AI Drafter 
TaxTMI 
TaxTMI 
2021 (9) TMI 1331
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.... the assessees have challenged correctness of the order passed by the learned Principal Commissioner of Income Tax(Central), Surat,under section 263 of the Income Tax Act. 2. Since, the issues involved in all the appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 69/SRT/2021 for Assessment Year 2014-15, have been taken into consideration for deciding the above appeals en masse. 3. Grievances raised by the assessee in lead casein ITA No. 69/SRT/2021 for AY.2014-15, are as follows: "1. On the facts and in circumstances of the case as well as law on the subject, the learned Pr. CIT has erred in passing the order u/s 263, although he assessment order passed u/s 143(3) r.w.s. 153A of the I. T. Act,1961 was neither erroneous nor prejudicial to the interest of the revenue. 2. It is therefore prayed that above order passed by Pr. CIT u/s 263 may please be quashed or modified as your honours deem it proper." 4. Brief facts as discernable from the orders of lower authorities are thatassessee filed h....
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....st of revenue and accordingly a show cause notice under section 263 of the Act dated 16-03-2021, was issued by the ld PCIT, fixing the case for hearing on 22-03-2021. The relevant para of the same is reproduced as under: "3. Subsequently, on verification of the case-records, it is observed that the assessment in your case was completed without proper verification or enquiries in respect of the incriminating documents found and seized during the course of search and survey proceedings. In the initial part of the assessment proceedings, the Assessing Officer issued a detailed questionnaire along with notice under Sec, 142(1) of the Act dated 24.10.2018 based on the incriminating documents found and seized/impounded during the course of search and survey proceedings. A notice under Sec. 143(2) of the Act was also issued on 16.11.2018 and duly served upon you. After considering the preliminary submissions made by you, the Assessing Officer issued a detailed show cause notice on 10.12.2018 requiring you to explain the specific points mentioned therein. In compliance to the said show cause notice issued by the Assessing Officer you have furnished certain explanation which is pla....
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....ed. The cash payments reflecting on the back side of the 'Sathakhat' is Rs. 16,10,00,000/-. Page No.7, 9 & 10 of Annexure BS-39 seized from the residence of Shri Manish Naranbhai Sheladiya situated at E203. Swastik Towers, Sarthana Jakat Naka, Varachha Road, Surat shows details of loans advanced by you and two other partners of M/s. Amrut Sarovar. This document also confirms that the said land was purchased by you along with other partners of the firm and payment of unaccounted cash was made for the same to the sellers. Page No.7 & 9 shows advancement of loans by you amounting to Rs. 2,05,00,000/-and other partners to the Partnership Firm and on Page No. 10, there is a noting of return of loan of Rs. 10000 (Coded) i.e. 1 Crore to 'Bhaveshbhai on 08.10.2013. On 08.10.2013, cash payment has also been made of aggregate Rs. 3 Crore to Shri Govindbhai Vekharia as noted in the a copy of Rojmel impounded from the premises of the firm, M/s. Amrut Sarovar. This confirms the modus operandi of payment of cash on-money to sellers of the property. The details of the above unaccounted payments were also recorded by the assessee group in the Lenova laptop seized from the residen....
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....4/2013 06.12.2013 11280000 553000 KMJ/1 4440/2013 30.12.2013 3200000 157000 TOTAL 24680000 1210000 The details of the above unaccounted payments were also recorded by the assessee group in the Lenova laptop seized from the residence of Shri RajeshbhaiLaxmanbhaiMangroliya, located at flat no. E-202, Swastik Towers, SarthanaJakat Naka, Surat. In the said laptop, the same is available in the form of an excel spreadsheet named as 'JAMIN NU PAYMENT.xlsx. In the Rojmel, on various dates and payments have been made by way of cash/cheque towards purchase of land in the name of the assessee and therefore, the cash payment component was also required to be assessed in your hands. The Assessing Officer has simply accepted your submission that the payment for the same has been made by the partnership firm and it is covered by the disclosure made by the firm in IDS, 2016 in respect of net profit from on money transactions. However, the Assessing Officer has failed to carry out any enquiries especially when the partnership firm cameinto existence only on 15.07.2013 and the assessment proceedings in the case of the partnership firm and land owners ....
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....oceedings. 6.4 On perusal of the assessment records, it is observed that your case was also selected for scrutiny under CASS to inquire the following issues:- (i) Purchase of Property. (ii) Unsecured Loans Subsequently, the proceedings initiated under CASS were abated and proceedings under Sec. 153A of the Act were initiated as a consequence of search proceedings in the SRK group of cases. The assessment proceedings under Sec. 143(3) r.w.s. 153A of the Act was completed on 29.12.2018 by accepting the returned income of Rs. 34,08,540/- Here, it is pertinent to mention that it was imperative on the part of the Assessing Officer to enquire into the issues of 'Purchase of Property' and "Unsecured Loans", the reasons for which the case was selected for scrutiny under CASS. However, from the perusal of the records, it appears that the Assessing Officer has neither verified nor enquired into these issues. This shows lack of application of mind while completing the assessment proceedings. 7. In view of the above facts and circumstances of the case, it is observed that the Assessing Officer has not made any effort to verify the above issues by ta....
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....cer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the income-tax Officer on the basis of the directions issued by the Joint Commissioner under; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal 9a[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner; (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 s....
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....eal before us. 8. Shri Rasesh Shah,Learned Counsel for the assessee, vehemently pleaded and filed synopsis of arguments before the Bench. The sum and substance of his arguments are that most of the issues raised by the ld PCIT in his order under section 263 of the Act, are covered by the disclosure made by the assessee-firm in IDS, 2016 in respect of net profit from "on money" transactions, therefore addition should not be made in the hand assessee-firm as well as in the hands of partners/individuals. The said transactions have been again repeated by the ld PCIT in his order under section 263 of the Act, therefore, it is tantamount to impose tax on the same income twice, which is not the intention of the Income Tax Act, therefore, on this fact alone, the jurisdiction exercised by the ld PCIT is void ab-initio in the eye of law. Further, ld Counsel submits in brief that during the assessment proceedings, the Assessing Officer has issued notice u/s 142(1) of the Act wherein the Assessing Officer has raised all the queries / questions which are raised by the Ld. PCIT in his order u/s 263 of the Act. In response to queries raised by the Assessing Officer u/s 142(1) of the Act, th....
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.... place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedents laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of....
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....by the assessee in response to reply of notice u/s 142(1) of the Act. Therefore, order cannot be erroneous on this count. (c). In respect of ITA No.83/SRT/2021, for AY 2014-15, the main issue raised by the Ld. PCIT in his order passed u/s 263 of the Act was payment of purchase of land, in Block 514, 515,516/1 and 516/2 of Rs. 2.75 crores of Khator village. The second issue raised by the Ld. PCIT was payment of purchase of land Block No.518, 519 and 522A of Rs. 2,71,41,970/- of Khator village. In addition to this, Ld. PCIT has raised the issue about non-verification of cash loan advance to partnership firm and validity of disclosure under IDS. We note that all issues were questioned by the Assessing Officer during the assessment stage, by way of notice u/s 142(1) of the Act and assessee has replied the same during assessment proceedings. (d). In ITA No.84/SRT/2021, for AY 2015-16, we note that Ld. PCIT has raised the issue regarding payment for the purchase of land in Block No.514, 515, 516/1 & 516/2 of Rs. 2,28,36,707/- of Khator village and payment for purchase of land in Block No.518, 519 & 522A of Rs. 18,41,363/- of Khator village. The Ld. PCIT also raised the ....
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.... addition on account of capital gains. Hence, we note that assessee has submitted the relevant documentary evidences before AO,therefore, order passed by Assessing Officer should not be erroneous. (2). (a) In respect of Shri Navinchandra G Topia in ITA No.74/SRT/2021, for AY 2015-16, we note that the Ld. PCIT has raised the issue relating to source of loan advance to firm of Rs. 50 lakh on 05.04.2014 and source of advance to firm of Rs. 3 crores on 12.12.2014 and source of loan advance to firm of Rs. 3 crore on 01.01.2015. We note that about source of loan advance to firm the Ld. Counsel for the assessee demonstrated that the issue has been examined by the Assessing Officer vide paper book pages 92 and 63 respectively. The source of advance to firm of Rs. 3 crore has also been examined by the Assessing Officer vide paper book page 89 and 61 respectively. During the assessment stage, the Assessing Officer has raised the query and assessee has submitted the reply alongwith documentary evidences. (b) In respect of ITA No.75/SRT/2021,for AY 2016-17, Ld. PCIT has raised the issue mainly for understatement of income of Rs. 7,96,86,000/-. Ld. PCIT....
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....of Rs. 7,96,86,000/- along-with other co-owners. Ld. PCIT has also raised the issue for cash deposit of Rs. 14,08,000/- in HDFC bank. The Ld. Counsel for the assessee submits before us that cash deposit in HDFC bank is a part of regular books of account and it is getting reflected in the cash book of the assessee. Therefore, this issue has been examined by the Assessing Officer. The assessee also submitted the relevant documentary evidence regarding sale of Rs. 7,96,86,000/- along-with other co-owners vide paper book page 50, 37, 44 and 62 respectively. Therefore, Assessing Officer has examined the issue during the assessment stage. (4). (a) Regarding Shri Amita Kamlesh B Bhensania in ITA No.80/SRT/2021 for AY 2017-18, the Ld. PCIT has raised the issue about investment of Rs. 1,59,84,800/- in Mangal Murti Complex and payment for purchase of land Block 494 at Kamrej. The Ld. PCIT has also raised the issue about nonverification of cash loan of Rs. 4,63,475/- as per Annexure A1 and B1 respectively. The Ld. PCIT also observed that Assessing Officer has not verified the sale of Rs. 66,66,666/- along-with other co-owners. The Ld. PCIT also noted that Asse....
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..... Counsel for the assessee submits that in respect of capital gains due to conversion of capital asset into stock-in-trade, the conversion was made on the book value,therefore there should be any capital gains tax, as the capital gains tax may arise when the stock-in-trade is sold. Therefore, Ld. Counsel for assessee submits that assessee has submitted documentary evidences during the assessment stage and Assessing Officer has examined the same and taken the possible view. Therefore, assessment order passed by the Assessing Officer should not be erroneous. (b) In respect of ITA No.71/SRT/2021, for AY 2016-17, the Ld. PCIT has raised the issue relating to payment for purchase of land, Block No.514, 515, 516/1 and 516/2 of Rs. 47,29,960/- of Kathor village and payment for purchase of land for Block No.518, 5119 & 522A of Rs. 89.50 lakh of Kathor village. The Ld. PCIT also noted that assessee has not explained the source of investment of Rs. 2,85,333/- and Rs. 2,99,166/- in Block No.411 and 406 respectively in village Hathoda, Mangrol. The ld Counsel has submitted the relevant documentary evidences during the assessment stage, which is placed at paper book page no. 82 and 240....
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.... Vekariya have been explained properly during the assessment stage by submitting relevant documentary evidences. Therefore, the order passed by the Assessing Officer should not be erroneous. (6) (a) In respect of Jigneshkumar D Radadiya, in ITA No.97/SRT/2021, for AY 2015-16, the ld PCIT observed that there is cash loan and expenses, which were not examined by the assessing officer. The Ld. Counsel for assessee submits that cash loan and expenses were duly supported by the documentary evidences which were submitted by the assessee before the Assessing Officer. This cash loan and expenses partly explained by assessee as a part of sale of mango. The Assessing Officer made adequate inquiry during the assessment stage and assessee has submitted the relevant documentary evidences before the Assessing Officer. (7) In respect of Harsukhbhai Vallabhai, in ITA Nos.85,86,87/2021, the same issues were raised by the ld PCIT which are duly examined by the assessing officer. In respect of Kapil Kumar in ITA No.72,73/2021,the same issues were raised by the ld PCIT which are duly examined by the assessing officer. Therefore, Ld Counsel for the assessee submits t....
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....inent to mention here that the way in which assessment should be finalized falls in the exclusive domain of the Assessing Officer. Section 142(1) of the Act speaks of inquiry before assessment and gives immense power to the Assessing Officer for conducting enquiry. Therefore, the Assessing Officer, under section 142(1)(ii) and (iii) of the Act, can ask the assessee almost any information which he things necessary for passing assessment and even if Ld. PCIT has such results of enquiries, the resultant order cannot be subjected to revision proceedings. Therefore, the very initiation of proceeding u/s 263 of the Act by the Ld. Pr. C.I.T. is in violation of the settled position in law. When the conditions precedent for invoking revisional power u/s 263 of the Act on the facts and in the circumstances of the case are not fulfilled in the case of the assessee, the subsequent action in passing the order u/s 263 on such invalid proceeding becomes null and void. Reliance is placed on the following decisions, the ratios of which are totally applicable to the facts of the assessee's case: (1) Smt. Juthika Kar vs. ITO [I.T.A. No.1128/Kol/ 2009, dated 16.5.2012] "8. With the leave a....
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....fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order-sheets go to show that appropriate enquiry was made and the Assessee was heard from time to time. In deciding the question the court has to bear in mind the presumption in law laid down in section 114 clause (e) of the Evidence Act : "that judicial and official acts have been regularly performed." 86. Therefore, the court has to start with the presumption that the assessment order dated March 28, 2008, was regularly passed. There is evidence to show that the Assessing Officer had required the Assessee to answer 17 questions and to file documents in regard thereto. If the A.O. cannot be shown to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind." [Emphasis given] 15. We note that section 263 of the Act speaks of revision of orders prejudicial to revenue. As per the said section and various judicial precedents including those of Hon'ble Apex Court in the cases of Malabal Industrial Co. Ltd. vs. CIT (243 ITR 83) and CIT....
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....ke of brevity, the notice under section 142(1) issued by the assessing officer and replies made by the assessee are not reproduced in this order, however, we have gone through the contents of the notice under section 142(1) of the Act and replies filed by the assessee before the assessing officer and noticed that assessing officer asked the queries on various items of return of income filed by the assessee and in turn, the assessee has submitted documents, evidences and written submissions before the assessing officer. On the above facts, therefore, the allegation of the Ld. Pr. C.I.T. in his show cause notice u/s 263 that "AO has passed the impugned assessment order without making further enquiries" does not come within the purview of twin conditions contained in section 263 of the Act. The Ld. Pr. C.I.T. by setting aside the assessment order has allowed the Ld. A.O. to reopen the concluded issue, which was adjudicated upon after detailed enquiry. This course of action on the part of Ld. Pr. C.I.T. is not permissible u/s 263 of the Act. It is a settled position in law that the proceedings u/s 263 cannot be initiated by the Ld. Pr. C.I.T. merely in his supervisory capacity. Befo....
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....assessment, in that situation the assessment order passed without receiving such report may appear to be erroneous within the meaning of section 263 of the Act. In the case of the assessee under consideration, there is no denying the fact, as detailed above and acknowledged in the assessment order u/s 143(3) r.w.s 153A, that in response to notices u/s 143(2)/142(1) and further requisitions made during the course of assessment proceeding, the A/R of the assessee appeared from time to time and produced/ submitted necessary details/documents as per requisitions in relation to the issues raised by the Ld. Pr. C.I.T., which were examined by Assessing Officer. Therefore, it is the appraisal of the same records which are already with the Ld. A.O. and the Ld. Pr. C.I.T. took a different view than adopted by the A.O. on the same set of facts, which is not permissible u/s 263 of the Act. In the above circumstances, the view taken by the A.O. was one of the possible views and the assessment order passed by him could not be held to be erroneous and prejudicial to the interests of revenue. For that we rely on the decision of Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. [(20....
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....t. As noted above, the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi-judicial functions vis-a-vis passing the assessment order u/s143(3)r.w.s 153A of the Act. Therefore, certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. However, what is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the Assessing Officer, and even if Ld. Pr. Commissioner does not agree with the results of such enquiries, the resultant order cannot be subjected to revision proceedings. For that we rely on the decision of the Coordinate Bench of I.T.A.T., Kolkata in the case of Smt. JuthikaKar vs. ITO [I.T.A. No.1128/Kol/ 2009, dated 16.5.2012 ], wherein it has been held as under (relevant portion) :- "8......However, what is opinion formed as a result of these enquiries is something which is in exclusive domain of the Assessing Officer, and even if Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceedings. The conclusion....
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....ing such details therein, as held by the Coordinate Bench of ITAT Kolkata in the case of Chroma Business Ltd. vs. DCIT (2004) 82 TTJ 540 (Cal). Further support in this connection is taken from the decision of Hon'ble Delhi High Court in the case of CIT vs. Vikas Polymers (2012) 341 ITR 537 (Del). Relevant part of the observation in this regard reads as under : "This is for the reason that if a query is raised during the course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer was reflected in the assessment order, that would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision." [Emphasis supplied] 21. According to the decision of Coordinate Bench of I.T.A.T., Hyderabad in the case of Manisha Agri Biotech P. Ltd. vs. CIT (2014) 36 ITR (Trib.) 42 -, wherein it was held as follows: "The respondent had no different or new material to take a different view from the one taken by the Assessing Officer and the reasons given by him to reopen the assessment and sustain the revision are totally unacceptable. The respondent....
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....lectrical Industries Pvt. Ltd., Hyderabad vs. Collector of Customs, Bombay - AIR 1997 SC 3467 at page 3471 and also see Justice G. P. Singh, Principal of Statutory Interpretation 234 Lexus 2016. It has to be kept in mind that while the Commissioner is exercising his revisional jurisdiction over the assessment order, he has to exercise his power in an objective manner and not arbitrarily or subjectively since he is discharging quasi-judicial powers vested in him while doing so. Thus, according to us, Explanation (2) inserted by the Parliament u/s 263 cannot override the main section i.e. section 263(1) of the Act. The Ld. CIT can exercise his revisional jurisdiction in the event the assessment order is erroneous as well as prejudicial to the interest of the Revenue as discussed above and not otherwise. 23. Conclusion: We note that main grievance of Learned Counsel is that most of the issues raised by the ld PCIT in his order under section 263 of the Act, are covered by the disclosure made by the assessee firm in IDS, 2016 in respect of net profit from "on money" transactions, therefore further additions should not be made in the hands of assessee-firm and in the hands of partners....