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TMI Blog2024 (4) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... being identical, the same are being enumerated in general manner mentioning the figures involved in both the years. In effect, both the appeals are being dealt with together. 3. A perusal of the order of the ld. PCIT reveals that the assessment order, which was revised by the ld. PCIT, was passed u/s 143(3) r.w.s. 147 of the Act. That the case of the assessee was reopened u/s 147 of the Act for both the years noting huge cash deposits in his bank accounts amounting to Rs. 24,35,15,372/- in AY 2012-13 and Rs. 18,78,90,358/- in AY 2013-14. That the assessment ultimately was finalized treating the cash deposits as pertaining to that of the business of the assessee and taxing only the net profit earned thereon estimating it @ 3% of the total cash deposits. The addition, therefore, made in AY 2012-13 by the Assessing Officer amounted to Rs. 74,72,960/- and in AY 2013-14 the same tantamounted to Rs. 58,33,151/-. 4. The ld. PCIT found both the assessment orders to be erroneous for the reason that he noted that the Assessing Officer had made no inquiries while treating the huge cash deposits as relating to the business turnover of the assessee and taxing only 3% of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case and in law, the Principal Commissioner of Income-tax (PCIT) Rajkot-1 erred in setting aside the order by stating that the assessing officer has not conducted any inquiries or applied his mind correctly on finalizing the order by estimating the profit @3% on the total deposits through cash & RTGS of Rs. 24,35,15,372/-. 2.2 That on the facts and circumstances of the case and in law, the Principal Commissioner of Income-tax (PCIT) Rajkot-1 erred in holding that the assessment order is erroneous and prejudicial to interest of revenue on the issue of applicability of section 68 by considering total deposit as cash of Rs. 24,35,15,372/- in bank accounts." 6. The arguments of ld. Counsel for the assessee before us challenging the order passed u/s 263 of the Act, briefly stated, were to the effect that:- (i) It was not a case of no inquiry or lack of inquiry by the Assessing Officer; that the Assessing Officer had made all the inquiries and taken a plausible view treating the cash deposits as business receipts of the assessee and treating 3% thereof as a net profit of the assessee. Therefore assessment order could not be held to be erroneous causing prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the ld. Counsel for the assessee that since the issue was pending before the ld. CIT(A), the revisionary powers could not be invoked, citing the decision of Hon'ble Apex Court holding otherwise in the case of CIT vs Amritlal Bhogilal & Co., 34 ITR 130 (SC). 9. As for the invocation of Explanation 2 to Section 263 of the Act, without giving any show-cause notice to the assessee, ld. DR opposed the same stating that a bare reading of the Section would reveal that there was no such requirement. 10. We have heard the contentions of both the parties. 11. We shall first deal with the contention that the revisionary order was bad in law, finding the assessment order passed to be erroneous on account of no inquiry/lack of adequate inquiry on the issue of cash deposits in the bank account of the assessee. The contention of the ld. Counsel for the assessee is that adequate inquiry had been done and the Assessing Officer had taken a plausible view treating the cash deposits as related to the business turnover of the assessee and taxing net profit earned thereon estimating the same @ 3% of the turnover/cash deposits. The Department, on the other hand, states that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was carried out by Shri Bharat Pranlal Popat. Further Shri Dipak Shivial Tanna is expired on 17.11.2014 (Death certificate has been filed), therefore, it is not possible to furnish any other details related to bank transactions carried out in these banks viz. The Social Credit Co Op. Bank Ltd as the assessee has no knowledge about such transactions. Further assessee has contended that the said transactions are carried out by above persons. D) The assessee has also contended that since the transactions carried out in bank account were business transactions the addition of total amount of the transactions should not be done as well as provisions of section 44AD of the Act is not attracted. However in absence of details assessee has requested that the addition should be restricted to 2-3% of the transactions carried out in bank accounts. The contention of assessee is duly considered. E) Further assessee has filed a letter of the M/s. Archar Metal Limited confirming the transactions with assessee as business transactions. After considering details like affidavit, death certificate of Sh. Dipak Tanna, affidavit filed by Sh. Bharat Popat after considering the contentions raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, the Assessing Officer accepts the other contention of the assessee, but gives no reason for the same. It is obvious and patent from the assessment order that the Assessing Officer made no inquiries vis-à-vis any of the contrary contentions made by the assessee though both admittedly were supported with evidence. In the case of the contention of the assessee that the transactions in the bank account did not relate to him, the Assessing Officer notes the assessee to have filed an affidavit given by the person whom he alleged to have operated the bank account i.e. Shri Bharat Pranlal Popat, admitting the transactions in the said bank account belong to him. With respect to his contention that the transactions were his business transactions, a letter of one M/s. Archar Metal Limited was filed confirming the transactions with the assessee as business transactions. The assessment order finds no mention any inquiry made by the Assessing Officer either with regard to Shri Bharat Popat who owned the transactions to relate to him in his affidavit or with M/s. Archar Metal Limited who contrarily stated the transactions to pertain to the business of the assessee. Even the Ld. Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year was pending at the material time before the Appellate Assistant Commissioner; and so no question of merger arose in respect of the order granting renewal of registration for this period. There can be no doubt that even on the theory of merger the pendency of an appeal may put the order under appeal in jeopardy but until the appeal is finally disposed of the said order subsists and is effective in law. It cannot be urged that the mere pendency of an appeal has the effect of suspending the operation of the order under appeal. The High Court, however, appears to have taken the view that the revisional power is an extraordinary power and can be exercised only for unusual and extraordinary reasons. It was also assumed by the High Court that, in the pending appeal, the department would have an alternative remedy because, according to the High Court, the department could have challenged the validity or the propriety of the respondent's registration and could have asked the Appellate Assistant Commissioner to cancel it. As we have already pointed out, the department could not challenge the validity of the registration order in the assessee's appeal before the appellate author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. To understand the import of the argument that the invocation of Explanation 2 to section 263 was to be confronted before being applied, it is necessary to see what Explantion-2 to section 263 is all about. For this purpose, provision of section 263(1) of the Act along with the Explanation 2 to the same are reproduced hereunder: 263. (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or 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 [or the Transfer Pricing Officer, as the case may be,] 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,-- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same. Explanations are not substantive provisions and are inserted to clear up any ambiguity in the section. They only clarify an existing law. Normally Explanations do not enlarge the scope of the section but only explain the scope. Explanation 2 to section 263, clearly provides additional support to the dominant object of section 263, specifically pointing out situations where assessment orders will be deemed to be erroneous. The main provision of the section and its import has not been altere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not necessary to mention any specific Explanation thereto which has been invoked. Therefore, this contention of the ld. counsel for the assessee is rejected outrightly that the order needs to be set aside for the reason that ld. Pr. CIT did not confront the assessee before invoking Explanation 2 to sub-clause (a) to section 263 of the Act. 37. As for the decision of the jurisdictional High Court in the case of Shreeji Prints (supra), relied upon by the ld. counsel for the assessee in support of this contention, the assessee, we hold, cannot derive any benefit from the same. 38. On going through the decision of the Hon'ble High Court, we find that the decision is not on the question framed before it whether Explanation to section 263 of the Act can be said to be validly invoked without first confronting it to the assessee. In the case before Hon'ble High Court in the decision relied upon by the Ld.AR, the Revenue had proposed the following questions as substantial question of law before the Hon'ble High Court: "(a) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is correct in holding that the PCIT was not empowered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Hon'ble High Court was not to the effect that Expl 2 to section 263 not being confronted to the assessee its invocation was invalid. Neither was the decision rendered in the backdrop of this question before the Hon'ble High Court, nor does the Hon'ble High Court hold so in its order. What is noted in the order to this effect is only its noting of the findings of the ITAT while setting aside the order passed u/s 263 of the Act. Therefore the decision of the Hon'ble jurisdictional High Court cannot be read as holding that order passed u/s 263 of the Act is invalid when Expl to section 263 is invoked without confronting it to the assessee. 43. It is settled law that a precedent is an authority only for what it actually decides and a decision on a question that has not been argued cannot be treated as a precedent. Judgments must be read as a whole and observations in judgements should be considered in the context in which they are made and in the light of the questions that were before the court. The Hon'ble apex court has held so in the case of CIT vs Sun Engineering Works Pvt. Ltd. 198 ITR 297 (SC). In the case of Padma Sundra Rao v State of T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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