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TMI Blog2023 (11) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... section 263 of the Act only on the basis of an audit objection which is not permissible and as such the order passed is illegal, arbitrary, unjustified which merits annulment. 3. That the Ld. Principal Commissioner of Income Tax has erred in failing to consider the various replies and submissions placed on record in proceedings before him in the correct perspective which is arbitrary and unjustified. 4. That the assessment order having been passed by the Assessing Officer after due application of mind and taking into consideration the various replies and material on record, the action resorted to by the Principal Commissioner of Income Tax is unwarranted and uncalled for. 5. That the order of Commissioner of Income Tax is erroneous, arbitrary, opposed to the facts of the case and is unsustainable in law. " 2. At the outset, it is noticed that there is a delay in filing the present appeal by five days as pointed out by the Registry. After considering the application seeking condonation of delay along with Affidavit placed on record and hearing both the parties, we find that there was a reasonable cause for the delayed filing of the present appeal due to COVID-19 Pandemic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly held that the whole of the amount of Rs. 3,88,15,830/- has escaped assessment by reasons of failure on the part of the assessee to furnish return of income under section 139(1) of the Act. 7. It was submitted that in response to the notice under section 148, the assessee firm filed its return of income declaring total income of Rs. 2,36,480/- and thereafter, notices were issued on 07/09/2018 and thereafter on 20/09/2018 along with detailed questionnaire. In this regard, our reference was drawn to the notice dt. 20/09/2018 along with detailed questionnaire wherein the AO has sought information and the explanation from the assessee in terms of certified copy of the partnership deed of the firm, copy of the capital account of partners along with supporting evidence regarding addition in capital by the partners if any, copies of the bank statement, loan account etc. for the period 01/04/2013 to 31/03/2014, complete name & address & PAN number of the persons from whom purchases and sales have been made exceeding Rs. 5 lacs, details of opening stock, purchases and closing stock in terms of quantity and value and also method and basis of valuing the closing stock along with documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page 29-47, it was submitted that in the said submission, the assessee has again explained that the main source of its income is from poultry farming and there is no other source of income. Further copy of the Income Tax Return, Balance Sheet, P&L Account, Audit Report and copy of the Bank Statement were also submitted for necessary examination and verification by the AO. 10. It was further submitted that during the course of assessment proceedings, the AO also called for the books of accounts and the assessee has thereafter duly produced its audited books of accounts for necessary verification before the AO and after verification thereof, the books of accounts have been returned back to the assessee. In this regard, our reference was drawn to the order sheet entry dt. 20/12/2018 wherein the AO has stated that Shri Nitin Bhasin, Advocate attended the proceeding, books of account produced and returned back, information filed and case discussed. 11. It was further submitted that the AO has also called for information from the SBI u/s 133(6) of the Act to independently verify various banking transactions and other filings with the bank to avail the term loan and OD limit and as par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the ld PCIT and therefore the subsequent findings which have been recorded by the ld PCIT regarding lack of examination of the cash deposits amounting to Rs. 3,88,15,830/- is clearly beyond the scope of Section 263 of the Act as the assessee has been denied an opportunity to respond to the same in absence of any specific show cause issued by the Ld. PCIT either at the time of initiation of the revisionary proceedings or even during the course of the revisionary proceedings before passing of the impugned order. 16. Regarding the findings of the Ld. PCIT regarding non-verification of partner's capital account amounting to Rs. 2,72,63,568/- unsecured loans amounting to Rs. 26,00,000/-, stock amounting to Rs. 2,24,90,295/-, it was submitted that these matters were not part of the reasons for which the case of the assessee was reopened u/s 147 of the Act and therefore, where the ld PCIT talks about these matters, it is clearly beyond the scope of his jurisdiction u/s 263 of the Act. It was further submitted that all these balances are opening balances which are being carried forward from the previous audited balance sheet and the P&L Account for the F.Y. 2012-13 relevant to A.Y. 2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where there is a lack of inquiry on the part of the AO and therefore where the Ld. PCIT held that the order so passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue, it is incumbent on the Ld. PCIT to carry out certain basic inquiries to came to a prima-facie findings that the order so passed is erroneous in so far as prejudicial to the interest of the Revenue. It was submitted that the said preposition has been laid down by the Courts and has been reiterated from time to time and in this regard, our reference was drawn to the Hon'ble Delhi High Court decision in case of PCIT Vs. Delhi Airport Metro Express (P) Ltd. 398 ITR 8 (Del), I.T.O. Vs. D.G. Housing Projects Ltd. 343 ITR 329 (Del), DIT Vs. Jyoti Foundation 357 ITR 388 (Delhi) and Coordinate Chandigarh Benches decision in case of Shri Abhimanyu Gupta Vs. PCIT in ITA No. 771/Chd/2017. 20. It was accordingly submitted that in light of aforesaid submissions, the order so passed by the ld PCIT be set-aside and that of the AO be sustained and necessary relief be provided to the assessee. 21. Per contra, the Ld. CIT DR submitted that it is a case where the assessee has not filed any original r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the ld AR doesn't apply in the facts of the present case. It was accordingly submitted that there is no infirminity in the order so passed by the ld PCIT and the assessment order has been rightly held to be erroneous in so far as prejudicial to the interest of Revenue and the appeal so filed by the assessee thus deserves to be dismissed. 23. We have heard the rival contentions and purused the material available on record. Firstly, we refer to the contention advanced by the ld AR on behalf of the assessee that it is not a case of lack of enquiry on part of the AO and the AO has carried out requisite enquiries. It has been submitted that the AO has called for necessary information/documentation, and after due verification and due application of mind, has passed a speaking order accepting the source of cash deposits, the reason for which the case was re-opened u/s 147 and has also called for and examined the audited financial statements for the year under consideration as well as for previous financial year and issued specific queries and thereafter, has accepted the opening balances regarding partner's capital account, unsecured loans and stock. It was accordingly submitted that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has wrongly claimed depreciation on assets like land and building, it was incumbent upon the Pr. CIT to undertake the inquiry as regards which of the assets were purchased and installed by the assessee out of its own funds and which were those assets that were handed over to it by DMRC and this basic exercise has not been undertaken by the Pr. CIT. It was further held by the Hon'ble High Court that setting aside the entire matter to the file of the AO for a fresh assessment can be exercise only after the Pr. CIT undertakes an inquiry himself and not otherwise and accordingly the Hon'ble High Court held that Tribunal has not committed any error in setting aside the order of the Pr. CIT and appeal of the Revenue was dismissed. 26. Similarly, in case of I.T.O. Vs. D.G. Housing Projects Ltd. (Supra), the Hon'ble Delhi High Court has held as under: "Section 263 has been enacted to empower the Commissioner to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the revenue. The expression 'pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. [Para 16] This distinction must be kept in mind by the Commissioner while exercising jurisdiction under section 263 and in the absence of the finding that the order is erroneous and prejudicial to the interest of revenue, exercise oj jurisdiction under section 263 is not sustainable. In most cases of alleged 'inadequate investigation', it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without Commissioner conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. Commissioner cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the Commissioner to ask the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form am opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue. In the second set of cases, the Commissioner cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. [Para 19] 27. Similarly, in case of DIT Vs. Jyoti Foundation (Supra), following the decision in case of D.G Housing Projects Ltd, it was held by the Hon'ble Delhi High Court that Revisionary power under section 263 is conferred by the Act on the Commissioner/Director of Income- tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the revenue, but orders which are passed after inquiry/investigation on the question /issue are not per se or normally treated as erroneous and prejudicial to the interest of the revenue because the revisionary authority feels and opines that further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the meaning of section 147 of the Act. Subsequently, notices were issued during the course of assessment proceedings wherein the AO has specifically enquired about the source of said cash deposits in the bank account maintained with SBI along with documentary evidence. In response to the notices, the assessee has submitted that cash deposit of Rs 3,88,15,830/- relates to cash sales arising out of its poultry farming business which has been deposited from time to time in the bank account maintained with SBI and in support, has submitted its stock statement detailing the opening stock, purchases during the year, sales during the year and closing stock, list of purchasers and sellers exceeding Rs 5 lacs as called for by the AO, copy of the bank statement reflecting the deposits of cash sales made during the financial year, comparative gross profit position reflecting turnover of Rs 9,53,56,752/- during the current financial year and corresponding turnover of Rs 8,96,17,135/- in the previous financial year and audited trading and profit/loss account for the year under consideration. 31. The AO thereafter has examined the submissions and supporting documentation so submitted by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings u/s 263 of the Act. 35. Further, there is no dispute that where the assessee has filed its return of income for the earlier assessment year 2013-14, the opening balances which are carried forward from the said assessment year to the year under consideration are easily verifiable. At the same time, in the instant case, we find that the AO has called for and examined the audited financial statements for the previous financial year relevant to earlier assessment year 2013-14 and thus, where the audited financial statements for the previous financial year are on record and the same has been examined by the AO, the findings of the ld PCIT holding the order so passed by the AO erroneous in nature due to non-examination of the opening balances is clearly not borne out of records. 36. Now coming specific to matter relating to opening stock, as we have noted above, the assessee has submitted its stock statement giving breakup of the opening stock (Rs 2,24,90,295), purchases(Rs 8,36,67,077), sales(Rs 9,53,56,752) and closing stock (Rs 1,93,94,525) and the AO has examined the same and accepted the turnover and closing stock as well as trading results and gross profit (Rs 528, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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