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TMI Blog2024 (8) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... AO passed order u/s 147 r.w.s 144B of the Act accepting the returned income. Thus, it can be said that the AO has examined the issue and taken a considered view on the subject issue. AO cannot be said to have not applied his mind because in the assessment order itself he has observed that he had considered the details and documents and reply of assessee. PCIT has invoked jurisdiction u/s 263 by issuing notice u/s 263 of the Act and passed an order directing the AO to pass fresh assessment order after giving opportunities of being heard to assessee. There is a distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that could not, by itself, give occasion to the Ld.PCIT to pass order u/s 263 of the Act merely because he has different opinion in the matter. It is only in cases of lack of inquiry that such a course of action could be opened. In the present case, the Assessing Officer has duly examined the facts and formed an opinion that no addition is necessary in view of the reply of the assessee on the subject-issue. Therefore, the decision of PCIT that the order passed by AO was erroneous and prejudicial to the interest of revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und(s) either before or in the course of hearing of the appeal. 2. The facts of the case in brief are that assessee filed its return of income (ROI) for the AY 2015-16 on 29.09.2015 declaring total income of Rs. 2,07,944/- . The return was processed u/s 143(1) on the same income. As per information received from Asstt. Director of Income-tax (Inv.) Unit-1(2), Ahmedabad, assessee had entered into various transactions with Sh. Chiragkumar B. Patel, providing accommodation entries to various firms and persons, to the tune of Rs. 93,11,587/-. These entities were paper concerns engaged in providing accommodation entries to various parties. The nature, purpose and source of such transactions remained unexplained. Hence, the AO obtained prior approval of the Addl. CIT, Range-1(1), Surat and initiated proceedings u/s 147 by issuing notice u/s 148 of the Act on 31.03.2021. In response, assessee filed ROI on 26.04.2021 declaring same income as was declared in its original ROI. The assessee-firm was engaged in trading of chemical for the last many years. The assessee was provided copy of reasons recorded for re-opening assessment. The assessee vide letter dated 22.10.2021 raised objection for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into various transactions with Shri Chiragkumar B. Patel to the tune of Rs. 93,11,587/-. The assessee replied that it had not done any business with Shir Chiragkumar B. Patel but it has purchased goods of Rs. 36,38,356/- from M/s Maruti Enterprise (proprietor Shri Shailashbhai P Patel). The assessee had also mentioned that it had purchased goods worth Rs. 36,38,356/- from Maruti Enterprise as against the alleged amount of Rs. 93,11,587/- mentioned in the show-cause notice. Thus, assessee had submitted all the details and explanations and AO passed a speaking order which is not erroneous or prejudicial to the interest of Revenue. The assessee had also relied on the decisions in cases of CIT vs. Vikash Polymers [2010] 194 Taxman.57 (Delh), Malabar Industrial Co. Ltd. vs. CIT [2000] 243 ITR 83 (SC), CIT vs. Design Automation Engineers (Bombay) Pvt. Ltd. 323 ITR 632 (Bom) and CIT vs. Sohana Woollen Mills 296 ITR 238 (P H). The Ld.PCIT was not satisfied with the reply of assessee and stated that assessee-company had not submitted the supporting documents/evidences during assessment proceedings. The AO has passed the assessment order without proper verification/inquiry, applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is neither erroneous nor prejudicial to the interests of revenue because the AO has taken a possible view with respect to the alleged transaction of Rs. 93,11,587/- which has escaped assessment. The Ld. AR of the assessee submitted that the AO has made inquiries during assessment proceedings by issue of notice u/s 143(2) dated 05.07.2021. The assessee has replied to the AO vide letter dated 13.07.2021, which is at pages 40 to 42 of the paper book. Subsequently, assessee filed letters to the AO on 03.09.2021 and 22.10.2021. The assessee has stated that it had not carried out any transaction with Shri Chiragkumar B Patel, proprietor M/s Mahavir Sales Corporation. The name of the assessee is missing in the table of FIU-IND report (page-5). It was also submitted that assessee had purchased good worth Rs. 36,38,356/- from M/s Maruti Enterprises, proprietor of Shri Saileshbhai P Patel. There is no information as to how that Shri Shri Saileshbhai P Patel is connected with Shri Chiragkumar B Patel. Thus, it is not a case of 'no inquiry' or 'lack of inquiry.' The Ld.AR of the assessee submitted that Ld. PCIT as well as Id.CIT-DR, have emphasized that it is a case of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT 128 taxmann.com 228 (Guj). He further submitted that when proceedings u/s 147 is not valid, action u/s 263 cannot be sustained for revising the invalid assessment, as held in case of Jignesh Lilachand Shah vs. PCIT ITA No.149/Ahd/2021 (Ahd). In view of above, Ld.AR prayed to quash the order passed by Ld.PCIT u/s 263 of the Act. 5. On the other hand, Ld.CIT-DR has strongly relied on the order passed by Ld.PCIT. He has stated that Ld.PCIT has called for the records and duly examined it including the assessment order passed/s 147 r.w.s. 144B of the Act. He has also referred to provisions of section 263 of the Act and stated that the present case is covered by the scope and ambit of Section 263 of the Act because the AO has not made any inquiry which should have been made to come to a proper conclusion. He stated that AO has not made necessary inquiry in respect of the transaction of assessee with Shri Shaileshbhai P Patel though it is mentioned in the FIU-IND report. He also relied upon the decisions which were referred to in the order passed u/s 263 of the Act by Ld.PCIT. 6. We have heard rival submissions and perused materials on record. We have also deliberated upon the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the hue amount involved in transactions made by the assessee during the year under consideration. 5 6. Findings of the AO Basis of forming reason to believe and details of escapement of income: In view of the above that this office is of clear view that the assessee has mad e the huge transactions through his undisclosed sources as the scale of amount involved in the transactions made by the assessee are in disproportion to his income declared by him in his ROI and therefore this is clear case of concealment of the income by the assessee at least to the extent of Rs. 93,11,587/- in absence of creditworthiness and genuineness of the transactions transacted through its account maintained by the assessee. I have therefore reasons to believe that income of Rs. 93,11,587/- has escaped assessment in this case with active intentional concealment by the assessee of his income and therefore the case of the assessee for AY 2016-17 needs to be re-opened within the meaning of section u/s 147 of the I.T. Act 1961 by reason of assessee s planned purposeful omission to disclose fully and truly all material financial facts necessitated assessment of the same. It is, therefore, requested that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by the assessee and after verification of balance sheet. Profit loss account and bank details provided by the assessee the submission of the assessee found genuine and hence acceptable on the following ground: On going through the FIU-IND report it is gathered that Sh. Chirag B.Patel was the proprietor of M/s Mahavir Sales Corporation and it is evident from the name of the parties with whom the said Mahavir Sales Corporation had done business as mentioned in the report the name of the assessee proprietary concern M/s Cilarchem Industries is missing. However, the assessee firm had carried out its business activities with M/s Maruti Enterprises whose proprietor is Sh. Shaileshbhai Patel. Considering all the facts circumstances and the details documents filed by the assessee, assessment is completed u/s 143(3) /147 of IT act on returned income i.e., Rs. 2,07,944/- as shown by the assessee in its Income Tax Return for the year under consideration. 6.2 It is clear from the facts narrated above and the assessment order passed by the AO that the case of the assessee was reopened because of transaction with Shri Chiragkumar B Patel (Proprietor of Mahariv Sales Corporation), who w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, [including,- (i) An order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) An order modifying the order under section 92CA; or (iii) An order cancelling the order under section 92CA and directing a fresh order under the said section]. 6.4 The Hon ble Apex Court in case of CIT vs. Greenworld Corporation, 314 ITR 81 (SC) held that the jurisdiction u/s 263 can be exercised only when both the following conditions are satisfied i.e., (i) the order of the Assessing Officer should be erroneous and (ii) it should be prejudicial to the interests of revenue. These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible. The Hon ble Apex Court in case of Max India Ltd. vs. CIT 295 ITR 282 (SC) held that the Commissioner has to be satisfied of the twin conditions as stated above. If one of them is absent, recourse cannot be had to Section 263 of the Act. We find that the impugned issue of transaction with Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue. If he intends to do so, a fresh notice u/s 148 of the Act would be necessary. Since the AO did not make any addition in respect of transaction with Shri Chirakumar B Patel, he could not have made addition in respect of transaction with Shri Sailashbhai P Patel as suggested by the Ld.PCIT. When he is precluded from making the addition, the question of making inquiry does not arise. 6.6 In the instant case, the Assessing Officer had called for the explanation on item in question (reopening issue) from the assessee and assessee had furnished his explanation, which clearly shows that the AO had undertaken the exercise of examining as to whether the transactions with Shri Chiragkumar B Patel are duly explained. It is clear that the AO was satisfied with the assessee s explanation and therefore he accepted same. The grievance of the Ld.PCIT is that the AO should have made further inquiry in respect of Shri Saileshbhai P Patel rather than accepting the assessee s explanation. Therefore, it could not be said that it was the case of lack of inquiry . There is a distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that could not, by it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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