TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 189
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....brevity) accepted the return of income without making any addition in this case vide order dated 23.03.2016 passed under section 143(3) of the Act. However, the Ld. PCIT after perusal of the assessment record was of the view that the assessment order was erroneous in as much as it was prejudicial to the interest of the revenue in respect of certain issues, hence, he issued show cause notice u/s 263(1) of the Act to the assessee as under: "3. As per CIB information, you made the following cash deposits in your bank accounts:- 1. 69,25,000 15.06.2012 2. 30,75,000 14.06.2012 3. 7,50,000 19.12.2012 4. 1,00,00,000 10.09.2012 5. 3,07,200 01.10.2012 6. 60,00,000 11.09.2012 Total 2,70,57 ,200 As per AIR Information, you made following cash deposits in your bank accounts:- 1. 1,60,00,100 31.03.2013 2. 1,04,74,700 31.03.2013 When enquired, you filed copy of cash book. As per Cash Book (copy obtained and available in records), you had shown opening cash-in-hand of Rs. 1,06,03,607/-. You are maintaining bank accounts in different banks and hence maintaining such a huge cash in hand should have been examined from the angle of unexplained investments, whic....
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....the provisions of Section 68 of the Income Tax Act, 1961 and had been presumed as genuine by the Assessing Officer simply on the basis of these transactions being of banking nature. Huge transactions in the bank accounts in respect of an assessee who has shown meager income of Rs. 8,43,730/- only should have been examined in depth. No income from such a large investment of Rs. 2 crone had been shown by you in the return. No cash flow statement furnished by you though specifically asked by the Assessing Officer in the questionnaire. 8. You gave interest free loans to VK. Holding at Rs. 7,30,000/, V.K. Infratech Pvt. Ltd. Rs. 1,66,30,000/- during the year. The nature of investments had not been examined. You had also given interest free advances to M/s V.K. Real tech Ltd., Delhi with opening debit balance Rs. 2,53,02,000/- and closing balance Rs. 1,97,02,000/, Benefit derived from these investments should have also been examined by the Assessing Officer. Without deriving any benefit directly or indirectly, such huge investments were not made. The Indirect benefit derived by such investment by any member of your family in terms of income was assessable u/s 64 of the Income Tax Act,1....
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....rson's giving advances for indefinite period should have been probed by the Assessing Officer. Detailed investigation in respect of these advances could have resulted in unearthing particulars of income apparently concealed by the assessee." 3. In response to the aforesaid notice, the assessee filed reply on dated 12.03.2018 the contents of which have been summed up by the Ld. PCIT in the impugned order, which read as under: " The relevant submissions stated that as per CIB information regarding cash deposits in the bank account of the assessee was filed during the course of assessment proceedings. The case for the assessment year 2012-13 was also taken in scrutiny on the same fact. The assessee has been keeping cash in hand of a higher volume. The nature of business of the assessee requires cash in hand to clinch beneficial deals. However, during the course of assessment proceedings, the source of deposits in bank, copies of bank accounts, cash book and ledger were submitted before the Assessing Officer. That the case was selected on the basis of AIR information and the information was duly submitted during assessment proceedings before the AO. Various deposits mentio....
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....egarding non payment of interest by Sh. Ranjan Gupta. The amount of interest of free loans is much more than the amount advanced, inter alia to Sh. Ranjan Gupta the case of the assessee is supported by decision of Punjab & Haryana High Court in the case Bright Enterprises Pvt. Ltd. supra. 6. Since charging of interest on cancellation of deal was sine qua non of the transactions, non charging of interest cannot be objectionable. Further how a person arranges the funds on cancellation of a contract is not the responsibility of the assessee and hence no adverse inference may be drawn. 7. The assessee purchased eight drafts of Rs. 50,00,000/- each out of cash in hand available in the books and is quite apparent from the copy of the cash book submitted before AO during assessment proceeding. Out of these 4 drafts were cancelled and the other 4 were got encashed by the concerned person. The amount was given for arranging loans for the business. Later it was apprehended that the assessee was victim of fraud, the balance four drafts were encashed. It is not a case of accepting any deposit, there is no question of application of the provisions of section 68. 8. The assessee is a partn....
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....ns which should have been made and even without application of mind. He therefore, held that the assessment order passed by the A.O. was erroneous in so far as it was prejudicial to the interest of revenue. He accordingly setaside the order of the A.O. to make assessment a fresh on the issues as noted above. 5. The assessee has thus come in appeal before us contesting the above action of the Ld. PCIT. 6. At the outset, the Ld. Counsel for the assessee has invited our attention to the assessment order in question dated 23.03.2016 passed u/s 143(3) of the Act and has submitted that the return filed by the assessee was originally processed u/s 143(1) of the Act, however, the case was later selected for scrutiny under the CASS because as per CIB information, the assessee had made cash deposits in his bank account. The Ld. Counsel in this respect has submitted that the Ld. Assessing officer, therefore, had made adequate enquiries regarding the source of deposits by the assessee in his bank account, the details and explanation regarding which were duly supplied by the assessee to the Assessing officer and the Assessing officer being satisfied with the evidences given by the assessee co....
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....led. The issue was again clarified vide letter dated 19.10.2015 (placed at page 18 of PB). In respect of Dr. Gulshan Gupta and Ranjan Gupta, wife and son of the assesse, their copies of account duly confirmed by them were filed giving their PAN No. 3. No interest was charged on the debit balances of Gulshan Gupta and Ranjan Gupta During the course of revision proceeding it was explained to the learned PCIT that since the capital of the assessee and amount of interest free loans was much more than the interest free advances no adverse inference could be drawn in view of the decision of the Hon'ble jurisdictional High Court in the case of Bright Enterprises Pvt. Ltd. v/s CIT (2016) 381 ITR 107 4. Receipt of 12,00,000/- from son Ranjan Gupta; 7,00,000 on 30.11.2012 and 5,00,000/- on 30.03.2013 against debit balance of Rs. 17,67,960/- Facts are same as discussed in 3 above. 5. Repayment of opening balance of Rs. 14,55,000/-in two installments of Rs. 8,00,000/- on 11.02.2013 and Rs. 6,55,000/- on 23.02.2013 by Kulwant Singh. The A.O did not examine the genuineness of the credit and chargeability of interest on the debit balance. Since it was noticed by the Id. PCIT that th....
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....d by obtaining complete the details from the assesse. Vide letter dated 19.10.2015 it was explained vide reply to query no. 2 that expect for loans and advances except loan /advances to Gulshan Gupta and Ranjan Gupta all other advances and loans were old. During the course of proceeding of under section 263 it was explained to the PCIT ( page 36 of the paper book) all 35 advances were against sale of plots which pertained to assessment year 2012-13 and IN ere examined during course of assessment proceeding of the year. So for as the year under appeal is concerned no advance was received hence there was no occasion for the learned A.O to make any enquiry as to genuineness or the factual aspect of the case. No document was required to be drawn as the advances were not received in the year under appeal. From the above chart it would transpire that:- 1. In respect of the Sr. No. 1 of the chart the ld. PCIT is of the view that since the assessee was maintaining huge cash balances, besides the reasons given by the assessee, the ld. A.O should examine the issue from the angle of possible unexplained investment for which there is nothing adverse on record. As per the reply filed duri....
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.... of the PCIT to submit that the Ld. PCIT has categorically observed that the A.O. simply accepted the submissions on the assessee but failed to make the required enquiries and verifications. 9. We have considered the rival contentions made by the representatives of both the parties. A perusal of the notices issued by the A.O. and replies thereto furnished by the assessee reveal that all the queries raised by the A.O. including about the source of deposits were duly answered by the assessee supported with the documentary evidence. It has also been mentioned in the assessment order that after discussion and verification of details /explanations furnished by the assessee the income of the assessee was assessed at =.843730/-. However, the Ld. PCIT has set aside the assessment order on the ground that the assessing officer should have made more enquiries. The issue before us is that whether the Ld. PCIT was justified u/s 263 in setting aside the assessment order and directing the A.O. to make more/further enquiries in the relevant facts and circumstances of this case. 10. To arrive at the correct conclusion of the case, we deem it necessary to reproduce the relevant provisions of sect....
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....ment/dissatisfaction there to, it was not open to the Ld. PCIT to brand the order of the A.O. as erroneous. Admittedly, the AO asked the assessee to furnish the necessary details from time to time which were duly furnished by the assessee and after considering the same the AO passed the assessment order. 13. Then the second step for the Ld. PCIT, as per the provisions of section 263 as enumerated above, was that after getting the reply/explanation from the assessee, the Ld. PCIT was supposed to examine the contention of the assessee in respect of each of the issue. Before passing an order of modifying, enhancing or cancelling the assessment, he was supposed either to himself make or cause to make such an enquiry as he deems necessary. The words "as he deems necessary", in our view, do not mean that the Ld. PCIT was left with a choice either to make or not to make an enquiry. As per the relevant provisions of section 263, it was incumbent upon the Ld. PCIT to make or cause to make an enquiry. So far as the words "as he deems necessary" are concerned, the said words suggest that the enquiries which are necessary to form a view as to whether the order of the AO is erroneous and pre....