TaxTMI 
TaxTMI 
TaxTMI 
2021 (9) TMI 1133
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....d. Therefore, the impugned order dated 11.03.2021 u/s 263 of the Act kindly be quashed. 3. The ld. Pr. CIT erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly holding that the AO failed to examine and verify the claimed recoveries made in cash from the Sundry Debtors and erred in cancelling/ setting aside the subjected assessment order passed u/s 143(3) dated 10.12.2018, with a direction to the AO to examine the identity & creditworthiness of the debtors, genuineness of the transactions w.r.t. recovery of advances of cash amount of Rs. 85 Lakh and also to make necessary additions wherever required. The assumption of jurisdiction u/s 263 and the impugned direction, being contrary to the provisions of law and facts on record hence, the proceedings initiated u/s 263 of the Act and the impugned order dated 11.03.2021 deserves to be quashed. 4. The ld. Pr. CIT erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly invoking Explanation 2 to S. 263 as if the same conferred unbridled power upon the Pr. CIT even though the facts and circumstances of the ....
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.... by you in the month of March, 2016 and because of this lack of enquiry, the assessment order in your case for A.Y. 2016-17 is found to be erroneous in so far as it is prejudicial to the interest of Revenue." 4. In response to the show-cause, the assessee filed his submissions and necessary information/documentation which were considered but not accepted by the ld PCIT and the assessment order passed u/s 143(3) was held as erroneous and prejudicial to the interest of the Revenue and the assessment order was set aside and the Assessing Officer was directed to examine the matter afresh after providing reasonable opportunity to the assessee. Against the said findings and order of the ld PCIT, the assessee is in appeal before us. 5. During the course of hearing, the ld. AR raised various contentions as are contained in his written submissions and the contents thereof read as under: "1. Legal Position on Sec.263 - Judicial Guideline: Before proceeding, we may submit as regards the judicial guideline, in the light of which, the facts of this case are to be appreciated. 1.1 The pre-requisites to the exercise of jurisdiction by the CIT u/s 263, is that the order of the Assessing Office....
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....n principle. 2. Due application of mind: 2.1 It is submitted that the AO had raised very specific and relevant queries/called for explanation and evidences w.r.t. cash recoveries made from the Sundry Advances (debtors), to the extent he was supposed to act in law. The AO after making a detailed enquiry relating to the issue in hand and examination of books of account, in particular cash book for the current year (PB 23-26) and other records being Balance Sheets starting right from A.Y. 2008-09 to 2015-16 (PB 23-50) took a possible view that the assesse was having sufficient cash available immediately prior to the subjected cash deposits (i.e. 08.11.2016 and onwards) and completed the subjected assessment without any variation. The relevant para of the assessment order, wherein the AO has examined each any every documents submitted by assessee during scrutiny proceedings, is reproduced below: "The case was selected for scrutiny through manual scrutiny guidelines issued by the CBDT. The first notice u/s 143(2) issued on dated 28.07.2017 by the DCIT, Central Circle Kota which was served upon the assesse and hearing was fixed on 16.08.2017. Further, notice u/s 142(1) issued on 28.0....
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....lar queries were raised and explanation called for vide Notice u/s 142(1) dated 23.10.2017 through Pr. 8,9,10 & 11. "8. It is also requested to upload all the previous replies on e-proceedings portal. 9. If you have deposited cash amounts in demonetized currency during the period beginning from 8th November, 2016 to 30th December, 2016 and cash in hands shown during the financial year 2015-16. Kindly submit cash ledger account of FY 2015-16 and 2016-17." 2.2.2 Reply dated 07.07.2018 filed to the above notice/s (PB 13), was as under: "With reference to you notice we hereby submit following documents: 1. Copy of P&L A/c and Balance Sheet are being submitted. 2. There is no addition in Capital except income earned during the year. Income can be verified from the Income & Expenditure Account." x x x x "5. Uploaded all previous replies. 6. The assesse has deposited demonetized currency during 8.11.2016 to 30.12.2016, cash is verifiable from the Balance Sheet as at 31.03.2016. 7. Ledger account for explanation of bank entries." 2.2.3 Reply dated 25.10.2018 submitted to the above notice/s (PB 14), was as under: "1. Computation of Income-Shri Rameshwar Pd. Shringhi, M/....
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....018. The assesse was having sufficient cash in hand with him out of which cash of Rs. 85,00,000/- was deposited in bank." 2.3 The ld. AR attended time to time, produced books of account, copies of accounts of Sundry Advances (debtors), and filed various other details as required, stated above and also those even though not required, which were duly examined. The AO made all the inquiries, sought clarifications on all the relevant issues to the extent he was supposed looking to the nature of the issue involved, the past accepted history of the case and the evidences and material already available therein together with the material provided during the assessment proceedings. Moreover, Assessing Officer has recorded a categorical finding that entries in bank account were verifiable from cash book produced by assessee. Thus, ld. AO framed the assessment in accordance with the available judicial guideline. Hence, it cannot be said that the impugned assessment order was erroneous and therefore prejudicial to the interest of the revenue, for want of enquiry by the AO. 3. Beyond the scope of enquiry contemplated u/s 263: 3.1 It is submitted that the AO raised very specific and relev....
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....ses of various Sundry Advances (debtors) from whom claimed recoveries were made and also the genuineness of the transactions were not examined, appears factually incorrect, in as much as, one cannot presume that the Assessing Officer while passing the scrutiny Asst. Order, must not have seen or looked upon the past asst. records. It is pertinent to note that the assesse in its replies made specific reference to the income surrendered of Rs. 1,96,37,930/- in the course of survey carried out u/s 133A on 13 & 14 .02.2008 and the breakup of the undisclosed income surrendered towards different heads of outgoings, investments, assets etc. was also explained through various questions & answers, while recording the statements of the assesse, summarized in an at a glance chart titled as "Statement Showing Undisclosed Income," (PB 29) filed before the AO during the asst. proceedings for A.Y. 2008-09 and also again during the subjected asst. proceedings for A.Y. 2016-17. 3.2.2 Out of Rs. 1.96 Cr. surrendered and included in the return of income of A.Y.2008-09 filed at total income for Rs. 1,98,65,480/- on 30.07.2008, the assesse at the S. No. 7 in chart (PB 29) explained the utilization. Ear....
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.... the intervening period (i.e. A.Y. 2008-09 to A.Y. 2016-17), these facts have itself established that there did exist the Sundry Advances (Debtors) detailed above, fact of recoveries made from them, the amount recovered was utilized one way or the other and the fact that finally at the end of the previous year related to A.Y. 2015-16, the assesse was having closing balance of cash in hand of Rs. 85,80,796/- as on 31.03.2016 (PB 66), and was carried over to the next year A.Y 2016-17 i.e. on 1.04.2016 (PB 61-66) which, remained available till the first deposit made on 08.11.2016 and thereafter. 3.2.5 It is now well settled that where assesse has regularly maintained books of accounts is an admissible evidence under Indian Evidence Act, 1872. This holds good more particularly, when the Ld. CIT did not disbelieve or did not doubt or even did not reject the same. Since, availability of the opening balance of the particular amount in the regularly maintained cashbook, which were duly and admittedly submitted before the AO in the subjected assessment proceedings, hence, there was no reason as to why the AO should have doubted. 4. Fairly speaking, from the point of a quasi-judicial autho....
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....s. 69 was to confer a discretion on the ITO in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under s. 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the ITO under s. 69 to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case. In the instant case, the Tribunal has held that the discretion had not been properly exercised by the ITO and the AAC in taking into account the circumstances in which the assessee was placed and the Tribunal has found that the sources of investments could not be treated as income of the assessee. The High Court has agreed with the said view of the Tribunal. There is no err....
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....er CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) (DPB 60-63), wherein Delhi High Court was considering the aspect, when there is no proper or full verification, and it was held that one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. 6.2 In CIT vs. Chemsworth Pvt. Ltd. (2020) 275 Taxman 408 (Kar) (DPB 64- 66), it was held that: Revision-Erroneous and prejudicial order-AO taking plausible view-AO completed the assessment without considering expenditure which was not allowable under s. 14A-CIT held that non-consideration of disallowable expenditure under s. 14A was erroneous and is prejudicial to the interest of the Revenue-Not correct-CIT has held hat the en....
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....nt case. If the amount of Rs. 20,000 disclosed under the Disclosure Scheme had been found to be deposited or utilised by the assessee or the HUF in some other manner, in that case, a legitimate inference could be drawn that the amount in dispute was from undisclosed sources as the amount so disclosed under the Disclosure Scheme had been found to be otherwise utilised by the assessee or by the HUF, but the finding on this aspect of the case is otherwise. Therefore, the assessee prima facie discharged its initial burden. Before the Department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The Department cannot, by merely rejecting unreasonably a good explanation, convert good proof into no proof.-Sreelekha Banerjee & Ors. vs. CIT (1963) 49 ITR 112 (SC) : TC42R.1145 relied on." 7.2 In another case of PCIT vs. Dilip Kumar Swami [2019] 106 taxmann.com 59 (Raj) (DPB 5-7) it was held that Assessee filed his return declaring certain taxable income - In course of assessment, Assessing Officer noted that assessee had deposited certain amount in his bank acc....
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....ound that the withdrawals shown by the assessee are far in excess of cash found during the course of search- In the absence of any material to support the view that the entire cash withdrawals must have been spent by the assessee, Tribunal was justified in holding that the addition was not sustainable-Order of the Tribunal does not give rise to a substantial question of law" In this case, cash was found on search carried out on 04.02.2001 and was explained to be out of the cash withdrawal in Dec-2000. 7.5 Also refer Anand Prakash Soni v/s DCIT (2006) 101 TTJ 97 (Jd) para 5-6 "Search and seizure-Block assessment-Computation of undisclosed income-Cash found during search-Assessee is entitled to furnish cash flow statement to explain the transactions when no books of account are maintained-In such circumstances it becomes the duty of the AO to verify the balance sheet and cash flow statement with the necessary material including the details already filed along with the returns in the past- Assessee explained that the cash found at the time of search was withdrawn from the bank some time back which was partly used for purchasing gold and part of the amount was given by the assessee....
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....ubmitted above here also the AO was not supposed to have required the name and address of debtors (because the same were already available, established or even assuming not so, was not required in the facts of the case). The genuineness of the transaction was already established and accepted by the Deptt. in the past hence, on that count also, the assessment order was not erroneous. 9. Benefit of telescoping available: 9.1 Another aspect of the matter to be looked into is that even one need not go into the factual nexus between the income surrendered on one hand in A.Y. 2008-09 and the availability of the resultant funds for onward deposit in the bank, on the other because the law of telescoping is well established that some undisclosed income once surrendered and got taxed, the benefit of the availability (telescoping) of the same towards the other outgoing/investments/expenditure etc. must be allowed as was held long back in the case of Anantharam Veerasinghaiah & co. v. CIT [1980] 123 ITR 457 (SC) (DPB 22-25) followed by Rajasthan High Court in the case of ITO v. Tyaryamal Balchand [1987] 32 Taxman 64 (Raj.) (DPB 26-30), more particularly in absence of any evidence of utilizat....
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.... it is submitted that it is not a case of mere acceptance of submissions and claims made by the assesse but the same was fully and adequately supported by voluminous evidences, starting from the generic or the nucleus source i.e. 1.96 crore (or Rs. 1.59 cr.) in F.Y. 2007-08 (A.Y. 2008- 09) continuing with the assesse, finally culminating into cash realization from the debtors and appearing as opening cash balance in the cashbook as on 01.04.2016. The Ld. CIT admitted the fact of filing cashbook and the appearance of opening balance therein however, he did not whisper a single word if he could find any defect in the cashbook of this year or in the books of account maintained in the previous year/s. 10.1.2 The AO being a quasi-judicial authority, is all entitled by the law to take its own decisions and cannot be guided or instructed by any superior authority as per u/s 119 of the Act. Even the Explanation to S. 263 was not applicable (as submitted later). The identity, name & address etc. were already established by the assessee, when he referred to the destination of the income surrendered during survey u/s 133A on dated 13/14.08.2008 and the same is also available in the documents....
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.... and this amount was shown as a closing capital as on 31st March, 1992 and on 1st April, 1992 it was an opening balance. It does not require any elaborate argument that a carried forward amount of the previous year does not become an investment or cash credit generated during the relevant year 1993-94. This alone is sufficient to sustain the order of the Tribunal in deleting the amount from the assessment for asst. yr. 1993-94." 10.2 Para 6.5 - Further objection of the Ld. CIT was that every year is a separate year and not binding unless, that particular assessment year is not scrutinized. What comes out is that Ld. CIT is ignoring the binding evidentiary value of the past completed assessments because of the simple fact that those assessments were not completed under scrutiny. Firstly, on the very face of it, this is a mis-conception and purported mis-reading and this argument is completely mis-placed in as much as firstly, it is not the choice of the assesse to get the assessment completed either under scrutiny or as a summary assessment u/s 143(1). The decision solely rests with the department only and if they chose to complete the assessment in a particular manner the fact rem....
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.... Dept./Ld. CIT could have demolished or rebutted these evidences, what is established is the opening cash balance as on 01.04 2016. Even the fact of recovery need not to got established by the AO to the for simple reason that such cash had already been realized prior to F.Y. 2015-16 and A.Y. 2016-17 and such evidences not having been rebutted and assessment not disturbed, the department cannot go backward to disbelieve the claimed availability of cash. The ratio laid down in Parmeshwar Bohra (2008) 301 ITR 0404 even though rendered in the context of S. 68, directly support the assesse. Further argument in para 6.9 is that the law does not forbid the AO to verify debtors from whom recoveries were made but then above contention adequately answers this objection also of the CIT. 10.6 Para 6.10 - The Ld. CIT again repeats the same arguments which we have already answered here and also in our detailed submissions. Thus, the AO evidently acted completely in accordance with law, duly and fully applying his mind by calling for all the relevant details and the has taken a possible view and did not find any contrary material or suspicious or anything raising his suspicion. 11. Rule of Con....
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....laimed deduction u/s. 35D-AO restricted deduction on ground that only eligible expenses were allowed to be spread over u/s. 35D and therefore, expenses only to extent that had nexus to eligible projects were admissible- However, Tribunal, noted that in last seven years, no such disallowances were made and directed such benefit to be granted-Held, since last several years, AO had granted such claim on same consideration-Following rule of consistency, Tribunal therefore, correctly held that such claim could not have been suddenly disallowed-Revenues' appeal dismissed 12. Supporting Case Laws on S. 263: 12.1 Kindly refer CIT v/s Rajasthan Financial Corporation (1996) 134 CTR 145 (Raj). (DPB 52-55) held that: "Once Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Offer allowed the claim being satisfied with the explanation of assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order not make an elaborate discussion in that regard." 12.2 In CIT v/s Ganpat Ram Bishnoi (2005) 198 CTR (Raj) 546 ....
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....DPB 67-76) it was held that when Assessing Officer was fully aware of matter, he had appraised evidences filed by assessee and then had formed a view to accept same, Commissioner was unjustified in invoking jurisdiction under section 263. Whether if there was an enquiry, even inadequate, that would not, by itself, give occasion to Commissioner to pass order under section 263, merely because he has a different opinion in matter; it is only in case of 'lack of inquiry' that such a cause of action can be open. 12.5 In another case of Sanspareils Greenlands (P.) Ltd. v. CIT [2018] 99 taxmann.com 222 (Delhi - Trib.), it was held that Assessee-company, engaged in manufacture, purchase, sale and export of sports goods, claimed expenditure towards payments made to cricket players under head 'advertisement and publicity' - Assessing Officer, after making enquiries and considering explanation furnished by assessee allowed said expenditure - Subsequently, Commissioner, exercising power under section 263, disallowed expenditure claimed by assessee on ground that Assessing Officer had failed to make an inquiry in this regard - It was noted that it was not department's case ....
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....nces, facts and figures and this is a mere claim without any basis. The AO has merely accepted the submission of the assessee without making any independent enquiries in respect of the debtors from whom substantial cash amounts of Rs. 85,00,000/- are claimed to have been recovered by the assessee which were earlier given to them in the form of advances and that to in A.Y. 2008-09. The mere submissions of the assessee that out of surrendered and declared income of Rs. 1,96,37,930/- during the survey proceedings on 13.02.2008, an amount of Rs. 1,59,00,000/- were the advances and investment and cash realization from the advances and investment were recorded in the cash book for the year 2015-16 and hence cash in hand as on was of Rs. 85,80,796/- has merely been accepted by the AO without verifying the correctness of statement of the assessee. Rather, the AO has merely accepted this submission of the assessee without making any enquiry and verification and he has relied upon the cash book of the assessee. The existence of the debtors from whom recovery of substantial cash amounts of Rs. 85,00,000/- are claimed to have been made by the assessee has not been enquired into. The details re....
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.... is that in the balance sheet filled in the return of income for A.Y. 2011-12, the sundry advances increased to Rs. 82 lacs and thereafter to Rs. 92 lacs. As per the assessee the moment there is increase/decrease in the sundry advances (debtors) and increase in the cash/bank balances in the intervening period (i.e. A.Y. 2008-09 to A.Y. 2016-17), this fact has itself established that there did exist the sundry advances (debtors) and recoveries were made from them. As per the assessee existence of sundry advances (debtors) of Rs. 85 lacs is well established. If argument of the assessee is that there did exist the sundry advances (debtors) then it is not understandable as to why details i.e. identity of such debtors are not disclosed and details regarding creditworthiness of such debtors and genuineness of transactions are not furnished. Another argument of the assessee is that this amount of Rs. 85 lacs was an undisclosed income offered at the time of survey, this could be available in any form, be it cash, sundry advances (debtors) or fixed assets. As per the assessee the department never doubted nor rebutted the assertion of the assessee that such undisclosed income of assessee is ....
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....] 20 taxmann.com 462 (Punj. & Har.) Zaveri Diamonds v. CIT, Ludhiana 11-20 3 [2012] 25 taxmann.com 552 (SC) Zaveri Diamonds vs. CIT 21-22 4 [2000] 109 Taxman 66 (SC) Malabar Industrial Co. Ltd. vs. CIT 23-28 5 Denial Merchants P. Ltd. vs. Income Tax Officer on 29 November, 2017 25-30 7. We have heard the rival contentions and perused the material available on record. The legal proposition laid down by various Courts regarding the exercise of powers u/s 263 have to be seen in light of facts and circumstances of the present case. In this case, it is noted that the Assessing Officer had issued notice u/s 142(1) dated 23.10.2017 where, inter-alia, he had asked the assessee to furnish the details of all his bank accounts explaining the credit entries and all cash deposits as well as debit entries and all cash withdrawals along with the copy of the bank statements. In response, the assessee vide his submission dated 16.11.2017 submitted the copies of all his bank account statements as well as ledger accounts in the books of accounts maintained by him in respect of three bank accounts maintained by him during the period under consideration. It is further noted that the A....
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....lared income of Rs. 1,96,37,930/- during the survey proceedings on 13/02/2008. Out of such amount, Rs. 1,59,00,000/- were in the nature of Sundry Advances and Investments as per Balance Sheet as at 31.03.2008. Cash hand/Sundry Advances/Investments of Rs. 85.00 Lakhs or more have been continuously appearing on assets side of the Balance Sheets from F.Y 2009 to F.Y 2015. Copies of ITR, Balance Sheet and Income & Expenditure for A.Y 2009-10 to A.Y 2015-16 are enclosed herewith in support of availability of funds with the assessee which was deposited during the F.Y 2016-17. The assessee has been regularly filing Income Tax Returns since A.Y 2008-09. The assessee has already deposited tax on declared income of Rs. 1,96,37,930/- in A.Y 2008-09 and case was completely/assessed under scrutiny scheme. Copy of order has already submitted with the previous letter dated 12.11.2018. The assessee was having sufficient cash in hand with him out of which cash of Rs. 85,00,000/- was deposited in bank." 9. We therefore find that the Assessing officer has carried out exhaustive enquiries and verifications regarding source of cash deposits in the bank account during the financial year relevant to i....
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....heets for the subsequent financial years which were also placed on record and examined by the Assessing officer. If we look at the balance sheet of the financial year 2014-2015 which is the immediately preceding financial year, we note that these advances were standing in the books of assessee at Rs. 85,00,000/- which again lends credence to the explanation that out of total advances of Rs. 1,59,00,000/-, there were recovery to the extent of Rs. 74,00,000/- in the earlier years and the advances to the tune of Rs. 85,00,000/- were outstanding at the beginning of the current financial year 2015-16 out of which the advances to the tune of Rs. 75,00,000/- were recovered during the year under consideration with remaining advances of Rs. 10,00,000/- continues to remain outstanding as on the close of the current financial year 2015-16. The recovery so made from earlier advances as well as cash receipts from other activities represent cash in hand of Rs. 85,80,796/- as on the close of the current financial year which has been explained as source of cash deposits during the demonetization period in the subsequent financial year 2016-17. Further, it is noted that the tax returns for all thes....