TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 1399
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....r and are decided by consolidated order to avoid the conflicting decisions. For appreciation of facts, facts in ITA No.104/SRT/2022 in the case of K.N.Diamond, is treated as "lead" case The assessee has raised the following grounds of appeals:- "1. The learned Pr.CIT erred in passing an order u/s 263, when the jurisdictional conditions were not satisfied. 2. The learned Pr.CIT erred in assuming jurisdiction u/s 263 even though a detailed inquiry was carried out by the Assessing Officer on the issue pertaining to the cash deposits made by the Appellant firm during the year under consideration. 3. The learned Pr.CIT erred in assuming jurisdiction u/s 263 merely on the basis of a difference of opinion with the Assessing Officer. 4. On the facts and in the circumstances of the case as well as law on the subject, the learned Pr.CIT has erred in invoking his powers / authority under section 263 of the Income Tax Act, 1961, and the order passed by him u/s 263 is without jurisdiction. 5. On the facts and in the circumstances of the case as well as law on the subject, the learned Pr.CIT has failed to appreciate that the assessment order passed by the ACIT, Navsari Circle, Navsari ....
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....de cash deposited of Rs. 77.00 lakhs in HDFC bank during demonetization period. The assessee asked to furnish the details regarding source of such huge cash amount during such demonetization period. The assessee in response such show cause notice submitted that cash was deposited from the sales made during the year. The assessee furnished the required details and contended that Rs. 29,31,752/- was deposited in cash from the sale in the month of October, 2016 and Rs. 49,57,789/-was on account of cash sale from the period of 01.11.2016 to 08.11.2016 respectively. The Assessing Officer compared such details with earlier year and found to be abnormal. On such discrepancy, the Assessing Officer issued fresh show cause notice to the assessee to furnish complete details of customers to whom the sales were made in cash from 01.10.2016 to 08.11.2016. The assessee was also asked to furnish supportive evidence to explain the genuineness of such sales for such period. The assessee filed its reply, vide reply dated 17.12.2019. The contents of reply of assessee is recorded by Assessing Officer in para-3.4 of assessment order. The assessee in its reply stated that there is nothing abn....
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....ial year 2015-16, however, in financial year 2016-17 cash sales is at Rs. 81,98,017/-. The Assessing Officer also examined the turn-over & gross profit ratio of last four years as reported by assessee. On comparison of such figures, the Assessing Officer was of the view that cash sales in October and November, 2016 were seemed to be highly abnormal as the case were not verifiable and the figures of cash sales are inflated on the ground. By taking such view, the Assessing Officer rejected the books of account. After rejection of books of account, the Assessing Officer noted that gross profit of current year of assessee is 14.99%. The assessee has already offered gross profit on turnover of cash deposits. However, as there were abnormal cash deposits in the bank account of assessee, the assessee must have earned profit over the above book profit. The Assessing Officer accordingly estimated @ 10% Rs. 78,89,541/-, as profit on alleged inflated sales for the period from 01.10.2016 to 08.11.2016. Accordingly, added Rs. 7,88,954/- as an extra profit of such inflated sales and made addition in the assessment order dated 31.12.2019 passed under section 143(3) of the Act. 3. The....
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....e and without analysing it simply kept with record. The auditor has remarked the stock had been valued at average cost and at another point it was shown as cost price and assessee in its reply has pointed out that closing stock is valued as at cost price and no inquiry was done by the Assessing Officer on the closing stock. The Assessing Officer has not gone through the profit and loss account. In the details of purchase, the assessee has shown purchased of Rs. 7.07 crores, however in other details, it is shown at Rs. 3.03 crores and VAT of Rs. 2,87,501/-. Thus totalling Rs. 7,06,40,635/- and there is difference of Rs. 63,325/- in the purchase that took in the audited accounts. The Assessing Officer has not verified such vital aspects. The ld. PCIT further noted that out of total cash sales, during the relevant financial year, (Rs. 81,98,017/-) cash sales took place in the month of October and November, 2016 respectively. The ld. PCIT also made passing remark that stock record does not match with export sales and export return. The ld. PCIT set aside the assessment order with the direction to frame the assessment as de novo after making proper inquiries on the aforesaid issue....
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.... The Assessing Officer again asked the assessee vide notice dated 18.11.2019 to furnish party-wise details of sales made in cash; details of major expenses, employees remuneration. The assessee furnished party-wise details, sales, detail of major expenses and details of employee's remuneration after signatures of details. The Assessing Officer issued notice under section 133(6) to HDFC Bank to verify the cash deposits after making all such details inquiries and investigation. The Assessing Officer issued show cause notice as to why cash deposits of Rs. 77.00 lakhs should not be considered as unexplained cash credit under section 68 of the Act. In response to such show cause notice, the assessee furnished its reply dated 17.12.2019 and furnished documentary evidence of cash-in-hand, sales book for month of October and November, 2016, cash flow statement, VAT return for October and November, 2016, names and addresses of customers from whom sales exceeding Rs. 1.00 lakh were made. The ld. AR for the assessee further submits that copies of all such details are filed e before Tribunal in the form of paper book. The Ld. AR for the assessee submits that ultimately the Assessing Officer af....
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.... has been examined at the original assessment stage but the same does not reflect in the final assessment, then that by itself would not lead to a conclusion that order of Assessing Officer calls for interference by ld. PCIT under section 263 of the Act. To support his submission, ld. AR for the assessee relied upon following decisions: CIT vs. Nirma Chemicals Works (P.) Ltd. 309 ITR 67 (Guj) Rayon Silk Mills vs. CIT 221 ITR 155 (Guj) Hari Iron Trading Co. vs. CIT 263 ITR 437 (P&H) CIT vs. Gabriel India Ltd. 203 ITR 108 (Bom) CIT vs. Vikas Polymears 341 ITR 537 (Del) CIT vs. Honda Siel Power Products 333 ITR 547 (Del) 9. The ld. AR for the assessee submits that if two views are possible, revision under section 263 is not justified as the Assessing Officer has taken one of the possible view thus, the Assessing Officer is merely on different view could not have taken on different view, the order passed by ld. PCIT under section 263 cannot be revised. To support his submission, ld. AR for the assessee relied upon following decision: Malabar Industrial Co. Ltd. vs. CIT 243 ITR 83 (SC) Kwality Steel Suppliers vs. CIT....
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....ation of ld. PCIT in his order under section 263 of the Act that there is a difference of Rs. 63,325/- and the figure of purchased of the assessee between details of purchase furnished by assessee. The ld. AR for the assessee submits that said difference is nothing but a figure of purchase return of Rs. 62,698/- which is clearly reflected in the trading account, details of such is available at page 79 of the paper book and VAT @ 1% thereof i.e. 627/- which aggregates to Rs. 63,325/- thus, there is no difference or discrepancy in respect of such issued. The ld.AR for the assessee submits that such issue was not the subjectmatter of show cause notice or any of such issue was confronted with the assessee to explain such fact, the passing remarks with the difference of stock record vis-à-vis export sales return is not enquired and does not reflect any specific error and such passing reference is made without proper verification. The ld. AR for the assessee finally submits that there is no error in the assessment order passed by Assessing Officer that on similar / identical issue a strong reliance is also placed of co-ordinate Bench of Rajkot in the case of Premji Valji & S....
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....judicial to the interest of Revenue. 15. We have considered the rival submission of both the parties and have gone through the order of Assessing Officer as well as ld. PCIT passed under section 263 of the Act. Before adverting to the facts of the present case, we may refer the scope of provisions of section 263 of Income tax Act. The Supreme Court in case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 832 (SC), held that the prerequisite for the exercise of jurisdiction by the Commissioner suo-motu is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of 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. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1) of the Act. It can be exercised only when an order is erroneous, the section 263 will be attracted. 16. Further, Hon'ble Bombay H....
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....figure higher than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. But that by itself will not be enough to vest the Commissioner with the power of suo-motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the revenue, then also the power of suo-motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on a....
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....itted that cash was deposited from the sales made during the year. We find that the assessee furnished the required details and contended that Rs. 29,31,752/- was deposited in cash from the sale in the month of October, 2016 and Rs. 49,57,789/-was on account of cash sale from the period of 01.11.2016 to 08.11.2016 respectively. Further, the Assessing Officer compared such details with earlier year and find certain discrepancy. The Assessing Officer issued fresh show cause notice to the assessee to furnish complete details of customers to whom the sales were made in cash from 01.10.2016 to 08.11.2016 and was asked to furnish supportive evidence to explain the genuineness of such sales for such period. The assessee filed its reply, vide reply dated 17.12.2019. The assessee in its reply explained that there is nothing abnormal about cash sales, which took place in the current year, just there was a currency note demonetization during the assessment under consideration should not lead to presumption that this transaction is abnormal and suspicious. The assessee provided the details with date of sales, name of customers, address of customers, description of sales gross weight of jewelle....
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....d not permit him to take the order in revision, it if further held that when Assessing Officer made full enquiry, he made up his mind, the notice of revision is not valid. In CIT Vs Nirma Chemical Works (P) Ltd (supra), the Hon'ble High Court also held that when assessing officer after making due inquiries had adopted one of the view and granted partial relief, merely because Commissioner took a different view of the matter, it would not be sufficient to permit commissioner to exercise his powers under section 263. The Hon'ble Court in para 22 of its order on the objection of the revenue that there is no discussion of the issue in the assessment order held that the contention on behalf of the revenue that the assessment order does not reflect any application of mind as to the eligibility or otherwise under section 80-I of the Act requires to be noted to be rejected. An assessment order cannot incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic some. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he ca....