9911796707
TMI Blog2023 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... business of selling gold, the quantity sold often did not vary, and therefore, the amounts shown in the invoice were also similar. This was a plausible explanation which found favour with the AO. The respondent/assessee, in support of the plea that the cash sales were the source of the deposits found credited in the subject bank account, had concededly submitted relevant material, which the AO examined in the course of the assessment proceedings. AO, having been satisfied with the explanation given, chose not to make any addition with regard to the cash deposit. PCIT on the other hand, without making any enquiry at his end, chose to cancel the assessment order with a direction to pass a fresh assessment order. PCIT had to reach a conclusion in the fact situation obtaining in the instant case, that the assessment order was erroneous by conducting an enquiry before passing an order u/s 263. PCIT, in our opinion, took the easy route by cancelling the impugned order and remanding the matter for a fresh assessment to the AO. While exercising powers under Section 263 of the Act, the concerned officer is entitled to examine the entire record, which includes not only the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee filed its Return of Income (RoI) on 28.09.2013. The income declared in the RoI by the respondent/assessee was Rs. 59,99,560/-. The income declared comprised earnings from business amounting to Rs. 12,88,981/-. The remaining amount, i.e., Rs. 47,10,582/-, was disclosed as income from other sources. 3. On 25.04.2014, a search and seizure action was conducted against the "Dua Group". The respondent/assessee, concededly, belongs to the Dua Group. The search and seizure action also brought the respondent/assessee within its sway. 4. The record shows that a centralisation order under Section 127 of the Act was passed on 04.03.2015. The centralisation order was followed by the respondent/assessee being issued a notice dated 16.05.2016 under Section 153A of the Act. 5. With this, the AO commenced his inquisition by issuing notices under Section 142(1) of the Act. These notices are dated 01.06.2016 and 25.07.2016. Significantly, a questionnaire accompanied the notice dated 01.06.2016. 5.1 In the interregnum, the respondent/assessee filed its RoI as per the directions contained in the 153A notice via the e-filing system on 03.06.2016. The RoI filed in response to this noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd loss account. In support of this plea, a copy of the cashbook reflecting the cash sales transaction and cash deposited against the same was also enclosed with the reply. 9. It is against this backdrop that the AO passed the original assessment order dated 30.12.2016 under Section 153A read with 143(3) of the Act. It is important to note that the AO accepted the returned income, as disclosed by the respondent/assessee. 10. The record shows that on 05.09.2017, the PCIT issued a show cause notice proposing the exercise of revisionary power under Section 263 of the Act. Although the appellant/revenue has failed to file a copy of the show cause notice, it is common ground that it adverted to the proposed addition concerning unexplained cash deposits. 11. Via the said show cause notice, the respondent/assessee was called upon to file its objection, if any, on or before 14.09.2017. A reply qua the same was filed by the respondent/assessee on 14.09.2017. The PCIT discussed the case with the Chartered Accountant (CA) appointed by the respondent/assessee as its authorised representative and director, Mr Rajesh Dua. The discussion with the CA was held on 14.09.2017, while the director a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original assessment order dated 30.12.2016 was both erroneous and prejudicial to the interest of the appellant/revenue. [See Malabar Industrial Company Ltd. v. CIT, (2000) 243 ITR 83 (SC)] In support of this submission, reliance was placed on the order dated 11.10.2017 passed by the PCIT. It was emphasised that the PCIT had exercised his powers under Section 263 of the Act as the respondent/ assessee had furnished "inadequate evidence to justify the nature and source of cash deposited" in the concerned bank accounts. 18.2 It was also sought to be highlighted that the respondent/assessee had failed to produce its books of accounts both during the search as well as in the post-search proceedings. The cashbook submitted during the assessment proceedings was nothing but computer-generated papers. 19. Furthermore, the following discrepancies noticed by the PCIT were emphasised by Mr Chandra to support the conclusion that no enquiry was made with regard to the unexplained cash deposits: (i) Since several invoices bearing the same amount were issued on a single day, it was improbable that gold was sold to different parties as claimed by the respondent/assessee. (ii) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inter alia, reliance was placed on the questionnaire dated 19.12.2016 and the reply dated 23.12.2016 filed by the respondent/assessee. (iii) The fact that an enquiry was made is also demonstrable from a perusal of the order sheets of the AO placed before the Court. Therefore, the observation made by the PCIT in paragraph 6 of the order dated 11.10.2017 that "no enquiry or investigation" was made by the AO concerning cash deposits was incorrect. (iv) Although the PCIT has laid great emphasis on the fact that the respondent/assessee has not produced his books of accounts during the search carried out at its registered office or thereafter in the post-search proceedings, what was lost sight of was that the AO issued the show cause notice for precisely this reason. (v) Inadequacy of the enquiry conducted by an AO as against no enquiry cannot form a basis for setting aside an assessment order. In such cases, the PCIT should conduct an enquiry and after that return unambiguous findings in the matter. In the instant case, the PCIT, without conducting an enquiry, has remanded the matter for passing a fresh assessment order, disregarding the fact that an enquiry had been con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash deposits made by the respondent/assessee in the subject bank accounts maintained with Axis Bank and Kotak Mahindra Bank. The sum deposited in Axis Bank was Rs. 2.03 crores, while in Kotak Mahindra Bank Ltd., cash amounting to Rs. 1.30 crores was deposited. 21.1 The clue to this issue is contained in the order sheets, the questionnaire dated 19.12.2016, and the response dated 23.12.2016 submitted by the respondent/assessee, qua the said questionnaire. 21.2 For convenience, the orders passed by the AO during the assessment proceedings are set forth hereafter, as they provide a pen picture of how the assessment proceedings were conducted. "01.06.2016 Notice u/s 142(1) alongwith questionnaire issued and fixed the case for hearing on 09.06.2016. 09.06.2016 The assessee vide letter dated 09.06.2016 furnish Power of Attorney and requested for adjournment. 25.07.2016 Notice u/s 142(1) of the Income Tax Act, 1961 issued and fixed the case for hearing on 08.08.2016. 08.08.2016 The assessee vide letter dated 27.07.2016, received in this office on 08.08.2016 furnish part details, placed on record. 01.09.2016 Notice u/s 143(2) and 142(1) alongwith questionnaire issued and fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that neither any books of account were found at the registered address of the company during search nor the same were produced thereafter during the course of post search proceedings. You are requested to attend the assessment proceedings either in person or through your authorised representative duly authorised in this behalf or make written submissions on queries and details called for as above on 23.12.2016 at 3.30 pm positively. A formal notice u/s 142(1) is enclosed herewith." The relevant extract of the response dated 23.12.2016 "With reference to above and in continuation to my earlier submissions we are hereby further submit, in response to the notice no. 2513 dated 19.12.2016 regarding cash deposit of Rs. 1.94 Crore in Axis Bank and Rs. 1.30 Crore in Kotak Mahindra Bank, we hereby explain the source of the cash deposit. The Financial Accounts along with books has already been produced and submitted before your office. All the cash deposit is out of the Cash sales proceeds, we further explain as under: 1. That Assessee company deals in metals including gold and registered with the Delhi sales tax department vide registration no. 07480375501 with ward 30, New Delhi. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent/assessee had categorically stated that if further information /documents were required, it should be given an opportunity in that behalf. Given this position, the observation made in paragraph 6 of the order dated 11.10.2017 passed by the PCIT is clearly contrary to the record. For convenience, the contents of the said paragraph are referred to hereafter: "6. Further, there has been no inquiry or investigation made by the Assessing Officer on account of unexplained cash deposits, the assessment order passed by the Assessing Officer is held to be erroneous and prejudicial to the interest of revenue and, accordingly, the assessment order is hereby cancelled to the extent of unexplained cash deposit in the bank a/c. The AO is directed to decide the issue afresh and pass speaking order as per law after giving proper opportunity of being heard to the assessee" 22.1 As a matter of fact, there is an internal contradiction in the conclusion reached by the PCIT, as recorded in paragraph 6 and in the earlier part of his order, which reads as follows: "Nature and source of this cash deposit was not duly verified during the course of assessment proceedings. Details furnished to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had offered an explanation with regard to cash deposits. In the course of the assessment proceedings, the AO had accepted the explanation given by the respondent/assessee that the source of the cash deposits was cash sales. The respondent/assessee had also explained why several invoices were issued on the same date bearing the same amount. It was the respondent/assessee's submission that since it was in the business of selling gold, the quantity sold often did not vary, and therefore, the amounts shown in the invoice were also similar. This was a plausible explanation which found favour with the AO. The respondent/assessee, in support of the plea that the cash sales were the source of the deposits found credited in the subject bank account, had concededly submitted relevant material, which the AO examined in the course of the assessment proceedings. The AO, having been satisfied with the explanation given, chose not to make any addition with regard to the cash deposit. The PCIT on the other hand, without making any enquiry at his end, chose to cancel the assessment order with a direction to pass a fresh assessment order. In our opinion, the PCIT had to reach a conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is "erroneous in so far as it is prejudicial to the interests of the revenue?. It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous? simply because in his order he did not make an elaborate discussion in that regard." 16. Thus, in cases of wrong opinion or finding on merits, the CIT 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. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising revisionary jurisdiction under Section 263 of the Act. While exercising power under the said provision, the concerned officer has to be satisfied that the twin conditions provided therein stand fulfilled, i.e., the order passed by the AO, which is sought to be revised, is erroneous and is also prejudicial to the interest of the revenue. In other words, if one of the two conditions is not satisfied, the revisionary power under the said provision cannot be invoked. One cannot quibble with the principle of law in the said case. However, on facts, the Court sustained the exercise of power by the Commissioner under Section 263 of the Act, as the AO had made no inquiry with regard to the additional sum received by the assessee on the sale of agricultural land on account of delay in paying the original consideration. The assessee had portrayed before the AO that the extra sum was received as compensation/damages for loss of agricultural income and other liabilities. The Commissioner had revised the order as the assessee had placed no material that the amount received by it represented compensation for the loss of agricultural income. The entry in the statement of account had been ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
