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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 ..... ales 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 AO thereafter has examined and has recorded a specific finding in the assessment order that the assessee s source of income is from poultry farming business and audited financial statements, books of accounts, bank statement and explanation called for from the assessee regarding source of cash deposit has been duly examined and thereafter, no adverse finding has been recorded. Thus the matter relating to source of cash deposits has been duly examined during the course of assessment proceedings and it is clearly not a case of lack of enquiry as so held by the ld PCIT. Balances of partner s capital account, unsecured loans and stock at the beginning of the year not verified due to non-filing/invalid treatment of original return of income - As far as non-filing of the original return of income, we find that the present proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward from the earlier assessment year and there are no movements in these accounts during the year, it is a revenue neutral exercise and thus, there is no prejudice which is caused to the Revenue and in any case, the matter has been examined by the AO and no further enquiries have been conducted by the ld PCIT. Thus, the findings of the ld PCIT in this regard that the order so passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue are again not borne out of records and thus deserve to be set-aside. The matter has been duly examined by the AO and nothing has been brought on record in terms of any further enquiries conducted by the ld PCIT so as to reach a prima facie finding that the order so passed is erroneous in so far as prejudicial to the interest of the Revenue - no basis for setting aside the assessment order and that too, a speaking order, thus, the order so passed by the ld PCIT u/s 263 is hereby set- aside and that of the AO is sustained. Decided in favour of assessee. - SHRI. AAKASH DEEP JAIN, VP SHRI. VIKRAM SINGH YADAV, AM For the Appellant : Shri Tejmohan Singh, Advocate For the Respondent : Shri Sarabjeet Singh, CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt maintained with State Bank of India and thereafter reasons were recorded and notice under section 148 was issued and served on assessee. In response to the notice, the assessee filed its return of income on 09/02/2018 declaring total income of Rs. 2,36,480/- and thereafter notices under section 143(2) and 142(1) along with detailed questionnaire were issued and after taking into consideration the information/documents submitted by the assessee, the assessment proceedings were completed by passing the order under section 147 r.w.s 143(3) dated 25/12/2018 wherein the assessed income was determined by the AO at Rs. 3,36,480/- as against the returned income of Rs. 2,36,480/-. 4. Subsequently, the assessment records were called for and examined by the Ld. PCIT and a show cause notice under section 263 was issued on 08/02/2021 and thereafter, taking into consideration the submission filed by the assessee but not finding the same acceptable, the assessment order was held to be erroneous in so far as prejudicial to the interest of the Revenue and same was set aside to the file of the AO to pass the assessment order afresh in accordance with law keeping in view the observation made i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons thereof, and also to explain the source of cash deposit amounting to Rs. 3,88,15,830/- in the bank account maintained with SBI along with documentary evidence. 8. It was submitted that in response to the said notice, the assessee firm filed its submissions along with necessary documentation as called for in terms of copy of the partnership deed, details of the partner s capital accounts and it was also explained that there are no addition in the capital account during the year under consideration, copy of bank account statement, list of purchasers and sellers and their addresses were submitted, copy of trading and profit/loss account along with stock statement detailing the position of stock in terms of bird stock, feed stock, egg tray, medicine stock, egg stock, manour stock, gunnies stock was submitted, comparative chart and trading/business results for the year under consideration and the previous assessment year 2013-14 was submitted and also the reasons for delayed filing of the audit report due to fraud committed by earlier Chartered Accountant wherein the audit report and return of income was not filed, subsequent compliant against the audit firm, and engagem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification and after due application of mind, the AO has completed the assessment proceedings. 13. In this regard, our reference was drawn to the assessment order passed under section 147 r.w.s 143(3) dt. 25/12/2018 wherein the AO has clearly stated that the assessee s main source of income was from poultry farming and the Ld. AR attended the proceedings and filed information / documents from time to time and the books of accounts/vouchers were produced and which have been test checked. Further, our reference was drawn to the para 2 of the assessment order wherein the AO has recorded his specific findings stating that the ld AR of the assessee was asked to explain the source of cash deposit amounting to Rs. 3,88,15,830/- and in response, it has been submitted that the amount deposited in cash was out of the sale of the business. Thereafter, the AO has stated that the assessee has shown total sales amounting to Rs. 9.5 Crores during the year under consideration and copy of the bank account along with narration of entries have been furnished by the AR of the assessee, copy of the audited balance sheet, P L Account also furnished and duly examined. 14. It was accordingly, submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any case, these opening balances are being carried forward from the earlier financial year and thus no cause of action lies for the impugned assessment year. 17. It was submitted that inspite of assessee bringing the aforesaid facts to the notice of the Ld. PCIT during the course of revisionary proceedings, if we look at the contents of the show cause notice and the subsequent findings recorded by the Ld. PCIT, they are exactly verbatim and thus, it is apparent that he has failed to take into consideration the submission so filed by the assessee and has even failed to take into consideration the audited balance sheet for the previous F.Y. 2012-13 relevant to the Assessment Year 2013-14 which is very much part of the assessment records and a copy thereof has also been placed on record at page no. 48 to 60 of the assessee s paper book. 18. It was accordingly submitted that there is clear lack of application of mind on the part of the Ld. PCIT and it appears from both the contents of the show cause notices as well as findings so recorded by the ld PCIT that he was apparently guided by certain audit objection. It was submitted that merely certain audit objection doesn t authoriz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of which the reasons have been recorded before issuance of notice under section 148 of the Act and also any other matter which are apparent from the record. Where the AO has failed to carry out the requisite enquiry, the ld PCIT was well within jurisdiction and power to acquire jurisdiction u/s 263 of the Act. It was submitted that there were certain matters which were apparent from the record wherein the original return filed by the assessee was found to be invalid as per the IT system and wherein there were no balances reflected in respect of partners share capital, secured loans and stock of goods. Similarly, there is no return of income filed for the previous assessment year 2013-14 therefore it was incumbent on the part of the AO to not just verify the transactions pertaining to the year under consideration but also transaction in respect of the opening balances which are likely to have impact on the taxability of income for the year under consideration. It was submitted that this material defects were observed by the Ld. PCIT while examining the assessment records/I.T System and therefore, he was very much empowered to acquire jurisdiction under section 263 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prima-facie findings that the order so passed is erroneous in so far as prejudicial to the interest of the Revenue and thus, merely stating that the AO should conduct detailed enquiries doesn t empower the ld PCIT to set- aside the assessment order. 25. In this regard, our reference was drawn to decision of the Hon ble Delhi High Court in case of PCIT Vs. Delhi Airport Metro Express (P) Ltd. (Supra). Briefly the facts of the case are that the assessee was a concessionaire of the Airport Metro Express Project of the Delhi Metro Rail Corporation Ltd. (DMRC) under a Build-Operate-Transfer (BOT) Scheme. The assessee had accepted the concession for a period of 30 years. During the assessment year in question, the assessee claimed depreciation on fixed assets at 50 per cent of the eligible depreciation rates since, during the assessment year in question, the assets were used for less than 180 days. The Assessing Officer allowed claim of depreciation. The Commissioner in exercise of power under section 263 set aside assessment order on ground that the assessee had claimed excess depreciation than what was allowable in terms of CBDT Circular No. 9 of 2014, dated 23-4-2014. The order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officials fails to conduct the said investigation, he commits an error and the word 'erroneous' includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. [Para 11] In cases of wrong opinion or finding on merits, the Commissioner has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. The Commissioner cannot remand the matter to the Assessing Officer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the Commissioner must come to the conclusion that the order is erroneous and is unsustainable in law. It may be noticed that the material which the Commissioner can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record. Nothing bars/prohibits the Commissioner for collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous. [Para 17] In the instant case, the findings recorded by the Tribunal are correct as the Commissioner has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the Commissioner is that 'order passed by Assessing Officer may be erroneous'. The Commissioner had doubts about the valuation and sale consideration received but the Commissioner should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the inquiries were not sufficient and further inquiries or details should have been called. However, in such cases, as observed in the case of ITO v. D.G. Housing Projects Ltd, the inquiry should have been conducted by the Commissioner or Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and directed the Assessing Officer to conduct the said inquiry. 28. There is thus no dispute that where the ld PCIT seeks to invoke his jurisdiction u/s 263 of the Act, both the conditions so envisaged in terms of the order so passed by the AO being erroneous as well as prejudicial to the interest of the Revenue needs to be satisfied. Further, where the AO has conducted certain enquiries and the ld PCIT still hold the order so passed as erroneous, it is a settled legal proposition that the ld PCIT is required to conduct further enquiries to reach some prima facie conclusion that the enquiries so conducted by the AO are insufficient or inadequate and thus, the order so passed is erroneous in nature. 29. In the instant case, in respect of matters relating to source of cash deposits in the bank account, and opening balances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n duly examined and thereafter, no adverse finding has been recorded. 32. We therefore find that the matter relating to source of cash deposits has been duly examined during the course of assessment proceedings and it is clearly not a case of lack of enquiry as so held by the ld PCIT. There is no finding recorded by the ld PCIT as to how the enquiry conducted by the AO is erroneous or for that matter, any further enquiry being conducted by the ld PCIT which can demonstrate that the order so passed by the AO is erroneous in nature and thus, the findings of the ld PCIT in this regard are not borne out of records and thus, deserve to be set-aside. 33. Now, coming to matter relating to balances of partner s capital account, unsecured loans and stock at the beginning of the year, the ld PCIT has recorded a finding that the same has not verified by the AO during the course of assessment proceedings. In this regard, we find that the basis of arriving at such finding by the ld PCIT was that the original return filed by the assessee was treated as invalid and even the return of income filed for the earlier assessment year 2013-14 was treated as invalid. Thus, due to non-filing/invalid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the interest of the Revenue. 37. Regarding the findings of the Ld. PCIT recorded non-verification of partner s capital account amounting to Rs. 2,72,63,568/- and unsecured loans amounting to Rs. 26,00,000/-, we find that these are again opening balances which are carried forward from the earlier assessment year as apparent from the audited financial statements for the earlier assessment year which is available on record and duly examined by the AO. Further, during the course of assessment proceedings, the AO has called for and examined the partnership deed and it has also been submitted by the assessee that there is no addition to the capital account during the year. We thus, find that where the balances are carried forward from the earlier assessment year and there are no movements in these accounts during the year, it is a revenue neutral exercise and thus, there is no prejudice which is caused to the Revenue and in any case, the matter has been examined by the AO and no further enquiries have been conducted by the ld PCIT. Thus, the findings of the ld PCIT in this regard that the order so passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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