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TMI Blog2023 (10) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... ing into consideration the above facts and circumstances, we find that the ld. PCIT is justified in holding that that the assessment order u/s 143(3) made by the AO had been rendered erroneous and prejudicial to the interest of the revenue and we concur with the findings of the ld. PCIT taking into consideration the written submissions of the assessee. Thus the appeal of the assessee is dismissed. - DR. S. SEETHALAKSHMI, JM SHRI RATHOD KAMLESH JAYANTBHAI, AM For the Appellant : Shri Mahendra Gargieya ,Adv. Shri Devang Gargieya, Adv. For the Respondent : Shri James Kurian, CIT ORDER PER: DR. S. SEETHALAKSHMI, J.M. This is an appeal filed by the assessee against the order of the learned Principal Commissioner of Income Tax, Udiapur [hereinafter referred to as PCIT ], dated 15.02.2021 for the assessment year 2017-18 raising therein following grounds:- 1. The Ld. Pr. CIT, Udaipur seriously erred in law as well as on the facts of the case in invoking the provisions of S. 263 of the Act and therefore, the impugned order dated 15.02.2021 u/s 263 of the Act kindly be quashed. 2. The ld. Pr. CIT, Udaipur seriously erred in law as well as on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of limitation in all such proceedings, irrespective of the limitation prescribed under general law or Special Laws whether condonable or not shall stand extended w.e.f. 15 March, 2020 till further orders to be passed by this Court in present proceedings. It was further observed vide order dated 22.05.2020 by the Hon'ble Court that in the case the limitation has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown. Even thereafter, the Hon'ble Court had been extending time limits again and again for all the concerned to complete their actions which were getting barred by limitation as also time limit for filing replies and making compliance for the notices were also extended. Recently the Hon'ble Court passed an order dated 10.01.2022 in Suomotu Writ Petition (C) No. 3 of 2020 on the issue of law of limitation by observing as follows:- Taking into consideration the arguments advanced by learned counsel and the impact of the surge of the virus on public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en received and the needful has been done. However, when, the counsel situated at Jaipur, was discussing some other matters of the assessee, it came to surface that those appeal papers, which were duly sent for signature had been misplaced somewhere, and were not received back by him. Hence, when even after, an intensive search Shri Manoj Porwal could not trace back such papers, accordingly the appeal papers were prepared once again and sent to the assessee. Thereafter, the same were immediately signed and sent to Jaipur for filing thereof. 4.2. That in support of the aforesaid facts, affidavits of the assessee and of Shri Manoj Porwal are enclosed with this application. It is thus, evidently clear that things were beyond the control of the directors of the said company. 5. That the applicant is a layman and not very conversant with the complex tax laws and because of the circumstances stated above, the delay so caused was beyond his control but was bonafide and unintended which is established from the fact that the assessee has already deposited the requisite filing fees much before the due date being 28.04.2022. The assessee was not going to gain any benefit because of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee for adjudication relating to Section 263 of the Act. The brief facts of the case are that assessee filed its return of income for A.Y. 2017-18 on 27.05.2017 declaring total income of Rs. 65,87,590/-. Thereafter, the case was selected for scrutiny through CASS. Assessment u/s 143(3) of the I.T. Act for the A.Y. 2017-18 was completed on 28.03.2019 by the ACIT, Kota at total income of Rs. 71,70,120/-, thereby making an addition of Rs. 82,533/- on account of disallowance of unverifiable expenses and Rs. 5,00,000/- on account of disallowance of unverifiable material expenses. Thereafter, on examination of records, it is seen that the case of the assessee for A.Y. 2017-18 was selected for scrutiny through CASS. The AO in his order stated that the assessee has not submitted anything specific in response to the notice. As stated, various expenses claimed by the assessee are not subject to verification for want of proper vouchers and also due to cash payment of these expenses. Therefore a lumps sum disallowance of Rs. 5,00,000/- is made and added to the total income of the assessee. Subject to the above discussion and decision, total income of the assessee is computed as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the I.T. Act for A.Y. 2017-18. 3.2 I have carefully examined the written submission of the assessee. The assessee has failed to furnish any credible documentary evidence in his support hence contentions offered by the assessee are not fully acceptable. Further, on careful examination of the cash book of the assessee furnished during the course of assessment proceedings, it is seen that the assessee has deposited Rs. 35 Lakhs in State Bank of Patiala on 12.11.2016 (in old currency during the demonetization period) and has shown closing cash bank balance of Rs. 36,56,466/- as on 11.11.2016. Also, closing cash in hand as on 11.09.2016 has been shown at Rs. 22,79,335/- and as on 04.10.2016 of Rs. 30,84,017/-. Now, further scrutiny/examination of the above referred cash book reveals that following cash withdrawals have been made by the assessee: - S. No Date Cash withdrawals Opening cash balance 1. 12.09.2016 Rs. 5,00,000/- Rs. 22,79,335/- 2. 26.09.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee as per law wherever required by modifying the assessment order u/s 143(3) of the I.T. Act dated 28-03-2019 for A.Y. 2017-18. However, an opportunity of being heard should be given to the assessee before passing the order. 3.3 Aggrieved from the finding of the ld. PCIT the assessee preferred the present appeal before the Tribunal. To support the grounds so taken by the assessee, the ld. AR for the assessee has submitted his written submission and the same is reproduced as under:- GOA 1 to 4: Order passed u/s 263 Invalid Submissions: 1. Legal Position on Sec. 263 Judicial Guideline: Before proceeding, we may submit as regards the judicial guideline, in the light of which, the facts of this case are to be appreciated. 1.1 The pre-requisites to the exercise of jurisdiction by the CIT u/s 263, is that the order of the Assessing Officer is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The CIT 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 any one of them is absent i.e. if the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the year etc. to the extent he was supposed to act in law. The AO after making a detailed enquiry relating to the issues in hand and examination of books of account, for the current year and other records took a possible view that the assessee was admittedly (impugned order u/s 263) having sufficient cash balance of Rs. 36,56,466/- on 11.11.2016 available immediately prior to the subjected cash deposits (i.e. 12.11.2016 and onwards) and completed the subjected assessment. The relevant para of the assessment order, wherein the AO has examined each any every documents submitted by assessee during scrutiny proceedings, is reproduced below: The case was selected for scrutiny through CASS and issued notice u/s 143(2) on 13.08.2018, which was duly served by e-mail. Notice u/s 142(1) along with query letter to the assessee was issued on 28.01.2019. In response thereto, Shri Vishal Gupta, CA AR attended from time to time and furnished online submission required documents and details. The case was heard and discussed with him. 2.2 This is also evident from queries raised and the replies given thereto, reproduced hereunder: 2.2.1 Through the Notice/s u/s 142(1) dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are enclosing with this letter copy of both the bank statement as Annexure-P x .x x .x 26. As annexure are more than 5MB and not possible to upload the same and the same will be submitted manually to the department. Rest information is under preparation and will be submitted on next hearing. The relevant extracts from the reply dated 14.03.2019 are reproduced as under:- 3. During demonetization period assessee has deposited old currency of Rs. 35,00,000/- on dated 12.11.2016 in bank out of cash balance available in hand. For your reference we are enclosing with this letter complete cash book for the period 01.04.2016 to 31.03.2017 as Annexure-A 4. As Annexure are more than 5MB and not possible to upload the same and the same will be submitted manually to the department. 2.3 The ld. AR attended time to time, produced books of account, copies of accounts of unsecured loans, sundry Advances taken (Creditors), Copy of Cash Book, and filed various other details as required, stated above and also those even though not required, which were duly examined. The AO made all the inquiries, sought clarifications on all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records of the creditor Shambhu Kumar. There is nothing on record to show contrary thereto. The apparent and admitted facts are the receipt of the amount as also repayment through banking channels. Even interest of Rs. 7,15,891/- was also paid through Cheque and TDS of Rs. 71,589/- was also deducted. Thus, all the requisite details which prove the identity of the creditor, capacity of the creditor as also the genuineness of the transactions were already available on record, when he passed the subjected Assessment Order. 3.2 AO acted as per Judicial Guidelines: This all the more holds good when binding decisions of the Hon ble jurisdictional High Court in various cases (infra) have propounded the principle in the context of S.68 being only the examination of the identity of the money lender concerned his/her the confirmation of the fact of providing/ transferring subjected amount to the assessee but the AO is not legally bound to examine source of source, once the immediate source is available. 3.3 Following decisions of Hon ble Rajasthan High Court are directly relevant for the purpose. 3.3.1 Kindly refer Labhchand Bohra V/s ITO (2008) 8 DTR 44 (Raj.) held that Cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the money lender. It was nothing but a mere case of suspicion and substitution of opinion by the CIT who wanted the AO to do something more which was not otherwise warranted in the eyes of law. The AO has done everything which he was supposed to have done. 3.6.1 Before the Ld. CIT also, the appellant admittedly submitted various evidences being the copies of the ledger A/c of Shambhu Kumar, his Bank Passbook, his ITR along with computation of total income and financial Statements of Shambu Kumar to establish the Creditworthiness of the Lender (PB 12-24). And once he was satisfied with their transaction did not make any adverse observation after considering the entire record available before him on the date of examination u/s 263, he was not supposed yet to continue with the proceeding u/s 263 and sending it back to the AO to make a futile and duplicate exercise, which has already been done. In other words, the Ld. CIT having all the record before him and felt satisfied, should have dropped the issue in hand there itself. 3.6.2 In Gabriel India Ltd. [1993] 203 ITR 108 (Bom) (DPB 38-43), law on this aspect was discussed in the following manner (page 113): . . . From a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factually incorrect in as much as one cannot presume that the Assessing Officer while passing the scrutiny Asst. Order, must not have seen or looked upon the past asst. records. It is pertinent to note that the assessee in its replies made specific reference to the cash deposited of Rs. 35,00,000/- in the period of demonetization on 12.11.2016 and the source of cash deposited was also explained through Annexure-A cash book attached with reply dated 22.03.2019 in response to notice u/s 142(1) dated 28.01.2019. 4.1.2 It is now well settled that where assessee has regularly maintained books of accounts is an admissible evidence under Indian Evidence Act, 1872. This holds good more particularly, when the Ld. CIT did not disbelieve or did not doubt or even did not reject the same. Since, availability of cash balance in the regularly maintained cashbook, which were duly and admittedly submitted before the AO in the subjected assessment proceedings, there was no reason as to why the AO should have doubted. 4.2 It is submitted that the AO raised very specific and relevant queries/called for explanation and evidences w.r.t. cash deposits made during demonetization, to the extent he w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,54,587/-as on 01.04.2016, there being no indication even remotely to raise a suspicion warranting an inquiry, were all the sufficient facts, material evidences, to take a possible decision. He was not supposed to examine with a microscope. 5.2 In the instant case, the AO was having regularly maintained cash book on day to day basis and opening cash in hand showing sufficient cash balance immediately prior to the subjected bank deposits and more particularly, when all along in the past the availability of the cash, bank balances, investments and creditors stood accepted by the Dept. as stated above, the AO was not supposed to doubt the explanation of the assessee until and unless there was some contrary evidence available on record, arousing his suspicion. 6. Supporting Case Laws on Cash Deposit beyond scope s. 263: 6.1 In another case of PCIT vs. Dilip Kumar Swami [(2019) 264 Taxman 33 (Raj)(DPB 6-8) it was held that Assessee filed his return declaring certain taxable income - In course of assessment, Assessing Officer noted that assessee had deposited certain amount in his bank account - On being enquired about source of said deposit, assessee explained that it represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TTJ 2316 (Chd) (DPB 44-53) The principal propounded in the above cases directly apply in the present case. 7. Supporting case laws on availability of funds: 7.1 In CIT v/s P.V. Bhoopathy (2006) 205 CTR 495 (Mad) held: Appeal (High Court) Substantial question of law Income from undisclosed sources AO did not accept various sources of income explained by the assessee and made additions under ss. 68 and 69 in respect of difference between the investments and the sources accepted by him Tribunal accepted the explanation of the assessee vis-a-vis availability of funds with the assessee from the sale proceeds of jewellery belonging to his mother- in-law, receipt from a party and also the amount of opening balance and savings from earlier years and deleted all the additions Findings recorded by the Tribunal are purely findings of fact There is no reason to interfere with the same No substantial question of law arises CIT vs. Pradeep Shantaram Padgaonkar (1983) 143 ITR 785 (MP) relied on 7.2 In CIT vs Kulwant Rai (2007) 210 CTR 380 ( Delhi) para 16-17 Read held Search and seizure Block assessment Computation of undisclosed income Cash found during search A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous simply on the allegation of inadequate enquiry. Unless there is an established case of total lack of enquiry. Kindly refer CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (del), wherein Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held that one has to see from the record as to whether where was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open. The Ld. CIT himself admits that the AO did make enquiries however, in his view it was insufficient and in adequate enquiries, which is not a good basis, more probably, when he did not invoke explanation (Expl. 2(a) to Sc. 263. 8.3 In CIT vs. Chemsworth Pvt. Ltd. (2020) 275 Taxman 408 ( Kar),, it was held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the particular case. In the instant case, the Tribunal has held that the discretion had not been properly exercised by the ITO and the AAC in taking into account the circumstances in which the assessee was placed and the Tribunal has found that the sources of investments could not be treated as income of the assessee. The High Court has agreed with the said view of the Tribunal. There is no error in the said finding recorded by the Tribunal. There is thus no merit in these appeals and the same are accordingly dismissed. CIT vs. Smt. P.K. Noorjehan (1980) 15 CTR (Ker) 138: (1980) 123 ITR 3 (Ker):42R.1622, affirmed. In view of the above submissions and the judicial guideline, the impugned order passed u/s 263 deserves to be quashed. 3.4 On the other hand, the ld. DR supported the order of the ld. PCIT, Udaipur. 3.5 We have heard the rival contention and perused the material available on record. Brief facts of the case are that the assessee is a builder and during the year under consideration constructed a multistory building. During the course of assessment proceedings, the AO noticed that the assessee had debited following expenses. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the total income of the assessee. The ld. PCIT during the proceeding of Section 263 of the Act did not find merit in the assessment order of the AO and held that the order of the AO is erroneous and prejudicial to the interest of the Revenue as the AO has not made proper verification and enquires in the case of the assessee. The ld. PCIT has also observed that the assessee had deposited cash of Rs. 35.00 lacs in the form of old currency notes in bank account on a single day i.e. 12-11-2016 during demonetization period for which the AO was required to verify as per guidelines of SOP of CBDT Circular in this matter including calling of information u/s 133(6) of the Act including demonetized currency. The ld. PCIT also noted that the AO had failed to verify the cash deposits of Rs. 35 lacs in the form of old currency notes in the bank account on a single day and also failed to verify the sources of this cash deposits of Rs. 35 lacs and therefore the assessment order in the case of the assessee for the assessment year under consideration was found to be erroneous in so far as it is prejudicial to the interest of the revenue. Consequently, the ld. PCIT observed that due to lack of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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