Gurdeep Singh Vs PCIT (ITAT Chandigarh)
ITAT Chandigarh held that invocation of revisional power under section 263 of the Income Tax Act unjustified once detailed inquiry conducted by AO on the matter.
Facts- The assessee is the sole proprietor of M/s Sunrise Steels which is engaged in the trading of MS Bar, Angle, Patti etc. PCIT set aside this order passed by the AO u/s 143(3) of the Act exercising powers u/s 263 of the Act. It was alleged that AO has simply raised a query and accepted the returned income ignoring the fact that huge deposits were made in the demonetization period and comparative analysis from the earlier year was required to be done by him. It was submitted that even the household withdrawal contribution of Rs. 10,000/- has been accepted by the AO.
Conclusion- On a careful consideration of the same, we find that in the facts of the present case, the exercise of power by the ld. PCIT in setting aside the assessment order cannot be sustained. We have seen that the record clearly speaks of repeated enquiries made by the AO. These have been replied to by the assessee. We have seen that the queries were raised on the e-portal and specifically the AO has required the assessee to reply on e-portal. We have seen that the fact that enquiries have been made by the AO are accepted by the PCIT also as some of the queries have been extracted in the order by her. However, the ld. PCIT considering the fact that on record that there was no comparative analysis of the assessee’s sale and purchase in cash or otherwise from the earlier years despite the enquiries raised by the AO. The ld. PCIT incorrectly concluded that the AO has casually accepted whatever replies have been made by the assessee. Hence, it was concluded that the comparative analysis which the AO was required to examine was not examined.
The ld. PCIT failed to consider the fact pleaded on record before the AO that the assessee in response to the specific query of the AO had responded that this was the first year of assessee’s business and hence, there was no past comparison available which the assessee could file. This fact has not been noticed by the ld. PCIT which she was duty bound to consider. The power to set aside a validly passed assessment order is an onerous responsibility. The Revisionary Authority cannot be permitted to exercise the power on a shoddy perusal of the record. The Revisionary Authority is expected to exercise the power considering the record. The power cannot be permitted to be exercised on whims. It is seen that the replies of the assessee and the queries raised by the AO are through the e-portal and this fact stands un-demolished by the Revenue.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
The present appeal has been filed by the assessee wherein the correctness of the order dated 26.03.2022 of Pr.CI T, Chandigarh-1 pertaining to 2017-18 assessment year is assailed on the following grounds :
1. Whether Ld. PCIT has erred in exercising jurisdiction under Section 263 of the Act, where specific inquiry was already conducted by the Ld. AO?
2. Whether on facts and circumstances of the case and in law the Ld. CIT has exceeded legislative jurisdiction under Section 263 of the Act, and the order passed is bad in law?
3. That the Ld. CIT has erred in passing an order under Section 263 of the Act in the absence of any erroneous position prejudicial to the interest of revenue, in the original assessment order passed by Ld. ITO under Section 143(3) of the Act.
4. That Ld. CIT has erred in substituting an alternative view as against a view already adopted by the Ld. AO at the time of assessment proceedings under Section 143(3) of the Act.
5. That the Appellant craves leave to add, amend, or alter the grounds of appeal before the appeal is finally disposed off.
2. The assessee as per record is the sole proprietor of M/s Sunrise Steels which was stated to be engaged in the trading of MS Bar, Angle, Patti etc. A perusal of the record shows that the assessee filed its return on 18.10.2017 which was accepted by the AO vide his order dated 27. 12.2019. The ld. PCIT set aside this order passed by the AO u/s 143(3) of the Act exercising powers u/s 263 of the Act. This order is under challenge in the present proceedings.
3. The ld. AR inviting attention to the record submitted that he would be able to show on the basis of material available on record that the AO before the passing of the order had made complete enquiries. The order passed by ld. PCIT was assailed on the grounds that it has been passed without looking at the assessee’s records.
3.1 For the said purpose, attention was invited to the Paper Book No.I wherein the queries raised by the AO and the detailed replies to the notices issued to the assessee by the AO in the course of assessment proceedings are attached. The replies made available by the assessee to the AO alongwith the explanations also available in the Paper Book were heavily relied upon. The said Paper Book, it was submitted, also contains the copy of the Show Cause Notice dated 14.03.2022 issued to the assessee by the ld. PCIT. Relying upon these documents available in the Paper Book it was submitted that the ld. PCIT is presumed to have gone through the same. Reading from the order, it was submitted that he fails to show what was the shortcoming in the enquiries carried out by the AO. On a reading of the impugned order, it was submitted, no fact or evidence has been set out therein to justify holding that the order passed by the AO is erroneous as well as prejudicial to the interests of the Revenue. The exercise of power by the ld. PCIT, accordingly, was assailed to be arbitrary. It was argued that it does not satisfy the twin conditions which the ld. PCIT is bound to satisfy.
3.2. Before proceeding to address the issues further, attention was invited to paragraph 3 of the impugned order to show that the notice sent by the ld. PCIT has not been replied to by the assessee. It was submitted that as per his instructions, the notice was sent to the assessee’s Chartered Accountant who was having some health problems on account of which fact, the notice(s) received by him were never communicated to the assessee.
3.2.1 However, it was submitted that the assessee is not pleading lack of notice nor seeking an opportunity of being heard as on the basis of material available on record, he would be able to demonstrate that the order passed by the ld. PCIT is de-hors the facts and record.
3.3 Referring to the copy of the Show Cause Notice at pages 20 to 28, it was submitted that infact more or less the SCN is reproduced in the impugned order itself. Carrying the Bench through the impugned order, attention was invited to the facts as summarized in para 4 which were taken from the replies of the assessee already on records. This information is captured by the ld. PCIT in the Show Cause Notice as well as the impugned order which is month-wise details of sales and then proceeds to conjecture instead of referring to some hard fact or information. It was submitted that the ld. PCIT appears to be making out a case as though by stating facts on record some conjectures can be treated to be as though some fresh fact is noticed by him. Carrying the Bench through the replies made by the assessee to the AO, it was submitted that these facts flagged by the ld. PCIT all along had been noticed by the AO. They were questioned. The replies were provided by the assessee to the AO in response to the queries raised by him in the course of the assessment proceedings. These facts from the record, it was submitted, the ld. PCIT has more or less extracted from the replies made available by the assessee to the AO in the course of assessment proceedings. It was submitted that nothing new is noticed by ld. PCIT. Specific attention was invited to Paper Book page 19 which was the continuing reply of the assessee to notice u/s 142(1) dated 13. 12.2019.
3.4 Reading from the order, it was submitted that the ld. PCIT has taken note of the fact that the case was selected for complete scrutiny through CASS for a specific purpose. Thus, it was submitted that it was not a new fact that there were cash deposits during the demonetization period. The AO was conscious of this fact and even the ld. PCIT was very well aware of the fact why the AO was looking into it. This fact, it was submitted, would be evident from para 1 of the impugned order itself wherein the ld. PCIT has noticed that the case at the assessment stage was selected for Complete Scrutiny through CASS to verify the abnormal increase in cash deposits during the demonetization period during the year as compared to the pre-demonetization period.
3.5. The ld. AR further invited attention to para 4. 1 of the impugned order so as to point out that the ld. PCIT was aware that the AO had made specific enquiries as he has noticed in his order that the AO vide specific question No. 10 sought month-wise details of sales and purchases in a specific format. The details required the assessee to clearly depict whether the payment was received/paid by cash or otherwise. Quoting from the impugned order, it was submitted that the ld. PCIT has also noticed that the AO required the assessee to further show “in case there is a sharp variation in the above figures of the current year as compared to the preceding years figures, please explain the reason for such variations.” The ld. PCIT also took note of the fact that vide question No. 1 1 and 12, the AO before the passing of the assessment order had also required the assessee to provide the following details :
Que No.11 : Month-wise cash sales and cash deposits from 01.04.2015 to 31.03.2016.
Que No.12 : Month-wise cash sales and cash deposits from 01.04.2016 to 31.03.2017. ”
3.6. However, on going through the replies available in the assessment folder the ld. PCIT it was submitted that either the Ld. PCIT misunderstanding the facts or arbitrarily in para 4.2 has held that “the assessee had selectively replied to the questions posed by the AO”. On a reading from para 4.2 of the order, it was pointed out that infact the ld. PCIT has herself selectively read the record as repeatedly the assessee is castigated for not providing the data to the AO pertaining to the preceding assessment year i.e. 2016-17 assessment year for a comparative analysis. This shortcoming, it was submitted is repeatedly pointed out by the ld. PCIT. Ignoring the facts, the ld. PCIT holds that the AO was required to make an analysis of the cash receipts before and after demonetization with respect to the previous financial year. Reading the conclusion of the order, it was submitted that the ld. PCIT has incorrectly on facts held that the AO has passively accepted the assessee’s submission. Inviting attention to the replies made available to the AO in the course of the assessment proceedings which were available to the ld. PCIT also, it was submitted that the information made available was many a times required to be further explained. The assessee, it was argued, had specifically replied that this was the first year of setting up of this business for the assessee and hence admittedly there was no historic data available for comparative analysis which could have been made available by the assessee. Accordingly, it was his submission that it is possibly a cut paste order where facts of some other case are over-lapping.
3.7 Over and above the written submissions, reliance has also been placed on the written synopsis para 1. 1 1. Same is reproduced hereunder :
1.11 As per the contention of the 1d. Pr. CIT that the 1d. AO failed to requisition and examine the cash book of the preceding year i.e., F.Y. 2015-16 and make a comparative analysis of the cash-in-hand and cash receipts vis-a-vis FY 2016-17, ” All the questions that required the assessee to provide the data pertaining to the preceding year i.e., A.Y. 2016-17, were ignored by the assessee.” It is very respectfully submitted that the Assessee started the business of M/s Sunrise Steels during this F.Y. 2016-17 itself which is why no comparative analysis could not have been made as to previous years.
3.8 Referring to para 4.3 of the order, it was submitted that the ld. PCIT has alleged that the AO has omitted to examine the fact that within a span of 39 days i.e. in the month of October, 2016 and upto 08. 1 1.2016 the assessee allegedly made huge cash sales i.e. amounting to Rs.55,07,396/- as against total sales of Rs. 1,01,83,375/-. Referring to the record wherein replies made to the AO were available on record. He submitted that this tabulated chart also had been made available by the assessee to the AO. Thus, by mere reproduction of the same in the Show Cause Notice or thereafter in the impugned order, it was submitted, that the ld. PCIT cannot conclude that the order suffers from any error. The conjecture that comparative analysis was ignored by the AO, it was submitted, was contrary to fact as this was the very first year of assessee’s business. Thus, once these facts were evident on record and made available by the assessee to the queries raised by the AO as he had required the assessee to give the required information nothing much turns. The said response on record has been ignored by the ld. PCIT. It was urged that the reply of the assessee accepted by the AO must be shown to be erroneous or prejudicial to the interests of the Revenue. No such effort has been done.
3.9 It was argued that the ld. PCIT cannot selectively ignore the facts brought on record. The fact that there were huge sales in the month of October should have been seen considering the replies to the AO that there were corresponding depletion in the stock of the assessee and consequently heavy purchases stood reflected in contemporaneous evidences available for the month of November. These facts, it was submitted, were all comprehensively enquired into by the AO and explained and demonstrated by the assessee to his satisfaction by the replies available on record. These replies, it was argued were available to the ld. PCIT and she was duty bound to upset the same. The impugned order, it was submitted, should have been passed after looking at complete records available. It was argued that the order has been passed ignoring the information and facts on record. Allegations made in sub-paras (a) to (m) from pages 5 to 8 of the impugned order, it was submitted, are basically conjectures and surmises. These conjectures, moreover, also are mutually exclusive to each other and cannot exist simultaneously on record. Accordingly, in the absence of any evidences, the allegation that a huge cash sales in the specific period was manufactured was strongly objected to. Para 1. 12 and 1.13 relied upon in the synopsis filed are reproduced hereunder for completeness:
1.12. Regarding the claim of the Ld. Pr. CIT that the Assessee had shown increased cash sales in the period from 01.10.2016 to 08.11.2016 in order to manufacture cash in hand so as to cover up the cash deposits made by him during demonetization from his other hitherto undisclosed income, it is stated that the Assessee’s nature of business is predominantly cash oriented and moreover, the Assessee has already submitted his reply with respect to this query raised vide final show cause notice dated 13.12.2019 having DIN- ITBA/COM/F/17/2019-20/1022288651(1), (Refer Page No. of Paperbook -2), which is as follows:-
