ORDER
Bhavnesh Saini, Judicial Member - This appeal by the assessee is directed against the order of ld. CIT, Varanasi dated 13.08.2012 u/s. 263 of the IT Act for the assessment year 2009-10.
2. The facts of the case are that the assessee filed return of income at Rs.2,91,340/- and assessment u/s. 143(3) was completed by the Assessing Officer on total income of Rs.3,24,250/- vide assessment order dated 24.12.2011. The Assessing Officer submitted the proposal u/s. 263 of the IT Act to the Commissioner being the assessment order erroneous and prejudicial to the interest of the Revenue. The ld.CIT on perusal of the assessment record found the assessment order to be erroneous and prejudicial to the interest of Revenue and issued show cause notice u/s. 263 dated 14.06.2012 seeking explanation of the assessee. The assessee appeared before the ld. CIT through his counsel and filed the required details and written submissions. The ld.CIT considering several issues found the order of the Assessing Officer to be erroneous and prejudicial to the interest of Revenue and set aside the same to the file of the Assessing Officer with the direction to pass the assessment order afresh de novo on various issues discussed by him the impugned order. The issues considered by the ld. CIT(A) are briefly as under :
(i).
From the perusal of the record it was revealed that this case was selected for scrutiny assessment on the basis of AIR information wherein it was reported that the assessee has deposited cash of Rs.1,01,35,000/- in saving bank account of Uttaranchal Gramin Bank, Dehradun. The details are available on record. The assessee also maintained other bank accounts in bank of Baroda, BHU Branch, Varanasi and State Bank of India, Dehradun. The deposits are mentioned at page 2 of the impugned order. It was further found that the assessee was engaged in the country liquor business and during the assessment proceedings, the profit and loss account filed shows sales to the tune of Rs.29,30,110/- as against purchases of Rs.24,73,525/-. The net profit shown is Rs.3,47,350/- @ 11.85% on the total sales and returned the income at Rs.2,91,040/-. Since the assessee did not produce certain bills for expenses, therefore, the book results were rejected u/s. 145 of the IT Act. The Assessing Officer, therefore, did not bother to examine the source and nature of huge cash deposits in the aforesaid bank account and total receipts remained unverifiable and even applicability of section 40A(3) was not looked into by the Assessing Officer.
(ii).
The total sale is Rs.29,30,110/- and source of deposit of Rs.2,81,92,963/- required to be examined, which has not been done by the Assessing Officer. The assessee's explanation of withdrawing and depositing the amount in cash in the same bank account was not acceptable and the deposits are not explained. The Assessing Officer has admitted total receipts of Rs.36,00,000/- in whole year without giving any reason as to how he has arrived at the same figure. Moreover, this addition is not opposed by the assessee.
(iii).
As per bank statements, total turnover o the assessee exceeded Rs.40,00,000/-. Therefore, the assessee is liable to get the accounts audited u/s. 44AB of the IT Act, which fact has not been looked into and the Assessing Officer did not examine the same.
(iv).
Certificates regarding awarding quota of liquor and its monthly sales from District Excise Officer, Sant Ravidas Nagar were not called where the assessee claimed annual license fee of Rs.17,47,200/- and in the profit and loss account this amount is not mentioned and no verification has been done by the Assessing Officer.
(v).
In the profit and loss account, the assessee has shown net profit of Rs.3,47,350/-, which has been directly credited to the capital account of balance sheet. The verification of the return shows the assessee's claim of deduction of Rs.56,314/- under Chapter VI-A (LIP) and this amount is not taken into assets or investment side.
(vi).
The Assessing Officer passed the order in hurried manner without examining the issues, which is prejudicial to the interest of Revenue and no proper enquiries or investigations have been made.
3. The ld. Counsel for the assessee challenged the impugned order on several grounds and initially at the time of hearing of the present appeal, the ld. Counsel for the assessee brought to our notice that there were certain inconsistencies and mistakes in the impugned order u/s. 263 of the IT Act and the assessee has preferred the rectification application u/s. 154 of the IT Act before the ld. CIT, Varanasi and his rectification application has not been decided by the ld. CIT. Considering the above submission, it was found proper to direct the ld. Commissioner to decide the application of the assessee u/s. 154 of the IT Act. The ld. Counsel for the assessee now intimated that the ld. Commissioner took up the application of the assessee u/s. 154 of the IT Act as per directions of the Tribunal and the assessee was given opportunity, in which also, the assessee explained each and every issue on which the assessment order was set aside, but the ld. Commissioner did not apply mind to the submissions of the assessee and rejected/disposed of the application u/s. 154 of the IT Act vide order dated 27.12.2012, copy of which is filed at page 185 of the paper book. He has submitted that on all the issues, the assessee again explained the issues before the Commissioner, but instead of deciding the objections of the assessee and considering the mistakes in the impugned order, the ld. CIT held that since the issues are already pending for verification before the Assessing Officer, therefore, application of the assessee was forwarded to the Assessing Officer separately so that the discrepancies pointed out by the ld. Counsel for the assessee could be verified in the assessment proceedings. The ld. Counsel for the assessee, therefore, submitted that merely forwarding the rectification application of the assessee u/s. 154 of the Act filed against the impugned order to the file of the Assessing Officer is nothing, but non-application of mind to the facts of the case and there is no provision in law to forward the rectification application against the order u/s. 263 of the IT Act. He has submitted that the ld. Commissioner did not examine any of the issue correctly and on distorted and wrong figures he has passed the impugned order u/s. 263 of the IT Act. Therefore, the same is liable to be set aside. The ld. Counsel for the assessee referred to PB-181 to 183 and the supporting documents on each and every issues which were submitted before the ld. CIT in the proceedings u/s. 154 of the IT Act and submitted that all the issues were again explained, but the same have not been appreciated and considered by the ld. Commissioner. The ld. Counsel for the assessee elaborating each and every issue on which 263 order has been passed, has filed a detailed written submission supported by all the documents on record. The gist of his submissions on all the issues is as under :
(i).
He has submitted that the case was selected for scrutiny on the basis of AIR information regarding the cash deposit of Rs.1,01,35,500/- and the AO at the assessment stage issued notice dated 01.09.2011, copy of which is filed at page 4 of the paper book, which is a detailed notice u/s. 142(1) in which at Sl. No. 9, the Assessing Officer called for the details of the same deposit. The assessee was also summoned u/s. 131 of the IT Act vide notice dated 01.09.2011 (PB -6) and the statement of assessee was recorded u/s. 131 of the IT Act (PB- 8), in which question No.5 was specifically asked regarding the source of deposit of Rs.1,01,35,500/- and the assessee explained in statement that the figure of the deposit is not correct because the correct amount of deposit is approximately Rs.60,00,000/-. The assessee filed detailed reply before the Assessing Officer on 18.11.2011 (P.B.-98), in which complete details of the deposits were explained and it was explained that on certain dates, there were certain withdrawals of the cash amount and equivalent amount was re-deposited in the same bank account with Uttaranchal Gramin Bank, Dehradun. Copy of the bank account is filed at pages 86 & 87 of the paper book. He has submitted that total cash deposit in this bank was Rs.62,85,500/-. Rs.35,00,000/- was deposited in the same bank within one week after withdrawal from the same bank. There were further cash deposits by withdrawing the same from M/s. Pyare Lal Jaiswal & Co., AOP in a sum of Rs.25,49,000/-. Copy of ledger account of AOP is filed at pages 117 and 118 of the paper book. He has, therefore, submitted that the cash deposited above is explained through known sources and there was only balance of Rs.2,36,500/-, which was deposited out of sales made by the assessee. It was submitted that the issue of deposit in the Uttaranchal Gramin Bank was fully explained before the Assessing Officer.
(ii).
As regards the deposits made in other banks, i.e., Bank of Baroda Branch Rohania, explanation was given that Rs.30,000/- was deposited out of the sales (PB 120). Regarding Bank of Baroda, BHU, Branch, the figure taken by the ld. CIT at Rs.17,00,000/- is incorrect figure because correct figure is Rs.9,50,000/- which is also explained before the Assessing Officer. Copy of the reply is filed at page 119 of the paper book and source is explained from the sales and cash withdrawals from the same bank. Regarding the deposit in State Bank of India, Dehradun, the explanation was filed before the Assessing Officer (PB -121) that the deposits are from the sales. The ld. Counsel for the assessee, therefore, submitted that since the Assessing Officer made a detailed enquiry on the issue of deposits made in various bank accounts and he was satisfied with the explanation of the assessee on the basis of the evidences and material produced before him and similar submissions were made before the ld.CIT, which have not been considered. Therefore, on mere change of opinion, the assessment order cannot be said to be erroneous in so far as prejudicial to the interest of Revenue.
(iii).
Regarding estimate of sales, the ld. Counsel for the assessee submitted that total sales of the assessee are Rs.29,30,110/- (P.B.-15) and the Assessing Officer in the assessment order estimated turnover of the assessee at Rs.36,00,000/- after rejecting the books of account. He has submitted that since the sales of the assessee were less than Rs.40,00,000/- and as per provisions of section 44AF, profit margin has to be taken at 5% and in the case of assessee, he has declared the profit rate of 11.85%. Therefore, the case of the assessee would be covered by the overriding provisions of section 44AF. He has submitted that the Assessing Officer has given reasons for estimating the sales, which were reasonably estimated and made addition of Rs.79,250/- on account of extra profit addition, which was challenged before the ld. CIT(A) and the ld. CIT(A), Varanasi vide order dated 03.05.2012 deleted the addition of Rs.79,250/- and the impugned order u/s. 263 has been passed on 13.08.2012 after the same issue is decided by the ld. CIT(A). Therefore, the ld. CIT has no jurisdiction to revise the issue on which the ld. CIT(A) has already decided the appeal. This issue, therefore, cannot be considered in the proceedings u/s. 263 of the IT Act. The ld. CIT is also not justified in holding that the assessee has not opposed the extra profit addition in the matter.
(iv).
The ld. Counsel for the assessee submitted that the ld. CIT considered the bank deposits of Rs.40,00,000/- for the purpose of compulsory audit u/s. 44AB of the IT Act, but in the above provision, the turnover and gross receipts have to be considered and not the total bank deposits. Therefore, the case of the assessee would not fall for compulsory audit. On mere bank deposits, the provisions of section 44AB would not apply.
(v).
The ld. Counsel for the assessee further submitted that the ld. CIT has wrongly considered the issue of annual license fee of Rs.17,47,200/- in the provisions under section 263 of the IT Act. In the notice u/s. 263 dated 14.06.2012, this issue is not raised by the ld. CIT, therefore, it cannot be considered u/s. 263 and the ld. CIT has no jurisdiction to pass order u/s. 263 on this issue. On merit, the ld. Counsel for the assessee referred to balance sheet as on 31.03.2009 (P.B.-14), in which license fee is shown at Rs.2,52,000/-. The ld. CIT mistook the annual MGQ of 16800 BL-1400 per month, would mean minimum guarantee for lifting of goods for full year. Value of the same was Rs.17,47,200/- (P.B.-123) and the assessee has shown total purchase of Rs.24,73,524/- against this minimum guarantee for lifting of goods (P.B.-14). Therefore, there is no question of showing the same figure in the balance sheet as alleged by the ld. Commissioner. He has also submitted that on the same figure also, TCS was made, which was also verified by the Assessing Officer.
(vi).
On the point of deduction under Chapter VI-A, the ld. Counsel submitted that no notice has been given u/s. 263 on this point, therefore, the commissioner has no jurisdiction to pass any order against the assessee. The deduction of LIP was covered by drawings. Therefore, it could not be adverse in nature against the assessee and should not be shown on the asset side.
(vii).
The ld. Counsel for the assessee submitted that the Assessing Officer has raised several query letters to the assessee way back from 01.09.2011 by issuing the detailed questionnaire u/s. 142(1). The summons u/s. 131 was issued and statement of assessee was recorded on each and every aspect. The assessee filed detailed written submissions copies filed in the paper book from pages 10 to 147. He has submitted that the Assessing Officer has examined each and every issue at the assessment stage, therefore, there is no mistake in the order of the Assessing Officer and the order of the Assessing Officer cannot be considered as erroneous in so far as prejudicial to the interest of Revenue. He has relied upon the order of ITAT, Rajkot Bench in the case of
Antala Sanjay Kumar Ravjibhai v.
CIT [2012] 135 TTD 506/[2011] 16 taxmann.com 238 in which the Assessing Officer after considering whole matter, decided the issue. Therefore, suo motu revisional jurisdiction by the CIT was not found to be justified.
4. On the other hand, the ld. DR relied upon the order of the ld. CIT and submitted that no proper enquiry has been done in the matter. Therefore, the ld. CIT was justified in revising the assessment order.
5. We have considered the rival submissions, impugned orders and considered the material available on record.
6. The Assessing Officer, in the assessment order specifically mentioned that the assessee's representative appeared from time to time, filed details replies and produced relevant material /documents before him, which have been test-checked. The Assessing Officer issued detailed questionnaire to the assessee way back from 01.09.2011 (PB-4) when notice u/s. 142(1) was issued to the assessee for completion of assessment, in which on 9 points, the explanation of the assessee was called for. In the same, the Assessing Officer also mentioned AIR information received regarding deposit of Rs.1,01,35,500/-. The assessee filed reply to the same and statement of assessee on oath was also recorded, in which the assessee has explained that aforesaid figure of Rs.1,01,35,500/- is incorrect in Uttaranchal Gramin Bank, Dehradun because the correct figure was Rs.62,54,500/- (P.B.-98). It was explained that there were withdrawals from the same bank and other amounts were withdrawn from AOP, which were deposited in the bank account of the assessee. The same are supported by the bank statement of assessee and bank statement & ledger account of the AOP. Thus, there was balance of Rs.2,36,500/-, which the assessee claimed to be deposited after making the sales. Regarding other bank accounts with Bank of Baroda and State Bank of India, the assessee filed detailed reply before the Assessing Officer at assessment stage, copies of which are filed in the paper book at pages 119, 120 and 121 and it was also explained that the figure of Rs.17,00,000/- in Bank of Baroda, BHU, Branch was incorrect because correct amount was Rs.9,50,000/-. The Assessing Officer was satisfied with the explanation of the assessee and accepted the claim of assessee regarding deposit in the bank account. The assessee explained same issues before the ld. Commissioner and it was also explained that figure shown in the show cause notice u/s. 263 is incorrect, but the ld. Commissioner did not take notice of the same. When the same facts were explained before the Commissioner u/s. 154 of the IT Act, despite directions by the Tribunal to consider the objections of the assessee, the ld. Commissioner merely reiterated his stand taken in the impugned order and surprisingly also forwarded the rectification application u/s. 154 to the Assessing Officer, where the matter is still pending before him for adjudication, so that the discrepancies pointed out by the assessee could be verified at the assessment proceedings. It is well settled law that rectification application shall have to be considered and disposed of as per law by the same authority who has passed the order, on which rectification application has been filed. The ld. Commissioner was, therefore, having no power to delegate his authority to decide the application u/s. 154 to the Assessing Officer. Since the order u/s. 263 has been passed by the ld. Commissioner, therefore, rectification application u/s. 154 should not have been forwarded to the Assessing Officer for reconsideration. It would, therefore, show that the ld. Commissioner instead of rectifying the mistakes in the impugned order, has confirmed his stand and blatantly did not take into consideration the reply of the assessee in proper perspective and even on wrong figures revised the assessment order. Since the replies of the assessee have not been considered by the ld. CIT under 263 proceedings as well as proceedings u/s. 154 of the IT Act, on this sole reason itself, the impugned order is liable to be set aside. Hon'ble Gauhati High Court in the case of Smt. Lila Choudhury v. CIT [2007] 289 ITR 226/[2008] 167 Taxman 1 held that explanation of the assessee in response to notice u/s. 263 must be considered. The order of Revision without considering the explanation is not valid. Hon'ble Delhi High Court in the case of Cit v. M/S. Vikas Polymers [2012] 341 ITR 537/[2010] 194 Taxman 57 held that explanation of the assessee not considered by the Commissioner - order of Revision not valid. Hon'ble Allahabad High Court in the case of Commissioner Of Income-Tax v. Goyal Private Family Specific Trust. [1988] 171 ITR 698/[1987] 35 Taxman 522 observed that the order of the ITO may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment order as erroneous and prejudicial to the interest of Revenue. Since on the issue of bank deposits, detailed queries have been raised and the assessee furnished all explanations and also explained that the figures taken by the ld. Commissioner are incorrect and the Assessing Officer after detailed enquiry accepted the claim of assessee, which was just and proper in the matter, therefore, the ld. CIT should have examined the same details in proper perspective and should not have directed the Assessing Officer to re-frame the assessment on the same facts afresh by passing the order u/s. 263 of the IT Act. The Assessing Officer examined all the material on the issue. Therefore, there was no justification for the ld. CIT to have set aside the impugned order. Further, with regard to estimate of sales, the matter was examined by the Assessing Officer at assessment stage and rejected the book results of assessee and enhanced the turnover of assessee for the purpose of making addition. The assessee challenged the extra profit addition before the ld. CIT(A), Varanasi, who vide order dated 03.05.2012 deleted the extra profit addition. Therefore, this issue was considered by the ld. CIT(A) prior to issue of show cause notice u/s. 263 of the IT Act. Therefore, on the principle of merger, this issue cannot be taken in the proceedings u/s. 263 of the IT Act. The provisions of section 263(1)(c) clearly prohibits the ld. CIT to adjudicate upon the issue which has already been dealt with in appeal. We are fortified in our view by the judgment of Hon'ble M.P. High court in the case of CIT v. Shalimar Housing & Finance Ltd. [2010] 320 ITR 157 , in which it was held on the issue of doctrine of merger that the Commissioner revising the order of the Assessing Officer - issue taken up by the Commissioner already dealt with by the Commissioner (Appeals)- Commissioner not competent to assume jurisdiction u/s. 263 of the IT Act. This judgment has been confirmed by the Hon'ble Supreme Court. Therefore, the ld. Commissioner was not justified in revising the assessment order on the issue of estimate of turnover. With regard to compulsory audit u/s. 44AB, the ld. Counsel for the assessee rightly contended that under the provisions of section 44AB, the total sales/ turnover or gross receipts shall have to be considered and not the bank deposits. Therefore, on such an issue, the ld. Commissioner was not justified in holding that the accounts of the assessee are required to be audited u/s. 44AB of the IT Act. On the issue of license fee of Rs.17,47,200/-, the assessee has explained that it was a figure of minimum guarantee for lifting of goods for whole year, which is supported by the certificate of Excise Officer (P.B.- 123), against which the assessee made total purchase of Rs.24,73,525/-, which is also shown in the trading account. Therefore, minimum guarantee for lifting of goods should not have been adversely considered by the ld. Commissioner against the assessee and this figure would not come in the profit and loss account and balance sheet of the assessee. Further on this issue no notice u/s. 263 has been issued, therefore, the ld. Commissioner would not have any jurisdiction to pass any adverse order against the assessee on this issue. Similarly for deduction claimed under Chapter VI-A (LIP deduction), the assessee claims that it is covered by drawings. Therefore, there is no question of showing the same on asset side. On this issue also, no notice u/s. 263 has been issued against the assessee. Therefore, no order can be passed adverse against the assessee by the ld. Commissioner. We rely upon the decision of Hon'ble Madras High Court in the case of Commissioner Of Income-Tax v. Smt. R.G Umaranee [2003] 262 ITR 507/127 Taxman 265 , wherein it was held as under :
"Held, (i) that in the absence of any notice by the Commissioner to treat the cost of construction of the building as undisclosed income of the assessee it was not open to the Commissioner to hold that the cost of construction of the building would represent undisclosed income of the assessee and hence the Commissioner was not justified in directing the Income-tax Officer to initiate an enquiry regarding the cost of construction of the building, and after ascertaining the valuation, treat the unexplained investment as the undisclosed income of the assessee."
The Assessing Officer at the assessment stage selected the case for scrutiny on the basis of AIR information and issued several statutory notices against the assessee and also recorded the statement of assessee. The assessee filed several replies before the Assessing Officer as well as details and evidences, copies of which are filed in the paper book would show that the Assessing Officer applied his mind to the facts and circumstances of the case and considered each and every issue and made detailed and proper enquiries and investigations into the matter. Therefore, the same could not be said to be the assessment order passed in hurried manner. The Assessing Officer took one of the views possible in the matter and the ld. Commissioner cannot substitute the view of the AO in the garb of proceedings u/s. 263 of the IT Act. We rely upon the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66 . Therefore, the order of the Assessing Officer cannot be said to be erroneous in so far as prejudicial to the interest of Revenue. We may again note here that when all the discrepancies in the impugned order were pointed out in the rectification application u/s. 154 of the IT Act, the ld. Commissioner should have verified all the facts in proper perspective and should not have forwarded the rectification application to the Assessing Officer for verifying the discrepancies pointed out before him by the assessee. In view of the above discussion, we are of the view that the ld. Commissioner was not justified in revising the assessment order in the proceedings u/s. 263 of the IT Act. We accordingly, set aside the order u/s. 263 of the IT Act and quash the same. Resultantly, the assessment order u/s. 143(3) dated 24.12.2011 is restored. As a result, the appeal of the assessee is allowed.
7. In the result, the appeal of the assessee is allowed.
S.K.J