2023 (12) TMI 137 - AT - Income Tax

Revision u/s 263 - unexplained cash deposits - as per CIT AO had omitted to conduct basic enquiries with regard to abnormal cash deposits during the demonetization period as compared to pre- demonetization period as well as the various claims made by the assessee - HELD THAT - PCIT has referred to the assessee s return of income wherein it was disclosed that an amount of Rs 4 lacs was deposited during the demonetization period in a bank account maintained with SBI. We find that the matter was duly enquired into by the AO during the course of assessment proceedings and it was explained by the assessee that the said bank account doesn t belong to him but belong to Mr Raj Kumar and a copy of the bank state ment was submitted. Where the AO on review of the bank statement, was satisfied that the said bank account doesn t belong to the assessee but belong to Mr Raj Kumar and accepted the explanation of the assessee regarding the ownership of the said bank account and the transactions reflected therein, we find that no further cause of action lies and if any action is warranted, the same is warranted in hands of Mr Raj Kumar and not in the hands of the assessee. In any case, what further enquiries or verification is warranted is not specified by the ld PCIT. Therefore, on this account, the order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of the Revenue. Coming to transactions with M/s A.K. Minerals and M/s G.K Laxmi where the assessee has show cash receipts of Rs 5 lacs each against sales made to them and in respect of which, ledger account and a confirmation from these two parties has been filed during the course of assessment proceedings, where the assessee has filed certain confirmations from the aforesaid two parties during the course of assessment proceedings in support of sale transactions and receipt of consideration in cash and the authencity of the said confirmations stood falsified by subsequent confirmations received directly from the same parties even though after the close of the assessment proceedings, the ld PCIT is well within his jurisdiction to hold the assessment order so passed as erroneous in so far as prejudicial to the interest of the Revenue. The subsequent confirmations are very much part of the record which is available at the time of examination of the ld PCIT and the confirmations so received raises a question mark on the authenticity and correctness of the information and documentation available at the time of passing of the assessment order thus leading to a situation where certain incorrect information which goes to the root of entering into the transaction and challenges the very existence of the transaction has been considered by the AO leading to a wrong conclusion and passing of an erroneous order. It is therefore a case where the matter though enquired into by the AO but the transaction itself stood falsified by the subsequent confirmation received directly from the concerned parties and where the PCIT is ceased of the matter and the necessary information is available on record at the time of his examination, we find that he was well within his jurisdiction u/s 263 to set-aside the assessment order on this count and order a de-novo assessment. Contention advanced by the ld AR that remedial action u/s 147 can be taken in this regard and no basis for exercise of jurisdiction u/s 263 - In the instant case, it is an admitted position that the matter was enquired into by the AO during the assessment proceedings and answered by the assessee by way of providing the ledger account and the confirmations from the two parties and thereafter the Assessing Officer does not make any addition in the assessment order. In such situation, it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. Admittedly, assessment order was passed u/s 143(3) on 29.05.2019 and even though the confirmations have been received by the AO on 19.07.2019 and available on record, the AO has not taken any action u/s 147 knowing full well the scope of his reassessment jurisdiction, in such a situation, the ld PCIT is not precluded in exercise of his jurisdiction u/s 263 of the Act and issuance of show- cause u/s 263 dated 2.03.2022. In any case, at the time of issuance of show-cause by the ld PCIT, no reassessment proceedings u/s 147 were either initiated or pending for completion by the AO. Where the ld PCIT is ceased of information/documentation which has direct nexus with passing of an erroneous assessment order by the AO and if we were to go by the argument of the ld AR, the ld PCIT cannot be expected to wait indefinitely for the AO to initiate proceedings u/s 147 and where the AO sleeps over the matter, allow the expiry of limitation to pass the order u/s 263, thus failing in his supervisory and revisionary duty under Section 263 of the Act. Therefore, the contention advanced by the ld AR that remedial action u/s 147 can be taken in this regard and no basis for exercise of jurisdiction u/s 263 cannot be accepted. Assessee's claim of receipt of cash from various persons was false and was not investigated by the AO and the assessee s claim to have received cash from unnamed persons where no documents are available on assessment records to show that the AO has not made any enquiry or verification - The fact that the sales were effected in initial period during the same financial year and the cash has been received in the subsequent period even though during the demonetization period cannot be a basis strong enough to hold the order so passed by the AO is erroneous in so far as prejudicial to the interest of Revenue in absence of any adverse findings regarding availability of requisite stock and the sales so effected by the assessee which are both reported to tax. Where the AO felt satisfied with the documentation and explanation so submitted by the assessee, basis review of the same documentation, the ld PCIT may arrive at a different opinion, however, the same cannot lead to a situation of holding the order so passed as erroneous in so far as prejudicial to the interest of the Revenue. The only caveat here is that the documentation so submitted during the course of assessment proceedings shouldn t stand falsified by subsequent information/documentation as we have seen in case of M/s A.K Minerals and M/s G.K. Minerals and which is not a case as far as these transactions are concerned. Therefore, the findings of the ld PCIT in para 5.2 of the impugned order as regards transactions with Shri Bhupinder Singh, Shri Bindri, Shri Ajmer Singh and M/s Gurleen Traders are hereby set-aside. For retail cash sales - Where the AO felt satisfied with the documentation and explanation so submitted by the assessee, we find that the matter has been duly enquired into by the AO and the findings of the ld PCIT that no enquiry has been conducted by the AO is not borne out of the records and the same thus deserve to be set-aside. Further, there is no adverse finding recorded by the ld PCIT regarding availability of stock of petroleum products and corresponding sales reported by the assessee and where the stock and sales have been accepted, realization of sale proceeds in cash which is permissible under law cannot be held against the assessee or to hold that the assessment order is erroneous in so far as prejudicial to the interest of Revenue. Therefore, the findings of the ld PCIT regarding cash receipts from retail sale is hereby set- aside. Board s Instruction dated 09.08.2019 vide which verification checklist for assistance of AO s for OCM cases and framing of assessment in demonetization related cases was provided and which has not been followed by the AO - We agree with the contention of the ld AR that where the CBDT instructions were issued after passing of the assessment order, the AO cannot be expected to follow the same and on this count, the order so passed by the AO cannot be held as erroneous in not following the CBDT instruction and the findings of the ld PCIT in this regard in para 5.4 are thus set-aside. Gift received by the assessee from his mother - where the ld PCIT examines the matter and comes to a conclusion that the confirmation so filed is half-baked and incomplete and further, there is no explanation regarding the source of cash gift to the assessee and the AO didn t mount further examination and accepted the said incomplete confirmation on face value, we find that the ld PCIT has rightly exercised his discretion in setting aside the assessment order to examine the matter a fresh after providing reasonable opportunity to the assessee. The findings of the ld PCIT in thus upheld. Unsecured loans - We don t find that the ld PCIT has referred to any tangible piece of information or documentation which warrant examination and investigation across all transactions of unsecured loans which are undertaken by the assessee. Further, where the relevant confirmations from the creditors have been called for and examined by the AO, the latter being satisfied with the same and explanation so furnished by the assessee, merely the fact that the AO has not carried out independent enquiries of these confirmations from the creditors cannot be a basis to hold the order as erroneous in so far as prejudicial to the interest of Revenue. The ld PCIT has not pointed out any deficiency or inaccuracy in the confirmations so filed by the creditors unlike some of the other cases as we have noted above and in absence thereof, the order so passed by the AO in this regard cannot be held as erroneous in so far as prejudicial to the interest of Revenue and the findings of the ld PCIT in this regard at para 5.8 and 5.9 of the impugned order are hereby set-aside. Findings of the ld. PCIT that the AO did not even bother to get the copy of the Audit Report alongwith the audited accounts and the assessment has been completed without even examining the Audit Report - Where the AO chooses not to download and keep a copy of the audit report on assessment file, the same cannot take away the factual position that audit report was available for examination by the AO, therefore, the findings of the ld PCIT at para 5.10 are not borne out of record and the same are hereby set-aside.

Summary

Issues Involved:
1. Jurisdiction under Section 263.
2. Erroneous and prejudicial order under Section 263.
3. Substitution of alternative views.
4. Proper perusal of assessment records.

Summary:

Jurisdiction under Section 263:
The assessee contested that the CIT exceeded legislative jurisdiction under Section 263 of the Act. The Tribunal noted that the CIT's jurisdiction under Section 263 is valid if the assessment order is erroneous and prejudicial to the interests of the Revenue. The Tribunal upheld the CIT's jurisdiction to review the assessment order.

Erroneous and Prejudicial Order under Section 263:
The CIT found the assessment order to be erroneous and prejudicial to the interests of the Revenue due to the AO's failure to conduct basic inquiries and verification. Specific instances included:
- The AO did not verify the ownership and transactions of a bank account belonging to Mr. Raj Kumar, which the assessee claimed did not belong to him. The Tribunal found that the AO had conducted necessary inquiries and set aside the CIT's findings on this matter.
- Transactions with M/s A.K. Minerals and M/s G.K. Laxmi were found to be falsified based on subsequent confirmations. The Tribunal upheld the CIT's findings, noting the AO's acceptance of incorrect information.
- The CIT's findings on the assessee's claim of receipt of cash from various persons and retail cash sales were set aside by the Tribunal, noting that the AO had conducted sufficient inquiries.
- The CIT's findings on the gift received by the assessee from his mother were upheld, as the AO did not verify the source of the gift.
- The CIT's findings on unsecured loans were partially upheld, requiring further verification of transactions with three specified persons.

Substitution of Alternative Views:
The assessee argued that the CIT substituted an alternative view against the firm view adopted by the AO. The Tribunal noted that the CIT's intervention is justified if the AO's order is based on incorrect facts or lack of inquiry, leading to an erroneous and prejudicial order.

Proper Perusal of Assessment Records:
The assessee claimed that the CIT concluded proceedings without proper perusal of assessment records. The Tribunal found that the CIT had examined specific instances and transactions to conclude that the assessment order was erroneous and prejudicial to the interests of the Revenue.

Conclusion:
The Tribunal modified the CIT's directions, setting aside some findings and upholding others. The AO was directed to make inquiries and verification limited to matters where the CIT's findings were upheld and decide the same afresh as per law after providing reasonable opportunity to the assessee. The appeal was disposed of in light of these directions.