TaxTMI 
TaxTMI 
2023 (3) TMI 194
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of Revenue 4. The learned PCIT has erred in initiating the Proceeding u/s. 263 of the Act based on suspicion. 5. The orders of he learned PCIT is illegal, unjustified and against the principles of natural justice. 6. Without prejudice to the above your petitioner craves leave to add, amend, alter, vary or withdraw all or any of the grounds on or before the hearing of appeal. Total tax effect (see note below) 3. The brief facts of the case are that the Principal CIT observed that the assessee had deposited demonetised cash of Rs. 27 lakhs in two of its bank accounts in four instalments on different dates. The Principal CIT issued notice under section 263 of the Act on the ground that the AO has not verified the cash deposit during the demonetization period nor sought any explanation while finalising the assessment under section 143(3) of the Act. The Principal CIT took the submissions of the assessee on record and passed an order holding that the assessing Officer has passed an order which is erroneous and prejudicial to the interest of revenue and accordingly set aside the same. 4. The assessee is in appeal before u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer's prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various High Courts in this regard. 6.1 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon'ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 on the ground of inadequate inquiry "12...... There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of 'lack of inquiry'." 6.2 In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113) "The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner 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 wellaccepted 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 m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l and accepted genuineness of same, such view of Assessing Officer being a plausible view could not be considered erroneous or prejudicial to interest of revenue. The facts of this case were that respondent assessee has filed its return of income showing total income of Rs. 62,55,900/- which was assessed under section 143(3) of the Act, 1961 by an assessment order dated 14th March 2016. The respondent company received unsecured loans from M/s. GeorgettTradecom Pvt Ltd and M/s. PurbaAgro Food Pvt Ltd amounting to Rs. 2.49 Crore and the Assessing Officer allowed these unsecured loans. The Principal Commissioner of Income-tax invoked section 263 of the Act, 1961 for revising the assessed income of the respondent assessee. It was noticed by the PCIT that the unsecured loans obtained by the respondent assessee are shown as investment in the name of the assessee in the share application as well as in the balance sheet of the respective companies. The PCIT passed an order under section 263 of the Act directing the Assessing Officer to pass fresh assessment order under section 143(3) of the Act, 1961 on the aspect of unsecured loans shown by the respondent assessee. The Hon'ble Supreme Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of law arises. Tax Appeal is dismissed" 6.7 The Supreme Court in the recent case of Principal Commissioner of Income-tax-2, Meerut v. Canara Bank Securities Ltd[2020] 114 taxmann.com 545 (SC), dismissed the Revenue's SLP holding that 263 proceedings are invalid when AO had made enquiries and taken a plausible view in law, with the following observations: "Having heard learned counsel for the parties and having perused the documents on record, we see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed" 6.8 The Supreme Court in the case of Principal Commissioner of Income-tax--8 Mumbai v. Sumatichand Tolamal Gouti [2019] 111 taxmann.com 287 (SC)....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of assessment proceedings. The assessment proceedings were initiated specifically for the reason "verifying the cash deposited during demonetisation period". Accordingly, the AO issued notice for verifying the cash deposits made by the assessee, in response to which the assessee furnished the details which have been mentioned in the preceding paragraphs. Therefore, this is not a case where no enquiry was made by the AO during the course of assessment proceedings. Further, we also observe that the assessee also duly filed his reply in response to the notice issued by the AO and various details like Certificates from Lakshmi Vilas bank and Certificate from Allahabad Bank, bank statements of Lakshmi Vilas bank and Allahabad Bank, cash book for financial year 2016-17, VAT returns for financial year 2016-17, VAT audit report for financial year 2016-17 etc. were submitted before the AO in response to this query regarding the cash deposits made by the assessee during the demonetisation period. We further observe that it is also not the case of the Principal CIT that the AO has taken a view which is legally impermissible. Therefore, from the above facts, we are of the considered view that....