation cannot be said to have overridden the law as incorporated by various High Courts which have consistently held that before reaching to the conclusion that the order of the AO is erroneous and prejudicial to the interests of the Revenue, the Revisionary authority itself has to undertake some enquiries to establish that the assessment order is erroneous and prejudicial to the interests of the Revenue. 10. Trite it is that in order to attract section 263 of the Act, twin conditions are to be satisfied namely : (i) The order of the Assessing Officer sought to be revised is erroneous, and (ii) It is prejudicial to the interest of the Revenue. 11. The contention of Ld. Senior Standing Counsel that the order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial to the interest of Revenue and the basis of arriving at such a prima facie finding. 23. Following the aforesaid decision, in subsequent decision in case of CIT vs Anil Kumar Sharma (supra), the Hon ble Delhi High Court held that even if the inquiry was termed as inadequate, that would not by itself give occasion to the Commissioner to pass orders under section 263 of the said Act, merely because he has a different opinion in the matter. It was held that once application of mind is discernible from the record, the proceedings under section 263 would fell into the area of the Commissioner having a different opinion and the findings of facts arrived at by the Tribunal do not warrant interference of this Court. 24. Similarly, in case of Ganpati International vs PCIT (supra), the Chandigarh Benches have held that where the AO had made the enquiry and Id. PCIT is trying to substitute the plausible view taken by the Assessing Officer with his own view, the said course of action is not permissible under the revisionary provisions under section 263 of the Act 25. In light of the aforesaid discussion and in the entirety of facts and circumstances of the present case, we find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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