Income Tax Appellate Tribunal - Chandigarh
Sh. Gurcharan Singh, Yamunanagar vs Pr. Cit, Panchkula on 2 January, 2023
आयकर अपीलीय अिधकरण,च डीगढ़
अिधकरण च डीगढ़ यायपीठ , च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH
BENCH 'A' CHANDIGARH
BEFORE: SMT. DIVA SINGH, JUDICIAL MEMBER &
SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 341/CHD/2022
Assessment Year. : 2017-18
Shri Gurcharan Singh, बनाम The Pr. CIT,
Prop. M/s Khurana Trading Co., VS Panchkula.
Shop No.11, Anaj Mandi,
Yamuna Nagar.
थायी लेखा सं./PAN /TAN No: ACDPS7032F
अपीलाथ /Appellant यथ /Respondent
िनधा रती क ओर से/Assessee by : Shri Sudhir Sehgal, Advocate
राज व क ओर से/ Revenue by : Shri Vivek Nangia, CIT-DR.
तारीख/Date of Hearing : 03.11.2022
उदघोषणा क तारीख/Date of Pronouncement : 02.01.2023
आदेश/ORDER
PER DIVA SINGH Th e p r e se n t appeal has been filed by the a s se s se e wherein t he c o r r e ct n e s s o f t h e o r de r d a te d 23.03.2022 of C I T( A ) - 2 P a n c h k u l a pe r t a i n i n g to 2 0 1 7 - 1 8 a s se ss m e n t ye a r is a s s a i l e d o n t he f o l l o w i n g g r o u n d s :
1. That the Ld. PCIT, Panchkula has erred in assuming the jurisdiction to issue notice u/s 263 of the Income Tax Act, 1961 and, thereby, cancelling the assessment as already framed by the AO vide order dated 24.12.2019 to the file of the Assessing Officer, with the direction to frame the assessment, afresh in accordance with law, after granting reasonable opportunity to the assessee.
2. That the Ld. PCIT, Panchkula has failed to appreciate that on all the issues, which have been taken in the show-cause notice u/s 263, the Assessing Officer had raised specific queries, during the course of assessment proceedings and which were replied with numerous details and, thus, the ITA 341 /CHD/2022 A.Y. 2017-18 Page 2 of 52 Assessing Officer had, duly, applied his mind to all such details, copies of accounts and other voluminous details furnished to the Assessing Officer and had taken a conscious decision in respect of all the information and framed the assessment on the basis of the details furnished by the assessee.
3. That the Ld. PCIT, Panchkula had not considered the detailed reply of the assessee properly, furnished during the course of proceedings u/s 263 and had mislead herself, while giving a finding on various issues, particularly, ignoring the fact, that the deposit of cash during the demonetization period from 09.11.2016 to 31.12.2016 was to the tune of Rs. 97,45,000/-, against the deposit of cash during the same period i.e. from 09.11.2015 to 31.12.2015 to the tune of Rs. 97,50,000/-and, thus, has erred in holding that the assessment as framed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue.
4. Notwithstanding, the above said grounds of appeal, the Ld. PCIT, Panchkula has wrongly assumed the jurisdiction u/s 263 on the basis of the audit objection, and no valid jurisdiction could have been assumed by the Ld. PCIT, Panchkula on the basis of audit objection as per the binding judgment of the Jurisdictional Bench of the ITAT, Chandigarh Bench and of the Hon'ble Punjab & Haryana High Court.
5 . That the appellant craves leave to add, amend, alter any of the above grounds during the appellate proceedings have been considered.
2. B e f o r e a d d r e s s i ng t he s u b m i s s i on s o f t h e p a r t i e s be f or e t h e B e n c h , w e de e m i t a p p r o p r i a t e t o f i r s t a d d r e s s t h e b a s ic f a c t s o n r e co r d . A p e r us a l o f t h e a s se s s me n t o r d e r d a te d 24.12.2019 shows that t he a ss e ss e e e-filed it s r e t ur n on 07.11.2017 declaring an income of Rs.13,36,140/-. Th e assessee firm is shown to be e n g a ge d in s a l e / t r a d i ng of f e r t i l i ze r s e t c. Th e c a s e w a s s e le c te d fo r s c r u t i n y t h r o u g h C A S S i n te r m s o f t h e C B D T g u i d e l i n e s . N o t i ce s w e r e i s s ue d t o t h e a s se s se e u / s 1 4 3 ( 2 ) a n d 1 4 2 (1 ) w h i c h h a ve b e e n n o t i c e d t o h a ve b e e n r e p l ie d t o b y e - m a i l o n I TB A M o d u l e . Considering t h e s a m e , t h e AO a c ce p t e d t h e r e t u r n e d i n c o m e n o t i c i n g ; "All ITA 341 /CHD/2022 A.Y. 2017-18 Page 3 of 52 the inf ormation/documents as called f or vide questionnaire subsequently during the course of assessment proceedings have been obtained scrutinized and placed on f ile. Information u/s 133(6) has also been called f or from the Punjab National Bank, Yamuna Nagar, the said has also f iled reply along with bank account statement of the year under consideration." Th i s o r d e r h a s b e e n r e v i se d b y t he l d . P C I T u / s 2 6 3 o f t he A c t v i d e the o r d e r u n d e r ch a l l e nge . Th e a s s e s s e e i s a g g r i e v e d b y t h e sa i d order.
3. Th e ld. AR inviting a t te n t i on to ground No.4 in t he p r e se n t a p p e a l s u b m i t t e d t h a t h e i s n o t p r e s si n g t he s a i d ground. Re fe rr i n g to t he grounds raised, it was h is s u b m i s s i o n t h a t h e w o u l d be r e l y i n g u p o n t h e s y n o p s i s f i le d b e f o r e t h e B e n c h r u n n i n g i n t o 1 4 p a g e s r e a d a l o n g w i t h t he P a p e r B o o k r u n ni n g i n t o 1 2 2 p a g e s a n d c a se l a w P a p e r B o o k -I a n d P a p e r B o o k- I I . R e l y i n g o n t h e d e ci s i o n o f t h e B o m b a y H i g h C o u r t i n t he c a se o f C I T V s N i r a v M o d i o v e r a n d a b ove t h e d e c i s i o n s f i l e d , i t w a s a r g ue d t h a t t he o r de r p a s se d b y the A O a f te r r a i s i n g q u e r i e s a n d e xa m i n i n g d o c u me n t s c a nn o t b e s e t a s i de b y a ca s u a l e xe r c i se . O n c e t he v i e w o f t h e A O w a s a p l a u s i b l e v ie w , i t w a s a r g u e d t h e o r d e r c a n n ot be se t a s i de on whims.
3.1 It was s ub m i t t e d that he would be in a p o s it i o n to d e m o n s t r a te t h a t o n f a c t s m o r e t h a n a d e q u a t e e n q u i r i e s h a ve ITA 341 /CHD/2022 A.Y. 2017-18 Page 4 of 52 b e e n m a d e b y the A O i n t he p re se n t c a se be fo r e th e p a s s i n g of t h e or d e r . I t w a s s u b m i t t e d th a t i n f a c t t he i m p u g n e d o r d e r o n t h e c o nt r a r y i s b a se d o n c o n je ct u re s . A l l f a c t s r e fe r r e d t o i n t h e Sh o w C a u s e N o t i ce b y t he P C I T, i t w a s s u b m i t t e d , a r e e m a n a t i n g fr o m t h e d e t a i le d q ue r ie s m a d e b y t h e A O . Th e se q u e r ie s , it was submitted, have be e n r e pl i e d to by t he a s s e s s e e . Re f e r r in g t o t h e or d e r , i t w a s s u b m i t te d , t h a t t he l d . P C I T a p a r t f r o m r e p r od u c i n g t h e r e p l ie s o f t h e a s se s se e t o t h e A O h a s m a d e n o e f f o r t wh a ts o e ve r t o s h o w h o w t h e r e p ly m a d e a v a i l a b le t o t h e A O a n d c o n s i de r e d b y th e A sse s s i ng O f f i c e r i s se e n t o be a n e rr o r w h i c h i s s ou g h t t o b e a d d re sse d b y e xe r c i s i n g th e R e v i s i o n a r y p ow e r s u / s 2 6 3 . 3.2 R e a d i n g f r o m t h e or d e r , i t w a s su b m i t t e d t h a t f r o m p a g e s 1 to 4 of the synopsis f i le d contains the submissions h i g h l i g h ti n g t he f a c t t h a t t h e A O a s p e r r e c or d w a s f ul l y c o n s c i o u s o f t he f a c t t h a t h e wa s r e q u i r e d t o lo o k i n t o t he c a s h d e p o si t s du r i n g t he d e m o n e ti z a t i o n p e r i od . F r o m p a r a 4 o n w a r d s u p to p a g e 1 1 i n t h e s y n o p s i s , i t h a s b e e n a d d re s se d t h a t e a c h a n d e v e r y s h o r t c o m i n g p o i n te d o u t b y t he l d . P C I T h a d b e e n e n q u i r e d i n t o b y t h e AO . Re f e r r i n g t o t h e r e p l y f i le d b e f o r e t he s a i d a u t h o r i t y, i t w a s s u b m i t te d t h a t t h e a s s e s se e h a s b r o a d l y s um m e d u p h o w t h e a c t i o n p r o p o s e d w a s n ot sustainable. Th e se a r g u m e n t s s e t ou t i n p a r a s 7 t o 1 4 o f t he w r i t t e n s y n o p s i s w e r e h e a v i l y re l i e d u p o n .
ITA 341 /CHD/2022 A.Y. 2017-18 Page 5 of 52 3.3 In the said factual b a ck g r o u n d , the ld. AR i n v i te d a t te n t i o n to the Paper Book filed by the a s s e s se e on 23.05.2022. R e a d i n g t h e r e f r o m t h e l d . A R c a r r i e d u s t h r o u gh t h e d o c u me n t s fi l e d h i g h l i g h ti n g t h e a c co u n t i n g p o l i c y o f t he a s s e s s e e a s p e r t h e Ta x A u d i t R e p o r t a n d t h e v a l u a t i o n of inventories and the r e v e nu e r e co g n i t io n p o l ic y e t c. Th e A u d i te d a c c o un ts o f t h e a s se s se e , i t w a s s u b m i t t e d , h a ve no t b e e n f a u l te d . Th e l d . A R cl a r i f i e d t h a t t he a s se s s e e h a s be e n i n t h i s l i n e o f b u s i n e s s f o r o ve r m o r e o r le s s l a s t 1 5 y e a r s . Th e v a l u a t i o n o f I n ve n t o r y , t h e q u a n t i t a t i ve de ta il s a t p a g e 6 3 o f t h e P a p e r B o ok , t he a u d i te d B a l a n c e S h e e t a n d P & L A c c o u n t a t p a ge s 6 5 t o 7 1 h a ve b e e n r e p e a te d l y s e en b y t he t a x a u t h o r i t ie s . N o d i s c r e p a n c y h a s b e e n p oi n te d o u t t he r e i n . A t te n t i o n was invited to p a ge 63 w h e re i n i te m - w i se and q u a n t i t a ti ve d e ta i l s o f t r a d e d i te m s a l o n g w i t h d e t ai l s o f t o ta l t u r n o ve r , G P / Tu r n o v e r , N P / Tu r n o v e r . S t o c k i n tr a d e / t u r n ove r f o r n o t o n l y t he y e a r u n de r c o ns id e r a t i o n i . e . f o r t h e p re v i o us y e a r a s w e l l a s p r e vi o u s p r e ce d i ng y e a r a s m a n d a t e d w a s f u l ly d i s c l o se d a l on g w i t h q u a n t i t a ti ve d e ta i l s . N o n e o f t h e s e h a ve b e e n f a u l te d w i th .
3.4 A t te n ti o n w a s i n v i te d t o p a ge 6 5 t o 7 0 o f t h e s a m e . R e f e r r i n g t o th e n o t i ce d a te d 0 9 . 0 9 . 2 0 1 9 i s s ue d u / s 1 4 2 ( 1 ) c o p y a v a i l a b l e a t p a g e s 7 2 t o 7 7 w h i c h w a s s e n t t h r o u g h t he I TB A P o r t a l , i t w a s s u b m i t te d , t h a t t h e i s s u e s s t o o d f u l l y ITA 341 /CHD/2022 A.Y. 2017-18 Page 6 of 52 e n q u i r e d i n t o b y t h e AO . D r a w in g a t te n t i o n t o p a ge s 7 3 a n d 7 4 i t w a s s u b m it te d t h a t t h e s e w o u l d s ho w t ha t t he A O w a s conscious that cash deposits were made on 31.03.2015, 3 1 . 0 3 . 2 0 1 6 , 0 8 . 1 1 . 2 0 1 6 , 3 1 . 1 2 .2 0 1 6 a n d 3 1 . 0 3 .2 0 1 7 . Th u s , n o t h i n g ne w w a s n o t i c e d b y t h e ld . P C I T. R e fe r r i ng t o t he s e , it w a s s u b m i t te d th a t t h e A O w a s c o n s c i o u s a n d r e q u i r e d t he a s s e s s e e t o e x p l a i n t he se d e p o s i t s . A t t e n t i o n w a s a l s o i n v i te d t o t he f a c t t ha t t he a s s e s s e e w a s a l s o r e q u i r e d t o p r o v id e analysis of month-wise ca s h s a le and cash deposits from 01.04.2015 to 08.11.2015 and 01.04.2016 to 08.11.2016. P a ge s 7 5 t o 7 6 , i t w a s s u b m i t te d , e l a b o r a te t he q u e ri e s r a i se d b y t h e AO i n t h e c o u r se o f t h e a s s e s s m e n t p r o c e e d i n g s by the a f o re s a i d n o t i ce i s s u e d t o t he a s s e s se e w h i c h a m o n g s t o t he r i s s u e s i n cl u d e d s p e c i f i c q ue r i e s o n ' c a s h d e p o s i ts ' m a d e n ot o n l y i n t h e d i f f e r e n t p e r i od s f o r t h e ye a r u n d e r c o n s i d e r a ti o n b u t a l s o r e q u i r e d t he a s se s se e t o p r o v i de t he se c o m p a r a t i ve d e ta i l s f or t h e e a r l ie r ye a r s . Enquiry, it was submitted, was a l s o m a d e o n c a s h s a le s b y t h e a s s e s se e f o r t he se e a r l ie r ye a r s a n d t he ye a r un d e r c o n s i d e r a t io n . Th u s , t h e f a c t s i n t he p r e se n t ye a r w e r e f o u n d s i m i l a r t o t he e a r l ie r y e a r s . Th e e n q u i r ie s a n d i n f o r m a t i o n p r o vi de d o n c a s h s a le s a s pe r p a st p r a c t i ce l o o k i n g a t t h e a s s e s s e e ' s p e c u l i a r c u st o m e r b a s e w e r e all duly made. Th e s e we r e co u p l e d w i t h p u r c h a s e s m a d e b y t h e a s se s se e n o t o n l y f o r t he ye a r u n de r c o n si d e r a t i o n b u t a l so ITA 341 /CHD/2022 A.Y. 2017-18 Page 7 of 52 f o r t he l a s t 2 y e a r s . Th e s e we r e l o o k e d i nt o i n de t a i l b y m a k i n g a v a i l a b l e c o m p a r a t i ve m on t h - w i se d e t a i l s . Th e s e w e r e r e a d o u t a n d r e l ie d u p o n . I n v i ti n g a t t e n t i o n t o p a ge s 7 8 t o 1 1 1 of the Paper Book, specific a tt e nt i o n was invited to t he c o v e r i n g le t te r a t p a ge s 7 8 - 79 . R e f e r r i n g t o t h e s a m e , i t w a s s u b m i t t e d t h a t it w o u l d s h ow t h a t t h e a s s e s s e e a d d r e s s i n g t he specific bank account had e x p l a i ne d that during t he d e m o n e t i za t i o n p e r i o d fr o m 0 9 . 1 1 . 2 0 1 6 to 3 0 . 1 2 . 2 0 1 6 t h e c a sh d e p o s i t s w e r e e xp l a i ne d . Th e a s s e s se e e x p l a i n e d t h a t d e p o s i t s had been ma d e on t he s pe c i f i c dates and the to t a l cash d e p o s i t s in t he s e t w o s p e c if i c b a nk a c c o u n t s w a s R s . 9 7 l a c s. I t was submitted that it was seen to be c om p a r a b l e i.e. 09.11.2016 to 31.12.2016 and 09.11.2015 to 31.12.2015. I n f a c t in t he d e m o n e t i z a t i o n p e r i o d , i t w a s s ub m i t t e d t he r e w a s a l i t tl e le s s c a s h d e p o si t w h e n c o m p a r e d w i t h t h e e a r l ie r y e a r s . Th e e x p l a n a t i o n o f t h e a ss e ss e e i n re g a r d t o d e p o s i t on d i f fe r e n t d a te s a t t he b o t t o m o f p a ge 7 8 a n d p a g e 7 9 , i t w a s s u b m i t t e d w a s sp e ci f i c a l l y h i g h l ig h te d to e x p l a i n w h y d e s p i te having the ca sh a v a i l a b le , the a s se s se e s ti l l d e po s i t e d in b r o ke n a m o u n t . I t w a s s u b m i t te d t h a t i t h a d b e e n e x p l a i n e d t h a t t h i s w a s ne e d e d t o be d on e a s a p re c a u t io n a n d a s a s a f e t y m e a s u r e on a c c o u n t o f v a r io u s a l a r m i n g f a c t s a r i s i n g on a c c o u n t o f l o n g q u e ue s e t c . Th e sa i d r e p l y h a s b e e n c o n s i de re d b y t he A O a n d n o t be e n f a ul te d w i t h b y t h e l d . P C I T. No ITA 341 /CHD/2022 A.Y. 2017-18 Page 8 of 52 r e a s o n a r g u me n t o r f a c t i s re fe rr e d t o j u s ti f y wh y a c ce p t i n g t h e e x p l a n a t i on o n f a c t s i s a n e r r o r w h i c h h a s c a u s e d a p r e j u d i c e to t he R e v e n ue i n t h e e y e s o f t he l d . P C I T. F o r r e a dy r e f e r e n ce , t h e r e l e v a n t e x tr a c t is r e p r o d u ce d h e r e un d e r :
ITA 341 /CHD/2022 A.Y. 2017-18 Page 9 of 52 3.5 Attention was also invited to Paper Book page 80 and 85 which was month-wise and item-wise stock summary for 01.04.2016 to 31.03.2017. The details provided, it was submitted, were the quantitative sales in absolute terms which had been confirmed from the debtors. Inviting attention to pages 86 to 111, attention was invited to copy of ledger account of the debtors. It was submitted that the copies which were required to be confirmed by the AO have been got confirme d from the respective debtors who have confirmed that payments for sales has been made via bank/ cash etc. It was submitted that all these details were available to the AO, they have also been looked into by the ld. PCIT and have not been faulted with. It was argued that infact the observations made in the Show Cause Notice are emanating from the replies made to the AO on queries available on record. No independe nt enquiry by the ld. PCIT it was submitted, has been made to show that the replies made available were incorrect on facts. Th e effort is a mechanical exercise of power. Attention was invited to Paper Book page 112-113 which was again a copy of the reply submitted in the course of the assessment proceedings to the AO where the assessee had provided the further details sought for by the AO. For ready reference, the said reply relied upon is extracted hereunder :
ITA 341 /CHD/2022 A.Y. 2017-18 Page 10 of 52 3.6 Th e l d. AR furthe r sub mitte d that the assessee i s in trading of fertilizers and all purchases are largely from Government companies. It was further submitted that majority of its sales are made to licensed dealers in khad ITA 341 /CHD/2022 A.Y. 2017-18 Page 11 of 52 etc. who are appointed by Agriculture Department of Haryana and some retain sales are also made. Th e sales to the retailers have all along over the years has as a matter of practice been made in cash and also on credit basis. It was submitted that the assessee has been carrying on its business from two places, one is in Ambala functioning un de r the n ame of "Haryana Khad Store ", and the other is at Yamuna Nagar working under the name of "Khur ana Tr ading Co.". The as sessee is p ropr ie tor of b oth. It was submitted that the return was filed on the basis of audited books of account and neither in the earlier year or subsequent year they have been faulted. The orde r p assed b y the AO , i t was submitted, was after carrying out detailed enquiries on all facts. Considering the CBDT guidelines, it was submitted, not only facts for the year under consideration but also past factual and comparative history of the assessee also had been seen. It was argued that this has also been available to the ld. PCIT and has not been faulted with. Attention was invited to Paper Book page 114 which is moth-wise details of cash sales and cash received from debtors from 2015-16 assessment year to 2017-18 assessment year. Referring to Paper Book page 115-116 it was submitted, is copy of the consolidated stock summary for 2017-18 assessment year wherein again the stock details have been provided on a ITA 341 /CHD/2022 A.Y. 2017-18 Page 12 of 52 quantitative basis and absolute terms were highlighted.
Page 115, it was submitted, is position for Haryana Khad S t o r e , A m b a l a a n d P a p e r B o o k p a g e 1 1 6 i s K h u r a n a Tr a d i n g Co., Yamuna Nagar.
3.7 Inviting attention to page 117 it was submitted that again the assessee is informing that Rs.94 lacs had been deposited in cash as on 08.11.2016 out of sale proceeds of fertilizers etc. Ce rtificate from the Punjab National Bank during the demonetization period i.e. 09.11.2016 to 30.12.2016 was enclosed as a supporting document. It was submitted that this has also been verified by the AO from the bank. Along with these details, the assessee referring to page 117 again, it was submitted, had provided month-wise details of purchases and sales alongwith stock for the Financial Year 2016-17 and 2017-18. Referring to page 120, it was submitted that again the assessee re-furnished the details required by the AO in the format required as per CBDT guidelines. For ready reference, relevant page 120 relied upon is reproduced hereunder :
ITA 341 /CHD/2022 A.Y. 2017-18 Page 13 of 52 3.8 Referring to pages 121 to 122 of the Paper Book, it was submitted that month-wise cash-flow for the two periods i.e. 01.04.2015 to 08.11.2016 and 01.04.2016 to 08.11.2016 depicting opening cash balance, cash sales and cash deposits were also made available. Attention was also invited to pages 123 to 126 which is again a copy of the reply filed during the assessment proceedings which includes list of debtors from whom cash had been received during demonetization period and comparative details of cash deposits in the bank account in the financial year 2015-16 and 2016-17 were also made available and are on record.
These facts remain unrebutted. For ready reference, accompanying letter at page 123 is reproduce hereunder:
ITA 341 /CHD/2022 A.Y. 2017-18 Page 14 of 52 3.9 Attention was invited to comparative details of cash sales during Financial Year 2015-16 and 2016-17 at page 127 and copy of the Ledger Account of Bonus payable in the books of Khurana Tr a d i n g Co. from 01.04.2016 to
31.03.2018 at page 128. Attention was also invited to Paper Book page 129 copy of the reply dated 20.12.2019 which is filed before AO. Referring to the same, it was submitted that it addresses the nature of business of the assessee and also explains why cash sales have been made. It was submitted that as per record, the assessee had argued that the asse ssee 's product 'fertilizer' use d pr imar il y by far me rs as per past practice has always been purchased either from small sc ale re tailers i n rural areas or at ti me s dire ctly to the farmers in the rural areas.
3.10 Relying on these documents available it was submitted that the evidence demonstrating the nature of queries and the detailed replies received and cross checked by the AO was available to the ld. PCIT also. It was submitted that the order of the AO has been passed after seeing and examining these facts. Copy of this, it was su bmitted, has also bee n filed at page 1 30 and 13 1. The ld. PCIT it was submitted, had available on record the entire factual background of the queries raised and responses filed and none of it has been faulted with. Referring again to the ITA 341 /CHD/2022 A.Y. 2017-18 Page 15 of 52 Paper Book filed, it was submitted that from page 130 to 144 of the Paper Book, copy of the Show Cause Notice issued to the assessee is available. On reading from the same, it was repeatedly re-iterated that in the Show Cause Notice the replies made available to the AO by the assessee are repeated as an allegation raising unfounded conjectures. It was submitted that since the replies thereto are also avai lable which h ave re maine d ignored by the ld . PCI T, the order on conjectures it was his prayer, may be quashed as unsustainable.
3.11 Referring to the allegation of the ld. PCIT that there is some mis-match it was submitted that there is no mis-match in the accounts. Each deposit stands well explained. It was submitted that the AO has considered the cash deposits as though these were credit sales or purchases. It was vehemently argue d that ignoring the nature of assessee's business, ignoring the past history, the order has been passed on mere conjectures. Facts on record, it was submitted, have remained ignored. Relying on the basis of the supporting vouchers, it was his submission that the assessee makes sales in the vast rural areas of the State. As a result of this fact, since vast geographic spread is covered for sales and recovery by different salesmen/collecting staff, they necessarily carry their respective sale books/receipt ITA 341 /CHD/2022 A.Y. 2017-18 Page 16 of 52 books etc. It was submitted that these are bound to be different and cannot be in a sequence. Hence, since different people are moving in the geographical area with different Receipt Books, the serial numbers etc. are bound to be different. It was argued that there cannot be continuing voucher numbers in sequence as someone may have the number from 1 to 500, another may have some other receipt book from 100-200 etc. Th u s , t h e m e r e f a c t t h a t t h e r e w e r e different vouchers having different series of the same date was easily explainable and explained. It was submitted that this was only a method to ensure that whatever sales are made , payments received in lieu thereof is duly recorded and made available to the assessee. It was further objected that considering the cash in hand considered to be 'huge' the ld. PCIT presumes to question the prudence of the assessee in t h e R e v i s i o n a r y o r d e r . Th e c o n j e c t u r e t h a t m a i n t a i n i n g c a s h in hand is questionable and the allegations that huge cash sale is unprecedented in the business history of the assessee, it was submitted is contrary to facts. It was submitted that as a matter of fact in the year under consideration, cash sales are less as compared to the earlier years. It was his submission that the modus-operandi of the assessee is that for the sales made to small scale outlets and small farmers at the time of the sale, if possible, the ITA 341 /CHD/2022 A.Y. 2017-18 Page 17 of 52 p a y m e n t s a r e c o l l e c t e d a n d r e c e i p t m a y b e i s s u e d e t c . Th i s has been a continuous practice of the assessee over the years as per record. Thu s, it was argued that the re cord and past history is available on record. Month-wise details have been given. Accordingly, the allegations made by the Revenue based on conjectures, it was submitted, are de-hors the facts. Reply of the assessee dated 15.03.2022 at pages 145 to 149 was heavily relied upon. Th e said reply is extracted hereunder for ready reference :
Date : 15.03.2022 To Pr. Commissioner of Income Tax Aayakar Bhawan, Sector-2, Panchkula.
Sub ;- Notice u/s 263(1) of the income Tax Act 1961 for the A.Y. 2017-18 in the case of Sh. Gurcharan Singh, Prop. M/s Khurana Trading Co., Anaj Mandi, Yamuna Nagar - PAN:
ACDPS7032F-Reg-
Sir, With reference to your Notice: PCIT/PANCH/263/2021-22/3905 dated 04-03-2022. I am submitting the following required documents/ information:
1. The said firm is engaged in whole sale trading of Fertilizers etc. situated at Shop No. 11, Anaj Mandi, Yamuna Nagar. I am proprietor of two firms (i) Khurana Trading Co. Yamuna Nagar (ii) Haiyana Khad -Store, Ambala. Copy of Balance Sheet, Profit & Loss account for the financial year 2016-17 relevant to assessment year 2017-18 is already submitted during the course of assessment relevant to assessment year 2017-18.
2. Copy of Tax Audit Report U/s 44AB is already submitted during the course of assessment relevant to A.Y. 2017-18.
3. During the demonetization period i.e. 09.11.2016 to 30.12.2016 (SBN) cash has been deposited out of cash available as on 08.11.2016 out of sale proceeds of fertilizers/pesticides.
4. Bank Statement of all the bank accounts maintained during the year and ledger account copy of all the bank accounts regarding cash deposited during demonetization period is already submitted during the course of assessment relevant to A.Y. 2017-18.
5. As per Para 4 of your notice source of cash deposit in bank account during demonetization period is out of cash balance available as on closing of 08.11.2016 which was out of cash ITA 341 /CHD/2022 A.Y. 2017-18 Page 18 of 52 received from debtors and sale proceeds of fertilizers/pesticides and Ld. A.O. has checked the books of accounts, documents and explanations during the course of assessment and verify all the documents thoroughly.
6. As per para 4.1 there is no difference of Rs.10957578/- in cash received from debtors.
Debtors as on 31.03.2016 are 29633784/- and further sale of Rs. 172823973/- has been made during the year 2016-17 and cash has been received during the year out of opening balance of Sundry Debtors and sale made during the year 2016-17 and Ld. A.O. has checked the books of accounts, documents and explanations during the course of assessment and verify all the documents thoroughly.
7. In a reply to para 4.2, 4.3 & 4.4 of your notice it is explained that during the course of assessment Ld. A.O. has thoroughly checked all the record produced for kind verification. There is no bogus entries in the cash books. All the entries have been made as per receipt issued to Sundry Debtors on receipt as cash from Sundry Debtors. Receipt Books have been produced before Ld. A.O. during the course of assessment. Further, it is informed that one receipt book is kept in office and another receipt books given to two to three persons who goes to different markets for collections on different routes on same date that i.e. pattern or sequence in the receipt No. are different because three to four receipt books used simultaneously.
8. In reply to para no. 4.5 of your notice, As already all the person know in one day Rs. 20000/- can be given in cash and at the time of collection Sundry Debtors given Rs. 20000/- in one day, which is valid as per provision of Section 40A(3) r.w. rule 6DD.
9. In reply to para no. 4.6 of your notice, no cash receipt entries/vouchers no. had been manipulated, cash is only received against material sold and from debtors against sales which record was already verified by Ld. A.O. during the course of assessment. Copy of debtors account already on the file submitted during the course of assessment. The A.O. verified all the documents like supporting purchase bills cash vouchers copy of accounts of respective debtors, were examined by the A.O. and sent his inspector to verify from the same from different debtors. The Ld. A.O. checked thoroughly and verified the record submitted during the course of assessment.
10. In reply to para no. 5 it is submitted that no any clever strategy of induction of cash through multiple entries of cash receipt on small amount from debtors. I have already submitted that cash has been received from the debtors to whom material have been sold. Copy of account of sundry debtors are already on the file and verified by the Ld. A.O. Further it is informed that comparative analysis of month wise cash receipts and cash deposits have been ask by the Ld. A.O. from 01.04.2014 to 31.03.2017 and 01.04.2016 to 08.11.2016, 09.11.2016 to 31.12.2016, which have been submitted during the course of assessment and Ld. A.O. has verified the same. Vat Returns for the financial year 2016-17 has been demanded by the Ld. A.O. and submitted during the course of assessment proceedings.
11 .In reply to para no. 5.1 cash deposit in the bank on different dates are tallied with the record produced during the course of assessment and all the entries of cash deposit on different dates in Haryana Khad Store, Ambala and Khurana Trading Co. Yamuna Nagar have been verified by the Ld. A.O. during the course of assessment. Bank Statements of all the banks already on the file. There is no inflated cash in hand. It is genuine cash in hand as per cash book have been produced to the Ld. A.O. and already on the file.
12. In reply to para no. 5.2 cash is only received from sales and debtors as already explained in earlier para. (Being it is seasonal business depends on different agriculture crops like wheat ITA 341 /CHD/2022 A.Y. 2017-18 Page 19 of 52 & paddy, normally farmers after selling their crops give payment to retailers for purchase of fertilizers and retailer give us the payment after the crop season.
13. In reply to para no. 5.3 & 5.4 it is informed that the Ld.A.O. has asked the detail from us regarding the total cash deposit in 2015-16 and 2016-17 and cash deposit 01.04.2015 to 08:11:2015 and 09.11.2015 to 31.12.2015 and also asked about cash deposit 01.04.2016 to 08.11.2016 and 09.11.2016 to 31.12.2016. This information was submitted during the course of assessment and already on the file and detail of analysis submitted during the course of assessment is as under- Comparative chart of cash deposit in financial year 2015-16 & 2016-17 is as under:-
The Ld. A.O. thoroughly checked above said figures and from the above chart it is evident that Rs. 9750000/- has been deposited in bank, 09.11.2015 to 31.12.2015 which is not a demonetization period During the demonetization period 09.11.2016 to 31.12.2016 cash of Rs. 9745000/- has been deposited. Cash of Rs. 13141500/- has been deposited during the period 01.04.2016 to 08.11.2016 as compare to proceeding year Rs. 15823310/- during the period 01.04.2015 to 08.11.2015. Total cash deposit in Tank in financial year 2016-17 is Rs. 30748850/-as compare to total cash deposit in bank Rs. 32382310/- in the financial year 2015-16. I have also deposited the cash in the post demonetization period as per requirement of the business, the fact was duly explained during the course of assessment and documents are on the record.
14. During the demonetization period i.e. 09.11.2016 to 30.12.2016 cash amounting to Rs. 9745000/- (out of which Rs. 9400000/- is SBN) has been deposited out of cash available as on 08.11.2016 and out of sale proceeds of fertilizers etc. Certificate from Punjab National Bank, Main Branch, Yamuna Nagar regarding cash deposited (SBN) during the demonetization period i.e. 09.11.2016 to 30.12.2016 is already on the file and the Ld. A.O. has verified the same and verified the entries of cash deposit with the bank statement during the course of assessment. The A.O. has also investigate all the entries of month wise purchases & sales and which were submitted during the course of assessment.
15. In reply to para no. 7 income from Godown rent amounting to Rs. 95250/- has been duly reflected in profit & loss account. It is explained that rent of Rs. 95250/: has been received from RCF Ltd. as Godown rent which was not owned by me taken on annual rent of Rs. 72000/- duly reflected rent paid account in the profit & loss account. Hence, there is no question of source of investment on the construction of Godown. This fact has been explained to the A.O. during the course of assessment.
16. In reply to para no. 8 total purchase during the year is Rs. 169138373/- and sales are 172823973/- for the financial year 2016-17. And as per stock register purchase value is 169138373/- and sale value is 172823973/- and there is no difference. During the course of assessment stock summary-was prepared manually and there is clerical mistakes which were ITA 341 /CHD/2022 A.Y. 2017-18 Page 20 of 52 explained during the course of assessment and stock register was produced before the Ld. A.O. and explained the value of purchases and sales and the Ld. A.O. satisfied with the explanation/stock register produced during the course of assessment. Thus amount of Rs. 5129659/- was not taxable as per section 69 r.w.s. 115BBE.
17. In reply to para no. 9 It is informed that there is no mismatch amount paid to employees as business as reported in audit report and reported in ITR. Copy of audit report and ITR is on record and same has been verified by the ld. A.O. that there is no mismatch during the course of assessment proceedings.
18. In reply to para no. 10 house hold drawings are Rs. 204000/- not Rs. 180000/- as per capital account submitted during the course of assessment house hold drawing are 204000/- I am 74 years old living along with my wife in my own house. I belongs to agriculture family vegetables, wheat, paddy comes from own agriculture land living with my son. Keeping in view the size & status of the family drawings of Rs. 204000/- is quite sufficient. The Ld. A.O. asked about house hold expenses during the course of assessment and I have explained about house hold expenses to Ld. A.O.
19. Cash book for the period 01-04-2016 to 31-03-2017 has been produced for the verification during the course of assessment and Ld. A.O checked the cash book of every dates of full Financial Year. And copy of cash book for the period 01-04-2016 to 31-03-2017 placed on the file relevant to the A.Y. 2017-18. The ld. A.O has also checked the Balance of opening cash as on 01-04-2016 and closing cash of 08.11.2016. Keeping all the facts of the case & Explanation given to you & records produced for verification before Ld. A.O. above referred assessment order dated 24-12-2019 passed by ld. A.O Ward No. - 5, Yamuna Nagar is not erroneous and no loss to the interest of revenue, should not be cancelled Under Sec 263 of the income Tax Act, 1961. I hope that above information will satisfy you. Kindly do the needful and oblige. Thanking you, Yours faithfully, For Khurana Trading Co.
Gurcharan Singh Mob: 9215500276 3.12 Attention was invited to the incorrect allegatiion that there was a mis-match in the postings. The re-con ciliati ons available at pages 149A and 149B was relied upon to support the submission. In the said background, heavy reliance was p lace d up on deci si on of the I TA T w hi ch has cons idered near identical facts in the case of Smt. Charu Aggarwal V DCIT (I TA No. 31 0 /CHD /2 0 21 ) & M/s Kalaneedhi Je wel lers LLP Vs D C I T ( I TA N o . 3 1 1 / C H D / 2 0 2 1 ) o r d e r d a t e d 2 5 . 0 3 . 2 0 2 2 ( c o p y ITA 341 /CHD/2022 A.Y. 2017-18 Page 21 of 52 available at Pape r Book pages 153 to 222). It has been argued that herein also it was not a sudden spurt in the activity and it was as per past practice. Further, there was no discrepancy in the opening stock, closing stock and purchase and sales. All these have not been tinkered with. Proper entries in the Ledger Accounts have been seen and are in consonance with the submissions advanced. In the facts of the prese nt case, these have not been upset by the l d. PCI T. Books of account have not been rejected. The sales tax/ VAT Department records remain undisturbed as in the present case, hence addition was deleted. For the purpose of completeness, the documents on facts relied upon by the ld. AR to argue that all facts stood fully enquired into and considered are extracted hereunder :
1 Evidence of filing of Income Tax Return for AY 2017-18 1-54 along nth computation of income & complete ITR Form (ITR-3).
2 Copy of the Tax Audit Report along with the audited 55-71 Financial Statements as on 31.03.2017.
3 Copy of the notice dated 09.09.2019 issued u/s 142(1) of 72-77 The Income Tax Act, 1961 ('the Act').
4 Copy of the reply submitted during the course of 78-79 assessment proceedings along with the following details:
80-85
i)Month wise and item wise stock summary from 01.04.2016 to 31,03.2017 in quantitative as well as absolute terms 86-111
ii)Copy of ledger account of the debtors out of which, few copies of ledger accounts, as desired by the Ld. AO, have also been confirmed from the respective debtors confirming payment in modes of bank as well as cash.
5 Copy of the reply submitted during the course of 1 1 2 - 1 1 3 assessment proceedings depicting the following details: 114 ITA 341 /CHD/2022 A.Y. 2017-18 Page 22 of 52
i) Details of month-wise cash sales, cash received from debtors from AY's 2015-16 to 2017-18 giving justification 1 1 5 - 1 1 6 of availability of cash in hand.
ii)Copy of the consolidated stock summary for the AY 2017- 18 wherein, stock details have been presented in quantitative as well as absolute terms.
6 Copy of the reply submitted during the assessment 117-119 proceedings along with the copy of the confirmation from the Punjab National Bank with respect to the cash deposited in the bank account during the AY 2017-18 in specified bank currency.
Copy of the reply submitted during the assessment 120 proceedings wherein, the following details are submitted. 7 i) Month wise cash flow from 01.04.2015 to 08.11.2015 121 depicting the opening cash balance, cash sales during the year, cash deposited in the bank account and the closing balance of cash in hand. 122
ii) Month wise cash flow from 01.04.2016 to 08.11.2016 depicting the opening cash balance, cash sales during the year, cash deposited in the bank account and the closing balance of cash in hand.
Copy of the reply filed during the course of assessment 123 proceedings along with following details:
8 i)List of debtors from whom cash has been received during 124-125 the demonetization period i.e. 08.11.2016 to 31.12.2016.
ii)Comparative details of cash deposited in the bank 126 account of the assessee in FY 2015-16 and FY 2016-17.
iii)Comparative details of cash sales during the FY 2015- 127 16 and FY 2016-17.
iv) Copy of the ledger account of Bonus Payable in the 128 books of Khurana Trading Co., Yamuna Nagar from 01.04.2016 to 31.03.2018 depicting the payments made for the bonus payable 9 Copy of the reply dated 20.12.2019 filed with the office of 129 Income Tax Officer wherein, the nature of the nature of business of the assessee has been explained and along with that it has been also submitted that most of the cash sales have been made to small scale retailers of rural area. 10 Copy of the original assessment order dated 24.12.2019 130-131 passed u/s 143(3) of the Act wherein, the returned income of the assessee has been accepted by the then Assessing Officer after due examination of facts and due application of mind.
11 Copy of the Show Cause Notice dated 04.03.2022 issued 132-144 u/s 263(1) of the Act.
12 Copy of the reply dated 15.03.2022 filed by the assessee as 145-149 against the Show Cause Notice issued u/s 263 of the Act. 13 Statement of Reconciliation of Stock (Purchases and sales) 149A-
for the AY 2017-18, wherein, the stock details as per books, 149B stock registers and details submitted during the assessment ITA 341 /CHD/2022 A.Y. 2017-18 Page 23 of 52 proceedings has been tallied.
14 Relevant extract of the cash book of M/s. Haryana Khad 1 5 0 - 1 5 2 Store, Ambala for the date 17.05.2016 depicting cash balance of Rs. 5,91,445/- and for the date 18.05.2016 depicting cash balance of Rs. 3,10,945/- , as against the alleged balance of Rs. 1,91,445/-on 18.05.2016 mentioned in para 5.2 at page no. 9 of the Show Cause Notice issued u/s 263 of the Act.
15 Copy of Judgment of Hon'ble Chandigarh Bench in the 1 5 3 - 2 2 2 case of M/s Kalaneedhi Jewellers LLP in ITA No. 311/CHD /2021 dated 25.03.2022 CERTIFICATE: THIS IS TO CERTIFY THAT ALL THE DOCUMENTS AS MENTIONED IN SERIAL NO. 1 TO 15 ARE AS PER THE DEPARTMENT RECORDS.
Sd/-
Authorized Signatory 3.13. Accordingly, it was submitted that whatever has been mentioned in the Show Cause Notice has been on the basis of the replies made by the assessee before the AO. Thus, it was submitted no fact has remained ignored by the AO has been brought on record to show how the order is erroneous or prejudicial. It was submitted that the PCI T reproduces from the record the facts already on record and conjectures without fact or evidence to hold that the order is to be set aside u/s 263. Assailing the order, it was vehemently argued that the ld. PCI T failed to point out any error in the order. Nothing has been brought on record to show what enquiry was still required to be done or what fact taken into consideration to hold that the Assessing Officer has passed the order on incorrect facts. No such fact or evidence has been re ferred to by the l d. PCI T. Admittedly also no enquiry to rebut any fact taken as a correct fact by the AO has been done by the PCI T. Th e order, it was his prayer may be ITA 341 /CHD/2022 A.Y. 2017-18 Page 24 of 52 quashed. The detaile d rep ly made avai lable to the ld. P CI T which has been extracted in the order from page 3 to 8 which reply is supported by the documents already referred to. These, it was submitted, have re mained ignored for reason best left unaddressed. It was argued that the ld. PCIT arbitrarily seeks to compare the position upto 31.03.2016 and for un-stated reasons fails to consider that this is an ongoing business of the assessee where receipts in cash for sales made and recovery from some debtors is a continuing process and is continued upto 08.11.2016 i.e. upto the date of demonetization and infact beyond as the business is ongoing. Thi s fact, it w as sub mitted , had als o been argued b y the asse ssee bef ore the ld. P CI T, howeve r, she fail s to consider the submissions for reasons best left unaddressed. It was submitted that the ledger accounts have been made available to the AO and also ld. PCIT to show that as and when recoveries are made, outstanding balances are reduced b y the amount re ce ive d. Thu s, to cast aspersi ons on the basis of vouchers which are being maintained by the assessee's field staff who are spread out in the different areas and are going to different re tain customer s/far me rs in the rural belt and making sales as well as collecting p ayme nts has been d isbelie ved purely on susp ici ons . The working environment of the assessee and the availability of ITA 341 /CHD/2022 A.Y. 2017-18 Page 25 of 52 stock evidenced by purchase has completely been ignored. The sales, it was re-iterated are made in different geographic areas. Th e strange as persion on the asse ssee for the fact that the amounts received by the assessee from its customers/retailers were less than Rs.20,000/- at a point of ti me , it was submitted, is again a conjecture to cast aspersions on the assessee and does not upset any material fact. It was his submission that the purchaser possibly is conscious that payments beyond Rs.2000/- in cash cannot be made and has for whatever reasons ensured that he has complied with the legal provisions. It was argued that as far as the assessee is concerned, where is the bar u/s 40A(3) to collect the payment in cash of even amounts more than Rs. 2 0,000 /-. The bar ad mitted ly oper ates for the paye e only and who is the assessee to question the recovery/receipt of sale made . The transactions, it was submitted, are fully supported by the books of account. Detailed examination of the major purchasers from whom the assessee purchased has been done by the AO. Th e assessee has made availab le their ledger accounts. It was submitted that over the years, the manner of business of the assessee continues to remain the same. Thi s is the same modus-oper an di of the assessee over the years in the last few years. The inferences and conjectures that the AO possibly blindly accepted the replies ITA 341 /CHD/2022 A.Y. 2017-18 Page 26 of 52 were strongly objected to. Referring to the Paper Book again, it was submitted that the AO has not been satisfied with the reply given by the assessee and has required the assessee to re-file details as pe r the revised proforma c o m p l y i n g w i t h t h e C B D T i n s t r u c t i o n s . Th e a l l e g a t i o n o f t h e ld. PCIT that these facts are incorrect is based on no evidence. As per record, the AO has examined and analyzed the past history, all replies available with the AO were avai lable to the ld. P CI T. Before setting aside the order, it was submitte d, it is incumbent on the ld. PCIT to show that what was the incorrect factor. Merely stating that these are bogus, sham, it was his submission is strongly objected to. Stock is available, sales have been made, none of this has been doubted. The se are not c ash credits . Thus, on the basis of enquiries carried out by the AO, replies of the assessee , there was no occasion for the ld. PCIT to conclude that it was a case of lack of enquiry. Referring to page 140 of the Paper Book, it was also referred to so as to highlight that this fact has been clarified in para 5.2 before the ld. P CI T. 3.14. Summing up the Show Cause Notices on record, it was argued that the allegations based on suspicions de-hors the fac ts w as s trongly ob jected to. The se have been replied to and addressed in detail before the ld. PCIT also. Th us, ITA 341 /CHD/2022 A.Y. 2017-18 Page 27 of 52 relying on them and re-iterating those, he would want to clarify again that issues addressed in Paper Book page 141 specially in paras 5.3 and 5.4 are based purely on conjectures de-hors the facts ignoring the peculiar customer based of the assessee which is linked with agricultural activity and hence is seasonal, the conjectures were strongly objected to. The allegation in para 6 of the Show Cause Notice is also based on conjectures and is unsustainable as it clearly shows that how the ld. PCIT was hell-bent in finding faults where no faults existed. The alle gation s in para 7 of the SCN in regard to the godown rent again, it was submitted, is de-hors the facts and the issue has already been enquired into by the AO and not shown to be incorrect by the ld. PCIT also. The allegation in page 1 4 2-14 3 in paras 8, 9 and 10 in the SCN is again an incorrect appreciation of facts. Re-conciliation was made available to the ld. P CI T. Th e se i ssues had been en qu ired in to b y the AO. The b lanket allegation th at n ot even b asic enqu ir y was carried out by AO in the face of the evidence on record being arbitrary and contrary to facts was strongly objected to. The use of contemptuous and insulting language resorted to in the Show Cause Notice as an attempt to dramatize the issue, it was submitted, was not expected from the authorities such as the ld. PCI T. ITA 341 /CHD/2022 A.Y. 2017-18 Page 28 of 52 3.15 Having addressed the Show Cause Notice and the manner in which aspersions and allegations based on conjectures and surmises are said to be made out in the Show Cause Notice. Attention had been invited to the reply of the assessee dated 15.03.2022, copy of which is available at page 145 to 149. Th e re-conciliation questioned by the Assessing Officer, it was submitted was made and explained and was shown as tallied base d on Paper Book pages 149A and 149B. Inviting attention to Paper Book page 150 to 152, the specific allegations made out by the ld. PCIT at page 9 of her order vide paras 5.2 and 5.3 onwards, it was submitted, was fully explained from the extract of the Cash Book of M/s Haryana Khad Store, Ambala for the date 17.05.2016 and for the date 18.05.2016 as against the allege d b alances men tioned in par a 5.2 b y the ld . PCI T, attention was invited to page 146 and 147. Carrying the Bench through the said reply, it was submitted that each and every allegation of the ld. PCIT stood fully addressed. For ready reference, this reply at pages 145 to 149 has already been extracted.
3.16 Inviting attention to page 8 it was submitted that a perusal of paras 9 and 10 of the impugned order would show that the ld. PCIT has confused herself in considering the issue. Accordingly, the point-wise reply of the assessee in ITA 341 /CHD/2022 A.Y. 2017-18 Page 29 of 52 para 6 of the synopsis filed (specifically pages 5 to 12) was he avily relied upon requesting that these be taken on record as argued. The same is reproduced hereunder for completeness:
The finding of the Ld. PCIT starts from para 5.1 and then PCIT has referred to the amount of cash deposits of Rs. 97,45,000/-, during the demonetization period and referred to certain point, which are being tabulated as under:-
THE FINDING OF THE PCIT RE PLY OF THE ASESSEE
a) At page 9 of the order u/s 263, the Ld. PCIT It is submitted that the books of accounts of the has mentioned about the difference of Rs. assessee have been produced and examined 1,09,57,578/- by comparing the debit as on and such books of accounts have been 31.03.2016, with cash receipts from debtors and accepted by the Assessing Officer and right in response to that, she has referred to the reply of from first questionnaire, dated 09.09.2019 and the assessee in para 5.2, that there is no various replies placed at paper book pages 78 difference, because cash has been received on to 79, copies of accounts of various debtors as account of sales and has referred to the sales of enclosed at pages 86 to 99, the detail of cash Rs. 16,28,23,973/- during the year and mentioned in hand as given at page 113 of Paper Book in para 5.3, that no such query has been raised by and details of cash sale at pages 123 to 127, the Assessing Officer in any details sought by the clearly proves that there was available cash as Assessing Officer and it is a general explanation per books of accounts and no discrepancies and no co-relation of cash entries viz- a viz. have been noticed. It is also on record, that the debtors have been furnished confirmed copies of accounts of the debtors have been furnished and on account of availability of cash as per books, the observation of the PCIT is not correct specially when, the quantitative detail of stock had been furnished, which is there at pages 80-
to 85 of the paper book and cash sales have not been considered by the PCIT during the year.
The Ld. PCIT from the copies of accounts The finding of the PCIT is totally misleading, submitted of the various parties, has noted that in the sense that, she has failed to appreciate the receipt issued against cash collection are not that on a particular day, there may be, in 'serial order' as per para 6 of the order of Ld. salesman having gone to a place for collection PCIT and then in para 7, where after considering of receipts and whereas, some other party or the reply of the assessee, that there are different representative of some party on the same day, salesmen, who go out for collection of cash on may have come to the office of the assessee, for different routes as they have been given the making the payment and, thus, there has to be receipt books and then there is collection of cash difference in the numbers of receipts, one at the office and separate receipts are issued and having been issued by salesman and other without considering that, it has been stated by the from the office of the assessee or by other Ld. PCIT that there are glaring anomalies in Salesmen at some other place. Then as already respect of entries of cash receipts. stated that there are 2-3 salesmen, besides, the collection of cash at the office premises, the receipts books are given to salesmen with different serial numbers and, thus, it is only a ITA 341 /CHD/2022 A.Y. 2017-18 Page 30 of 52 doubt, without any evidence.
c). In para 7.1 of the order, the PCIT from the We strongly object to this remarks of the Ld. copies of accounts, which are confirmed copies of PCIT about the manipulation and accounts has stated that why continuously cash manufactured cash in hand. It is submitted that receipt of less than Rs. 20000/-, are being received even at times receipt No. has not been in the from the parties on day to day basis and then also books, but the date of payment has been stated that there is alleged manipulation made by recorded in cash book, which tallies with the assessee, in respect of receipts from the receipt book and which has been confirmed by debtors and then it has been mentioned that on the parties, It gives no reason to PCIT to certain receipts Voucher No/Receipt No. have not adversely comment upon the same. Further, been mentioned and, thus, has submitted in para there is no manipulation regarding alleged 7.4 that these are manufactured cash in hand. manufactured cash in hand, because the date of issue of receipt is April/May 2016, which is much earlier to the demonetization period and the assessee could never know that the demonetization will occur in November 2016.
Then, there is no violation of 40A(3) and due to the nature of business and modus operandi of the business, such is usual phenomenon and, hence, it is only a doubt and suspicion on the part of the Ld. PCIT without assigning any reason.
Further, there is no alleged manufactured cash in hand and it is genuine cash as per regular books of accounts and the assessee is having a seasonal business depends on different agriculture crops like wheat and paddy and normally farmers after selling their crops give payment to retailers for purchase of fertilizers and retailer gives us the payment after the crop season. Further, the cash deposits during the demonetization period and for the full year is less than the cash deposited in the earlier year.
d). The PCIT in para-9 and para 10 has confused The Ld. PCIT has mentioned wrong facts, herself with regard to drawing wrong because, there is one independent interpretation and has stated at page 19 of the partnership concern, in the name of M/s order that the material has been sold by one Haryana Khad Store, Yamuna Nagar and proprietorship concern to another proprietorship there are two proprietorship concerns of the concern and thus, has stated in para 10 that assessee namely, 'Haryana Khad Store, alleged manipulation is there. Ambala' and the other is 'Khurana Trading Co.', Yamuna Nagar. The Ld. PCIT has passed the order u/s 263 by assuming that the Haryana Khad Store is a Proprietorship concern of the assessee, which is clearly incorrect and wrong conclusion have been drawn on the basis of wrong facts and, thus mentioning of a colourful device by Ld. PCIT is totally void abi-nitio ITA 341 /CHD/2022 A.Y. 2017-18 Page 31 of 52
e). In para 10, the PCIT has mentioned that why It is submitted that the books of accounts have the assessee has huge cash in hand as on been maintained in the regular course of 08.11.2016 and the Assessing Officer failed to business and Ld. Assessing Officer has called examine the previous history in respect of cash for numerous details about the previous year deposits by the assessee in the bank account and cash deposits during demonetization period then in para 10.2 has only mentioned that the and for the whole financial year 2015-16 and Assessing Officer has failed to make the inquiry 2016-17, which is evident from reply at page s that why such a huge cash in hand has been kept 120, 122 and 123. Then he took notice of the by him collection of debtors at page 114, verified the quantitative details and asked for confirmed copies of accounts from the parties and most of them are licensed dealers by the Agriculture department, Haryana and, thus, the contention of the Ld. PCIT that no comparison of detail of monthwise cash receipts and deposits have been taken into consideration by the Assessing Officer is totally misleading. Further, the assessee is Sole Judge of carrying on its business and the Ld. PCIT cannot dictate as how to carry on the business. Reliance is being placed on the judgment in the case of S. A. Builders Ltd. as reported in 288 ITR 1.
f). PCIT has referred in para 10.4 and 10.5 We strongly deny the allegation of the Ld. about the availability of cash in hand before the PCIT, because no defects have been pointed demonetization period and has stated that the out in day to day maintenance of cash books, assessee was maintaining a reasonable cash in receipt book and also the sales and purchases hand but then in Ambala branch, there is cash in have been accepted and there is past history of hand of Rs. 81,52,764/- on 02.10.2016 and has the case, with regard to receipts and sales by commented upon the fact that cash been cash and only on certain assumption and manipulated. presumption, certain observation have been made and above all, when the cash in hand, was there about 82 lacs in October and even deposited lateron, it does not give license to the Ld.PCIT to comment adversely against the assessee. The contention of the PCIT that preponderance of evidence is prime-facie, indicate that unaccounted money has been deposited in the bank account is also misleading in the sense that there is documentary evidence of opening stock, purchases and sales and closing stock, both in quantity and in value and the same having not been disturbed and, therefore, when the documentary evidences are there, then the oral evidence will have no value as per the judgment of Hon'ble Apex Court in the case of Daulat Ram Rawatmall as reported in 87 ITR
349. The deposit of cash is as per regular books of accounts. Further, there is substantial cash in hand in June, July, August from 26 lacs to 60 lacs, when no demonetization was there and hence this is merely on allegation. Copies of accounts of the parties from whom, ITA 341 /CHD/2022 A.Y. 2017-18 Page 32 of 52 purchases made were filed.
g). In para 14, the PCIT has mentioned about It is stated that it was replied to the PCIT at certain observation on account of stock register page 148 in para 16, that there was some and pointed out certain discrepancies and then has clerical mistake and for which, the reproduced the reply of the assessee in para 14.1 reconciliation was explained as per page 149A that there is clerical mistake, which were and 149B and, in fact, certain figures of the explained during the course of assessment value of quantitative stock as available at proceedings and the Assessing Officer was pages 82 to 85, have wrongly been entered in satisfied therein and then has mentioned in para the quantity col. as per page 80 and 83 and, as 14.2 that this explanation is vague and it was such, when there is no discrepancy in opening required to be verified and also purchases are not stock of the khad as on 31.03.2016 and correctly recorded in books and has further stated 31.03.2017, the whole basis of clerical mistake at page 27 that sales are inflated. have been taken by the Ld. PCIT for the purpose of action u/s 263, which proves that the Ld. PCIT was bent upon to take action u/s
263. Further, thus, when quantitative details are available, no adverse view can be taken of such clerical mistakes and how such inadvertent mistake lead to purchases not correctly recorded in the books or sales are inflated, is not borne out from the order of Ld. PCIT .
h). The Ld. PCIT had stated that Godown rent has The rent as received has duly been disclosed at been disclosed in the profit and loss account and page 66 of the Paper Book and on other hand, that investment of such Godown had not been the rent have been debited in the profit and considered by the Assessing Officer and assessee loss account. The reply has been given as per had submitted that it had shown income from page 148 para 15 and no further query was Godown at Rs.90250/- and that investment in the raised by the Ld. PCIT and this fact was also Godown has not been disclosed. The assessee looked into by the Assessing Officer and submitted that Godown was taken on rent @ Rs. figures of rent received are quite evident from 72,000/-per anum and the same Godown was let the profit and loss account. There is no out to RCF Ltd. for Rs. 92,250/- and both have Godown in the Balance Sheet and hence no been disclosed in receipt and expenditure account investment was required. side. It has been mentioned that the assessee had not divulged the detail of the owner of property and whether the assessee can sublet the property or not.
i). The Ld. PCIT has mentioned that the case was The query was raised by the Assessing Officer into selection on account of mismatch in the about this mismatch and which have been amount paid to employees as bonus/commission replied at page 113 in para 13 and then, the and it was stated as per our reply that there is no copy of bonus payable has been submitted at mismatch and reliance was placed on the audit page 128 of the Paper Book, showing that report and ITR return and having no doubt, but there is no mismatch and it is wrong to state then, it has been again casually mentioned, that no that no query was raised. verification was made by the Assessing Officer. 3.17 Based on these facts, following submissions have been placed before us for our consideration :
ITA 341 /CHD/2022 A.Y. 2017-18 Page 33 of 52
7. From the above discussion, it is very clear that each and every thing has been looked into by the Assessing Officer concerned and number of queries had been raised with regard to deposit of cash during demonetization period and from the queries and various replies, it is quite evident that availability of cash in hand, as per earlier year and in the year under consideration, have been looked into, as well quantitative details and it has also been noticed that there is substantial cash available as per books of accounts and even there have been substantial 'cash in hand' during the period June 2016, July, August, September 2016, though, the demonetization came on 8th of November 2016.
The quantitative details of stock have been perused by the Assessing Officer and we rely on the judgment of Hon'ble ITAT, Chandigarh Bench, Chandigarh in the case of Sh. Surinder Pal Singh as reported in 94 ITR (Trib) 0458 (Chd- Trib.), copy placed at pages 1 to 13 of the Judgement Set, wherein, it has been held by relying on various judgments, that if the assessment has been made after making due enquiries, then exercise of jurisdiction by the PCIT cannot be made. In that judgment, number of judgments have been relied upon for this purpose, which are being relied upon. The finding in the above said starts from para 10.
8. Similarly, reliance is being placed on the judgment of ITAT, Chandigarh Bench in the case of 'Ganga Acrowools Limited', copy placed at pages 14 to 39 of the Judgment Set. The finding in the above said case is at page 32 para 6 and reliance has been placed on the various judgments at page 36 and on the Judgement of Hon'ble Punjab fit Haryana High and Others and the appeal of the assessee has been allowed.
9. Similar reliance is being placed on the judgment in the case of M/s Loil Continental Foods Ltd. and the extract of the finding is there at page 44 of the judgment Set and in para 17, it has been held as under:-
"No doubt the assessment orders are very brief, and did not have elaborate discussion on these issues, but it is pertinent to bear in mind that assessees have no control over the AO and cannot persuade him to draft the assessment order in a particular manner. It is the discretion of the AO, how to pass an assessment order. Had an elaborate discussion available, then that would be an ideal situation for the higher appellate authorities to appreciate, what has operated in the mind of the AO while passing the assessment. But in the absence of such discussion, it has to be ascertained from the questionnaire and the replies submitted by the assessee."
10. Similarly, reliance is being placed on the judgment in the case of Sh. Narain Singla, copy placed at pages 46 to 60 and the finding in this case starts from page 54, in which, it has been held that where certain issues were raised by the Assessing Officer and the same had been replied by the assessee, then, it is not a case of lack of enquiry. Besides, various judgments have been relied upon at page 45, 57 & 58.
11. Reliance is also being placed in the recent judgment of the Chandigarh Bench in the case of Smt. Surinder Kaur, where the same issue of 263 was there and it was cancelled by the Ld. PCIT by relying upon various queries and ITA 341 /CHD/2022 A.Y. 2017-18 Page 34 of 52 submissions made during the course of hearing and following the judgments of various Courts from page 67 onwards, the order of Ld. PCIT u/s 263 has been cancelled.
12. Reliance by the Ld. PCIT on certain case laws, starting from page 29 is on different facts where, no enquiries had been raised or they were not examined and, thus, they are not applicable, but once the requisite enquiries and application of mind is there, no jurisdiction can be assumed u/s 263.
13. Even on merits, the reliance is being placed on the judgment of 'Chandigarh Bench' in the case of M/s Kalaneedhi Jewellers LLP in ITA No. 311 /Chd/2021, which copy has been placed at pages 153 to 222 and, where the same issue of demonetization was there and in a detailed order, after considering the submissions before the Authorities below and before the Hon'ble Bench and by relying upon on various judgments, the finding has been recorded from page 205, and in para 10, wherein, it has been held that at page 206, in para 10.2, that when the opening and closing stock has not been doubted, no case of inflated purchases or suppressed sales have been noticed , then cash sales have been credited in the books of accounts and the reduction in the stock has not been doubted and no addition could be sustained and while giving the above said judgment after making reliance on the 3rd Member judgment as quoted in para 10.4 and 10.5 of the order, where the finding has been recorded as under:-
"10.4 On a similar issue the ITAT Chandigarh Third Member Bench in the case of Bansal Rice Mills Vs. ITO (supra) held that "since the sales proceeds have already been accounted for in the trading account no addition could be sustained even if the said deposits could be treated as bogus sales as complete stock tally was there".
10.5 In the present case also the assessee was maintaining complete stock tally, the sales were recorded in the regular books of accounts and the amount was deposited in the bank account out of the sale proceeds, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified."
14. Besides that number of other judgments of various High Courts and different Benches of the ITAT have been relied upon and, therefore, even on merits, it is submitted that no addition was called for on the basis of facts given by the Ld. PCIT in the order u/s 263."
3.18 In the said factual backdrop, it was submitted on behalf of the assessee that the order passed by the AO is after due application of mind and reliance was placed on the decisions considered by the Chandigarh Bench as noticed in ITA 341 /CHD/2022 A.Y. 2017-18 Page 35 of 52 the judgement set (filed on 31.05.2022) at Sl.No.2 Ganga Acrowools Ltd. V PCIT ITA No.196/CHD/2021 dated 31.03.2022 (copy placed at pages 14 to 39 of Paper Book) Reliance was also placed on Surinder Pal Singh Vs PCIT 94 ITR (Trib.) 0458 (CHD-TRIB) at Sl.No. 1 (copy at pages 1 to 1 3 of the Pape r Book) . The deci sions refer red to therei n at pages 8 to 9, it was submitted, fully support the prayer of the assessee as the ld. PCIT in the facts of the present case has failed to apply his mind and has exercised the power mechanically. Reliance was also placed upon the case law on decision at Sl.No. 3 of the said Paper Book in Loil C o n t i n e n t a l F o o d s L t d . V P C I T I TA N o . 5 7 7 / C H D / 2 0 1 9 d a t e d 04.12.2019) ( Paper Book pages 40 to 45). Specific attention w as invi ted to page 44 to argue that me re ly be cause the assessment order is brief and may not have an e laborate discussion. Thi s fact doe s not show n on-applicati on of mind by the AO. It has been held, it was submitted, that the assessee has no control over the AO and cannot persuade him how to draft the assessment order and whether it was a case of due application of mind or not is to be ascertained from the questionnaire and the replies submitted by the assessee. Specific attention was also invited to the decision dated 06.05.2022 in the case of Surinder Kaur Vs PCIT ITA No.86/CHD/2021 (Paper Book Page Nos. 61 to 70 and ITA 341 /CHD/2022 A.Y. 2017-18 Page 36 of 52 decision dated 31.08.2015 in the case of Shri Narain Singla V PCIT, Ludhiana & others ITA No.427/CHD/2015 & others (Paper Book Page Nos. 46 to 60 to argue that lack of application of mind cannot be conjectured and has to be shown on the basis of facts and evidences. The or de r on similar facts has been held to passed after due application of mind and. Reliance was placed upon CIT Vs. Anil Kumar 335 ITR 83 (Del) and Advertising Co. Ltd. 341 ITR 180. It was his prayer that the order may be quashed.
4. Th e ld . CI T-Dr Mr . Vivek Nangia ap pear ing on be half of the Revenue submitted that in the facts of the present case, the ld. PCIT has passed a fully exhaustive and well considered order and thus, he need not travel beyond the facts recorded in the order itself. It was submitted that all points highlighted are relevant facts emanating from the record itself. Submissions of the ld. AR on this aspect have no relevance. The case of the Revenue, it was argued, is that the AO has simply accepted the facts and explanations offered by the assessee, ld. PCIT exercising the Revisionary Powers has considered these facts and when these are considered in the proper perspective it changes the entire scenario and for this very purpose, the Revisionary powers are vested in the PCI T. I t was his submission that no doubt information was available to the AO, however, nothing much ITA 341 /CHD/2022 A.Y. 2017-18 Page 37 of 52 turns on this as he has failed to examine it. Th e c ase of the Revenue is that the AO has failed to enquire into the explanation and neither has the assessee been able to demonstrate whether any e nquiry was carried out despite the stated fact that the AO was conscious that this was de- monetization period.
4.1 A c c o r d i n g l y , i n t h i s b a c k d r o p , t h e l d . C I T- D R s u b m i t t e d that upto page 8, the facts and replies of the assessee have been considered in the order and thereafter from para 5 onwards has considered them in detail. Attention was invited to para 5.3 to show that no evidences were considered by the AO as he raised not even a single enquiry. Attention was invited to para 5.4 to submit that the assessee could not explain the mis-match of Rs.4 Cr odd. Inviting attention to page 11, it was submitted, that no field verification by the Income Ta x Inspector by way of any Inspection Report was found available on record and the assessee's argument that the AO had verified the debtors through field verification has been held to be incorrect by the l d. P CI T. 4.2 Inviting attention to page 11 para 6, it was submitted that the voucher numbers available with the assessee discussed in para 6.1 and 6.2 were noticed to be neither in sequence nor having any alpha numeric sequence, though ITA 341 /CHD/2022 A.Y. 2017-18 Page 38 of 52 having the very same date. Different staff me mbers are vouching on differe nt receipts which have been noticed by the ld. PCIT in detail. The e xplanation offere d has no meaning in the circumstances.
4.3 Th e next issue hi ghli ghted by the ld . PCI T i n par a 7 .1, it was submitted, is that surprisingly everyone paid the assessee with amounts less than Rs.2000/- which facts have been noticed right from para 7.1 to 7.3 pages 14 to 17. It was submitted that these were basically few parties and the receipt of payment has been kept at less than Rs.20,000/- or exactly Rs. 20,000/- and no verification was carried out by the AO.
4.4 I nviting attention to para 10.1 it was his submission that the ld. PCIT has noticed unprecedented cash deposits. In para 10.2, it was submitted, that AO paid no attention to this abnormal cash in hand. In para 10.3, it was highlighted the ld. PCIT has given the finding that in view of the facts that the deposit in the bank already stood made and the assessee, hence, was not in a position to reverse these entries. Accordingly, a bogus cash in hand has been fabricated. Inviting attention to para 10.5 of the impugned order, the ld. PCIT has completed that cash in hand has consistently been built by the assessee after 04.06.2016 and has held it to be a case of a "brazen manipulation" .
ITA 341 /CHD/2022 A.Y. 2017-18 Page 39 of 52 Referring again to the order, it was submitted that in para 10.6 a cash in hand deposited in the banks was created by the assessee in the post demonetization period and in para 11, the fact that the AO has failed to notice these facts is hi ghlighted by the PCI T. Attention was invited to para 13 of the impugned orde r again which highlights that the AO failed to carry out any enquiry on the expenses incurred or investigate whether all the purchases were accounted for by the assessee through banking channels. The re pl y of the assessee in para 14.1, 14.2 has been discarded. Reliance was placed on it for the Revenue. For ready reference, relevant extracts are reproduced :
14.1 In this regard, the assessee has submitted that "total purchase during the year is Rs. 169138373 and sales are Rs. 172823973 for the financial year 2016-17. And as per stock register purchase value is 169138373/- and sale value is 172823973/- and there is no difference. During the course of assessment stock summary was prepared manually and there is clerical mistake which were explained during the course of assessment and stock register was produced before the Ld. A. O. and explained the value of purchase and sales and the Ld. A.O. satisfied with the explanation/stock register produced during the course of assessment. Thus amount of Rs. 5129659/- was not taxable as per section 69 r.w.s.115 BBE."
14.2 The said submissions of the assessee do not stand authenticated w.r.t.
the relevant records. From the perusal of the assessment record, it is noticed that neither any query in this regard was raised by the AO, nor the assessee had furnished any explanation in this regard. Therefore, the vague explanation of the assessee in respect of this issue is found to be devoid of any strength. It is prima-facie evident from the Table above that the investment in purchases was not correctly recorded in the books of account furnished by the assessee. Thus the given investment of Rs. 5129659/- was required to be taxed as per the provisions of section 69 r.w.s. I15BBE of the Act. Still further, the sales were prima-facie inflated by the assessee to fabricate cash entries in his books of accounts to create artificial sources for the cash deposited by him during the period of demonetization. The AO, however, failed to do so on account of his failure to conduct any verification in respect of the assessee's accounts."
ITA 341 /CHD/2022 A.Y. 2017-18 Page 40 of 52 4.5 On the re maining paras on the two minor shortcomings addressed in para 15,16, 17 & 17,1 he had relied upon the impugned order. These paras are reproduced hereunder for completeness:
15. It is further noted that during the year under consideration, the assessee had shown income from "godown rent" amounting to Rs. 95,250/-. It is further noted that this income was shown by the assessee for the first time. The assessing officer, however, did not raise any query in this regard to ascertain the amount and sources of investment made by the assessee in the construction of the said godown, and the genuineness of the income claim. In response to the query in this regard in the notice u/s 263(1), the assessee has submitted that income from Godown rent amounting to Rs. 95,250/- was duly reflected in the profit & loss account. The assessee has further submitted that rent of Rs.
95250/- was received from RCF Ltd. as Godown rent which was not owned by him, but taken on annual rent of Rs. 72000/- duly reflected in the rent paid account. Hence there was no question of source of investment on the construction of Godown. However, no such information is found available on the relevant assessment record. The assessee has failed to furnish even now the copies of Rent agreements either for the rent paid by him, or for the rent received. The assessee has also not divulged any details about the owner of the property under question. It is not ascertainable whether at all he was authorized to sub-let the given godown, and that indeed the properly did not belong to him. Therefore, further inquiries are still required to be conducted in respect of this issue.
16. It is further noted that another reason for the selection of the assessee's case for scrutiny was the Mismatch in amount paid to an employee as bonus or commission as reported in Audit Report and as reported in the ITR. The assessee has submitted in this regard that "there is no mismatch amount paid to employees as business as reported in audit report and reported in ITR. Copy of audit report and ITR is on record and same has been verified by the La. AO that there is no mismatch during the course of assessment proceedings." It is, however, noted that not even a single query was raised by the AO in this regard. Obviously no verification was made by the AO to ascertain the correct facts on the given issue.
17. It is further noted that the assessee had shown drawings for his household expenses only at Rs. 1,80,000/- during the year under consideration. The AO accepted the said claim without batting an eyelid, despite the fact that the assessee had shown a turnover of about Rs. 15 crores. Even basic enquiries were not conducted by the AO to ascertain the size of the assessee's family, and expenses required to be incurred or essential items like electricity, telephone, vehicles, travel, medical needs, rent, daily provisions etc, commensurate with his status and standing in the society.
ITA 341 /CHD/2022 A.Y. 2017-18 Page 41 of 52 17.1 In this regard, the assessee has submitted that "he is 74 years old living along with my wife in my own house. I belongs to agriculture family vegetables, wheat, paddy comes from own agriculture land living with my son. Keeping in view the size & status of the family drawings ofRs. 204000/- is quite sufficient". The assessee has once again avoided giving any details in respect of his household expenses and has simply made a generic submission to justify his meager personal withdrawals. Obviously this issue too remained totally uninvestigated at the AO's end."
4.6 Accordingly, merely relying upon the decision dated 23.02.2022 in ITA 307/CHD/2020 in the case of Ashwani Marwah, it was his prayer that the order may be upheld.
5. Th e ld. A R in rep ly sub mitte d th at al l the allegations posed by the ld. PCIT have been addressed in the written submissions filed before the said authority and have already been addressed at length during his arguments. Accordingly, without repeating them, he would rely upon the submissions on record.
5.1 Addressing the findings given in the impugned order, it was submitted that these also point-wise have been replied to and have been included by way of a detailed chart in para 6 of his synopsis filed wherein the specific point-wise reply i s tabulated i n p ages 5 to 12 . Th us, he w ould he av il y rely upon those and not repeat himself except for saying these have not been countered with by the Revenue.
5.2 Th e objecti on of the l d. CI T-DR t hat the AO h as not got verified from the purchasers and the assessee's submissions ITA 341 /CHD/2022 A.Y. 2017-18 Page 42 of 52 that these have been verified by the AO are incorrect on facts and have been so held by the ld. P CI T. Respond in g to this, it was his submission that it was based on the assessee's version and in case there is no documentary evidence of those with the ld . PCI T, he conce des the issue as the submission is not supported by documented evidences on record cannot be re butted by him.
5.3 It was re-iterated that all these suspicions and conjectures do not take away the material fact that historically the assessee in this pe culiar line of business has been depositing cash considering the assessee's peculiar clientele of the assessee's product and the past historical evidences supporting the view taken by the AO, the order passed by the ld. PCIT being an arbitrary order, it was his prayer may be quashed.
6. We have heard the rival submissions and perused the material available on record. We find that though the parties have placed reliance on various decisions to canvass and support their point of view, however, before applying the ratios of the decisions cited by either party, it is necessary to first address the peculiar facts as it is only once the facts are culled out the ratios of decisions become applicable. In the facts of the present case, admittedly the assessee has ITA 341 /CHD/2022 A.Y. 2017-18 Page 43 of 52 been in this line of business for the last more than a decade or so. It is a matter of fact and not in dispute that the cash deposits on the specific dates noticed by the ld. PCIT in the year under consideration have been made by the assessee and these facts have not been disputed by the assessee. The assessee relying on record has canvassed that these facts were fully noticed by the AO and only after due enquiries, t h e a s s e s s m e n t o r d e r i s p a s s e d . Th e l d . P C I T c o n s i d e r i n g t h e peculiar factual position in the year under consideration as a result of the demonetization scheme has considered the deposits questionable during this specific time. The AO admittedly has accepted these as duly explained. On facts, the ld. PCI T is of the view that the AO has not raised any query and accepte d the assessee's version.
6.1 On going through the impugned order in detail, it is seen that the issues flagged by the ld. PCIT have been explai ned an d ad d re ssed b y the assessee bef ore the ld . PCI T, however, the said explanation though available on record, h a s n o t b e e n s p e c i f i c a l l y d i s c a r d e d b y t h e l d . P C I T. It is further borne out from the record that the AO before passing of the order u/s 143(3) dated 24.12.2019 was conscious of the reasons for which the specific case was selected for scrutiny. We find on going through the record that the assessee has successfully demonstrated before the AO that ITA 341 /CHD/2022 A.Y. 2017-18 Page 44 of 52 considering the assessee's line of business, it was trading in fertilizer which as per past practice was being dire ctly sold to identified licensed retailers identified by the Agriculture Department of Haryana and at time s directly to the farmers. We find that the assessee has successfully demonstrated this past practice by providing comparative figures year-wise and month-wise in the earlier years and the year under consideration. The se, we find are not faulted with or upset. The mis-match pointed out stands explained and addressed. 6.2 A perusal of the assessment order shows that information u/s 133(6) had been called forth from the Punjab National Bank, Yamuna Nagar Branch which was found to be supported by the Bank Account statements and information/documents called forth vide questionnaires. Perusal of the assessment order shows that the hearings took place before the AO on almost 9 specific dates i.e. 28.09.2018, 29/07/2019, 14/08/2019, 04/09/2019, 17/09/2019, 18/10/2019, 26/11/2019, 03/12/2019, 16/12/2019. I t i s a m a t t e r o f fact that the questions raised and the replies received from the assessee were on the on-line I TBA Portal. The introduction of this Portal, we find has brought out a greater transparency to the functioning of the authorities as the occasion to what queries were raised and what replies were received is no longer left to the mercies of trying to locate ITA 341 /CHD/2022 A.Y. 2017-18 Page 45 of 52 rele va nt recor ds a nd is readily a vai la ble on the I TB A Por ta l itself ensuring that the opportunity for mischief by introducing or removing documents from record is not available to any party. The infor mation freely available to the concerned parties operates as a powerful tool for demolishing a fact and simultaneously operates as a shield to protect the taxpayer or the Department from conjecturising on the issue. Th e initiative is laudable deserving appreciation. In the facts of the present case, we f i n d t h a t t h e a v a i l a b i l i t y o f t h e i n f o r m a t i o n o n t h e I TB A portal is a fact which the ld. PCIT cannot discard. The fact that in the assessee's business where the cash deposits in the banks being season driven, necessarily during this period over the years has shown that the assessee has available cash to deposit is evidenced and has been seen. Thus, the impugned order cannot be sustained. While so concluding, we have taken into consideration the various points highlighted by the ld . P CI T. Some of these we propose to address hereinafter :-
6.2.1 It is seen that the ld. PCI T has alleged that the cash receipt was less than Rs.20,000/- on each date. We find that this is not a fact for which the assessee is answerable as no sequences for receiving a higher cash is borne by the assessee. Similarly, the allegation that the vouchers were ITA 341 /CHD/2022 A.Y. 2017-18 Page 46 of 52 not in sequence stands addressed by the consistent explanation on record that the sales/recovery teams moved separately with different vouchers and hence having same sequence was not possible considering the vast rural geographical area being covered. In order to conclude that the case has been accepted by the AO without any enquiry or without a relevant enquiry, some facts need to be brought on record.
6.2.2 Similarly, the assertions that high deposits were made during this specific period needs to be considered in the backdrop where infact the assessee in the year under consideration has made lesser cash deposits when compared to the immediately preceding assessment year. Th e me re coincidence with the de-monetization scheme and the seasonal activity with historical evidences cannot be discarded on suspicions. The corresponding depletion in assessee's stock and corresponding purchases as per past historical practice evidenced on record remains unrebutted.
Similarly, the bald assertions that the household withdrawals in the year under consideration were less whereas the assessee's explanation on record remains that he is 74 years old person (at the relevant point of time) living alongwith his family, having vegetables and cereals available from his own agricultural activity and household ITA 341 /CHD/2022 A.Y. 2017-18 Page 47 of 52 drawings of Rs. 2,40,000/- in the circumstances was argued to be sufficient, has not been rebutted on any ground. Specific para 17 and 17.1 of the impugned order shows the arbitrary atte mpts to set aside the assessment order. Th e s o called mis-match addressed in para 16, we find stands addressed.
6.2.3 Similarly, the conjectures in para 14 and 15, we find stand fully addressed. Accordingly, without getting into each and every observation made, we would only refer to page 23 para 10.5 wherein the ld. PCIT states that the pattern of small cash deposits against the retention of such a huge cash in hand thus "exposes the brazen manipulation of cash" We find such rash observation as unfortunate scandalous attempt to arouse alarm and suspicion. Th is man ner of writing an order can not be approved. Th e authorities shoul d de sist fr om re sorting to making scandalous assertions de-hors facts. The assessee's explanation that considering the peculiar factual circumstances where during this specific period, the Country saw huge lines of people standing outside banks. The environment of standing with huge cash deemed to be unsafe by the assessee. Thus , in view of this pec uli ar fact, the assessee had exercised safety and caution and deposited smaller amounts on different dates is a valid explanation ITA 341 /CHD/2022 A.Y. 2017-18 Page 48 of 52 considering the then prevailing realities and cannot be outrightly discarded as an erroneous explanation accepted by the AO. We find that this consistent explanation remains i gnored by the ld . PCI T. 6.3 Accordingly, on a consideration of the factual matrix of the present case, we find that the impugned order being arbitrary and whimsical on facts deserves to be quashed. It is not a case wherein the AO can be said to have passed the order without carrying out necessary enquiries. We have seen on record that the explanation offered by the assessee has been faulted with by the AO initially. Th e asse ssee has been required to re-file the same with proper comparative details addressing the reasons for the deposits made on different dates. Th e explanation is on re cor d an d h as not been shown to be incorrect and infact the ground realities requiring the assessee to deposit the amounts on the specific dates has remaine d unrebutted on record. Historical factual position also remains unrebutted on record. Hence on a consideration of the entire facts and circumstances of the present case, we find that the impugned order deserves to be quashed.
7. While so holding, we do not deem it necessary to address the decisions relied upon by the ld. AR as the issues ITA 341 /CHD/2022 A.Y. 2017-18 Page 49 of 52 are very fact specific. No decisions need to be cited for the well settled legal position that merely because an order is cryptic, that fact itself cannot lead to the conclusion that the AO has failed to apply his mind. Specifically to address this aspect, the tax authorities may consider training the Departmental officers to write the orders in the manner deemed fit. Possibly specifically to address these issues the CBDT Board has mandated that the raising of queries and re ceip t of information mu st f low thr ough the I TBA por tal. The well settled position that it is the material available on record which would show whether the AO can be said to have applied his mind in the facts of a peculiar case or not needs no specific citation. In the facts of the present case, we find due application of mind of the AO is fully established. Accordingly, decisions relied upon by the ld. AR, we find do not require any specific discussion.
8. While so holding, we still deem it necessary to address the decision in the case of Ashwani Marwah dated 2 3.02.20 22 in I TA 3 07 /CHD /2020 relied up on by the ld . CI T- DR. We find on going through the said decision that the conclusion arrived at therein is very fact specific and does not have any play on the facts of the present case. In the facts of the said case, the assessee took the position that the issue taken into consideration by the ld. PCIT was beyond ITA 341 /CHD/2022 A.Y. 2017-18 Page 50 of 52 the scope of the limited scrutiny as the selection for the specific case under CASS was only "to examine sundry c r e d i t o r s a n d s a l e s t u r n o v e r m i s - m a t c h " Th e l d . P C I T a m o n g s t other issues had examined the ledger and vouchers payable and the assessme nt order was set aside. Th e Co-ordinate Bench on the other issues in regard to mis-match of figures etc. pointed out held that it was explained and there was no mis-match. However, the lack of enquiry on labour and wages payable were glaring areas highlighted by the ld. PCIT and these have been upheld by the I TA T. For ready reference, we reproduce paras 12 to 14 for complete ness :
12. Secondly, the Id PCIT has stated that only ledger account has been submitted during the course of assessment proceedings which only contains the name of the labourers but no address of such labourers have been furnished, no labour register containing signature of labour and labour payment vouchers has been furnished, the payments have been made in cash without deducting tax at source which makes the payment suspicious and no independent enquiries have been made to verify wages payable being old one and therefore, the order so passed by the AO has been held as erroneous in so far as prejudicial to the interest of Revenue.
13. To our mind, where the matter is selected for precise reason for examination of labour and wages payable, certain basic questions arises for consideration which a person of reasonable intellect and understanding should raise and examine. Firstly, who are these persons - whether regular employees or hired through a third party, name and address and other basic identification particulars of these persons who are hired and terms of such hiring in terms of salary/wages/social security, etc., work/project for which they are hired and their attendance records, etc to establish actual rendering of services and period/hours of service, payment/muster rolls etc showing salary/wages payable, actual payment and whether liable for TDS and actual TDS done and deposited in their respective accounts. And in respect of old outstandings, the persons in respect of whom the amount has remained outstanding, the period and reasons for such outstandings and whether any payments have been made during the year or not and applicability of TDS on such payments.
Therefore, where the Id PCIT has stated that besides ledger account, there ITA 341 /CHD/2022 A.Y. 2017-18 Page 51 of 52 is no documentation on record in support of such expenses, we agree that the Assessing officer did not make proper and adequate enquiries while making the assessment. The explanation in support of cash payments and reasons for such payments not liable for TDS can only be tested once the complete details are available on record and in absence of the same, the same will remain contention which cannot be accepted without leading any evidence in support thereof. It is ordinarily expected that the Assessing officer examine these transactions thoroughly rather than just relying on the information submitted by the assessee company and making an adhoc addition without specifying the basis thereof. It is not a question of kind and extent of enquiry and hence, a difference of approach and methodology of examination of a particular transaction as done by the AO and as suggested by the Id PCIT. No doubt every Assessing officer has his unique style of functioning and no hard and fast rule can be laid down as to how he should conduct the enquiry in discharge of his statutory functions. However, where the factual scenario of a case prima facie indicates abnormalities and cry for looking deep into it as rightly highlighted by the Id PCIT in terms of complete lack of documentation, old oustandings, payment in cash, etc, then mere calling for the details of labour and wages payable and accepting the ledger account containing incomplete details and without calling for further information/documentation and conducting independent enquiries cannot be held as conducting proper enquiry. Therefore, on this account, we agree with the findings of the Id PCIT that proper enquiries have not been conducted by the AO and the order thus passed is clearly erroneous and prejudicial to the interest of the Revenue.
14. It is not a case where the Id. PCIT has set-aside the assessment order rather he has examined these transactions and has carried out broad analysis of the ledger account so submitted by the assessee company and has come to a conclusion that the AO has failed to carry out adequate and proper enquiries which he should have conducted in respect of labour and wages payable.
9. Accordingly, on account of the detailed reasons on facts and position of law, we quash the impugned order.
10. In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court on 02 Jan.,2023.
Sd/- Sd/-
(VIKRAM SINGH YADAV) (DIVA SINGH)
लेखा सद य/ Accountant Member याियक सद य/ Judicial Member
"Poonam"
ITA 341 /CHD/2022
A.Y. 2017-18
Page 52 of 52
आदेश क ितिलिप अ ेिषत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु / CIT
4. आयकर आयु (अपील)/ The CIT(A)
5. िवभागीय ितिनिध, आयकर अपीलीय आिधकरण, च डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar