TaxTMI 
TaxTMI 
2022 (4) TMI 485
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Act in order to impose his own views on the Ld. A.O. simply by differing with his plausible view when the Ld. A.O. after scrutiny of the details and various documents requisitioned u/s. 142(1) in respect of receipt on sale of shares to M/s. Igloo Vanijya Pvt. Ltd. (YCL) had taken a possible view, which did not suffer from lack of independent and adequate enquiry. 2. That the Ld. Pr. CIT further erred in holding the assessment order passed u/s. 143(3)/147 to be erroneous and prejudicial to the interest of revenue only on the alleged premise that the order was passed without making any addition and hence the issue of receipt of Rs. 5,00,000/- from YCL on sale of investment in shares was not at all examined by the Ld. A.O. when the reasons for selection of limited scrutiny was about the assessee being a 'beneficiary of unaccounted cash of Rs. 5,00,000/-' and after appropriate enquiry, the assessment order was passed by taking a plausible view. 3. That, the Ld. Pr. CIT further erred in having held the assessment order u/s. 143(3)/147 erroneous and prejudicial to the interest of the revenue for alleged non-compliance of clause (a) of Explanation 2 to sec.263(1) of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ay of 45 days in filing of the appeal. This delay was stated to be neither deliberate nor intentional but was due to the pandemic circumstances prevailing at that time. We take note of the pandemic situation where the movement of people were restricted and because of such practical situation, it was always not possible to follow the time of limitation regarding filing of appeal before various forums. This fact was also observed and taken cognizance of by the Hon'ble Supreme Court of India, in Civil Original Jurisdiction, Suo Moto Writ Petition (Civil) No. 3 of 2020 dated 8th March, 2021. The assessee has also filed separately condonation petition. The ld. D/R agreed for the condonation of delay of 45 days. After hearing the parties and taking guidance from the decision of the Hon'ble Supreme Court (supra), we condone the delay of the assessee and proceed to hear the case on merits. 4. The Pr. CIT-5, Kolkata invokes the provisions of Section 263 of the Act and issued following show-cause notice to the assessee which is extracted for ready reference: "Related to the. Assessment year 2010-2011, your case was completed u/s. 147/143(3) of the Income Tax Act, 1961 on 29/12/20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts of the assessee by the DDIT(Inv.), Unit-4(1), Kolkata that unaccounted cash has frequently deposited in the bank accounts on different dates and immediately transferred to the accounts of different beneficiaries. Moreover of unaccounted cash of Rs. 5,00,000/-through banking channel and prepared in cash trail and beneficiaries have been identified. The beneficiaries have been identified based on the identity, genuineness and creditworthiness as ascertained from ITD data, MCA details and Directors profile. On the basis of nature of transactions reflected on their bank statements it is clear that the ultimate beneficiary is mentioned above and a sum of Rs. 5,00,000/- as to high value cash deposited on different dates." 3.2. In response to the said reasons recorded and notices issued u/s. 143(2) and 142(1) of the Act, the A/R of the appellant-company appeared on several dates of hearing and submitted written objections/explanations with the required information/evidences as per the said notices which, inter alia, included the following: Queries made during assessment proceeding Replies of the assessee with evidences Letter No. ITO/Wd- 15(l)/Kol/Reasons/20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also during the course of the assessment proceeding, after having examined/investigated each and every aspect as warranted for the impugned assessment proceeding and deemed fit and after being satisfied with the replies of the queries given by the A/R of the appellant on several dates of hearing vis-avis sale of shares, completed the assessment as per return with his following observation/finding vide assessment order u/s 143(3)/147 of the Act dated 29.12.2017 (P/B pages 91-95): "In response to the above notices, Shri Bijoy Kumar Authorized Representative of the Assessee Company, appeared time to tome to discuss the case. The A/R of the assessee company was asked to produce relevant documents as per notice u/s. 142(1). The A/R of the assessee submitted necessary particulars as per requisition. Books of accounts were also produced. The case was discussed and the A/R of the assessee was heard. On examination of information brought on record and during the course of hearing in connection with assessment proceedings u/s 147 of the I.T.Act, 1961 for the A.Y. 2010-11 the A/R furnished submission wherefrom it is known that the assessee company has sold shares during the year and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee filed its reply to the said show cause notice that in the order of rejection reference was made for the first time to statement of entry operators and M/s. Vrishi Fashion which was alleged to be instrumental in facilitating the deposit of unaccounted cash into the bank A/c of the assessee company. Therefore the show cause notice u/s 263 of the Act and further reasons given thereafter in the final order did not conform to the principle of natural justice and the assessee did not get a proper and adequate opportunity to reply to the allegations which are now being relied upon by the ld. Pr. CIT in his order under appeal. Therefore, in view of the series of judicial pronouncements cited above in this connection, the order of the ld. Pr. CIT u/s 263 of the Act needs to be set aside on the above counts at the threshold and not to remit the matter for fresh consideration. 6. On merits of the case, it was submitted that ld. AO has carried out a detailed enquiry and other evidences as deemed fit and satisfied himself regarding the genuine receipt of Rs. 5,00,000/- through banking channel on sale of shares of the company. Adequate enquiry was made and reliance was placed on the follow....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 1988 by the Assessing Officer 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 section 144A; (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 Chief Commissioner or Director General or Commissioner authorized 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 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 Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. 10.2. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following ratio with regard to provisions of section 263 of the Act: "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay). 10.5. This view is further supported by the decision of the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri in Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon'ble Gujarat High Court was seized with the following substantial question of law:- "Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT." 10.6. We find that the Hon'ble Delhi High Court in the case o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment. Assuming it to be so, in our opinion, this does not justify the conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were I.T. assessees and the unsecured loan taken from M/s Stutee Chit & Finance (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee." 64. Since in the instant case the A.O. after considering the various submissions made by the assessee from time to time and has taken a possible view, therefore, merely because the DIT does not agree with the opinion of the A.O., he cannot invoke the provisions of section 263 to substitute his own opinion. It has further been held in several decisions that when the A.O. has made enquiry to his satisfaction and it is not a case of no enquiry and the DIT/CIT wants that the case coul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ix) If the AO 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 AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 10.8. Hon'ble Delhi High Court in the case of ITO vs. DG Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) held as under: "19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r unaccounted trading and providing accommodation entries. On examination of the assessee's bank account, DDIT(Inv.) found frequent deposits of unaccounted cash and as per cash trail the same stood transferred to the accounts of different beneficiaries. Therefore, the high value cash deposit of Rs. 5,00,000/- on different dates during F.Y. 2009-10 was not commensurate with the assessee's return of income. Letter dated 13.11.2017 sent through Speed Post to the A.O. (P/B Page 3). That there is no transaction in our books with M/s. Vridhi Fashion. Request was also made to provide more details of transaction with date and amount of transaction to fulfil the queries. Vide notice u/s,142(l) dated 15.06.2017 and during the course of assessment proceeding, the Ld. A.O. called for various documents and information. [As listed in the next column and hence not repeated here]. (1) In response to 142(1) notice, the assessee vide letter dated 14.12.2017 (P/B pages 06-49) submitted the following details/ documents: a) ITR Acknowledgement & ITR in full set for AY 2010-11. b) Computation of income for A. Y. 2010- 11. c) The nature of business of the company is to finance and make investmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... called for and furnished and considering the explanation of the A/R of the assessee, the Ld. A.O. considered it prudent to accept the sale of shares as genuine and consequently the assessment was completed on the income returned by the appellant. Therefore, the order passed by the A.O. is neither erroneous nor prejudicial to the interest of the revenue." 12. We also notice that on 14.12.2017 various details were filed including the ITR, computation of income, bank statement showing the transactions placed at page 6 to 49 of the paper book. Again on 18.12.2017 reply was filed stating that no transactions were made with M/s. Vridhi Fashion. Copy of shares' sale bill issued to M/s. Igloo Vanijya Pvt. Ltd., copy of incorporation certificate of M/s. Igloo Vanijya Pvt. Ltd., the ledger account, audited financial statement and bank statement of M/s. Igloo Vanijya Pvt. Ltd. showing the alleged transactions were filed and the copies of the same placed at page 50 to 63 of the paper book. In the assessment order u/s 143(3) r.w.s. 147 of the Act, ld. AO specifically mentioned the issue pertaining to alleged transaction of Rs. 5,00,000/- from sale of shares and after making a detailed enqui....