AI Drafter 
TaxTMI 
TaxTMI 
2014 (12) TMI 140
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....dated 28.02.2014 is without jurisdiction, bad in law and be quashed. 2. Because the CIT (Central) has erred on fact and in law in holding that the order passed by the ITO under sec.153A r/w section 143(3) of the Act dated 31.03.2013 is prejudicial as well as erroneous to the interest of revenue. 3. Because the CIT has failed to make independent inquiries as mandated in section 263(1) "............, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary............... there being no inquiry by the CIT, the order passed under section 263 is bad in law and be quashed. 4. Because the order passed by the Assessing Officer having been approved by the JCIT, u/s 153D of the Act, and approval means application of mind, the order of the Assessing Officer having been merged with that of the JCIT, the CIT (Central) ceased to have power to exercise u/s 263 of the Act. 5. Because the Assessing Officer having framed the- assessment order u/s 153A/143(3) of the Act after making detailed enquiries, which proceedings being matter of search, and was subject to approval by the Addl. CIT/JCIT u/s 153D, cannot....
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....lam and his wife, Smt. Nausheen Farah Lari were carrying cash of Rs. 1 crore each in their two bags (totaling to Rs. 2 crores). A warrant under section 132 of the Act was issued by the DIT (Investigation), Kanpur and served on both of them and Panchnama dated 24.9.2010 was also drawn evidencing the seizure of Rs. 2 crores from Shri. Mehtab Alam and Smt. Nausheen Farah Lari. A statement under section 131(1A) of the Act was also recorded and in the statement of Shri. Mehtab Alam he introduced himself as Director in the company, M/s Model Tanners (India) Pvt. Ltd., Sultan villa, Jajmau, Kanpur and his wife, Smt. Nausheen Farah Lari as partner in Model Exims, Sultan Villa, Jajmau, Kanpur. Regarding source of cash of Rs. 2 crores, it was stated by Shri. Mehtab Alam that cash was being carried by them for purchase of raw hides through Jet Airways, flight No.9W24621 from Lucknow to Kolkata. In support of cash being carried by them, they produced photocopies of five undated letters written by the Director of M/s Model Tanners (India) Pvt. Ltd., Jajmau, Kanpur; Partner of M/s Model Exims, Jajmau, Kanpur; Director of M/s Model Echoes Pvt. Ltd., Jajmau, Kanpur, Proprietor of M/s S. K. Enterpr....
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....s : Rs. 25 lakhs 3) Model Echoes Pvt. Ltd. : Rs. 25 lakhs 4) S. K. Enterprises : Rs. 30 lakhs 5) A. L. Razeek : Rs. 70 lakhs 7. The copies of cash books of the aforesaid different companies were also furnished along with detailed reply. Being not convinced with the explanations of the ld. counsel for the assessee, the ld. Commissioner of Income-tax has observed that the cash of Rs. 2 crores found from the possession of Shri. Mehtab Alam and Smt. Nausheen Farah Lari is remained unexplained and should accordingly be treated as income from undiscoused source of the assessees as per section 68 of the Act. He accordingly held that though the Assessing Officer had information with him, yet he did not apply his mind to it. Still he took an erroneous decision resulting into income of Rs. 2 crores not being assessed to tax and this error has caused prejudice to the interest of the Revenue. Having held the assessment orders to be erroneous and prejudicial to the interest of the Revenue, the ld. Commissioner of Income-tax has set aside the assessment orders and directed the Assessing Officer to reframe the assessments after taking into account the points he made about on merit as ....
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....stablished that the detailed enquiry was made by the Assessing Officer during the course of assessment proceedings and when the Assessing Officer was satisfied with the explanations of the assessees relating to source of availability of cash, no addition was made in the hands of the assessees. The ld. counsel for the assessees has placed reliance upon the following judicial pronouncements in support of his contention that the assessment order cannot be set aside or revised under section 263 of the Act on account of inadequate enquiry:- 1. CIT vs. Vikas Polymers (2010) 194 Taxman 57 (Delhi) 2. Haryana Coach Body Builders vs. ITO, Rohtak (2006) 10 SOT 736 (Delhi). 3. CIT vs. Ganpat Ram Bishnoi (2006) 152 Taxman 242 (Raj.) 4. Balram Manmani vs. ACIT, 7 SOT 368 (Lucknow). 5. Salora International vs. ACIT, 2 SOT 705 (Delhi). 6. Malabar Industrial Co. Ltd. Vs. CIT, 243 ITR 83 (SC) 7. CIT vs. Gabriel India Ltd., 203 ITR 108 (Bom). 8. CIT vs. Max India Limited [2007] 295 ITR 282 (SC) 9. CIT vs. Sunbeam Auto Ltd., 332 ITR 167 (Del) 11. The ld. counsel for the assessee has further contended that while completing the assessment, approval was obtained from the JCI....
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.... It was further contended that the ld. Commissioner of Income-tax cannot thrust upon his opinion/wisdom upon the Assessing Officer. Therefore, the orders of the ld. CIT(A) passed under section 263 of the Act deserve to be set aside. 14. The ld. D.R., on the other hand, besides placing heavy reliance upon the orders of the ld. Commissioner of Income-tax passed under section 263 of the Act, has submitted that the Assessing Officer has not examined the issue of seizure of Rs. 2 crores from the assessee at the Choudhary Charan Singh Airport in the light of evidence collected. 15. We have heard the arguments advanced by the respective parties at length and from a careful perusal of the orders of the authorities below and the documents filed before us, we find that during the course of search operation, the statement of the assessee i.e. Shri. Mehtab Alam was recorded under section 131 of the Act and in his statement it was categorically stated by the assessee that he was carrying cash of Rs. 2 crores for purchase of raw hides from Kolkata. In support of cash being carried by them, they produced the photocopies of five undated letters, which are as under:- 1. Letter written by t....
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....tioned purpose. 2 -Do- Director M/s Model Echoes Pvt. Ltd, Jajmau, Kanpur NIL That we draw the cash Rs. 25,00,000/- from your branch for the purpose of raw hides from Kolkata due to less price prevail in the market and cash carried by Mr. Mehtab Alam. In this letter a request made to issue a certificate for mentioned purpose. 3 -Do- Partner M/s Model Exims Pvt. Ltd, Jajmau, Kanpur NIL That we draw the cash Rs. 25,00,000/- from your branch for the purpose of raw hides from Kolkata due to less price prevail in the market and cash carried by Mr. Mehtab Alam. In this letter a request made to issue a certificate for mentioned purpose. 4 The Manager IDBI Bank M.G. Road, Kanpur Prop. M/s S.K Enterprises, 95/26, Farash Khana, Kanpur NIL That we draw the cash Rs. 30,00,000/- from your branch for the purpose of raw hides from Kolkata due to less price prevail in the market and cash carried by Mr. Mehtab Alam. In this letter a request made to issue a certificate for mentioned purpose 5. -Do- Partner AL - Razeeq Traders Jajmau, Kanpur NIL That we draw the cash Rs. 70,00,0007- from your branch for the purpose of raw hides from Kolkata due to less price prevail in the mar....
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....aw hides and export of finished leather/leather goods, the assessee was duty bound to meet its export commtments. Failure on the part of the assessee's business concerns to meet its export obligations would have caused tremendous financial loss on account of both cancellation of orders and forfeiture of funds and as well as jeopardize the goodwill. Calcutta is a very good market for raw hides. Raw hide is a product of animal husbandry and is cash business. Thus, the business concerns of the assessee, being desperate made a move to purchase raw hides from Calcutta market and it was in this context that the assessee proceeded to Calcutta to purchase raw hides. Here its may be mentioned that purchase of raw hide in cash is specifically exempt as per Rule-6DD of Sec. 40A(3). The other reason of carrying cash was that the agents/suppliers/producers of raw hides insist on cash payment alone. That 24.09.2010 was Friday and the next day being Saturday and Sunday, it would not have been possible to enter into the transactions through bank. Moreover the transactions through bank is not feasible for the reason of time factor as well as the identity of the seller. Besides the assessee and ....
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.... withdrawals have already been placed on file. Copies of all the above papers was furnished both before the Investigation Wing also as well as before the AO i.e. DCIT-l (1), Kanpur with whom Mahtab Alam and Nausheen Farah were being assessed to tax. It may be submitted that carrying cash is not prohibited. There is no any unlawful incident against the assessee. The explanation of the assessee that the amount was being carried for the purpose of business cannot be disbelieved and suspected. The persons to whom this money belongs or relates, have all admitted as one belonging to them by way of producing their cash books, their bank accounts and also by the nature of the business. They are all assessed to tax. There is no denial from any of these persons vis-a-vis the cash found and owned by them. Confirmation from them duly stands supported by the extracts of the cash book. In the facts and circumstances, it is prayed that the source and acquisition of cash of R.2 Crores found from the possession of the assesses and his wife is totally explained. The purposes/reasons for carrying such cash has also been explained above. The same is related and for the purposes of business. N....
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....tion of the assessee, Smt. Nausheen Farah Lari. These assessment orders were framed under section 153C read with section 153A of the Act consequent to the search and seizure operation conducted upon the assessee, in which cash of Rs. 2 crores were found. Therefore, the issue of seizure of Rs. 2 crores was also examined by the Revenue authorities in the hands of the concerned persons to whom the cash relate. Our attention was also invited to the copies of the extract of cash book in the case of Model Tanners (India) Pvt. Ltd.; Model Exims; Model Echoes Pvt. Ltd.; S. K. Enterprises and A. L. Razeek to establish the availability of cash in their books of account. 20. From a careful perusal of these evidences, we are of the considered opinion that while completing the assessment not only in the case of the assessees but also in the case of other assessees, to whom the cash was claimed to relate, were thoroughly examined by the Assessing Officers in their respective hands by making detailed enquiries/investigations and once the Assessing Officer was convinced with the explanations with regard to the source of cash of Rs. 2 crores found from the assessee during the course of search, n....
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....has caused loss of the revenue. There must be material before the ld. Commissioner of Incometax to satisfy himself prima facie that the two requisites are present. Power cannot be exercised at the whims and caprice of the ld. Commissioner of Income-tax. In that case, the Income Tax Officer has made enquiries in regard to the nature of expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by letter in writing. All these are part of the record of the case. Such decision of the Income Tax Officer cannot be held to be erroneous simply because in his order he did not make any elaborate discussion in that regard. Therefore, the Hon'ble High Court has held that without finding the order of the Income Tax Officer as erroneous, the ld. Commissioner of Income-tax cannot set aside the same and direct the Income Tax Officer to re-examine the facts. 26. Again in the case of CIT vs. Max India Limited [2007] 295 ITR 282 (SC), their Lordships of the Hon'ble Apex Court have re-examined the scope of provisions of section 263 of the Act and has held that where two views are possible and the Income-tax Officer has taken one view with which the Comm....
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....of enquiry is erroneous. This can only happen if any enquiry or verification is conducted by the ld. Commissioner of Income-tax and he is able to establish and show error or mistake made by the Assessing Officer making the order unsustainable in law. The ld. Commissioner of Incometax cannot direct the Assessing Officer to conduct further enquiry without recording a finding that the order of the Assessing Officer is erroneous. 29. Again in the case of CIT vs. Vikas Polymers (supra), their Lordships have held hat for invoking the jurisdiction under section 263 of the Act, both the twin conditions namely (1) the order of the Assessing Officer sought to be revised is erroneous; and (2) it is prejudicial to the interest of the Revenue, must coexist. If one of them is absent i.e. if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but it is prejudicial to the revenue-recourse cannot be had to section 263(1) of the Act. It is a pre-requisite that the Commissioner must give reasons to justify the exercise of suo motu revisional powers by him to reopen a concluded assessment. A bare reiteration by him that the order of the I....
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....he case of CIT vs. Dr. Ashok Kumar (supra) on an issue whether the assessment order was passed with the approval of the Addl. CIT and their Lordships have held that the Assessing Officer was fully alive about the facts of the case and that is why he got necessary approval of the Addl. CIT before completing the assessment orders for all the assessment years and once that is not disputed by the Revenue, then the ld. Commissioner of Income-tax would not be justified in interfering in the approval according by the Addl. CIT for framing the assessment order and thus there was no case for setting aside the assessment order for the assessment years in question. 33. Though the assessee has also placed reliance upon the judgment of the Hon'ble jurisdictional High court in the case of Mohd. Ayub vs. Income Tax Officer (supra) in support of his contention that combined show cause notice for initiating action under section 263 of the Act cannot be issued and if issued, the order consequent thereto is not valid in law, but in this judgment the jurisdictional High Court has dealt with the issue of common notice issued for reopening of assessment under section 147 of the Act. Undisputedly ....