Case Law Details
Abhishek Sheti Udyog Bhandar Vs PCIT (ITAT Pune)
ITAT Pune held that revisionary jurisdiction under section 263 of the Income Tax Act unjustified in absence of satisfying twin conditions which is mandatory preceded the invocation of revisionary jurisdiction.
Facts- On the receipt of information that, assessee found to have made huge deposits of special bank note [SBN] into various bank accounts, the return of the assessee was subjected to scrutiny u/s 143(3) of the Act. After going through the written submission filed by assessee in response to notice u/s 142(1), the Ld. Asstt. Commissioner of Income Tax Circle-1, Nashik [AO] culminated regular assessment proceedings accepting the returned income by an order dt.18/12/2019.
Post assessment, perusing case records the Ld. PCIT observed that, while framing an assessment u/s 143(3) of the Act, the Ld. AO failed to make due verification and inquiries into such deposits and report thereon in terms of subjective CBDT circulars, instructions & internal guidance note dt. 13/06/2019. For the reason the assessee was put to a notice dt. 07/02/2022 and called upon to showcase as to why said assessment should not be revised u/s 263 of the Act.
Conclusion- Held that no-inquiries into the substantial SBN deposits at the first instance and further failure to carry out analysis in terms of CBDT-Directions is adequately sufficient to attract twin satisfaction as envisaged u/s 263 of the Act. And since such satisfaction of twin conditions preceded the invocation of revisionary jurisdiction, we see no reason in not upholding the action of Ld. PCIT.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal of the assessee is directed against revisionary order of the Pr. Commissioner of Income Tax-1, Nashik [in short ‘PCIT’] dt. 17/03/2022 passed u/s 263 of the Income-tax Act, 1961 [in short ‘the Act’] for the assessment year [in short ‘AY’] 2017-18.
2. Without reproducing grounds it shall be purposive to state that, the sole and substantive grievance is directed against assumption of revisionary jurisdiction u/s 263 of the Act.
3. From the rival contentions and submission following facts borne out for our consideration;
3.1 The assessee firm filed its return of income on 29/10/2017 declaring total income of ₹82,21,180/-u/s 139(1) of the Act.
3.2 On the receipt of information that, assessee found to have made huge deposits of special bank note [for short ‘SBN’] into various bank accounts, the return of the assessee was subjected to scrutiny u/s 143(3) of the Act. After going through the written submission filed by assessee in response to notice u/s 142(1), the Ld. Asstt. Commissioner of Income Tax Circle-1, Nashik [in short ‘AO’] culminated regular assessment proceedings accepting the returned income by an order dt.18/12/2019.
3.3 Post assessment, perusing case records the Ld. PCIT observed that, while framing an assessment u/s 143(3) of the Act, the Ld. AO failed to make due verification and inquiries into such deposits and report thereon in terms of subjective CBDT circulars, instructions & internal guidance note dt. 13/06/2019. For the reason the assessee was put to a notice dt. 07/02/2022 and called upon to showcase as to why said assessment should not be revised u/s 263 of the Act.
3.4 The contention that, upon specific requirement detailed submission was made, was duly considered by Ld. AO before framing assessment u/s 143(3) of the Act, hence exercise of revisionary jurisdiction is unwarranted did not inspire any confidence. Resultantly Ld. PCIT vide order dt. 17/03/2022 has set-aside the assessment and directed Ld. AO to reframe it after a detailed inquiries in terms of CBDT circulars, checklists, guidelines & Note etc.
3.5 During the course of hearing the Ld. AR reiterated all the contention put forth before revisionary authority. Per contra the Ld. DR pressing into service CBDT instruction No. 3/2017 dt. 21/02/2017, 4/2017 dt. 0303/2017 further CBDT SOP dt. 15/11/2018 & 03/03/2019 and internal guidance Note issued dt. 13/06/2019 [these collectively herein after be referred as ‘CBDT-Directions’] vehemently argued that, the Ld. AO beside collecting general information in relation to SBN deposits has cheerlessly failed to carry out inquiries and also failed to file report thereon in ITBA. For the very reason without a shadow of doubt the assessment rendered erroneous and prejudicial to the interest of the revenue, therefore exercise of revisionary jurisdiction is justified and thus needs to be upheld.
4. We have heard both the parties; and subject to the provisions of rule 18 of ITAT-Rules, 1963 perused the material placed on records.
5. We find that, the appellant during the demonetisation period has deposited total SBN/cash of ₹4,91,52,500/- into 11 bank accounts including Kotak Mahindra bank wherein a sum of ₹2,24,76,000/- were deposited and of which ₹2,14,77,000/- was alone deposited on 17/11/2016. In this connection, terms of binding CBDT-Directions, the Ld. AO was obligated to obtain deposit slips, details of denomination of SBN deposited, details of withdrawals (if any) and details of inter/intra bank transfer in order to carry out a comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits, however same found misplaced.
6. We further note that, these CBDT-Directions required the assessing officer to verify basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of fictitious cash sales. These instructions also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump during the period November-2016 to December-2016 as compared to earlier years. It also suggests that, abnormal jump in percentage of cash trails from identifiable persons as compared to earlier history will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history etc., to examine whether the case falls into any of the above parameters laid therefore. We note that, these instructions give a hint regarding kind of investigation, enquiry and evidences that Ld. AO was required to take into consideration before framing an assessment, which Ld. AO sadly lost sight of in the present case.
7. From a single para cryptic assessment order we observe that, there is no iota of discussion about calling of any information, raising specific queries vis-à-vis conducting of any inquiries / verification in terms of aforestated mandated CBDT-Directions. Consequently the failure on the part of Ld. AO to make even the basic inquiries indubitably rendered the assessment grievously erroneous which in turn resulted into loss of Revenue which could otherwise lawfully be recovered from the assessee. The loss to ex-chequer on account of outstepping from CBDT-mandates while framing an assessment in our considered view tent to set bad trend in terms of Hon’ble High Court of Madras in ‘Venkatakrishna Rice Company Vs CIT’ reported in 163 ITR 129 (Mad). Their lordship therein have held that;
In this context, it must be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the Order passed by the Income-tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration.
(Emphasis supplied)
8. In the present case, no-inquiries into the substantial SBN deposits at the first instance and further failure to carry out analysis in terms of CBDT-Directions is adequately sufficient to attract twin satisfaction as envisaged u/s 263 of the Act. And since such satisfaction of twin conditions preceded the invocation of revisionary jurisdiction, we see no reason in not upholding the action of Ld. PCIT in the light of Hon’ble Supreme Court landmark decision case of ‘Malabar Industrial Co. Ltd. Vs CIT’ reported in 243 ITR 83 (SC).
9. In result, this appeal stands DISMISSED.
In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Tuesday 30th day of May, 2023.
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