TaxTMI 
TaxTMI 
2021 (9) TMI 1133
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....bsence of which the entire proceedings u/s 263 is vitiated. 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 un....
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....n given by you and from whom such advances of Rs. 85,00,000/- were claimed to have been received 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-....
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....iew taken by the Assessing Officer is unsustainable in law." Ratio of these cases fully apply on the facts of the present case in 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 ....
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.... the source of all the movable and immovable held by you during the financial year 2015-16 with supporting documents. If any other immovable properties purchased and sold, kindly explain the same with books of accounts." Similar 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 dur....
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....sse which was deposited during the F.Y. 2016-17. The assesse has been regularly filing I tax Returns since A.Y. 2008-09. The assesse has already deposited tax on declared income of Rs. 1,96,37,930/- in A.Y. 2008-09 and case was completed/assessed under scrutiny scheme. Copy of order has already submitted with the previous letter dated 12.11.2018. 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 f....
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....fact, stood blocked (i.e. remain invested in a fixed asset or the like) wherefrom, it was not factually possible to liquidate so as to create a source of cash in hand prior to the cash deposits. 3.2 Requisite Details already available - allegation on Factually Incorrect: 3.2.1 The allegation by the Ld. CIT that the AO did not enquire about the name and addresses 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 ....
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....-12 the sundry advances increased to Rs. 82 lacs and thereafter to Rs. 92 Lacs (PB 44-47). The assessment for A.Y. 2011-12 also stood completed and continues to hold good, meaning thereby the debtors of Rs. 82 lacs and thereafter to Rs. 92 lacs stood accepted. Every time, when 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), 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 disbelie....
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....(1999) 237 ITR 0570 (SC): "As pointed out by the Tribunal, in the corresponding clause in the Bill which was introduced in Parliament, the word "shall" had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word "may". This clearly indicates that the intention of Parliament in enacting 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....
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....he basis of certain details and cashbook...." and the further fact that he did not factually denied or rebutted the factual aspect of the assesse's contention of filing of ROI with the Balance Sheets etc. Law is well settled that the Assessment order cannot be held to be erroneous simply on the allegation of inadequate enquiry. Unless there is an established case of total lack of enquiry. Kindly refer 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....
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.... According to the assessee, the said amount remained with his wife till her death in 1956. Thereafter Rs. 10,000 each was deposited with bank in the names of each of his two then major daughters. The Revenue sought to add the amount of Rs. 20,000 in assessee's hands as income from undisclosed sources. There was no provision analogous to the provisions of s. 69 of the IT Act, 1961 in the IT Act, 1922 which governs the present 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 rejecti....
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....vs. Pradeep ShantaramPadgaonkar (1983) 143 ITR 785 (MP) relied on" 7.4 Also refer CIT vs Kulwant Rai (2007) 210 CTR 380 (Delhi) para 16-17 Read held "Search and seizure-Block assessment-Computation of undisclosed income-Cash found during search-Assessee had withdrawn Rs. 2 lakh from bank some time back and there is no material with the Department to show that this money had been spent and was not available with the assessee-Tribunal has found 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....
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....true meaning of the Explanation in the context of application of mind by a quasi-judicial authority. In the case of Narayan Tatu Rane Vs. ITO Itat, (2013) 7 NYPTTJ 1493 (Mum) (DPB 12-21) it was held that newly inserted Explanation 2(a) to Sec. 263 does not authorize or give unfettered powers to Commissioner to revise each and every order, if in his (subjective) opinion, same has been passed without making enquiries or verification which should have been made. As submitted 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 establishe....
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....issions at pg. 13 pr. 6.1 onwards till pr. 6.3 of the impugned order. His finding starts from pg. 15 pr. 6.4 onwards, which are being dealt hereunder para-wise. 10.1.1 Para 6.4: The crux of the CIT's findings are that AO erred in merely accepting the assessee's submissions as stated and in also accepting the cashbook furnished without verifying the existence of the debtors and into the genuineness of the transactions w.r.t recovery of the cash of Rs. 85,00,000/-. At the outset 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.....
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....added in the income of the assessee as unexplained investment or cash credit in the asst. yr. 1993-94 was the same amount which was credited in the books of account of the assessee for previous year ending on 31st March, 1992. The Tribunal has categorically come to a finding, and that finding is not under challenge, that this is not a case of cash credit entered in the books of account of the assessee during the year but it is a case in which the assessee has invested the capital in the business 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 asses....
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....hand u/s 68 of the act which is not the case are relevant only here. The issue involved was only cash deposits in the bank account which could legally be investigated under S. 69A but not under S. 68. Otherwise also, the creditworthiness and the identity are to be seen of the creditors and not the debtors. Since the assessee has already filed voluminous details and assessments of the past years have already been completed remaining undisturbed, this is the biggest evidence against the department and unless the 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 ....
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....n one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." 11.2 DCIT v/s Gujarat Narmada Valley Fertilizers Co. Ltd. (2013) 84 CCH 271 GujHC: (2013) 215 TAXMAN 72 (Gujarat) Preliminary expenses-Amortization of certain preliminary expenses- Assessee claimed 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 Raja....
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....cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 12.4 In another case of Narain Singla v. PCIT [2015] 62 taxmann.com 255 (Chandigarh - Trib.) (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....
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....awn to the findings of the ld. Pr. CIT at para 6.4, 6.5 & 6.9 and 6.10 of his order which reads as under:- "6.4 The entire submission of the assessee as discussed in preceding paragraphs of this order is not found to be acceptable after considering the facts and circumstances of the case. First of all it is mentioned that the claim of the assessee is that during the F.Y 2015-16, recoveries of cash amount of Rs. 85,00,000/- were made from the debtors to whom earlier such amounts of advances were given, but such claim or submission of the assessee is not supported by any evidences, 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 realiz....
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....ces made to the debtors are not verified. Any confirmations from the debtors have not been obtained by the AO either from the assessee or from the debtors itself. On verification of assessment records of the assessee, it is seen that the AO has merely accepted the submission and records of the assessee and he has not applied his mind and he has not made any necessary verification which should have been made and this failure on the part of the AO has rendered the assessment order not only erroneous, but also prejudicial to the interest of Revenue." "6.9 One of the arguments of the assessee 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 th....
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....o directed to examine the creditworthiness of the such debtors. On the basis of outcome of such examination and verification, the AO is directed to make necessary addition, wherever required, in accordance with the provisions of Income Tax Act, to the total income of the assessee. However, the AO is directed to ensure that reasonable opportunity of being heard is granted to the assessee before passing the order." 6. Further, the ld PCIT/DR has placed reliance on the following decisions:- S. No. Description of the case Page No. 1 [1963] 49 ITR 112 (SC) Sreelekha Banerjee Vs. CIT 1-10 2 [2012] 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 c....
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....ce Sheet as at 31.03.2008, Income Tax Asstt. Order u/s 143(3) of the Income Tax Act, 1961 with notice of demand, Copy of ITR, Computation of Income for the A.Y 2008-09." 8. It is noted that the Assessing Officer again sought further documentation and explanation regarding availability of cash in hand and in response, the assessee vide submission dated 22.11.2018 submitted copy of the his ITRs and balance sheets and income and expenditure accounts right from F.Y 2008-09 to F.Y 2014-15 and the explanation regarding deposit of cash was again submitted which reads as under:- "2. It is already clarified that the assessee surrendered and declared 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 de....
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....assessee has surrendered an amount of Rs. 1,96,37,930/- to tax which includes an amount of Rs. 1,59,00,000/- in respect of unexplained advances/investment in the name of assessee and his family members in various schemes of land/plot. Once the said amount was surrendered and offered to tax, the assessee reflected the said amount of Rs. 1,59,00,000/- under the head "sundry advances and investments" in his regular books of accounts for the financial year 2007-08 relevant to assessment year 2008-09. The said advances were thereafter regularly reflected in terms of outstanding balances net of recoveries from time to time in the financial statements and balance sheets 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/- wer....
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....f the Assessing officer is sustained. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 23/09/2021. ============= Document 1 सबै के दौरान आपके वà¥à¤¯ Çསྟུ༥༥—༥ ་ན〠गया Bahe पेज संखà¥à¤¯à¤¾ 23 पर दूध वह à¤à¤• पे (अमसे à¤à¤• करोड़ उनढ लाख 3 की डिज कृ पया इनकी पà¥à¤°à¤•à¤¤à¥€ इन‌का कà¥à¤¯à¤¾ सà¥à¤¤à¥à¤°à¥‹à¤¤ है। पर à¤à¤• A- 174 *4,5,099/- 16 मैने अपने परिवर के खदानà¥à¤¯à¥‹à¤‚ के नाम से विकि à....