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TMI Blog2017 (3) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Assessing Officer then he cannot take the basis of inadequate inquiry and can direct the Assessing Officer to perform. Thus as when the Assessing Officer has conducted proper enquiry and has examined the relevant records before taking the final decision or framing the assessment order then in such circumstances ld. Commissioner of Income Tax cannot invoke the power u/s 263 of the Act for directing to frame assessment afresh. The assessment order u/s 143(3) dated 23.12.2010 is neither erroneous nor prejudicial to the interest of Revenue and accordingly we set aside the impugned order passed by ld. Commissioner of Income Tax u/s 263 of the Act - Decided in favour of assessee - ITA No. 1381/Ahd/2013 & ITA No.1903/Ahd/2015 - - - Dated:- 28-2-2017 - Shri R.P. Tolani, JM and Shri Manish Borad, AM. For The Appellant by Smt Urvashi Shodhan, AR For The Respondent by Shri R. I. Patel, CIT DR ORDER PER Manish Borad, Accountant Member . These two appeals of assessee for Asst. Year 2008-09 are directed against two separate orders (1) of Commissioner of Income Tax-1, Baroda, dated 28.03.2013 u/s 263 of the Income-tax Act, 1961 (in short the Act) arising ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 2. Out of these two appeals ITA No.1381/Ahd/2013 is challenging the order of ld. Commissioner of Income Tax u/s 263 of the Act and ITA No.1903/Ahd/2015 is on merits against ld. Commissioner of Income Tax(A) s order confirming addition u/s 68 of the Act made u/s 143(3) r.w.s. 263 of the Act.. 3. We will first take ITA No.1381/Ahd/2013. Briefly stated facts are that assessee is an individual earning income from house property and business. She filed return of income for Asst. Year 2008-09 on 16.02.2009 declaring total income at ₹ 7,81,690/-. Case was selected for scrutiny assessment and notice u/s 143(3) of the Act was issued on 19.08.2009 followed by notice u/s 142(1) of the Act dated 16.8.2010 duly served calling for various details and information. In response thereof assessee and her counsel attended from time to time and submitted detailed reply. After discussion, returned income was assessed as total income. Pursuant thereto ld. Commissioner of Income Tax invoked his power u/s 263 of the Act and on examining the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u may appear before the CIT-I in person or through your authorized representative on 30.01.2013 at 12.30 P.M. In case of non-compliance, the matter will be decided on merits. Yours faithfully, Sd/- (N.M. Rawal) ITO(Tech) For Commissioner of Income Tax -1, Baroda. Assessee filed submissions in pursuance to notice u/s 263(1) of the Act on 21.2.2013 mentioning that as regards cash deposits source was regular cash withdrawal from the bank and as regards rental income shops were actually given on rent. Further assessee also submitted that all details relating to cash deposits including copy of bank statement and cash book were provided to the Assessing Officer for due verification during the course of assessment proceedings. 4. On going through the submissions of assessee ld. Commissioner of Income Tax(A) was convinced with regard to the legitimate claim of interest paid against the rental income from the shops but not so relating to furnishing the source of cash deposits in the bank account and was of the view that assessee has not properly explained as to why he kept on withdrawing the cash from the bank and then depositing it again throughout the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciliation of cash deposits and cash withdrawals. As ld. Assessing Officer has made full application of mind on the details submitted during the assessment proceedings, such order cannot be held to be erroneous or prejudicial to the interest of revenue and, therefore, ld. Commissioner of Income Tax erred in invoking power u/s 263 of the Act for setting aside the assessment u/s 143(3) of the Act. Ld. Authorised Representative referred and relied on the following judgment/decisions :- 1. Commissioner of Income Tax vs. Amit Corpn. (2012) 21 taxmann.com.64 (Guj) 2. Tribunal s decision in the case of Patel Prahladbhai Harjivanbhai in ITA No.2347/Ahd/2012 3. Tribunal decision in the case of Shri Kumarbhai M. Tahelyani in iTA No.2144/Ahd/2012 4. Tribunal s decision in the case of Shital Priyasharan Shah vs. DCIT in ITA No.1454/Ahd/2015 7. On the other hand, ld. Departmental Representative vehemently argued supporting the order u/s 263 of the Act and submitted that assessee has not given proper explanation of the source of cash deposits and ld. Assessing Officer failed to observe the fact that assessee was continuously withdrawing and depositing cash without giving any reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings for Asessmertt Year 2008-09 reg. Please refer to Use notice a/s 145(2) dated 19-8-09 issued by ITO, Wd-2(3) Batoda. The notice has been now transferred to this office, as the jurisdiction over the case rests with the undersigned, and, accordingly letter dated 16.02.2010 requesting certain details was issued to you by this office. In addition to the above you are requested to furnish the following :- 1. A brief note on the nature of activities undertaken in the previous year and also of the earlier year if there is any change. 2. The addresses of all offices/shops, hotels/restaurants, and other entities owned and run by you as well as given on rent basis along with document in support of claim. 3. Please furnish the details of litigation with Tensile Steel Ltd. by filing a copy of plaint and your reply thereon in this matter. 4. Copy of profit and loss account/income and expenditure account and personal balance sheet. 5. Furnish copy of detailed capital account. 6. Details of investments made in Shrim Duplex/bunglow No.4 5 Nr. Vishwamitri Township, Mujmahuda, Baroda by you or by any family member. Please furnish copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.Y .2008-09 and 2009-10. (7) Please furnish source of cash deposit per enclosure explaining each entry. (8) The rent income as per enclosure has not been, shown by you please explain rhe same. 11. In response to the letter issued by the Assessing Officer the assessee filed reply on 9.2.2010 placed at page 3 of the paper book explaining the source of cash deposit of ₹ 39,48,493/- along with copy of cash book showing contra entries for for bank account, copy of bank account with Oriental Bank of Commerce showing cash deposits entries in order to support the fact that source of cash deposit was out of cash withdrawal from bank account. Pursuant thereto assessment was framed u/s 143(3) of the Act without calling for any addition in the assessment order. Thereafter on account of audit objection assessee was again asked to submit details of cash deposits and withdrawals which were duly complied by filing letter dated 7th July, 2010. 12. From the series of events which happened during the course of assessment proceedings it is well evident that information about cash deposits was duly asked by the Assessing Officer and assessee has also submitted necessary details wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer had excess to all records of assessee and after proper perusal of such record he has framed the assessment. Hon.Court decided the same against the Revenue by observing as follows :- 4. Tribunal was of the opinion that while framing the original assessment, the Assessing Officer had carried out full inquiries and thereafter framed the assessment. Tribunal, therefore, was of the opinion that the order of the Assessing Officer could not have been categorized as erroneous on the grounds stated by the Commissioner of Income-tax. Tribunal held and observed as under :- 6. We have carefully considered the rival submissions and have also perused the material on record as also the paper book filed before us. We find from the assessment order itself that as stated in para (4) thereof the A.O. has clearly stated that during the year there were sales of flats of ₹ 5,20,000/= on which a certain profit was declared. We find from the order that the assessee is a civil contractor and what is sold as flat is fixed assets of the firm. From the submissions to the I.T.O. and to the CIT it is noted that no business activity was made during the year. We also find that the ITO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio:- A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous ; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous 8. Now, let us see in the light of the above ratio whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised by the ADIT at the time of hearing. On 12.02.2013, the DCIT, Circle (11), Ahmedabad issued a show-cause notice which reads as under:- On perusal of the details submitted by you and the information available on record, it is seen that you have invested ₹ 3.87 crores in M/s Radhey Developers ( India ) Ltd by acquiring 2,10,000 shares. In this regards, you have submitted that the sources of these investments were loans received from M/s Shital Bio Agritech Ltd, whose account pay cheques drawn on Bhuj Mercantile Cooperative Bank on 29-06-2009. The investment was made on 30-06-2009 and further you have submitted that the loan of ₹ 3.40 lacs was repaid by you after selling these shares before 30-03-2010. On further perusal it is noted that you have made investment of ₹ 38.07 lacs that is 10 per cent of total investment ₹ 3.87 crores out of which funds available in your business firm M/s Divya Investment. It is seen that you have furnished the details as to how the surplus funds of ₹ 38.7 lacs were raised by your firm M/s Divya Investment and as regards the loan of ₹ 3.4 crores obtained from M/s Shital Bio Agritech Ltd, no evidences whatsoev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee have been verified and kept on record. The assessee is an individual and deriving income from business, house property, capital gains and income from other sources And the returned income was accepted as such. 13 The Assessing Officer has taken a view which may be different from the view of the ld. Principal CIT and assuming that the view taken by the Assessing Officer is a loss to the Revenue, but the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) has held that every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue . 14. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By erroneous is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, nothing stated in this order would affect either side in considerations of such claim. 7. No question of law arises. Tax Appeals are dismissed. 15. As mentioned elsewhere, the elaborate enquires were made not only before the assessment proceedings started but also during the course of the assessment proceedings and the assessee has fully complied with all queries raised by the Revenue Authorities. The contention that the present Assessing Officer did not make full enquiry is not acceptable, because when the assessment records were transmitted from one DCIT to another DCIT, the other DCIT was well aware of the queries raised during the course of proceedings. The Officer was also aware of all the replies filed by the assessee, supported by relevant documentary evidences. 16. Considering the facts in totality in the light of the judicial decisions discussed hereinabove, in our understanding of law, the assessment order is neither erroneous nor prejudicial to the interest of the Revenue. We, therefore, set aside the impugned order passed by the Principal CIT u/s 263 and restore that of the Assessing Officer passed u/s 143(3) of the Act. 15. Respectfully following t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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