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TMI Blog2025 (3) TMI 1423X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment made vide order under section 143(3) dated 15/12/2019 and passing an order under section 263 of the Act on the grounds that the original assessment order passed under section 143(3) was erroneous and prejudicial to the interest of the revenue and directing AO to frame fresh assessment order (de novo) after giving reasonable opportunity of hearing to the appellants. Grounds No. 3 The Learned PCIT, Bareilly has further failed to appreciate that the original assessment order was passed by the Assessing officer after considering all the issues mentioned in his show cause notice and after making due enquiries, and thus the case was not the one of lack of enquiry by the Assessing officer. Grounds No. 4 The Learned PCIT, Bareilly erred in law as well as on the facts of the case in wrongly setting aside the assessment order dated 15/12/2019 despite there being complete application of mind by the AO on the subjected issues and it was nothing but a case of change of opinion, based on which, assumption of jurisdiction u/s 263 is not permissible, The impugned order dated 21/02/2022 therefore, lacks valid jurisdiction u/s 263 of the Act and hence, the same kindly be quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Prayer - It is therefore prayed that, impugned order dated 21.02.2022 under section 263 of the Act be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. Grounds No. 12 The assessee's case does not fall within the mischief of section 263 and as such the order is bad in law and the same is liable to be cancelled. Grounds No. 13 That the Appellant craves leave to amend alters, add or forego any of the above grounds." 2. The facts of the case are that the assessee filed its return of income for the A.Y. 2017-18, declaring total income of Rs. 1,78,19,610/-. The Assessing Officer records the fact that the case of the assessee, though selected for complete scrutiny, was selected to mainly examine the large cash deposits in the bank accounts during the year. Therefore, the Assessing Officer asked the assessee to furnish the source of money which was deposited in different banks during the year. He also called for various other information such as the month-wise details of purchases and sales figure, Comparative chart of G.P/N.P, details of unsecured loans and unsecured loans squared up during the period, details of cash deposits in diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k accounts. From the documents available on file, the Ld. PCIT observed it was not possible to correctly verify as to how much of old SBNs the assessee had deposited during the demonetization period. He held that the AO should have obtained the details and it was expected of him to make detailed examination thereof. But the AO had not issued relevant queries for examination of cash deposit from the demonetization period. The Ld. PCIT also cited the case of CIT Vs. Rangila Ram and others 254 ITR 230 (SC) and PCIT Vs. Chamundi Winery and Distillery 408 ITR 402 (Kar) and pointed out that the entire income from the liquor business should be taxed in the hands of the licensee and expenses incurred by other persons should be disallowed, and noted that in the said case, the AO had not asked the assessee to submit the details of licenses issued to him for the trading of liquor. He also held that the AO had failed to examine the sales of liquor with supporting documents such as sales and bills/vouchers referring to the decision of the Hon'ble Rajasthan High Court in the case of CIT Vs. Ram Singh and others 363 ITR 417 and Trilok Chand Girdharilal and party 369 ITR 751, which had held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various liquor vends which was allotted in the name of its members. All the investments in the business towards payment of license fees purchases etc were done by the AOP and the sales pertained to the assessee AOP. Accordingly, TCS was also collected in the name of the assessee by various parties and deposited to the credit of Central Government account. But books of accounts were regularly maintained and audited as per the Section 44AB of the Act. Each and every item of income and expenditure was duly vouched and verifiable. Further, the assessment u/s 143(3) of the Act had been done after make due enquiries and examination by the Assessing Officer. The main reason for the selection of the case under scrutiny were "large cash deposited during the demonetization period" and "Abnormal increase in sales with lower profitability", and each and every reason had been dealt with by the Assessing Officer during the proceedings. The assessee submitted that it was within the province and jurisdiction of the Assessing Officer to decide on which points he wants to take up for enquiry and to what extent and Ld. PCIT could not interfere with the same and therefore the assessee held that the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at any revising authority that felt that enquiry was inadequate must make enquiry itself and show that the assessment order was erroneous. The revising authority had no power to remand the matter and direct the Assessing Officer to conduct enquiry. The Ld. AR further referred to the decision of ITAT Delhi in the case of M/s. Uma Glass Works Vs. PCIT-1, Agra in which the ITAT has followed this order of the Hon'ble Delhi High Court and held that the assumption of jurisdiction u/s 263 of the Act by the Ld. PCIT was bad in law in the case where the Ld. PCIT had set aside the assessment order and directed the Assessing Officer to conduct enquiries. The Ld. AR submitted that the assessee had furnished a reply to the Ld. PCIT that it had provided the complete details of unsecured loans, sundry creditors, details of cash sales and cash deposits in F.Y. 2015-16 and F.Y. 2016-17 (month-wise) and it was submitted that the cash balance as on 08.11.2016 had not been disputed either by the Assessing Officer or by the Ld. PCIT. The Ld. AR further took us through the notices issued by the Assessing Officer and the replies that had been furnished by the assessee during the course of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w reference to the case of CIT Vs. SB Pannalkar and Co reported in 344 ITR 232 (Kar) to point out that the Hon'ble Karnataka High Court had held that if a partnership firm chooses to obtain a licence in the name of one of its partner that would be a partnership asset. Regarding vouchers for liquor, the Ld. AR pointed out that the details of sale have been furnished before the AO along with audited accounts and in the line of business of liquor trade, sales bills were not issued and even the customers do not give their names and address. The Ld. AR placed reliance on the decisions of the Hon'ble Allahabad High Court in the case of Shahabuddin & Sons 38 STC 47 and Ramjilal & Sons 50 STC 344 and the decision of the Jabalpur Bench ITAT in Additional CIT Sagar VS. Basant Kesherwani & Co. Sagar & others in ITA No.30/Jab/2009, in support of such arguments and submitted there was no reason to reject its books of accounts on this ground. He submitted that the issue of purchases was already verified by the Assessing Officer by reconciling them with Form no. 26AS of the assessee. The licence fee was paid was evidenced by the treasury challans which were recorded in the books of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment of rent, it was submitted that AOP had paid total rent of Rs. 34,82,500/- and provided details of all the address of operations of the AOP (which were the liquor shops and allotted to the AOP during the year under consideration). The shop-wise rent from the assessee had been provided to the AO during the assessment proceedings and TDS was deducted whenever it was required to be deducted u/s 194IA of the Act. It was submitted that AO had called for the details vide notice dated 04.07.2019 and the assessee had submitted its response on 20.12.2019. The Ld. AR, therefore, submitted that all the issues upon which the Ld. PCIT held that the enquiry was not done, had in fact been enquired into by the Ld. AO and these facts had been duly intimated to the Ld. PCIT in the submission made before him during the proceedings u/s 263 of the Act. However, the Ld. PCIT had refused to take cognizance of these submissions and had proceeded to set aside the case for de-novo assessment, which was not justified in the eyes of law. Accordingly, it was prayed that the order u/s 263 of the Act may be quashed. In support of his arguments, the Ld. AR submitted a gist of case laws where assumption of ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the fact that the operational portion of the order was confined to just one page. The Ld. DR pointed out that the assessee had shown less net profit in comparison to its turnover. She further drew our attention to the fact that the AO had issued six notices u/s 142(1) of the Act along with detailed questionnaire as per his own assessment order, but had not rendered any findings on any of the issues which had been raised by him in these notices. The Ld. DR drew reference to the order of the Ld. PCIT and pointed out that the CBDT internal guidance note had not been followed and these details had not been taken. Furthermore, the AO had not completed any verification of the sundry creditors and not examined the various expenses in the profit and loss account. He had also not enquired regarding the rent paid in cash. The AO had failed to reject the books of accounts and not made any third party enquiries. The Ld. DR pointed out that where the Assessing Officer did not make third party enquiries; the Ld. PCIT was justified invoking his jurisdiction u/s 263 of the Act. She placed reliance on the following case laws, CIT Vs. Dhananjay Kumar Yadav (2024) 159 taxmann.com 638 (Patna), PCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, if, the Assessing Officer had conducted enquiries and come to another finding, then the powers u/s 263 of the Act could not be invoked to direct that the Assessing Officer conduct the enquiries or to arrive at a conclusion that was the correct conclusion in the opinion of the Principal Commissioner. Therefore, essentially what has to be seen in each case is whether the enquiries that ought to have been done were, in fact, done. 8. In the present case, on a perusal of the order of the Ld. PCIT, we observe that the case was picked up for complete scrutiny but the CASS selection reasons for the same were (i) large cash deposit during demonetization period (ii) abnormal increase in sales with the lower profitability. Now while the case was picked up for complete scrutiny, the indicator of the reasons why it had been picked up in CASS, would to our mind indicate the focus with which this complete scrutiny was to be taken up. The Assessing Officer had been given powers to examine all the accounts of the assessee with a view to determine whether the large value of cash deposited during the demonetization period needed to be brought to tax and whether the profits had been adequat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. PCIT in response to his show cause notice u/s 263 of the Act. With regard to first point i.e. lack of enquiry regarding genuineness of the source of cash deposit of Rs. 12.76 crore and Rs. 11.98 crore in old SBNs during demonetization period, we observe that the cash deposits were verified at the time of assessment proceedings with the ITS Data as generated from the ITBA Portal. The assessee had explained the cash deposits from cash sales since the nature of the business was retailer of liquor also out of cash deposits from cash withdrawals during the year under assessment. We observe that the AO could not obtain the details of SBNs from the banks because of lack of response from them, but the assessee had itself submitted the details of deposits and also the detail of deposits in SBNs to the Assessing Officer. Furthermore, we observe that the AO had called for the details of all the bank accounts maintained by the assessee and the cash deposited in various accounts during the demonetization period, to which the assessee had responded. We also observe that, on being quarried the assessee had submitted a month-wise chart of cash sales, cash deposited, cash withdrawal and clos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that it could not run shops without paying the license fee which was paid to the credit of the government account and that details of all shops being run by it were furnished to the AO. These license fees were duly recorded in the books of account of the assessee and these books of accounts have been produced before the AO. Thus, the source of payment of licence fees stood explained from the books of accounts, in which no infirmity has been pointed out. Furthermore, it is observed that the payment of licence fee for the running of excise shops is not immediately relevant to the reasons for selection of the case for scrutiny. Therefore, even though, the books of accounts have been produced and examined and to that extent the license fee has been considered by AO, this observation of the Ld. PCIT would not, in our opinion, constitute an item of lack of inquiry, given the reasons for selection of case for scrutiny. 11. With regard to the Ld. PCIT opinion that the AO had failed to obtain the ledgers/confirmation from the parties through which the assessee had made purchases of Rs. 74,05,11,413/-, we have noted the submissions of the assessee that were made before the Ld. PCIT tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the genuineness of the sundry creditors as the purchases themselves were confirmed. The next issue on which the Ld. PCIT has held that the enquiry were not made were certain expenses claimed in the profit and loss account. The assessee has submitted that details of various expenses were called for by the AO during the course of assessment proceedings and since the AO was satisfied with what had been furnished, therefore, there was no reason to draw adverse inference. We notice that the Assessing Officer vide his notice dated 24.03.2019 called for details of major expenses debited to profit and loss account and also asked for comparative chart of expenses for the A.Y. 2016-17 and A.Y. 2017-18. We further notice that the ledger account of the major expenses as well as the comparative chart of expenses were provided to the AO vide Annexure -8 of the assessee's reply to the said notices. We further observe that the examination of expenses primarily pertains to the second issue on which account the case was picked up for scrutiny i.e. "abnormal increase in sales with lower profitability" and we find that the AO vide his notice dated 24.03.2019 has examined the gross profit/net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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