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TMI Blog2023 (3) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... ng assessment proceeding, which demonstrates that not only purchases, but sales were also duly verified by the AO. PCIT stated that assessee has purchased diamonds and sold diamonds to small customers, which is not practical as a small retail customers don t buy loose diamonds. In this regard, the assessee submitted that it has not sold loose diamonds to customers, but loose diamonds are purchased and after engaging labourers, jewelry was made, which was then sold. The sales are only in respect of the jewelry during October 2016 and which includes bangles, pendants, rings, earrings etc, which is evident from the copy of the bills, ledger accounts, labour bills etc. detailed filed in the paperbook. The finding of the PCIT that enquiry or verification which ought to have been done, had not been done, is devoid of merit and not justified. The Explanation -2 to section 263 of the Act cannot be invoked in such circumstances. The order of the Ld. PCIT is accordingly set aside. The grounds of the appeal of the assessee are accordingly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 263 of the Act initiated only to make roving enquiries on the issues which are already enquired by the AO in detailed manner 6. erred in law and in fact by initiating the proceedings under section 263 of the Act, without appreciating the fact that the AO has already applied his mind on the same issue and made adequate inquires, undertaken necessary verification/investigation basis the details/documents sought from the Appellant and even from suppliers and customers of the Appellant under section 133 and 133 (6) of the Act, verified the stock during the course of assessment proceedings. As AO has passed the order post inquiries and verification of fact relating to only issue which is subject matter of the order Wis. 263, the order is neither erroneous nor it can be deemed to be erroneous and therefore the proceedings under section 263 is not called for; 7. erred in making a difference of opinion as a basis for invoking the provisions of section 263; 8. erred in assuming jurisdiction u/s. 263 for making fishing/roving enquiry on the issues which are already enquired by the Assessing Officer (AO') passing the order dated 27 December 2019; 9. erred in not appreciating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the Assessing Officer had not examined the issue of cash deposits properly and the order passed was without proper verification of the records. The assessee filed a detailed submission and submitted that the Assessing Officer had issued numerous notices which were duly responded by the assessee and filed all details including monthly cash sales and cash deposits for financial years 2015-16 and 16-17, VAT returns, parties with details of cash sales, stock registers, parties from purchases were made in the month of October and December 2016, details of parties from whom purchases were made etc. the Ld. PCIT noted that notices were issued by the Assessing Officer, however according to him the Assessing Officer has not examined the issue in proper perspective. According to him following issues are not been examined by the Assessing Officer: "4.6 It can be seen from the above that there was huge cash deposits by the assessee during the demonetization period. The assessee explained that cash deposited during the demonetization period was out of self-proceeds of Rs. 2,61,95,330/- of sales made in cash during the month of October 2016 and the entire cash of the cash s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the Assessing Officer, the Ld. PCIT invoked section 263 of the Act and set aside the assessment order with the direction to make a fresh assessment as under: "6. In view of the facts discussed in para 4.1 to 4.8, I am of the considered view that the assessment order dated 27.12.2019 passed by the AO has been passed without making enquiry and verification which should have been made by him. Hence, the assessment order dated 27.12.2019 passed u/s. 143(3) is erroneous in so far as it is prejudicial to the interest of revenue. Therefore, the assessment order dated 27.12.2019 passed by the AO us 143(3) is set aside to the AO with a direction to make a fresh assessment. While completing the fresh assessment the AO shall examine and verily the issue discussed in para 4.1 to 4.8. The nature and source of cash deposited during the demonetization period shall be examined keeping in view the facts discussed in para 4.1 to 4.8, particularly the extraordinary and abnormally high cash sales reported by the assessee in the month of October 2016 and upto 8th November 2016. The claim of the assessee with regard to cash sales may be accepted by estimating the reasonable amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in the order she dated 27/12/2019 has duly acknowledged that the issue of cash deposits was thoroughly examined and view was taken following the various judicial precedents after analyzing the evidence as available on record, therefore the order of the Ld. Assessing Officer cannot be said to be erroneous insofar as prejudicial to the interest of the revenue. 7. The Ld. counsel of the assessee submitted that ITAT in identical circumstances in the case of Abhusan Jewellery Vs PCIT in ITA No. 793/Mum/2000 2022 dated 12/08/2022 has set aside the order passed u/s. 263 of the Act. 7.1. The Ld. counsel submitted that Explanation-2 to section 263 of the Act also cannot be invoked as sufficient inquiries on the issue in dispute have been carried out by the Assessing Officer in the instant case. The inadequate enquiry could only be shown if the Assessing Officer does not make relevant and meaningful inquiries or there is gross negligence in making inquiries. But in the present case the Assessing Officer has made all inquiries, which could have been possibly made by any person of the reasonable prudence, hence the assessment order cannot be held to be erroneous and prejudicial to the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 287- 301 of PB 2. Notice dated 26.08.2019 asking for various details failing which the books may be rejected and cash d posits may be taxed u/s 68/69A and taxed u/s 115BBE. [Pg 31-40] Submission dated 19.11.2019 and 04.12.2019 wherein the various details as called for are filed before the Ld. AO [Pg. 41-42 and Pg. 43 of PB] 1. Pt. 7 - Details of Online response filed w.r.t. cash deposited during demonetization period. * Pt. 7 of submission dated 19.11.2019 [Pg. 41 of PB] Evidence filed at Pg 302-304 of PB. 2. Pt. 8 - Source of cash deposited during demonetization period. * Pt. 8 of submission dated 19.11.2019 [Pg. 41 of PB] 3. Pt. 9 - Cash account of the assessee * Pt. 9 of submission dated 19.11.2019 [Pg. 41 of PB] Evidences filed at Pg 153- 162 of PB 4. Pt. 10 - Detail of persons from whom cash has been received * Pt. 1 of submission dated 04.12.2019 [Pg. 43 of PB] Evidenced filed at Pg 99-104 of PB 5. Pt. 19 - Monthwise details of sales and purchases of current year and preceding year and reason for sharp variation, if any of figures of current year with Preceding year * Pt. 19 of submission dated 19,11.2019. [Pg. 42 of PB]. Evidences filed at Pg 95 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.12.2019. [Pg 48-49 of PB] 1. Pt. 1 - Address of parties from whom purchases made in October and December'2016. * Submission dated 09.12.2019 and 13.12.2019 wherein various details as called for are filed before the Ld. AO. [Pg. 50-51 of PB] Pt. 1 of submission dated 09.12.20 9 [Pg. 50 of PB]. and Pt. 1 of submission dated 13.12.20 9 [Pg. 51 of PB] Evidences filed at Pg 115-116 of PB. Pt. 2 - Address of parties from whom sale made in October and December' 2016 * Pt. 2 of submission [Pg. 50 of PB]. Evidences filed at Pg 105-114 of PB. 5. Show cause notice dated 18.12.2019 Submission filed by the asking to show cause why cash deposits of Rs.2,65,44,000/- shall note be treated as unexplained cash c edit and higher tax rate u/s 115 BBE of the Act be not applied. [Pg 52-53 of PB] appellant dated 23.12.2019 justifying the nature and source of cash deposits made during demonetization period and why no addition shall be made in the present case. [Pg. 54-57 of PB] Evidences in the nature of purchase and sale bills of A.Y.2017-18 filed [Pg. 163- 205 of PB] Evidences in the nature of purchase bills, bank statements for earlier year and subsequent year filed Pg. 206-258 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly verified by the Assessing Officer. c. The Ld. PCIT has stated that in respect of purchases made in October 2016, payments were made in February 2017 after recycling the cash and the books of accounts. The Ld. counsel submitted that this statement is factually incorrect and payment towards purchases were made immediately except for one small amount which was paid in Feb. 2017. The Ld. counsel submitted that assessee had filed a chart showing details of purchases and payments made immediately along with evidences in the form of ledger accounts, invoices and bank statement, which have been made part of the paperbook. d. The Ld. PCIT stated that assessee has purchased diamonds and sold diamonds to small customers, which is not practical as a small retail customers don't buy loose diamonds. In this regard, the assessee submitted that it has not sold loose diamonds to customers, but loose diamonds are purchased and after engaging labourers, jewelry was made, which was then sold. The sales are only in respect of the jewelry during October 2016 and which includes bangles, pendants, rings, earrings etc, which is evident from the copy of the bills, ledger accounts, labour bills ..... 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