TaxTMI 
TaxTMI 
2018 (1) TMI 180
X X X X Extracts X X X X
X X X X Extracts X X X X
....g of Indian Made Foreign Liquor. The assessee filed its return of income for the Asst Year 2011-12 declaring total income of Rs. 15,14,564/-. The case was selected for scrutiny. In the course of assessment proceedings, the assessee furnished copies of cash book and party ledgers before the ld AO which were duly examined by the ld AO. The assessee produced details of creditors in support of its claim of purchases and the ld AO issued notices u/s 133(6) of the Act in order to verify the claim of the assessee. The ld AO observed that the assessee had made cash payments exceeding Rs. 20,000/- on a single day in contravention of provisions of section 40A(3) of the Act and disallowed a sum of Rs. 1,44,52,154/- in the assessment, ignoring the submissions of the assessee explaining the circumstances under which such cash payments were made. The said assessment was completed u/s 143(3) of the Act on 4.3.2014. The assessee preferred an appeal before the ld CITA against this order of assessment and the same is stated to be pending. 4. While this was so, the ld Administrative CIT sought to revise the assessment u/s 263 of the Act by treating the same as erroneous in as much as it is prejudi....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../- ( 4,73,29,301 + 40,38,080) and whereas the purchases shown in the profit and loss account was Rs. 4,66,29,230/- only, for which reconciliation was sought for by the ld CIT. 5. The assessee explained that the difference in purchases between purchase parties list and that shown in the profit and loss account was due to TCS amount of Rs. 4,68,521/- and credit note given by the party in the sum of Rs. 2,31,550/- which has been reduced in the profit and loss account towards purchases account. Hence there is no under reporting of purchases in the profit and loss account. It was also explained that there was no purchase of Rs. 40,38,080/- from Raja Ram Yadav as stated by the ld CIT in his show cause notice during the Asst Year 2011-12. It was further stated that the issue of disallowance u/s 40A(3) of the Act had been the subject matter of appeal before the ld CITA and the same is pending and hence the very same issue of section 40A(3) of the Act could not be the subject matter of discussion in revision proceedings u/s 263 of the Act. 6. The assessee further explained that the entire issue of purchases were duly examined by the ld AO in the course of assessment proceedings by iss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding issue of applicability of provision of section 40A(3) of the Income Tax Act, 1961 on the cash payment having amount exceeding Rs. 20,000/- per payment/entry to purchase parties, Authorised representative of the assessee stated in his submission that "regarding violation of sec 40A(3), the matter is at Appeal stage". No further clarification/explanation was furnished by the assessee during the proceeding u/s 263 along with original cash book, party ledger to sustain that payment beyond Rs. 1,44,52,174 was made within the purview of sec. 40A(3) of the IT Act 1961. Therefore, the type and number of violations, amount paid and disalIowable thereon could not determined. It is a fact that the entire purchase of the assessee was admittedly made in cash, not routed through bank. In view of this fact the said transaction in connection with purchase needs to be re-examined at the micro level to check whether the other transaction over and above the disallowances of Rs. 1,44,52,174 pass the test of provisions u/s 40A(3) of the IT Act, 1961. 6(II) The Assessing Officer is directed to re-examine the issue of cash payment exceeding Rs. 20,000/- at the micro level which att....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne the genuineness of the claim of assessee. 6. (V)Regarding discrepancy in purchase amount as mentioned in foregoing paragraph no 2(111), assessee submitted during proceeding u/s 263 that "the difference is due to a) T.C.S amount of Rs. 468521/- b) credit note of Rs. 231550/- ".But no corroborative evidence in support of T.C.S. mismatch or bills, ledger or any reconciliation statement of parties was produced during proceeding u/s 263. Therefore, the discrepancy in purchase could not be verified. 6.(VI) The Assessing Officer is directed to re-examine the above discrepancy in purchase with supporting bills, party ledger, reconciliation statement and other relevant documents. 7. It is a settled position of law that the failure to make enquiries which are called for on the facts of the case would itself make the assessment erroneous and prejudicial to the interest of revenue." Finally the ld CIT observed in his order as under:- "8. In view of facts as stated above, it is hereby held that assessment order u/s 143(3) of Income Tax Act, 1961 dated 04-03-2014 passed in this case for Assessment Year 2011-12 is erroneous and prejudicial to the interest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quiries of some of the sundry creditors against purchases in spite of the fact that after thorough scrutiny of the details of purchases, supporting bills, party ledger, books of accounts and after application of mind, the AO. accepted the purchases and moreover the alleged discrepancies pointed out by the Ld. Pr. CIT were also duly explained during 263 proceeding, warranting thus any scope of discrepancy in purchase account. 6. That as the order of Ld. Principal CIT on the above issues suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for. 7. That the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds." 9. We have heard the rival submissions and perused the materials available on record. We find that the ld CIT had set aside the order of the ld AO by treating it as erroneous and prejudicial to the interests of the revenue. The short point that arises for our consideration is as to whether the order of the ld AO could be construed as erroneous in the facts and circumstances of the case. It is not in dispute th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oreover, we find that the ld CIT had not brought on record how the order passed by the ld AO was erroneous. He had only directed the ld AO to make further enquiries by expanding its scope, to find out whether error had crept in in the earlier order. This, in our considered opinion, is not permissible in the revisionary proceedings u/s 263 of the Act by the ld CIT. Reliance in this regard is placed on the decision of the Hon'ble Bombay High Court in the case of CIT vs Nirav Modi reported in (2016) 71 taxmann.com 272 (Bom) dated 16.6.2016 wherein it was held that :- 7. Firstly, the Revenue contends that the exercise of powers under Section 263 of the Act is justified as in this case, as no inquiry in respect of the gifts received during the subject years was done by the Assessing Officer for the Assessment orders for Assessment Years 2007-08 and 2008-09. This according to the Revenue is evident from the Assessment Orders dated 31st December, 2009 and 30th December, 2010 which does not even make a mention of the gifts received much less discuss and/or deal with the same. This issue is no longer res integra as this Court in Idea Cellular Ltd. v. Dy. CIT [2008] 301 ITR 407 (Bom....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the CIT recording how and why the order is erroneous due to not examining the donors. Thus, this objection to the impugned order by the Revenue is also not sustainable. 9. It was next submitted that no enquiry was done by the Assessing Officer to find out whether the donor Mr Deepak Modi (father) had received money from M/s. Chang Jiang as claimed. Nor any inquiry was done to find out whether the sister had in fact earned amounts on account of Foreign Exchange Transactions as claimed by her. We find that this enquiry of a source of source is not the requirement of law. Once the Assessing Officer is satisfied with the explanation offered on inquiry, it is not open to the CIT in exercise of his revsional powers direct that further enquiry has to be done. At the very highest, the case of the Revenue is that this is a case of inadequate inquiry and not of "no enquiry." It is well settled that the jurisdiction under Section 263 of the Act can be exercised by the CIT only when it is a case of lack of enquiry and not one of inadequate enquiry. This view has been taken by this Court in the matter of CIT v. Shreepati Holdings & Finance (P.) Ltd. [ITA 1879 of 2013 dated 5th October....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... directs the Assessing Officer to find out whether the order is erroneous by making further enquiry. This the decision of the Delhi High Court in D.G. Housing Projects Ltd. (supra), clearly negates. In the above view, the decision of Delhi High Curt in D.G. Housing Projects Ltd. (supra) would not assist the Revenue in the present facts. In the instant case, the ld CIT himself concedes in his order that the ld AO had not made complete and full enquiry on the issue of purchases. 9.1. We find that the ld CIT nowhere in his order had definitely held that the expenditure over and above the sum of Rs. 1,44,52,154/- falls within the purview of section 40A(3) of the Act or that the records show that the purchase claim made or their creditors are bogus. He is only raising a suspicion that there might be some more payments falling within the ambit of section 40A(3) of the Act or the related purchases / creditors could be bogus. Moreover, we find that the ld CIT had directed the ld AO to find out, basing on further enquiries to be conducted by the ld AO, whether the earlier order passed by him was erroneous or not. If he has got some doubt, then the ld CIT himself should conduct the nec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....then the assessee would have repaid the creditors instead of making advances to partners since most of the creditors represented balances brought forward from earlier years. Here the ld CIT concedes that the difference in closing balances in creditors account did not occur due to purchases made during the year under appeal and that the said difference arose only in the opening balance. Hence in any case, there cannot be any addition towards opening balance of sundry creditors in this year under appeal under any provisions of the Act. Hence there cannot be any error that could be attributed in the order of the ld AO in this regard. 9.4. As far as the discrepancy in the purchases figure, the assessee had filed a party wise reconciliation statement before the ld CIT enclosed in page 13 of the paper book which contained credit notes issued by several parties to the tune of Rs. 2,31,550/- contributing to the difference in purchases. We find that the ld CIT had merely directed the ld AO to reconsider the matter without pointing out any specific error in the assessment concluded by the ld AO in this regard. Further Rs. 4,68,521/- was on account of Tax Collected at Source (TCS) by the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- a) CIT vs Subarna Plantation and Trading Co. Ltd reported in 238 ITR 319 (Cal) b) CIT vs Vippy Solvex Products (P) Ltd reported in 228 ITR 587 (MP) c) CIT vs Sashi Theatre Pvt Ltd reported in 248 ITR 126 (Guj) d) CIT vs Ram Kishore Raj Kishore reported in 135 Taxman 511 (All) e) CIT vs K Sera Sera Productions Ltd reported in 374 ITR 503 (Bom) f) CIT vs Palghad Shadi Mahal Trust reported in 212 ITR 287 (Ker) g) CIT vs Saraff Bandhu P Ltd reported in 216 ITR 833 (Bom) 10.2. We hold that the ld CITA having conferred with the co-terminus powers with that of the ld AO has got every right to even enhance the assessment if circumstances so warrant. Just because the ld CITA had not exercised his enhancement powers in the instant case, even if it is to be done, that would not confer automatic revisionary power u/s 263 of the Act for the ld CIT. In this regard, the reliance placed by the ld AR on the observations of the Hon'ble Supreme Court in the case of Jute Corporation of India Ltd vs CIT and Another reported in 187 ITR 688 (SC) is very well founded, wherein it was held that :- 5. In CIT v. Kanpur Coal Syndicate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Section 263 - Revision of orders prejudicial to revenue (1) .................. Explanation 1 - For the removal of doubts, it is hereby declared that, for the purposes of this sub-section, - (c ) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal. Hence the emphasis is to be given on the expression 'matters as had not been considered and decided in such appeal' in Clause (c ) of Explanation 1 to section 263(1) of the Act. Hence even if the issues raised by the ld CIT in the revision proceedings u/s 263 of the Act are found to be correct, the same could very well be done by the ld CITA in the first appellate proceedings, if he so desires, in view of enhancement powers provided to him in the statute. It would be relevant to look into the decision of the Hon'ble Calcutta High Court in the case of Oil India Ltd vs CIT rep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onths. But, now, if further consideration is superimposed by the Commissioner by rectification made by the ITO as a result of the order passed by the Commissioner under section 263 then that would be in conflict with the direction given by the AAC in his appellate order. Therefore, where an appeal is preferred and the subject-matter of appeal, particularly raised, is the subject-matter before the AAC, then that order, in our opinion, cannot be the subject-matter of an order of revision by the Commissioner. This principle, however, comes where the appeal does not lie from the order of the ITO and before the AAC where different kinds of appeal are provided for in the scheme of the Income-tax Act. This principle was enunciated by the Supreme Court in the case of CIT v. Amritlal Bhogilal & Co. [1958] 34 ITR 130 (SC). This was also reiterated in the decision in the case of Jeewanlal (1929) Ltd. v. Addl. CIT [1977] 108 ITR 407 (Cal) and the decision in the case of Premchand Sitanath Roy v. Addl. CIT [1977] 109 ITR 751 (Cal). The Allahabad High Court reiterated the same principle in the case of J.K. Synthetics Ltd. v. Addl. CIT [1976] 105 ITR 344 (All). Therefore, it appears to us that as....