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TMI Blog2024 (6) TMI 932X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer, which is manifest from the materials brought on record in the form of notices issued under section 142(1) and 143(2), the order-sheet entries, replies filed by the assessee, it is not possible under any circumstances to conclude that the Assessing Officer has misstated the facts or has recorded false order-sheet entries. Therefore, the only conclusion one can reach is, the allegations made by the PCIT that the Assessing Officer has not conducted any inquiry with regard to cash deposits during demonetization period, is not based on materials on record, or rather, contrary to materials on record. The materials on record certainly make it clear that learned PCIT has initiated proceedings under section 263 of the Act mechanically without properly examining the assessment records. Non-disclosure of scrap sales, the materials on record clearly reveal that there, in fact, is no such nondisclosure of scrap sales. The Audited financial statement furnished in course of assessment proceedings clearly indicate that the scrap sales, indeed, were shown by the assessee. The primary conditions for invoking section 263 of the Act are, the order sought to be revised must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Report not filed . The Assessing Officer issued notices under sections 142(1) and 143(2) of the Act from time to time calling upon the assessee to furnish various details. As observed by the Assessing Officer, in response to such notices, the assessee furnished replies, documents, books of account, bills and vouchers etc., which were verified on test check basis. While verifying the books of account and documents filed by the assessee, the Assessing Officer made the following disallowances: (i) Disallowance of car running and repair maintenance expenses Rs. 8,839/- (ii) Disallowance of Depreciation Rs. 83,923/- 5. After making addition of disallowances noted above, the total income was determined at Rs. 8,91,626/-. Accordingly, the assessment was completed under section 143(3) of the Act. After completion of assessment, as aforesaid, learned PCIT called for and examined the assessment records. While doing so, he was of the view that in course of assessment proceedings, the Assessing Officer has not verified/examined certain issues, such as, cash deposited in the bank account during the demonetization period and the taxability of scrap sales of Rs. 7,46,000/-. He further observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention to the notices issued under section 142(1) of the Act along with the questionnaire attached to such notices. He submitted, in response to the queries raised in the notices and questionnaire, the assessee furnished reply along with documentary evidences from time to time starting from 27.02.2019 and thereafter. In this context, he took us through all the notices issued under sections 142(1)/143(2) of the Act and the replies given in response thereof. He submitted, the Assessing Officer, in fact, has conducted thorough inquiry not only with regard to the cash deposits made during demonetization period, but all other issues raised by the revisionary authority in the notice issued under section 263 of the Act. He submitted, insofar as the allegation of learned PCIT that the assessee has not furnished the Audit Report in Form 3CA during the assessment proceedings and non-disclosure of scrap sales etc. are concerned, these are frivolous issues as Form 3CA is not applicable to the assessee and so far as receipts from scrap sales are concerned, the assessee has disclosed them in its audited financial statements. 8. He submitted, the Assessing Officer, in fact, has recorded the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer has conducted detailed inquiry on all the issues, including the issue on which the proceeding under section 263 of the Act was initiated, the assessment order cannot be held as erroneous and prejudicial to the interest of Revenue, so as to empower the revisionary authority to revise it. 10. Per contra, learned Departmental Representative strongly relied upon the observations of learned PCIT. 11. We have considered rival submissions and perused the materials on record. We have also applied our mind to the judicial precedents relied upon by the parties. However, in our view, the issue is purely factual. This is so because, learned PCIT has invoked his jurisdiction under section 263 of the Act to revise the assessment order, alleging that the Assessing Officer has not made inquiry with regard to the cash deposits made during demonetization and further he has not examined non-disclosure of income from scrap sales. 12. Before we proceed to examine the validity of exercise of jurisdiction under section 263 of the Act, being the last fact finding authority, it is necessary for us to factually verify the nature of inquiry conducted by the Assessing Officer in course of assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 142(1) of the Act from time to time calling for various other details and the assessee furnished its reply with supporting documents. 14. As could be seen from the materials placed on record, beginning from 11.08.2018 to 07.06.2019, a period of almost one year, the Assessing Officer has conducted thorough inquiry by issuing a notice under section 143(2) as well as notices under section 142(1) of the Act with questionnaire calling upon the assessee not only to furnish the details of cash deposits in the bank account, but also explain the source thereof. The Assessing Officer has also called upon the assessee to explain the reason for low profit compared to the turnover. It is a matter of record that the assessee has responded to each of the queries raised by the Assessing Officer in the questionnaire by explaining the source of cash deposits as well as various other details called for. Not only the Assessing Officer has conducted threadbare inquiry on various issues by issuing number of notices to the assessee, but he has also conducted discreet inquiries from third parties, including the banks, wherein, the assessee has held account by issuing notices under section 133(6) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t total income of Rs. 8,91,630/- is erroneous in so far as it is prejudicial to the interest of the revenue on the following grounds :- On perusal of assessment record, it has been observed that during the year under consideration, the assessee is engaged in the business of Agro-based industries and deposited cash during demonetization period (from 09.11.2016 to 31.12.2016) amounting Rs. 91,00,000. Assessee had also availed C.C. Limit of Rs. 1.75 Cr from the bank. On perusal of assessment record, it is observed that cash book and bank account statements from the assessee were not been obtained and copy of bank accounts for the relevant period not placed on file. It means that huge cash deposits made by the assessee were not been examined. Assessee had not filed his audit report along with his ITR, but trading results declared by the assessee in his ITR were accepted. As per Profit and Loss account, Sales by the assessee was shown at Rs. 11,09,59,501. A copy of scrap sales account placed on records shows sale at Rs. 7,46,000. Further, the assessee had also not collected the tax at source (TCS) on scrap sales under provision of section 206 of the I.T. Act, 1961, In Form No. 3CD in Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment records. Even, with regard to the alleged non-disclosure of scrap sales, the materials on record clearly reveal that there, in fact, is no such nondisclosure of scrap sales. The Audited financial statement furnished in course of assessment proceedings clearly indicate that the scrap sales, indeed, were shown by the assessee. 17. The primary conditions for invoking section 263 of the Act are, the order sought to be revised must be erroneous and at the same time prejudicial to the interest of Revenue. Unless, these twin conditions are satisfied, section 263 of the Act cannot be invoked. In the facts of the present case, learned PCIT has put much emphasis on Explanation 2 to section 263 of the Act. In our view, Explanation 2 to section 263 of the Act does not invest unbridled power with the revisionary authority so as to empower him to invoke revisionary jurisdiction arbitrarily. The words appearing in Explanation 2(a) to the effect that the order is passed without making inquiries or verification which could have been made , certainly do not mean that on mere allegation that in the opinion of the revisionary authority the Assessing Officer has not made inquiries or ve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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