Case Law Details

Case Name : Ravi Sher Singh Toor Vs PCIT (ITAT Chandigarh)
Appeal Number : ITA No. 405/CHD/2022
Date of Judgement/Order : 27/10/2023
Related Assessment Year : 2017-18

Ravi Sher Singh Toor Vs PCIT (ITAT Chandigarh)

ITAT Chandigarh held that initiation of reassessment proceeding merely on the fact that AO has not carried out independent enquiries of confirmations from the creditors, without pointing out any deficiency or inaccuracy, cannot be a base to hold that order was erroneous in so far as prejudicial to the interest of revenue. Accordingly, reassessment unsustainable.

Facts- The assessee is engaged in operating a Petrol Filling Station under the name and style of M/s Toor HP Centre and has filed his return of income, declaring a total income of Rs. 10,90,270. The case of the assessee was selected for scrutiny through CASS and notices u/s 143(2) and 142(1) were issued, and assessment was completed u/s 143(3).

Subsequently, the assessment records were called for and examined by the ld. Pr. CIT and as per observations of the ld. PCIT, the AO omitted to conduct basic enquiries that were necessary to ascertain the true facts of the case with regard to the reasons for selection of the assessee’s case for scrutiny as well as other facts of the case holistically and the various claims made by the assessee to explain the source of cash deposits in his bank account and thereafter, a Show Cause u/s 263 was issued dated 02.03.2022 wherein the ld. Pr. CIT has listed the major omissions on the part of the AO and it was held that in view of the same, the assessment order passed u/s 143(3) was prima facie erroneous in so far as prejudicial to the interests of the Revenue within the meaning of Explanation 2A to Section 263(1) of the Act as the order has been passed without making enquiries or verification which should have been made and the assessee was granted an opportunity to explain why the assessment order so passed u/s 143(3) may not be cancelled and the AO be directed to make a fresh assessment.

Conclusion- Held where the ld PCIT examines the matter and comes to a conclusion that the confirmation so filed is half-baked and incomplete and further, there is no explanation regarding the source of cash gift to the assessee and the AO didn’t mount further examination and accepted the said incomplete confirmation on face value, we find that the ld PCIT has rightly exercised his discretion in setting aside the assessment order to examine the matter a fresh after providing reasonable opportunity to the assessee.

Held that merely the fact that the AO has not carried out independent enquiries of these confirmations from the creditors cannot be a basis to hold the order as erroneous in so far as prejudicial to the interest of Revenue. The ld PCIT has not pointed out any deficiency or inaccuracy in the confirmations so filed by the creditors unlike some of the other cases as we have noted above and in absence thereof, the order so passed by the AO in this regard cannot be held as erroneous in so far as prejudicial to the interest of Revenue.

FULL TEXT OF THE ORDER OF ITAT CHANDIGARH

This is an appeal filed by the assessee against the order of ld. Pr.CIT, Chandigarh-1 dated 11.03.2022 pertaining to assessment year 2017-18 wherein the assessee has taken the following grounds of appeal:

1. Whether on facts and circumstances of the case and in law, the Ld. CIT has exceeded legislative jurisdiction under section 263 of the Act thus order passed is bad in law.

2. That the Ld. CIT has erred in passing order under section 263 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.

3. That the Ld. CIT has erred in substituting an alternative view as against the firm view adopted by the Ld. AO at the time of original Assessment under section 143(3).

4. That the Ld. CIT has erred in concluding proceedings under section 263 of the Act without proper perusal of Assessment record.

That the Appellant craves leave to add, amend or alter the grounds of appeal before the appeal is finally disposed off.”

2. Briefly the facts of the case are the assessee is engaged in operating a Petrol Filling Station under the name and style of M/s Toor HP Centre and has filed his return of income declaring total income of Rs.10,90,270/-. The case of the assessee was selected for scrutiny through CASS and notices u/s 143(2) and 142(1) were issued and assessment was completed u/s 143(3) dated 29.05.2019 wherein assessed income was determined at 11,52,495/- by making certain disallowances of expenses amounting to Rs.62,225/- as against the returned income of Rs 10,90,270/-.

3. Subsequently, the assessment records were called for and examined by the ld. Pr. CIT and as per observations of the ld. PCIT, the AO omitted to conduct basic enquiries that were necessary to ascertain the true facts of the case with regard to the reasons for selection of the assessee’s case for scrutiny as well as other facts of the case holistically and the various claims made by the assessee to explain the source of cash deposits in his bank account and thereafter, a Show Cause u/s 263 was issued dated 02.03.2022 wherein the ld. Pr. CIT has listed the major omissions on the part of the AO and it was held that in view of the same, the assessment order passed u/s 143(3) was prima facie erroneous in so far as prejudicial to the interests of the Revenue within the meaning of Explanation 2A to Section 263(1) of the Act as the order has been passed without making enquiries or verification which should have been made and the assessee was granted an opportunity to explain why the assessment order so passed u/s 143(3) may not be cancelled and the AO be directed to make a fresh assessment.

4. In response, the assessee filed his submissions which were considered but not found acceptable by the ld PCIT and the PCIT vide the impugned order dated 11/03/2022 set aside the assessment order with the direction to make requisite enquiries and proper verification with regard to the issues mentioned in the impugned order and to make the assessment de-novo after due consideration of facts and law in this regard.

5. Against the said findings and directions of the ld. PCIT, the assessee is in appeal before us.

6. During the course of hearing, the ld. AR submitted that the case of the assessee was selected for scrutiny through CASS to verify abnormal increase in cash deposits during the demonetization period as compared to pre-demonetization period. Subsequently, notice u/s 143(2) was issued on 09.08.2018, thereafter, notices u/s 142(1) dated 05.04.2019 and 10.05.2019 were issued and in response, the assessee submitted all the requisite documentation as called for by the AO. It was submitted that the AO after considering the reply of the assessee as well as other information and documentary evidence furnished by the assessee, assessed the income at Rs.1 1,52,495/-.

7. It was submitted that the main contention/finding as per the Show Cause issued by the ld. PCIT is that the AO had omitted to conduct basic enquiries with regard to abnormal cash deposits during the demonetization period as compared to pre-demonetization period as well as the various claims made by the assessee. It was submitted that it is a matter of fact that the said finding of the ld. PCIT is not borne out from the records as the AO has conducted the requisite enquiries and has duly verified the claim made by the assessee during the course of assessment proceedings. It was submitted that it is a matter of record that the AO vide notice u/s 142(1) dated 05.04.2019 and thereafter vide notice dated 10.05.2019 had raised certain enquiries and in response, the assessee filed the requisite submissions and documentation from time to time. It was further submitted that all the verbal enquiries as raised by the AO were duly answered to his satisfaction and the AO has therefore, formed an opinion after perusal of the evidences submitted and it is, therefore, not a case of no enquiry or non-application of mind by the AO.

8. Regarding various contentions/findings raised by the ld. PCIT in the Show Cause Notice and thereafter confirmed in the final order, it was submitted that the assessee can demonstrate that the necessary enquiries stood conducted during the assessment proceedings.

9. Firstly, regarding the contention of the ld. PCIT in relation to bank account No.65078774798, that the said account pertains to Mr. Raj Kumar, Village Dakhla and the bank statement furnished by the assessee is also incomplete and AO has failed to make any further enquiries or investigations about the ownership of the said account and about the transactions therein, it was submitted that necessary query in this regard was duly raised by the AO vide notice dated 10.05.2019 and in response thereto, the assessee has submitted vide his submissions dated 24.05.2019 that the account does not belong to the assessee and as a proof of the same, an extract of the bank account was submitted. It was, accordingly, submitted that when an enquiry already stands conducted, the ld. PCIT’s contention for further enquiry is against the intent of Section 263 as this is not a case of no enquiry.

10. It was further submitted that the ld. PCIT has raised a conjecture that documents are falsified by relying on two information reports which were sent by the AO to take further necessary action in the case of M/s A.K. Minerals and M/s G.K. Laxmi. It was submitted that, it is evident from record that the said information was passed on by the AO to ITO, Ward-1(1), Nangal on 29.05.2019 after the conclusion of the assessment proceedings. Thereafter, on 19.07.2019, ITO Ward 1(1) Nangal responded by stating that the parties have responded by denying the transaction. It was submitted that such subsequent denial after the conclusion of assessment proceedings cannot be a case of failure to make enquiry on the part of the AO and is not a valid cause of action u/s 263. It was submitted that remedial action u/s 147 can be taken on the basis of information in possession but the same does not lead to the conclusion that enquiry was not conducted by the AO. It was, accordingly, submitted that when enquiry already stood conducted, the ld. PCIT’s contention for further enquiry is against the intent of Section 263 as this is not a case of no enquiry.

11. Regarding ld. PCIT’s contention that assessee’s claim of receipt of cash of Rs.17,27,521/- from various persons was false and was not investigated by the AO and the contention of the ld. PCIT that the assessee claims to have received cash amounting to Rs.86,09,079/- from unnamed persons and no documents are available on assessment records to show that the AO has not made any enquiry or verification in respect of these cash receipts, it was submitted that the ld. PCIT has erred in including the same cause of action twice. It was submitted that at para 5.2 of the impugned order, the ld. PCIT has already stated his comments with respect to recovery from debtors but has again repeated the figure to create further conjecture at Sr. No. 1 i.e. cash received from debtors which stood verified as explained earlier.

12. It was further submitted that with respect to the retail cash sale, ld. PCIT has failed to appreciate the fact that the assessee is running a Petrol Pump which owing to the grave necessity of the population of the country for basic necessities, use of demonetized currency for purchase of fuel was allowed by the Government to avoid bringing the economy to a complete It was submitted that the AO has verified the appellant’s purchase which is from a duly authorized source and Government Company i.e. HPCL and daily sale register has been duly submitted and verified by the AO and reduction of one asset i.e. stock of oil and increase of other assets i.e. cash is a basic enquiry already conducted by the AO to verify the source of cash deposit. It was, accordingly, submitted that where the enquiry already stood conducted by the AO, ld. PCIT’s contention for further enquiry is against the intent of Section 263 as this is not a case of no enquiry.

13. Regarding the contention of the ld. PCIT that the Board’s Instruction dated 09.08.2019 vide which verification checklist for assistance of AO’s for OCM cases and framing of assessment in demonetization related cases was provided and which has not been followed by the AO, it was submitted that the said finding of ld. PCIT is mechanical in nature without appreciation of the facts in the present case wherein the assessment already stood concluded on 29.05.2019 well before the issuance of the CBDT Instructions and therefore, the ld. PCIT expectation that the AO should have followed CBDT Instruction issued two months after conclusion of the assessment is gravely misplaced and is a mere conjecture.

14. Regarding the findings of the ld. PCIT regarding the gift of 3,23,000/- received by the assessee from his mother Smt. Karamjit Kaur, it was submitted that the AO has given due regard to the relationship of the assessee with his mother and age of the donee having the requisite source of Rs.3 lacs to gift to her son. It was, accordingly, submitted that it is again not a case where enquiry has not been conducted by the AO.

15. Regarding the findings of the ld. PCIT that only generic information has been called regarding the unsecured loans, it was submitted that the scope of the scrutiny assessment was to verify cash deposit during demonetization period and where beyond the scope of the assessment, the AO has already made additional enquiries, the ld. PCIT’s contention that further enquiry was not made by the AO is biased and again based on conjectures and surmises.

16. Regarding the findings of the ld. PCIT that the confirmation in relation to few creditors are placed on record and wherein also the AO has made no effort to verify the authenticity of this confirmation by conducting independent enquiries, it was submitted that the ld. PCIT has failed to appreciate the materiality of the amount in question and also the scope of the scrutiny assessment which was to verify cash deposit during demonetization period and where the AO beyond the scope of assessment has made additional enquiries, the contention of ld. PCIT that further enquiry was not made by the AO is biased and based on conjectures and surmises.

17. Regarding the finding of the ld. PCIT that the AO did not even bother to get the copy of the Audit Report alongwith the audited accounts and the assessment has been completed without even examining the Audit Report, it was submitted that Form 3CD is an e-filed document duly submitted on the e-filing Portal of the tax department and same is available for verification by the AO. It was, further submitted that it is not in doubt that the AO has called for and verified the purchases, sales, cash, bank, creditors, debtors expenses accounts and after detailed perusal and verification thereof, certain additions have been It was, accordingly, submitted that where the AO has made additional enquiries, beyond the scope of the assessment, the contention of the ld. PCIT that further enquiry was not made by the AO cannot be sustained. It was, accordingly, submitted that the AO has passed the assessment order after taking into consideration all the relevant documents and evidences submitted during the course of assessment proceedings and it is, therefore, not a case of no enquiry.

18. Further reliance was placed on the Hon’ble Supreme Court decision in the case of CIT Vs Nuclear Power Corporation of India Ltd. 138 com 332, ITAT Chandigarh Bench in the case of Krypton Datamatics Ltd. Vs DCIT Patiala 65 taxmann.com 324, Hon’ble Allahabad High Court in case of CIT Vs Krishna Caphox 60 taxmann.com 243 for the proposition that where an enquiry has been made by the AO and which has been considered inadequate by the Commissioner, the same cannot lead to the order passed by the AO as erroneous and prejudicial to the interests of the Revenue.

19. It was further submitted that where on a perusal of evidence and explanation filed by the assessee, the AO formed an opinion which is not in consonance with the opinion of the Commissioner, it does not give rise to the powers to the Commissioner to revise the order u/s 263 of the Act and in support reliance was placed on the Coordinate Amritsar Bench decision in case of Jiwan Kumar Vs PCIT 82 com 221, Chandigarh Benches in case of Narain Singla Vs PCIT 62 taxmann.com 255 and in case of Pawan Kumar Vs CIT 62 taxmann.com 260.

20. It was further submitted that the various decisions relied on by the ld. PCIT are distinguishable and does not apply in the facts of the present case and it was, accordingly, submitted that the order so passed by the ld. PCIT may be set aside and that of the AO be sustained.

21. Per contra, the ld. CIT/DR submitted that firstly, the ld AR contention that the scope of the assessment was to verify the abnormal increase in cash deposit during the de-monetization period is completely bereft of any merit as the assessee’s case was selected for complete scrutiny and high value receipts of cash shown from third party in response data and cash deposits during the de-monetization period were just the two scenario of the scheme conducted under CASS at the given point of time to pick up the cases that needed to be selected for scrutiny. It was, accordingly, submitted that the AO was under an obligation to verify the complete facts of the case holistically and the scope of assessment was not limited to examination of cash deposits during the de-monetization period as so contended by the ld. AR.

22. It was further submitted that it is a case where not even basic enquiries were conducted by the AO. It is a case where the AO has merely quoted the assessee’s submissions and the acceptance thereof, without conducting further enquiries and verification, cannot tantamount to requisite enquiries and verification as contemplated under the Act. It was submitted that all the AO has done in the present case is placing documents furnished by the assessee on the assessment records in a mechanical manner without even caring to carefully go through the contents and carrying out any independent enquiries or verification in respect of various claims made by the assessee.

23. It was submitted that the ld. Pr. CIT in his order has discussed at length various instances where there was complete failure on the part of the AO to carry out requisite enquiries and verification and in this regard, our reference was drawn to para 5 to 5.10 of the impugned order, which read as under :

demonetization period

enquiries and verification

enquiries and verification

claims made by the assessee

CASS

scope of the assessment

assessee's submissions

impugned order

24. Further, our reference was drawn to the findings of the ld. Pr. CIT which are contained at para 6 and para 9 of the impugned order, which reads as under:

“6. In view of the discussion above, the assessment order passed u/s 143(3) of the Act dated 29.05.2019 is prima-facie erroneous in so far as it is prejudicial to the interest of revenue, as the order has been passed without making requisite enquiries or verification which should have been made. There is thus failure on the part of the Assessing Officer in making the requisite enquires and verification. It is such failure which calls for revision of the assessment order u/s. 263 of the Act. The assessee, in his written submissions, has inter alia mentioned that the “justification assumed by your good office under section 263 of the Act is bad in law as you are placing reliance on Explanation 2 of Section 263 of the Act to allege that enquiries have not been made in the subject case”. The said contention of the assessee is found to be devoid of any force, as it is amply evident from the facts narrated above that not even the basic enquiries were conducted by the A.O. in the present case. Mere collection of assessee’s submissions and its passive acceptance doesn’t amount to conducting enquiries, investigation and verification. All that the A. O. has done in the present case is placing of documents furnished by the assessee on the assessment records in a mechanical manner without even caring to carefully go through their contents. The assessee ‘s contention that the “Scope of assessment was clearly laid out as this is a case of Complete Scrutiny to verify deposit during demonetization period” is also bereft of any strength, as the assessee ‘s case was selected for “complete scrutiny”. “High value receipts of cash shown

from third parties in response data” and “cash deposits during the demonetization period” were just the two scenarios of the schema adopted under the CASS at the given point in time to flag the cases that needed to be picked up for scrutiny. Thus the A. O. was under an obligation to verify the facts of the case holistically.

7…………………

8……………….

9. Having considered the facts and circumstances of the instant case, I am of the considered opinion that the assessment order u/s. 143(3) of the Act dated 29.05.2019 passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation ‘2(a) below section 263(1) of the Act, as the order has been passed without making inquiries or verification which should have been made, thus making the assessment order passed not only erroneous but also prejudicial to the interest of revenue. Accordingly, the impugned assessment order is set aside with the direction to the Assessing Officer to make requisite inquiries and proper verification with regard to the issues mentioned above and make the assessment de-novo after due consideration of the facts and law in this regard. The assessee is at liberty to adduce the facts as deemed relevant before the assessing officer at the time of assessment proceedings in consequence to this order. The Assessing Officer shall allow the assessee adequate opportunity of being heard and to make relevant submissions. It may be ensured that the fresh assessment order is passed within the prescribed time as stipulated under section 153(3) of the Act.”

25. It was accordingly submitted that the assessment order so passed by the AO has been rightly held to be erroneous in so far as prejudicial to the interest of the Revenue and thus, there is no basis in various contentions so raised by the ld AR and the same deserve to be dismissed and the order of the ld PCIT be upheld.

26. We have heard the rival contentions and purused the material available on record. The ld PCIT has referred to specific instances and/or transactions reflected in the assessee’s return of income and accompanying financial statements, other documents/submissions filed during the course of assessment proceedings as well as certain specific documents available on record at the time of his examination of the assessment records to reach a conclusion that the assessment order so passed by the Assessing officer is erroneous in so far as prejudicial to the interest of the Revenue. It would therefore be relevant to refer to these specific findings of the ld PCIT and submissions so made by the ld AR before us.

27. Firstly, the ld. PCIT has referred to the assessee’s return of income wherein it was disclosed that an amount of Rs 4 lacs was deposited during the demonetization period in a bank account maintained with SBI bearing account No.65078774798. The ld PCIT has further referred to bank statement furnished by the assessee during the assessment proceedings and noted that the said account pertains to Mr. Raj Kumar, Village Dakhla and the bank statement furnished by the assessee is also incomplete and the AO has failed to make any further enquiries or investigations about the ownership of the said account and about the transactions therein. In this regard, it was submitted by the ld AR that necessary query was duly raised by the AO vide notice dated 10.05.2019 and in response thereto, the assessee has submitted vide his submissions dated 24.05.2019 that the account does not belong to the assessee and as a proof of the same, an extract of the bank account was submitted and therefore, an enquiry already stood conducted and the ld. PCIT’s contention for further enquiry is against the intent of Section 263 as this is not a case of no enquiry.

28. We find that the matter was duly enquired into by the AO during the course of assessment proceedings and it was explained by the assessee that the said bank account doesn’t belong to him but belong to Mr Raj Kumar and a copy of the bank statement was submitted. Where the AO on review of the bank statement, was satisfied that the said bank account doesn’t belong to the assessee but belong to Mr Raj Kumar and accepted the explanation of the assessee regarding the ownership of the said bank account and the transactions reflected therein, we find that no further cause of action lies and if any action is warranted, the same is warranted in hands of Mr Raj Kumar and not in the hands of the assessee. In any case, what further enquiries or verification is warranted is not specified by the ld PCIT. Therefore, on this account, the order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of the Revenue and the findings of the ld PCIT in para 5 of the impugned order is hereby set-aside.

29. Now, coming to transactions with M/s A.K. Minerals and M/s G.K Laxmi where the assessee has show cash receipts of Rs 5 lacs each against sales made to them and in respect of which, ledger account and a confirmation from these two parties has been filed during the course of assessment proceedings, the ld PCIT has referred to confirmations so filed by the assessee from these persons during the course of assessment proceedings and subsequent confirmations received directly from these persons, which were called for by the AO towards the end of the assessment proceedings but have been received after the close of the assessment proceedings wherein they have denied making any cash payment to the assessee. The ld PCIT has held that the confirmations given by the assessee during the course of assessment proceedings which is on a plain paper, undated and doesn’t bear any PAN details and signed by Shri Suresh Kumar though it was a case of proprietorship concern of M/s A K Minerals of Shri Krishan Kant Goyal is absolutely false and the AO has accepted the bald assertion on face value. Similar findings have been recorded by the ld PCIT regarding M/s G.K. Laxmi. In this regard, it has been submitted by the ld AR that the ld. PCIT has raised a conjecture that documents are falsified by relying on two information reports which were sent by the AO to take further necessary action in the case of M/s A.K. Minerals and M/s G.K. Laxmi. It was submitted that, it is evident from record that the said information was passed on by the AO to ITO, Ward-1(1), Nangal on 29.05.2019 after the conclusion of the assessment proceedings. Thereafter, on 19.07.2019, ITO Ward 1(1) Nangal responded by stating that the parties have responded by denying the transaction. It was submitted that such subsequent denial after the conclusion of assessment proceedings cannot be a case of failure to make enquiry on the part of the AO and is not a valid cause of action u/s 263. It was submitted that remedial action u/s 147 can be taken on the basis of information in possession but the same does not lead to the conclusion that enquiry was not conducted by the AO. It was submitted that when enquiry already stood conducted, the ld. PCIT’s contention for further enquiry is against the intent of Section 263 as this is not a case of no enquiry.

30. In our view, where the assessee has filed certain confirmations from the aforesaid two parties during the course of assessment proceedings in support of sale transactions and receipt of consideration in cash and the authencity of the said confirmations stood falsified by subsequent confirmations received directly from the same parties even though after the close of the assessment proceedings, the ld PCIT is well within his jurisdiction to hold the assessment order so passed as erroneous in so far as prejudicial to the interest of the Revenue. The subsequent confirmations are very much part of the record which is available at the time of examination of the ld PCIT and the confirmations so received raises a question mark on the authenticity and correctness of the information and
documentation available at the time of passing of the assessment order thus leading to a situation where certain incorrect information which goes to the root of entering into the transaction and challenges the very existence of the transaction has been considered by the AO leading to a wrong conclusion and passing of an erroneous order. It is therefore a case where the matter though enquired into by the AO but the transaction itself stood falsified by the subsequent confirmation received directly from the concerned parties and where the PCIT is ceased of the matter and the necessary information is available on record at the time of his examination, we find that he was well within his jurisdiction u/s 263 to set-aside the assessment order on this count and order a de-novo assessment.

31. It is no doubt true that operation of both section 263 and 147 is somewhat similar in the sense that where the ld PCIT under Section 263 of the Act finds that the assessment order is prejudicial to the interest of the Revenue, he can review the assessment, at the same time, the Assessing Officer, under section 147 and 148 of the Act can reopen assessment on account of income having escaped assessment. There is however a fine distinction which is maintained between the two sections in terms of power to review and power to reassess and the AO doesn’t have power to review his own order and such power is enshrined under section 263 of the Act and bestowed on the ld PCIT which cannot be ceded to the AO. Thus where an Assessing Officer comes to a wrong conclusion based on assumption of incorrect facts, resort to Section 263 of the Act is available and should be resorted to. But initiation of reassessment proceedings in such cases will be invalid on the ground of change of opinion.

32. In the instant case, it is an admitted position that the matter was enquired into by the AO during the assessment proceedings and answered by the assessee by way of providing the ledger account and the confirmations from the two parties and thereafter the Assessing Officer does not make any addition in the assessment order. In such situation, it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He thus forms an opinion and in such a situation, the reassessment proceedings even where initiated will be held as invalid because the Assessing Officer had formed an opinion in the assessment proceedings, though he had not recorded his reasons.

33. Admittedly, in the instant case, the assessment order was passed u/s 143(3) on 29.05.2019 and even though the confirmations have been received by the AO on 19.07.2019 and available on record, the AO has not taken any action u/s 147 knowing full well the scope of his reassessment jurisdiction, in such a situation, the ld PCIT is not precluded in exercise of his jurisdiction u/s 263 of the Act and issuance of show-cause u/s 263 dated 2.03.2022. In any case, at the time of issuance of show-cause by the ld PCIT, no reassessment proceedings u/s 147 were either initiated or pending for completion by the AO. Where the ld PCIT is ceased of information/documentation which has direct nexus with passing of an erroneous assessment order by the AO and if we were to go by the argument of the ld AR, the ld PCIT cannot be expected to wait indefinitely for the AO to initiate proceedings u/s 147 and where the AO sleeps over the matter, allow the expiry of limitation to pass the order u/s 263, thus failing in his supervisory and revisionary duty under Section 263 of the Act. Therefore, the contention advanced by the ld AR that remedial action u/s 147 can be taken in this regard and no basis for exercise of jurisdiction u/s 263 cannot be accepted.

34. In light of aforesaid discussions, the findings of the ld PCIT in para 5.2 of the impugned order as far as transactions with M/s A.K Minerals and M/s G.K. Laxmi is hereby confirmed.

35. Now, coming to the ld. PCIT’s findings in para 5.3 of the impugned order where he has held that assessee’s claim of receipt of cash of Rs.17,27,521/- from various persons was false and was not investigated by the AO and the assessee’s claim to have received cash amounting to Rs.86,09,079/- from unnamed persons where no documents are available on assessment records to show that the AO has not made any enquiry or verification in respect of these cash receipts. In this regard, it was submitted by the ld AR that at para 5.3 of the impugned order, the ld. PCIT has already stated his comments with respect to recovery from debtors but has again repeated the same figure to create further conjecture at Sr. No. 1 i.e. cash received from debtors which stood verified as explained earlier. It was further submitted that with respect to the retail cash sale, ld. PCIT has failed to appreciate the fact that the assessee is running a Petrol Pump which owing to the grave necessity of the population of the country for basic necessities, use of demonetized currency for purchase of fuel was allowed by the Government to avoid bringing the economy to a complete stand still. It was submitted that the AO has verified the appellant’s purchase which is from a duly authorized source and Government Company i.e. HPCL and daily sale register has been duly submitted and verified by the AO and reduction of one asset i.e. stock of oil and increase of other assets i.e. cash is a basic enquiry already conducted by the AO to verify the source of cash deposit. It was submitted that where the enquiry already stands conducted by the AO, ld. PCIT’s contention for further enquiry is against the intent of Section 263 as this is not a case of no enquiry.

36. In this regard, we find that in para 5.2 of the impugned order, the ld PCIT has talked about transactions with six persons including M/s A.K. Minerals and M/s G. K Minerals (which we have discussed supra) and in para 5.3 has held that the above illustrations shows that the assessee’s claim of receipt of cash of Rs 17,27,521/- from eighteen persons was false. Firstly, in absence of any specific finding regarding the remaining 12 persons recorded by the ld PCIT and basic a generic observation where there is no description of the transactions and the persons concerned, the same cannot be a basis to hold that the order so passed by the AO vis-à-vis these 12 persons is erroneous in so far as prejudicial to the interest of the Revenue.

37. Further, it is the claim of the assessee that the figure of Rs 18,84,733/- includes the figure of Rs 17,27,521/-, the same however require verification and where the same is found to be in order, the duplication is hereby directed to be avoided.

38. Now coming to specific transactions with Shri Bhupinder Singh, and Shri Bindri as referred in para 5.2 of the impugned order, we find that the AO has enquired about the transactions carried out during the year and in response, the assessee has filed copy of the ledger account detailing the sale transactions and receipt of cash as well as copy of confirmation. Here it is relevant to note that the AO in his discretion has sought confirmation from debtors exceeding Rs One lacs and therefore, where no confirmation from other two parties namely Shri Ajmer Singh and M/s Gurleen Traders, also referred to in para 5.2 of the impugned order, where the respective transaction value during the year was less than Rs one lacs, the same cannot be held against the assessee or for that matter, form the basis to hold that the assessment order as erroneous in so far as prejudicial to interest of Revenue. Basis review of the said documentation and the explanation so furnished by the assessee and being satisfied therewith, where the AO has not recorded any adverse finding and has accepted the source of cash deposit as from the sale of petroleum products and which has been duly offered to tax, we find that the AO has duly enquired into the matter. The fact that the sales were effected in initial period during the same financial year and the cash has been received in the subsequent period even though during the demonetization period cannot be a basis strong enough to hold the order so passed by the AO is erroneous in so far as prejudicial to the interest of Revenue in absence of any adverse findings regarding availability of requisite stock and the sales so effected by the assessee which are both reported to tax. Where the AO felt satisfied with the documentation and explanation so submitted by the assessee, basis review of the same documentation, the ld PCIT may arrive at a different opinion, however, the same cannot lead to a situation of holding the order so passed as erroneous in so far as prejudicial to the interest of the Revenue. The only caveat here is that the documentation so submitted during the course of assessment proceedings shouldn’t stand falsified by subsequent information/documentation as we have seen in case of M/s A.K Minerals and M/s G.K. Minerals and which is not a case as far as these transactions are concerned. Therefore, the findings of the ld PCIT in para 5.2 of the impugned order as regards transactions with Shri Bhupinder Singh, Shri Bindri, Shri Ajmer Singh and M/s Gurleen Traders are hereby set-aside.

39. Now coming to retail cash sales of Rs 67,24,346/- as referred to para 5.3 of the impugned order, the ld PCIT has stated that no documents are available on assessment record to show that the AO had made any enquiry or verification in respect of these retail cash receipts. In this regard, we find that the assessee is engaged in operating a petrol filling station under the name and style of M/s Toor HP Centre. In retail sale of petroleum products, as we understand in general individual customer specific transaction documentation is practically not maintained except in case of running arrangements or where the transactions are on credit. Of course, each case has its own peculiar facts and circumstances of the case. In the instant case, it is an admitted position that the assessee has show cash receipts from retail sale of petroleum products which is in consonance with the nature of assessee’s business and is not something which is specific to the year under consideration and is a recurrent phenomenon year on year. During the year under consideration, it is also an admitted position that the government has allowed usage of demonetized currency at the petrol pumps during the specific window of the demonetization period and as such, there was no bar on acceptance of cash at petrol pumps. Therefore, during the year under consideration, in order to verify the retail cash sale of petroleum products, what is relevant to examine is the availability of stock of petroleum products and maintenance of quantity and quality wise stock of petroleum products and reporting of sales for VAT and for income tax purposes. In this regard, we find that during the course of assessment proceedings, the matter relating to purchase and sale of petroleum products was duly enquired into by the AO as evident from the queries raised from time to time and which has been replied to by the assessee as evident from his replies which find mention in the order sheet entries as well as the submissions filed by the assessee in terms of qualitative and quantitative stock of petroleum products including opening and closing stock, sales and purchase register of petrol, diesel and lubes and VAT returns besides reporting the purchase and sale transactions in the profit/loss account. Where the AO felt satisfied with the documentation and explanation so submitted by the assessee, we find that the matter has been duly enquired into by the AO and the findings of the ld PCIT that no enquiry has been conducted by the AO is not borne out of the records and the same thus deserve to be set-aside. Further, there is no adverse finding recorded by the ld PCIT regarding availability of stock of petroleum products and corresponding sales reported by the assessee and where the stock and sales have been accepted, realization of sale proceeds in cash which is permissible under law cannot be held against the assessee or to hold that the assessment order is erroneous in so far as prejudicial to the interest of Revenue. Therefore, the findings of the ld PCIT regarding cash receipts from retail sale in para 5.3 is hereby set-aside.

40. Coming to the findings of the ld. PCIT that the Board’s Instruction dated 09.08.2019 vide which verification checklist for assistance of AO’s for OCM cases and framing of assessment in demonetization related cases was provided and which has not been followed by the AO, it was submitted by the ld AR that the assessment proceedings already stood concluded on 29.05.2019 well before the issuance of the CBDT Instructions and therefore, the AO cannot be expected to comply with the same when the same were not issued on or before passing of the assessment order. We agree with the contention of the ld AR that where the CBDT instructions were issued after passing of the assessment order, the AO cannot be expected to follow the same and on this count, the order so passed by the AO cannot be held as erroneous in not following the CBDT instruction and the findings of the ld PCIT in this regard in para 5.4 are thus set-aside.

41. Now, coming to the findings of the ld. PCIT regarding the gift of Rs 3,23,000/- received by the assessee from his mother Smt. Karamjit Kaur, it was submitted by the ld AR that the AO has given due regard to the relationship of the assessee with his mother and age of the donee having the requisite source of Rs.3 lacs to gift to her son. It was, accordingly, submitted that it is again not a case where enquiry has not been conducted by the AO. In this regard, we find that a confirmation has been filed by the assessee from his mother Smt Karamjit Kaur on a plain paper during the course of assessment proceedings which is however undated and doesn’t mention even date of granting the gift. Further, there is nothing on record explaining the source of making the said gift. In our view, the relationship of mother and child is a pious relationship and the mother has all the rights to handover her property and assets to her son as and when required and there is thus no dispute regarding the same. However, for tax purposes, merely stating the relationship is not sufficient and it is equally relevant to explain the source of making the cash gift to the assessee and in absence of which, the initial onus cast on the assessee cannot be held to be discharged. A reasonable explanation in terms of accumulation out of her past savings or having any other independent source of income in her own rights and quantum thereof is expected which unfortunately the assessee didn’t care and bother to submit inspite of specific enquiry made by the AO. In such a situation, where the ld PCIT examines the matter and comes to a conclusion that the confirmation so filed is half-baked and incomplete and further, there is no explanation regarding the source of cash gift to the assessee and the AO didn’t mount further examination and accepted the said incomplete confirmation on face value, we find that the ld PCIT has rightly exercised his discretion in setting aside the assessment order to examine the matter a fresh after providing reasonable opportunity to the assessee. The findings of the ld PCIT in para 5.5 are thus upheld.

42.Now, coming to the findings of the ld. PCIT regarding unsecured loans, it has been stated by the ld PCIT that as per questionnaire dated 9.5.2019 issued by the AO, only generic information has been called regarding the unsecured loans by the AO whereby the AO has called for the confirmation from the persons where unsecured loan amount was outstanding above Rs one lacs as on 31.03.2017 as well as copy of ITR and computation of income and in response, the assessee has submitted confirmation from Shri Baldish Singh Toor, Smt Ramneek Toor and Shri Raj Kumar on a plain paper without mention of the address, PAN details, ITR Details and source of loan. It has been stated by the ld PCIT that the AO has not verified the same and the identity, creditworthiness and genuineness of the transaction thus remained unverified. It has been further stated by the ld PCIT that remaining unsecured loans also remain totally uninvestigated by the AO. On similar lines, the ld. PCIT has stated that the confirmation in relation to few creditors are placed on record and wherein also the AO has made no effort to verify the authenticity of the confirmations by conducting independent enquiries.

43. In this regard, it was submitted by the ld AR that the scope of the scrutiny assessment was to verify cash deposit during demonetization period and where beyond the scope of the assessment, the AO has already made additional enquiries, the PCIT’s contention that further enquiry was not made by the AO is biased and again based on conjectures and surmises.

44. In his submissions, the ld. CIT/DR has stated that the assessee’s contention that the scope of the assessment was to verify the cash deposit during the de-monetization period is completely bereft of any merit as the assessee’s case was selected for complete scrutiny and high value receipts of cash shown from third party in response data and cash deposits during the de­monetization period were just the two scenario of the scheme conducted under CASS at the given point of time to pick up the cases that needed to be selected for scrutiny. It was, accordingly, submitted that the AO was under an obligation to verify the complete facts of the case holistically and the scope of assessment was not limited to examination of cash deposits during the de-monetization period as so contended by the ld. AR.

45. In this regard, on perusal of notice u/s 143(2) dated 9.08.2018, subsequent notices u/s 142(1) dated 2.03.2019 and 10.05.20 19 and the contents of the said notices, we find that the case of the assessee was selected for complete scrutiny and not limited scrutiny. There is no mention in the body of these notices that the case was selected for limited scrutiny. In fact, along with the aforesaid notices, the AO has issued detailed questionnaire to verify various transactions reflected in the financial statement including source of cash deposited during the demonetization period which aptly demonstrate that the AO was aware and conscious of the fact that the case of the assessee was selected for complete scrutiny and not limited scrutiny. In the first part of the assessment order, the AO has again made a mention that the case of the assessee was selected under the category of complete scrutiny to verify cash deposit during the demonetization period and apparently, the ld AR emphasis on the latter part thereof which is no doubt cash deposit during the demonetization period but one cannot lose sight of the fact that it was again a case of complete scrutiny and not a case of limited scrutiny. On perusal of records, the ld PCIT has also stated that the case of the assessee was selected for complete scrutiny through CASS, primarily for the reason of high value receipts of cash shown from third parties in response data and cash deposits during the demonetization period and these were just the two scenarios of the scheme adopted under the CASS at the given point in time to flag the cases that needed to be picked up for scrutiny and the A.O. was under an obligation to verify the facts of the case holistically. We are therefore unable to accede to the contention so advanced by the ld AR that it was a case of limited scrutiny and not complete scrutiny and are in complete agreement with the following findings of the ld PCIT in para 6 of the impugned order where he has held as under:

“The assessee ‘s contention that the “Scope of assessment was clearly laid out as this is a case of Complete Scrutiny to verify deposit during demonetization period” is also bereft of any strength, as the ass essee’s case was selected for “complete scrutiny”. “High value receipts of cash shown from third parties in response data” and “cash deposits during the demonetization period” were just the two scenarios of the schema adopted under the CASS at the given point in time to flag the cases that needed to be picked up for scrutiny. Thus the A.O. was under an obligation to verify the facts of the case holistically.”

46. Having said that, even in case of a complete scrutiny, we cannot lose sight of discretion vested with the AO under law which he can judiciously exercise in examining or not examining a particular transaction. Depending upon the nature, volume and complexity of assessee’s business operations, it is the AO’s prerogative to examine a particular transaction or a set of similar or different transactions entered into by the assessee during the relevant financial year and level of enquiry or investigation which is warranted in a particular case and set the threshold of such examination. There cannot be a single yardstick which can be applied in every case and each case will turn on its own specifics. In the instant case, where the AO has sought confirmation from persons where unsecured loan amount was outstanding for more than One lac, the AO having examined the financial statements having reached a conclusion that it would be appropriate to apply the threshold of one lacs, the same cannot be challenged in the revisionary proceedings by the ld PCIT holding that the AO should have examined all transactions of unsecured loans irrespective of quantum involved and having failed to do so, the order so passed by the AO was held as erroneous and prejudicial to Revenue. The only caveat to allow such exercise of revisionary jurisdiction is availability of any information with the ld PCIT at the time of his examination which raises any suspicion or question mark on the transactions so undertaken by the assessee and which if not considered and relevant enquiry or investigation not mounted will lead to passing of erroneous order which is prejudicial to the interest of the Revenue. In the instant case, we don’t find that the ld PCIT has referred to any tangible piece of information or documentation which warrant examination and investigation across all transactions of unsecured loans which are undertaken by the assessee. Further, where the relevant confirmations from the creditors have been called for and examined by the AO, the latter being satisfied with the same and explanation so furnished by the assessee, merely the fact that the AO has not carried out independent enquiries of these confirmations from the creditors cannot be a basis to hold the order as erroneous in so far as prejudicial to the interest of Revenue. The ld PCIT has not pointed out any deficiency or inaccuracy in the confirmations so filed by the creditors unlike some of the other cases as we have noted above and in absence thereof, the order so passed by the AO in this regard cannot be held as erroneous in so far as prejudicial to the interest of Revenue and the findings of the ld PCIT in this regard at para 5.8 and 5.9 of the impugned order are hereby set-aside.

47. Now, coming to specific instances highlighted by the ld PCIT in 5.7 of the impugned order, the ld PCIT has referred to the confirmations from Shri Baldish Singh Toor, Smt Ramneek Toor and Shri Raj Kumar which have been submitted on a plain paper without mention of the address, PAN details, ITR Details and source of loan. It has been stated by the ld PCIT that the AO has not verified the same and the identity, creditworthiness and genuineness of the transaction remain unverified. We find that the AO has called for the confirmation as well as copy of ITR of these persons during the course of assessment proceedings and the assessee has partly complied and has submitted a copy of confirmation from these persons and the ld PCIT has highlighted the deficiency and incompleteness of these confirmations. Further, nothing has been submitted by the assessee to explain the creditworthiness of these persons who have advanced money to the assessee which ranges from Rs one lac to Rs 28 lacs. Where the AO on receipt of these half-baked and incomplete confirmation didn’t raise any further queries and accepted the same on face value, we find that the ld PCIT has rightly exercised his discretion in setting aside the assessment order to examine the matter a fresh after providing reasonable opportunity to the assessee. The findings of the ld PCIT in this regard at para 5.7 of the impugned order are thus upheld.

48. Now coming to the findings of the ld. PCIT that the AO did not even bother to get the copy of the Audit Report alongwith the audited accounts and the assessment has been completed without even examining the Audit Report, it was submitted by the ld AR that Form 3CD is an e-filed document duly submitted on the e-filing Portal of the tax department and same is available for verification by the AO. During the course of hearing, the ld DR couldn’t convert the said submissions of the assessee that the audit report is available on the e-filing portal of the department. In view of the same, where the AO chooses not to download and keep a copy of the audit report on assessment file, the same cannot take away the factual position that audit report was available for examination by the AO, therefore, the findings of the ld PCIT at para 5.10 are not borne out of record and the same are hereby set-aside.

49. In light of aforesaid discussions, the findings of the ld PCIT are hereby modified whereby the directions of the ld PCIT in para 5 relating to bank account is set-aside, the findings in para 5.2 so far as it relates to M/s A.K Minerals and M/s G.K Laxmi is confirmed and rest all findings in para 5.2 relating to Shri Bhupinder Singh, Shri Bindri, Shri Ajmer Singh and M/s Gurleen Traders are set-aside, the findings in para 5.3 relating to other cash receipts of Rs 18,84,733/- is hereby directed to be verified to check and delete to the extent of duplicity of figures vis-à-vis figures in para 5.2, the findings in para 5.3 relating to retail cash sales of Rs 67,24,346/- is set-aside, the findings in para 5.4 relating to CBDT Instructions is set-aside, the findings in para 5.5 relating to gift of Rs 3,23,000/- is upheld, the findings in para 5.7 relating to unsecured loan transactions with three specified persons are upheld, the findings in para 5.8, 5.9 and 5.10 are set-aside, and in view of the same, corresponding findings in para 6 stand set-aside or confirmed as the case be and in so far as scope of assessment proceedings, the findings are upheld. Accordingly, the directions contained in para 9 of the impugned order are hereby modified and the AO is hereby directed to make inquiries and verification limited to matters where we have upheld the findings of the ld PCIT and decide the
same afresh as per law after providing reasonable opportunity to the assessee.

50. In the result, appeal of the assessee is disposed off in light of aforesaid directions.

Order pronounced in the open Court on 27/10/2023.

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