TaxTMI 
TaxTMI 
2022 (9) TMI 1443
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....nd trading of jewelries. The PCIT on examination of the case records of the assessee, found that there was cash deposit in the bank account of the assessee during the demonetization period amounting to Rs. 6,58,76,500.00 only. According to the learned PCIT, the amount of cash deposits was not verified during the assessment proceedings by the AO. Accordingly, the PCIT initiated the proceedings under section 263 of the Act vide show cause notice dated 27 July 2021. 3.1 The assessee in response to such show cause notice submitted that it has deposited cash in the bank account which was withdrawn earlier from the bank and cash received against the sales on or before 8th of November 2016 which was utilized for making the deposits in the bank. According to the assessee, the facts of deposit of cash in the bank account was duly verified and enquired by the AO and the ADIT. Furthermore, the assessment was framed under section 143(3) of the Act after taking the approval from the ld. JCIT. Likewise, there was no doubt raised in respect to the cash sales made by it which was duly recorded in the books of accounts and the same was accepted in the assessment framed under section 143(3) of th....
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....ased on the above, the learned PCIT was of the view that possibility of channelizing unaccounted cash cannot be ruled out. But all these facts have not been verified by the AO during the assessment proceedings. In view of the above, the principal CIT concluded that the assessment has been framed without necessary verification therefore the same is erroneous insofar pre-judicial to the interest of revenue by observing as under: 11. It is the bounden duty of the Assessing Officer to collect and appreciate the facts collected and proper application of law is to be made while making the assessment. There is incorrect application of law by allowing deduction contrary to the provisions of Income tax Act. In the interest of justice and since the twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous and (ii) it is prejudicial to the interests of the Revenue, are satisfied, the assessment order passed u/s. 143(3) needs to be set aside for the discussion made above. 12. It may be mentioned that with effect from 01/06/2015. Explanation 2 to the section 263(1) has been inserted which reads as under: "Explanation 2.-For the ....
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.... the ld. AR drew our attention on page Nos. 48 to 132 and 173 to 249 where the sales register dated 0811-2016 and Bills along with their payment receipt were placed. Thus, the learned AR contended that the Ld. AO after verification of all these necessary documents had framed the assessment order under section 143(3) of the Act. Therefore, it cannot be said that the AO has not verified the documents and applied his mind at the time of assessment proceedings. 5.1 The learned AR further contended that the assessment was framed by the AO after considering the necessary details and verification and application of mind. The learned AR in support of his contention drew our attention on pages 26 to 34, page Nos. 170 to 171, page Nos. 210 to 213 and page Nos. 217 to 218 where the copy of the notice under section 142(1) of the Act dated 22-08-2019, dated 24-102019, dated 05-11-2019 and 14-11-2019 were placed where the assessee was asked about the details of cash sales/cash deposits in bank. Likewise, the learned AR also drew our attention on pages 35 to 169, page Nos. 172 to 209, page Nos. 214 to 216 and page Nos. 219 to 249 of the paper book where the reply of the assessee in response to....
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....on 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 Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open. --- From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by ma....
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....cial controversies as it must in other spheres of human activity. 7.4 The Mumbai ITAT in the case of Sh. Narayan Tatu Rane Vs. ITO, I.T.A. No. 2690/2691/Mum/2016, dt. 06.05.2016 examined the scope of enquiry under Explanation 2(a) to section 263 in the following words:- "20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provison shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO visà-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered....
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....der of revision. No question of law arises. Tax Appeal is dismissed" 7.6 The Supreme Court in the another 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" 7.7 From an analysis of the above judicial precedents, the principle which emerges is that the phrase ....
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....ing format Bank Account Cash deposited during the year Cash deposited during demonetization period Quantum of cash deposit in SBN during demonetization period 19. Please explain the sourse of cash deposited during the demonetizationperiod with corroborative evidences. Please provide the details of legal tender available with you on 08.11.2016. 20. Provide day wise stock register. 21. Furnish the following information in respect of cash deposits: Total cash deposit in bank F.Y. 2015-16 Total cash deposit in bank from 01.04.2015 to 08.11.2015 Total cash deposit in bank from 09.11.2015 to 31.12.2015 Total dash deposit in bank in FY 2016-17 Total cash deposit in bank from 01.04.2016 to 08.11.2016 Total cash deposit in bank from 09.11.2016 to 31.12.2016 22. Furnish the following information in respect of cash sales: Total cash sales in bank in FY 2015-16 Total cash Sales in bank from 01.04.2015 to 08.11.2015 Total cash Sales in bank in FY 2016-17 Total cash Sales in bank from 01.04.2016 to 08.11.2016 23. Furnish the following information in r....
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.... demonetization period with corroborative evidence is enclosed 20 Day wise Stock Register Details of Stock register enclosed 21 Information in respect of cash sales; Details of Cash receipts in given format is/are enclosed. 22 Information in respect of cash sales: Details of Cash Sales in given format is /are enclosed 23 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2015-16 in given format is enclosed herewith. 24 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2016-17 in given format is enclosed herewith. 25 VAT Audit Report or Form 205: VAT Report for the year 2016-16 in Form 205 is enclosed herewith. We have not revised return file after 08.11.2016. 26 Day wise cash book: Day wise cash book attached herewith 15 Closing Stock and Opening Stock:- Please find enclosed copy of audit report showing the same 16 Item wise Purchase and Sales:- Month wise details of Purchases and Sales as is enclosed 17 Sec.43....
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....23 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2015-16 in given format is enclosed herewith. 24 Month wise cash sales and cash deposits: Details of Cash Sales and Cash Deposited for the year 2016-17 in given format is enclosed herewith. 25 VAT Audit Report or Form 205: VAT Report for the year 2016-16 in Form 205 is enclosed herewith. We have not revised return file after 08.11.2016. 26 Day wise cash book: Day wise cash book attached herewith Relevant queries raised in the notice dated 24-10-2019: Please refer to the notice u/s.142(1) dated 22.08.2019. You have been requested to furnish the details however, you have partially responded to the questions asked in statutory notice issues. For ex: you have not submitted any response in respect of questions no.6 (bank statement & reconcillation not provided), 7 (old loans not provided), 15 with respect to cash sales and advances received on 08.11.2019 provide following details 1, Orginal bills and vourcher 2.PAN as mandated by section 285BA of the Act, Rule 114B) and address of purchases 3. Also pr....
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....ther cash bills issued on 08.11.2016 if not submitted earier. 3. Provide copy of any 10 cash bills issued in the month of October 2016. 4. Provide details of staff, their roles/duties assigned as on 8.11.2016 along with staff register. 5. Provide names, detailed address of the persons who have signed on the cash bills issued on 08.11.2016 as provided by you. The reply made by the assessee dated 18-11-2019 PAN No.AACEFP7696K Sub: Assessment Proceedings for A.Y. 2017-18 Reference is invited to your notice U/s 142(1) vide No.ITBA/AST/F/142(1)/2019-20/1020416785(1) dated 14/11/2019 calling us to furnish the details/information as per the notice. Please find enclosed the required details/information as called for as under: Sr.No. Particulars 1. Details of Sales Register for the Month of Oct. 2016 has been already uploaded vide our submission dated 11.10.2019 in reply to point no.16. However, the same is again reuploaded 2. Copies of Bills as mentioned vide No.TRS/1111 to TRS/1137 have been already submitted vide our submission dated 05.11.2019. However, the copies of same are again re-uploaded. 3. Cop....
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..../108. The reply made by the assessee dated 26-11-2019 Please refer to your notice No. ITBA/ASF/F/142(1)/2019 -20/1020834675(1) dated 21.11.2019. Please find enclosed the following details 1 Details of 5 persons from who have made purchases 2 Details of Artisians as called for 3 Full form of all abbreviations Relevant queries raised in the show cause notice dated 24-12-2019: The reason for such huge sales according to you is customer rush due to demonetisation. On 08.11.2016 demonetisation was declared at 20,00hrs. taking liberal view even if it is presumed that customer inflow began at 21.00 hrs, the approximate time for which you attended customers can not be more than 180 min [ assuming shop remained open till midnight 00.00 hrs] on 08.11.2016 after declaration of demonetisation. On 08.11.2016 you had 15 sales person [ including 03 sales executive]. Total customers attended by these 15 sales person were 414. This means 01 sales person attended aroung 28 customers in 180 min which in turn means on an average one customer took just 6.44 min to purchase goods. During these 6.44 min customer not just selected ....
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....d. We have 6 data entry operators working on 6 computers making bills. 3.4 many of the bills are for sale of bullion. There is no time taken in selling and preparing the bills for the same. The customers just pick up the quantity. Further it is well known that there was a huge shortage of time. The customers did not really sit down to choose. They just picked up what they could in a very short time. 3.5 We have made sales, given delivery of goods and accounted the same in our books. Since they have been accounted for in the books of account, it implies that the same have been added to the profit on which we have paid income tax. The proposal to add the amount again would lead to double taxation. 3.6 further, since all the transactions are accounted for there is no violation of any provisions under the Income tax Act. 4. We therefore submit that the proposal action is not justified. We request you to please not to make the proposed addition. 7.9 From the above, it is revealed it is not the case that the AO has not made any enquiry. Indeed the Pr. CIT initiated proceedings under section 263 of the Act on the ground that the AO has not made enqui....