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TMI Blog2022 (2) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... directed the AO to conduct detailed inquiries regarding the purchases and sales made by the assessee by conducting third party verifications, examination of the creditors, etc. and after inquiries necessary additions to be made as per law. The order of the Ld. Pr. CIT on this count is, thus, cryptic, vague and contradictory. No effort has been made to spell out as to in what manner there was lack of enquiry by the AO in the order of assessment vis- -vis the trading results declared by the assessee. Assessing Officer had made adequate inquiries as is evident from the order of assessment as well as from the replies furnished - Thus, in view of the documentary evidences, as called for and examined by the Assessing Officer, it is very much evident that the Assessing Officer had duly applied his mind to the issue of trading results and it was only thereafter that he had estimated income of the assessee. As far as the issue of investment in construction of house is concerned, the same is apparently misconceived, as it is not arising from assessment records. As far addition on account of fixed assets is concerned, the same stands separately added as part of the income declared during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directed against the separate orders dated 30.3.2021 passed u/s. 263 of the Income Tax Act, 1961 (hereinafter called 'the Act') by the Ld. Pr. Commissioner of Income Tax (Pr. CIT) for Assessment Year (AY) 2016-17. Since common issues have been raised in all these appeals, therefore, they were heard together and are being disposed of by this common order. 2. The grounds raised in the appeals are as under: 1. ITA No. 149/Chd/2021: 1. That order dated 30.3.2021 u/s. 263 of the Act by learned Principal Commissioner of Income Tax, Rohtak has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2. That the conclusion of learned Principal Commissioner of Income Tax that "the AO has passed the order dated 29.12.2018 in a very casual manner without due diligence and without conducting any worthwhile enquiries. Therefore, it is very clear that assessment proceedings completed u/s. 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of survey on account of excess cash, unexplained investment, unexplained expenditure and unsecured loans have been separately brought to tax then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view. 2.3 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s. 263 of the Act. 2.4 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax cannot travel beyond the show cause notice and therefore findings and observation and also the material relied upon not referred in the show cause notice but made part of the order could neither in law and nor on fact be made a basis to assume jurisdiction u/s. 263 of the Act; and thus order on this ground alone deserve to be quashed as such. 4. That finding and conclusion of the learned Principal Commissioner of Income Tax. that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue on the following basis is based on fundamental misconception of facts and provisions of law and hence untenable. a) That since during the assessment proceedings the AO had issued letters to creditors and they were either returned back unserved or were not replied to which led to the conclusion by the AO himself that assessee had bogus creditors and therefore addition on this account was required to be made however no such addition was made by the AO; b) That since the assessee has shown bogus creditors the purchases remained unverified. The AO was required to disallow the purchases however no such addition was made by the AO; c) That the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 263 of the Act be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. 3. ITA No. 151/Chd/2021: 1. That order dated 30.3.2021 u/s. 263 of the Act by learned Principal Commissioner of Income Tax, Rohtak has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2. That the conclusion of learned Principal Commissioner of Income Tax that "the AO has passed the order dated 29.12.2018 in a very casual manner without due diligence and without conducting any worthwhile enquiries. Therefore, it is very clear that assessment proceedings completed u/s. 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015" is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable. 2.1 That the finding of learned Principal Commissioner of Income Tax that order of the learned Assessing Officer is erroneous and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Principal Commissioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s. 263 of the Act. 2.4 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view. 2.5 That the learned Pr. Commissioner of Income Tax has also failed to appreciate that, u/s. 263 of the Act, an order of assessment cannot be set-aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable: a) That since during the assessment proceedings the AO had issued letter to creditors and debtors and they were either returned back unserved or were not replied to which led to the conclusion by the AO himself that assessee had bogus creditors and debtors and therefore addition on this account was required to be made however no such addition was made by the AO; b) That since the assessee has shown bogus creditors the purchases remained unverified. The AO was required to disallow the purchases however no such addition was made by the AO; c) That the Assessing officer conducted no enquiry regarding the purchases and sales made by the assessee; d) That there is clear lack of inquiry regarding purchase of fixed assets. 2.2 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had made additions by rejecting the books of accounts u/s. 145 of the Act and estimating the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re findings and observation and also the material relied upon not referred in the show cause notice but made part of the order could neither in law and nor on fact be made a basis to assume jurisdiction u/s. 263 of the Act; and thus order on this ground alone deserve to be quashed as such. 2.8 That various other adverse findings recorded in the notice u/s. 263 of the Act and, also in impugned order are factually incorrect, vague, legally misconceived and untenable. 3. That the learned Principal Commissioner of Income Tax has framed the impugned order without granting sufficient opportunity to the appellant and therefore the order made is illegal, invalid and, vitiated order Prayer - It is therefore prayed that, impugned order dated 30.3.2021 under section 263 of the Act be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. 5. ITA No. 154/Chd/2021: 1. That order dated 30.3.2021 u/s. 263 of the Act by learned Principal Commissioner of Income Tax, Rohtak has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2. That the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r making all possible enquiries had made additions by rejecting the books of accounts u/s. 145 of the Act and estimating the profits and further also made disallowance of expenses and therefore computed the net profit which estimation and computation have neither been rejected nor raised, in such circumstances the order of revision is perse misconceived, misplaced and untenable, more particularly when income surrendered in the course of survey on account of excess cash, unexplained investment, unexplained expenditure and unsecured loans have been separately brought to tax then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view. 2.3 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 2. That the conclusion of learned Principal Commissioner of Income Tax that "the AO has passed the order dated 29.12.2018 in a very casual manner without due diligence and without conducting any worthwhile enquiries. Therefore, it is very clear that assessment proceedings completed u/s. 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015" is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable. 2.1 That the finding of learned Principal Commissioner of Income Tax that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue on the following basis is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable: a) That since during the assessment proceedings the AO had issued letter to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew. 2.3 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s. 263 of the Act. 2.4 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view. 2.5 That the learned Pr. Commissioner of Income Tax has also failed to appreciate that, u/s. 263 of the Act, an order of assessment cannot be set-aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee voluntarily offered surrender of additional income of ₹ 31,00,000/- (Rupees Thirty-one lakh) over and above the normal business income for the assessment year 2016-17. From a perusal of the Income Tax return and audit report for the year under consideration, it was noticed by the Assessing Officer (AO) that the assessee had shown its business turnover at ₹ 2,30,72,738/- and shown gross loss of ₹ 23,44,693/- which was (-) 0.16% of the total turnover. In order to verify the genuineness of the assessee's return of income, the assessee was required by the AO to provide complete addresses and furnish confirmed copies of accounts of all the sundry creditors. The assessee furnished unconfirmed copies of accounts in respect of sundry creditors/debtors. In some of the cases, addresses of the creditors were not provided. In cases, where addresses had been provided, information was called in 17 cases u/s. 133(6) of the Act and the sundry debtors and creditors were asked to provide confirmed copies of account of the assessee from their books of account and the resultant situation of these notices has been summarized in the order of assessment as under: Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed u/s. 69A of the Act. The assessment was completed under section 143(3) of the Act vide order dated 30.12.2018 at an income of ₹ 32,36,730/-. 4.3. Subsequently, a notice was issued u/s. 263 of the Act on 18.3.2021 by the Ld. Pr. CIT mentioning instances of failure on the part of the AO and the assessee was required to show cause as to why the assessment proceedings for A.Y. 2016-17, vide order dated 30.12.2018 u/s. 143(3) should not be cancelled by invoking the provisions of section 263 of the Act. For the sake of ready reference, the relevant portion of the notice mentioning instances of failure is being reproduced as under: "2 The assessment record for the period under consideration was called upon and examined. a) On such examination, it has been noticed that letters were issued by the AO to the creditors and the same were neither replied to nor returned back. You have not given full details of all creditors during the assessment proceedings. Also, on perusal of assessment order it is seen that the assessee has shown bogus creditors. Therefore, it is clear that the creditors remained unverified. b) During the assessment proceedings the AO had observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the SO has himself stated in the assessment order that the inquiry letters sent to the creditors either remained unserved or were returned back. This indicates that the creditors are bogus. After inquiries necessary action should be taken as per law and necessary additions should be made. There is a clear lack of inquiry regarding purchase of fixed assets. The AO should examine this issue by way of inquiry supported by documentary evidences. Purchase vouchers should be examined. Regarding the issue of investment made in construction of house the AO should conduct inquiries made therein. The A.O. should also conduct enquiry by issuing letters to the persons who have given unsecured loans to verify genuineness of transaction and creditworthiness of the lenders. If required statements should be recorded." 4.5. Aggrieved with the order passed by the Ld. Pr. CIT, the assessee is now before this Tribunal (ITAT) and has challenged the proceedings u/s. 263 of the Act. The grounds raised by the assessee have already been reproduced in Para 2 above. 5. Before us, the Ld. Authorised Representative (AR) submitted that the impugned order was passed without satisfying the statutory provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in one addition. 5.3. The Ld. AR also submitted that, admittedly, there is no material available with learned Pr. CIT that unsecured loans were unexplained cash credits u/s. 68 of the Act. It was also submitted that the bank account does not constitute "books of account" of the assessee, as has been held in following cases: i) 113 TTJ 178 (Del) Mayawati vs. DCIT Affirmed by Hon'ble High Court of Delhi in the case of CIT vs. Mayawati reported in 338 ITR 563 ii) 171 ITR 532 (P&H) Shanta Devi vs. CIT iii) 291 ITR 232 (Mad) CIT vs. Taj Borewells iv) 298 ITR 1 (SC) K.C.C. Software Ltd. vs. DIT (Inv.) v) 141 ITR 67 (Bom) CIT vs. Bhaichand H. Gandhi 5.4. It was also submitted that where two views are possible and the AO has taken a view with which the Ld. Pr. CIT does not agree, the said order cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the AO is unsustainable in law. Reliance was placed on following judicial pronouncements: i) 350 ITR 555 (Del) CIT v. DLF Ltd. ii) 303 ITR 23 (P&H) CIT v. Munjal Casting 5.5. It was further submitted that an order u/s. 263 of the Act based on highly vague and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. Reliance was placed on the judgment in the case of CIT v. Leisure Wear Exports Ltd. reported in 341 ITR 166. It was also submitted that for holding that the assessment order passed by the AO is not only prejudicial to the interest of revenue but is also erroneous, the action of the Ld. Pr. CIT has to be preceded by some minimal enquiry. It was submitted that mere issuance of a show cause notice dated 18.3.2021 and, thereafter, mechanical passing of the order does not qualify as "minimal enquiry" u/s. 263 of the Act. It was submitted that the burden is on the learned Commissioner of Income Tax to establish that there is an 'error' in the order of assessment and that in absence of an 'error', invocation of section 263 of the Act was not in accordance with law. Reliance was placed on the judgment of Hon'ble Delhi High Court in the case of PCIT vs. Delhi Airport Metro Express (P) Ltd. reported in 398 ITR 8. 5.9. It was further submitted by the Ld. AR that Explanation 2 to section 263 of the Act does not authorise or give unfettered powers to the Ld. Commissioner to revise each and every order and, is not a substitute to the precondition u/s. 263(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vident that the Assessing Officer had duly applied his mind to the issue of trading results and it was only thereafter that he had estimated income of the assessee. As far as the issue of investment in construction of house is concerned, the same is apparently misconceived, as it is not arising from assessment records. As far addition on account of fixed assets is concerned, the same stands separately added as part of the income declared during the course of survey by the assessee. Therefore, we can safely conclude that proper inquiries had been made by the Assessing Officer while accepting the claim of the assessee and, therefore, the contention of the Ld. Pr. CIT that no inquiry was made by the Assessing Officer vis-à-vis trading results or addition in fixed assets is factually incorrect. It is not the case where no inquiry has been made by the Assessing Officer. Merely because the Ld. Pr. CIT felt that further inquiry should have been made, it does not make the order of the Assessing Officer erroneous and prejudicial to the interest of the revenue. 8.1. We also note that the Ld. Pr. CIT has merely remitted the matter back to the Assessing Officer without making any inqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax has done in the impugned order is to refer to the circular of the Central Board of Direct Taxes and conclude that "in the case of the assessee-company, the Assessing Officer was duty-bound to calculate and allow depreciation on the BOT in conformity of the Central Board of Direct Taxes Circular No. 9 of 2014 but the Assessing Officer failed to do so. Therefore, the order of the Assessing Officer is erroneous insofar as prejudicial to the interests of the Revenue". 11. In the considered view of the court, this can hardly constitute the reasons required to be given by the Principal Commissioner of Income-tax to justify the exercise of jurisdiction under section 263 of the Act. In the context of the present case if, as urged by the Revenue, the assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the Principal Commissioner of Income tax to undertake an inquiry as regards which of the assets were purchased and installed by the assessee out of its own funds during the assessment year in question and, which were those assets that were handedover to it by the DMRC. That basic exercise of determining to what exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act by which Explanation 2 has been inserted w.e.f. 1.6.2015 but the same does not give unfettered powers to the Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Officer to re-examine the issues already examined during the course of assessment proceedings. The Mumbai ITAT Bench has dealt with Explanation 2 as inserted by Finance Act, 2015 in the case of Narayan Tatu Rane vs. ITO reported in (2016) 70 taxman.com 227 to hold that the said Explanation cannot be said to have overridden the liability as interpreted by Hon'ble Delhi High Court, according to which the Commissioner has to conduct the inquiry and verification to establish and show that the assessment order was unsustainable in law. The ITAT Mumbai Bench has further held that the intention of the legislature could not have been to enable the CIT to find fault with each and every assessment order without conducting any inquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The ITAT Mumbai Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with law after affording reasonable opportunity of being heard to the assessee. Accordingly, the impugned order in ITA No. 150/Chd/2021 for A.Y. 2016-17 in the case of M/s. Pardeep Ispat (P) Ltd. stands modified in terms of our observations above and the 263 proceedings are partly upheld and partly quashed. It is so ordered accordingly. Grounds 1 to 9, thus, stand partly allowed. 9. In the remaining five appeals viz. ITA Nos. 149/Chd/2021 A.Y. 2016-17, 151/Chd/2021 AY 2016-17, 152/Chd/2021 AY 2016-17, 154/Chd/2017 and 157/Chd/2021 AY 2016-17, we note that identical grounds have been raised by the respective assessees in all these appeals challenging the impugned orders u/s. 263 of the Act wherein it has been held that the assessment orders passed u/s. 143(3) of the Act were erroneous in so far as being prejudicial to the interest of the Revenue and were set aside. We note that the grounds raised by the assessees are identical to the grounds raised in the case of Pardeep Ispat (P) Ltd. in ITA No. 150/Chd/2021 A.Y. 2016-17 with only one distinction that the issue of unsecured loans was not a subject-matter of proceedings u/s. 263 of the Act in these remaining five appeals. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation of the Ld. Pr. CIT is correct in so far as no query has been raised by the AO on this issue and neither has the assessee made any submissions either before the AO or even before the Ld. PR. CIT on this issue even when the said issue was duly mentioned in the show cause notice issued u/s. 263 of the Act. Accordingly, we have no option but to uphold the impugned order u/s. 263 of the Act on the issue. The remaining other issue in the impugned order is the non-acceptance of the trading results by the Ld. Pr. CIT. The same is not upheld in view of our detailed observations and findings in ITA No. 150/Chd/2021 for A.Y. 2016-17 in the case of M/s. Pardeep Ispat (P) Ltd. which has identical facts. Therefore, the proceedings u/s. 263 of the Act are partly upheld and the impugned 263 order stands modified in ITA No. 151/Chd/2021 in the case of Ms. Priya Goyal and the appeal of the assessee is partly allowed. 9.3. In ITA 152/Chd/2021, in the case of Ms. Priyanka, the issues are identical to ITA 151/Chd/2021 in the case of Ms. Priya Goyal. It has been alleged by the Ld. Pr. CIT that apparently no enquiries were conducted by the AO in respect of the issue of investment in construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is also not upheld in view of our detailed observations and findings in ITA No. 150/Chd/2021 for A.Y. 2016-17 in the case of M/s. Pardeep Ispat (P) Ltd. which has identical facts. Therefore, the proceedings u/s. 263 of the Act are quashed in ITA No. 154/Chd/2021 in the case of Shri Parshotam Goyal and the appeal of the assessee is allowed. 9.5. In ITA 157/Chd/2021 in the case of Shri Tarsem Goyal, the only issue raised by the Ld. Pr. CIT is the issue of trading results and this issue stands squarely covered in favour of the assessee in view of our detailed observations and findings in ITA No. 150/Chd/2021 for A.Y. 2016-17 in the case of M/s. Pardeep Ispat (P) Ltd. which has identical facts. Therefore, the proceedings u/s. 263 of the Act are quashed in ITA No. 157/Chd/2021 in the case of Shri Tarsem Goyal and the appeal of the assessee is allowed. 10. In the final result, ITA No. 150/Chd/2021 in the case of M/s. Pardeep Ispat (P) Ltd. stands partly allowed. ITA No. 149/Chd/2021 in the case of Shri Rajeev Goyal stands partly allowed. ITA No. 151/Chd/2021 in the case of Ms. Priya Goyal stands partly allowed. ITA No. 152/Chd/2021 in the case of Ms. Priyanka is partly allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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