AI Drafter 
TaxTMI 
TaxTMI 
2018 (3) TMI 1906
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.... setting aside the assessment order holding that the assessment framed by the Assessing Officer ("AO") was erroneous and prejudicial to the interests of revenue, was made without making necessary inquiries, and in directing the AO to quantify the amount of undisclosed cash deposited by the assessee in his bank accounts by examining the assessee in respect of all the bank transactions, i. Ignoring that the learned AO had made full enquiries by issuing notice u/s 142(1) and calling for details and copies of all bank statements, full details of investments with source of these investments, details of income from other sources, copies of balance sheet and statement of affairs and, most important, details of investments made as per AIR details that were enclosed with the notice issued u/s 142(1), ii. Ignoring that the above-stated issues were discussed by the learned AO with the assessee over at least three hearings, iii. By simply ordering fresh investigation without indicating how the assessment order was erroneous, i.e. contrary to law, and prejudicial to the interests of revenue, iv. By simply remanding the matter to the learned AO without giving ....
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....be initiated in this case. It is further noted by the Commissioner that the said report mentioned that the then Assessing Officer passing the assessment order, i.e., DCIT-26(1), did not make any enquiry about the AIR information received regarding cash deposits amounting to Rs. 30,70,000/- made in the bank account of the assessee during the previous year relevant to the assessment year under consideration while concluding the assessment u/s 143(3) dated 08.06.2011 (supra). The Commissioner thereafter issued a show cause notice u/s 263 of the Act dated 14.02.2013. While initiating the show cause notice u/s 263 of the Act, the Commissioner observed that in the assessment proceedings, the Assessing Officer had accepted the submissions and explanations furnished by the assessee regarding the cash deposits of Rs. 30,70,000/- without making "necessary inquiries" as were called for in the facts and circumstances of the case. Notably, the Commissioner noted that the explanation of the assessee was that the deposits of Rs. 30,70,000/- made in the bank account maintained with the HDFC Bank had come out of the cash in hand available of Rs. 37,50,000/- as on 01.04.2008. The point made by the C....
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....ion of the various bank statements revealed that the cash in hand claimed by the assessee at the end of various assessment years was at variance with the actual cash in hand available with the assessee as per the cash statement/cash flow prepared on the basis of the bank statements of various bank accounts. In the course of proceedings, the Commissioner noted that as against claimed opening cash balance as on 01.04.2008 of Rs. 37,54,000/-, the tabulation prepared by him showed only an amount of Rs. 9,18,800/-. In response, the assessee pointed out various mistakes, and the Commissioner records in para 19 of his order that after rectification, the available opening cash balance would be to the tune of Rs. 14,76,900/-. Accordingly, he inferred that there was a difference of Rs. 23,46,948/- which remained unexplained/unaccounted on account of the cash deposited by the assessee in his bank account during the year and this has prevailed with him to set-aside the assessment order dated 08.06.2011 (supra). Another aspect which has been noted by the Commissioner is that the assessee has been depositing cash as and when required inasmuch as the cash has been deposited to facilitate clearanc....
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....00/- was comprehensive and correct, based on all the entries in the bank accounts, and for that matter, referred to the Paper Book in this regard. The learned representative pointed out that so far as the statement prepared by the Commissioner is concerned, it contains discrepancies inasmuch as the entire entries of cash deposits and withdrawals from the bank account have not been considered. Pointing out the basic incorrectness in the approach of the Commissioner, the learned representative referred to page 209 of the Paper Book, which is the cash summary from 01.04.2001 to 31.03.2008, and pointed out that opening cash in hand was not considered. On the contrary, the learned representative pointed out that the cash statements submitted by the assessee before the Assessing Officer were from 01.04.2001 to 31.03.2009 and were based on each and every entry appearing in the bank account, whereas the Commissioner had picked-up only few entries from the bank statement and not the entire ones. On this basis, it is sought to be pointed out that the basis formulated by the Commissioner to reject the explanation furnished by the assessee at the stage of assessment, and which has been duly ve....
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....it is prejudicial to the interests of the Revenue, he may, after giving assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify including, an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. In the instant case, the Commissioner has invoked his revisionary power in the context of assessment order dated 08.06.2011 (supra) and the same has been set-aside with direction to make assessment afresh after giving opportunity to the assessee. Notably, invoking of Sec. 263 of the Act rests on the fulfilment of two conditions prescribed therein, namely, that the order passed by the Assessing Officer is erroneous and that it is prejudicial to the interests of the Revenue. The Hon'ble Supreme Court in the case of M/s. The Malabar Industrial Co. (supra) has categorically laid down that both the conditions have to be cumulatively fulfilled before recourse to Sec. 263 of the Act can be justified. It may be noted that the power to invoke his revisionary jurisdiction qua the assessment order has to be based on the exa....
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....t withdrawals. For this, the Commissioner refers to the bank statements obtained by him from the banks. Notably, such statements were not available with him when he initially examined the record of proceedings for initiating the proceedings u/s 263 of the Act. Curiously, the Commissioner in para 2 of his order gives an insight as to how the proceedings u/s 263 of the Act have been initiated. In para 2 of his order, the Commissioner refers to a report from ACIT-26(1), Mumbai dated 03.01.2013 proposing initiation of remedial action u/s 263 of the Act because the deposit of cash "has not been properly investigated". A copy of such communication of ACIT-26(1), Mumbai has been placed in the Paper Book filed before us. Before we proceed to examine as to whether a report of the Assessing Officer can be a good basis to initiate the proceedings, we may touch upon certain other material which has been placed in the Paper Book and has been referred to at the time of hearing. Our attention was drawn to a communication dated 26.06.2012 of DCIT-26(1), Mumbai addressed to the Commissioner of Income-tax-26, Mumbai on the 'subject - Review of Shri Adishwar Jain A.Y 2009-10'. In this communication, ....
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....t most of the cash deposit in his bank account came out of cash available out of past withdrawals. At this stage, it is pertinent to mention that the infirmity found by him, namely, "lack of necessary inquiry" is not based on the examination of record of proceedings before him, but on the basis of the information and inquires which were called for by him after the proceedings u/s 263 of the Act were initiated by him. We may hasten to add here that it is not our case that the Commissioner is without power to make or cause to make such inquiries as he may deem necessary; but such a course is open to him to pass a final order but in order to justify the initiation of Sec. 263 of the Act, the twin conditions have to be established on the basis of his examination of the record of proceedings available at the time of initiation. On this aspect, the learned representative had relied on the ratio of the decision of the Hon'ble Delhi High Court in the case of CIT vs New Delhi Television Ltd., 360 ITR 44 (Delhi) and also the judgment of the Hon'ble Bombay High Court in the case of Commissioner of Income Tax vs Gabriel India Ltd., 203 ITR 108 (Bom.). Notably, in the instant case, the ....
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.... justify invoking of Sec. 263 of the Act. The Hon'ble Delhi High Court in the case of New Delhi Television Ltd. (supra) by referring to its earlier decision in the case of CIT vs Sunbeam Auto Ltd., 332 ITR 167 (Delhi) noted the distinction between purported 'no verification' by the Assessing Officer and 'incomplete or inadequate verification'. The Hon'ble High Court emphasised the distinction between lack of inquiry and inadequate inquiry. According to it, if there was an inquiry, even inadequate, that would by itself not give an occasion for the Commissioner to invoke Sec. 263 of the Act merely because he has a difference of opinion in the matter. A similar proposition is also found adumbrated in the judgment of the Hon'ble Bombay High Court in the case of Gabriel India Ltd. (supra). Insofar as the present case is concerned, in our considered opinion, even the charge of inadequate inquiry by the Commissioner is not based on his examination of the record of proceedings, but on his subjective analysis of the records called for by him subsequent to initiation of the proceedings u/s 263(1) of the Act. 15. Considering the entirety of circumstances, we find that initiatio....