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TMI Blog2024 (4) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... two contrary submissions for the cash transactions in his bank account. AO in his order passed, so much so, gives no reason for accepting one of the contentions of the assessee and rejecting the other. In the face of two patently contrary explanation of the cash deposits in the bank account of the assessee, it was but logical for the AO to have made further inquiries to find out which explanation was true and then arrive at his findings accordingly. No hesitation, therefore, in holding that the assessment order passed in the present case is without any application of mind by the Assessing Officer to the submissions made before him and without conducting necessary inquiries before arriving at his findings. No hesitation therefore in confirming the order of the Ld. PCIT holding the assessment orders passed in the present case to be erroneous causing prejudice to the Revenue. As for the argument of assessee that the pendency of appeal before the ld. CIT (A) on the identical issue would debar the exercise of revisionary powers u/s 263 on the same issue, we find the same is grossly misplaced. The Hon ble Apex Court in the case of Amritlal Bhogilal Co. [ 1958 (4) TMI 3 - SUPREME COURT] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT found both the assessment orders to be erroneous for the reason that he noted that the Assessing Officer had made no inquiries while treating the huge cash deposits as relating to the business turnover of the assessee and taxing only 3% of the same as net profits. As per the ld. PCIT, the entire amount needed to be subjected to tax in the absence of any plausible explanation given by the assessee for treating them as business receipts and the provisions of Section 115BBE of the Act also needed to be invoked taxing the impugned cash credits at the special rate of tax prescribed under the said section. Accordingly, a show-cause notice was issued to the assessee. Due reply was filed by the assessee; after considering which, the ld. PCIT held the assessment order passed in both the years as erroneous causing prejudice to the Revenue on account of lack of inquiry relating to the issue of cash deposits in the bank account of the assessee. Accordingly he set aside the assessment orders to the Assessing Officer for framing fresh assessment, directing him to complete the assessment after due inquiry and verification to the extent of the issues discussed by him. 5. Aggrieved by the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble view treating the cash deposits as business receipts of the assessee and treating 3% thereof as a net profit of the assessee. Therefore assessment order could not be held to be erroneous causing prejudice to the Revenue. Reliance was placed on the following case laws in support... Karthik Estate Vs. Pr. CIT Bangalore ITAT in ITA No. 432/Bang/2022, Order dated 12.05.2023; Lexico Ceramics Vs. Pr. CIT-1, Rajkot ITAT, in ITA No. 1/Rjt/2023, Order dated 12.05.2023; (ii) When the matter was taken up for revision by the ld. PCIT, the assessee had already gone in appeal before the ld. CIT (A) - meaning thereby that the issue on which revisionary jurisdiction was exercised by the ld. PCIT was pending in appeal before the ld. CIT (A) and the ld. PCIT, therefore, could not have exercised his powers of revision u/s 263 of the Act. Reference was made to various case laws in this regard as under:- Lexico Ceramics Vs. Pr. CIT-1, Rajkot ITAT, in ITA No. 1/Rjt/2023, Order dated 12.05.2023; Manishbhai Laljibhai Vekaria Vs. Pr. CIT-1, Rajkot, in ITA No. 107/Rjt/2022, Order dated 31.08.2022 Parin Furniture Ltd. Vs. Pr. CIT, Rajkot, in ITA Nos. 86- 89/Rjt/2022, Order dated 20.07.2022 (iii) The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereon estimating the same @ 3% of the turnover/cash deposits. The Department, on the other hand, states that the Assessing Officer did not make any inquiries whatsoever and accepted the reply of the assessee stating that the cash deposits represented its turnover from business. 12. We have perused the documents filed by the ld. Counsel for the assessee before us disclosing the inquiries conducted during assessment proceedings by the Assessing Officer and have also gone through the assessment order. Paragraph No. 5 of the assessment order summarizes the facts noted by the Assessing Officer from the reply of the assessee and paragraph No. 6 contains his findings to the effect that 3% of the cash deposits be subjected to tax treating it as turnover. The contents of the said paragraphs are very relevant to adjudicate whether the Assessing Officer had accepted the assessee s submissions as such without conducting any inquiry while arriving at this finding or otherwise. The same are, therefore, being reproduced hereunder:- 5. In view of the above discussed facts assessee was issued notice u/s 142(1) of the Act on 9/12 / 2019 requested to show cause as to why cash/ cheque transactions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Dipak Tanna, affidavit filed by Sh. Bharat Popat after considering the contentions raised by assessee in statement on oath by the assessee, the addition on the cash / cheque deposit transactions made in bank accounts of the assessee during the F.Y. 2011-12 is considered as business transactions of assessee and the income is derived at net profit of 3% on the total cash/cheque transactions of Rs. 24,35,15,372/-. The said income is derived at net of all expenditure. 6. In view of the above discussion, the income is derived at Rs. 73,05,462/- (3.00% of turnover of Rs. 24,35,15,372/-) and the same is added to total income of assessee. 13. Paragraph No. 5 of the assessment order, containing the facts noted by the Assessing Officer from the submissions filed by the assessee, reveals that he noted the assessee s contention to the effect that the cash deposits did not pertain to him, though it was in the bank account opened in his name. The Assessing Officer noted the contention of the assessee as that this bank account was operated by some other persons mis-utilizing his name for the said purpose. The Assessing Officer also notes that one of the said persons Shri Bharat P. Popat had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain to the business of the assessee. Even the Ld. Counsel for the assessee was unable to demonstrate any inquiry /investigation carried out by the AO with respect to the contentions made by the assessee before him. There is no doubt, therefore, that the assessment order passed in the present case is without making any necessary inquiries, more particularly when the assessee had given two contrary submissions for the cash transactions in his bank account. The Assessing Officer in his order passed, so much so, gives no reason for accepting one of the contentions of the assessee and rejecting the other. In the face of two patently contrary explanation of the cash deposits in the bank account of the assessee, it was but logical for the AO to have made further inquiries to find out which explanation was true and then arrive at his findings accordingly. 17. We have no hesitation, therefore, in holding that the assessment order passed in the present case is without any application of mind by the Assessing Officer to the submissions made before him and without conducting necessary inquiries before arriving at his findings. 18. We have no hesitation therefore in confirming the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee's appeal before the appellate authority and so the argument that the Department had an alternative remedy is not correct. It is clear from the judgment of the High Court that it is the assumption that the department had an alternative remedy which weighed with the learned judges in reaching their final conclusion. Then the argument that the extraordinary revisional power must be exercised only for extraordinary reasons is really not very material. Whether or not the revisional power can be exercised in a given case must be determined solely by reference to the terms of s. 33B itself. Courts would not be justified in imposing additional limitations on the exercise of the said power on hypothetical considerations of policy or the extraordinary nature of the power. We must, therefore, hold that the High Court was also in error in holding that the Commissioner was not authorised in cancelling the order of the respondent's registration for the year 1949-50. The result is that the view taken by the High Court must be reversed and the first question framed by the tribunal as well as the additional question framed by the High Court must be answered in favour of the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a fresh order under the said section]. Explanation 1.--For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-- .... ..... ..... .... Explanation 2.-- For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,-- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 34. As is evident from the above, section 263 empowers Commissioners/ Pr. Commissioners to exercise revisionary power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 263 itself has been invoked and the reason for finding the assessment order erroneous clearly pointed out to the assessee during revisionary proceedings to the effect that adequate inquiries were not conducted by the AO on the issue in question, Explanation 2 to section 263 (a) also being to the same effect of assessment orders being deemed to be erroneous on account of lack of adequate inquiry, we see no reason why pointedly the Explanation also needs to be brought to the notice of the assessee while applying it to the case. 36 Once the ld. Pr. CIT brings to the notice of the assessee the reason why he finds the assessment order to be erroneous, which in the present case was inadequate inquiries conducted by the AO on the nature of disclosure made by the assessee during the survey in excess stock found, he need not specifically point out that he has invoked Explanation-2 to sub-clause (a) to the section which is to the same effect of inadequate inquiries conducted qualifying as error in assessment order. The fact that he clearly brings out the reason why he found assessment order erroneous, is sufficient in itself and self-explanatory. It need not to be technically qualified b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act r/w Explanation 2 thereto by ignoring that the order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue in as much as the Assessing Officer has passed the assessment order without making inquires/verification in the light of the unsecured loans of Rs. 2.49 Crores received from M/s. Georgette Tradecom Pvt. Ltd (GTPL) and M/s. PurbaAgro Food Pvt. Ltd (PAFPL)? (b) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is correct in cancelling the impugned order u/s. 263 of the I.T. Act and allowing all the grounds of the Assessee? 40. The Revenue had challenged the order of the ITAT setting aside the order passed by the ld. Pr. CIT under section 263 of the Act on account of inadequate inquiry made by the AO on unsecured loans received by it from two parties. The question framed before the Hon'ble High Court was therefore whether the ITAT order was correct when adequate inquiries were not made by the AO. The Hon'ble High Court answered the question against the Revenue, noting that the ITAT had given a finding of fact that the AO had made full inquiries in detail and accepted the genuineness of the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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