T. S. Kapoor (Accountant Member)- These are the two appeals filed by the assessee against the common and consolidated order passed by the learned Commissioner of Income-tax dated December 30, 2011, under section 263 for the assessment years 2007-08 and 2008-09.
2. The assessee has taken similar grounds of appeal in both the years, however crux of the grounds of appeal is the action of the learned Commissioner of Income-tax by which he had passed the order under section 263. The appeals were earlier dismissed for non-prosecution, vide the Tribunal order dated April 9, 2014, however, the said order was recalled, vide the Tribunal order dated September 26, 2014, and the appeals were listed for hearing on the merits.
3. At the outset, the learned authorised representative submitted that the assessment in these cases was completed under section 143(3) after due application of mind by the Assessing Officer and the learned Commissioner of Income-tax has wrongly completed the proceedings under section 263 of the Act. Explaining the facts of the assessment year 2008-09, the learned authorised representative submitted the original return in thiscase was filed on December 31, 2008, declaring an income of Rs. 1,06,870 and the case of the assessee was selected for scrutiny and notice under section 143(2) was issued on August 17, 2009. The assessee revised his return of income declaring an income of Rs. 4,49,510 on June 24, 2010, and included in the return his income from trading under the provisions of section 44AF of the Act. He submitted that the assessment was completed under section143(3) on November 30, 2010, at an income of Rs. 5,09,510 after taking into consideration the revised return. The learned authorised representative submitted that the revised returns were filed because of the fact that the assessee had forgotten to include his income from retail trade business and, therefore, before the questionnaire was issued on August 31, 2010, the assessee voluntarily revised his return of income. The learned authorised representative submitted that the Assessing Officer during the course of the assessment proceedings, vide the questionnaire dated August 31, 2010, raised certain queries including furnishing details of business in respect of which income was declared under section 44AF and in response the assessee submitted his reply, vide letter dated September 14, 2010. The learned authorised representative submitted that the assessee filed another reply wherein he submitted that in view of the provisions of section 44AF which opens with a non obstante clause, the provisions of section 28 to section 43C for computation of income under the head "Business" were not applicable to the assessee. The learned authorised representative further invited our attention to the paper book pages 68 to 70 where a copy of the letter dated November 11, 2010, written to the Assessing Officer was placed and submitted that the assessee had relied upon the decision of the honourable Income-tax Appellate Tribunal Amritsar Bench in ITA No. 548 (Asr)/2008, for the proposition that where the assessee had offered for taxation the income under the presumptive provisions of section 44AF no further inquiry was needed and, therefore, after the Assessing Officer was satisfied with the applicability of the provisions of section 44AF, he passed the order on November 30, 2010, and, therefore, the initiation of proceedings under section 263 was not warranted as the Assessing Officer had completed the assessment after satisfying himself from all angles. The learned authorised representative submitted that though the Assessing Officer had not written his order elaborately but that does not mean that the order was erroneous. Reliance in this respect was placed on the decision of the Income-tax Appellate Tribunal Delhi Bench in the case of Addl. CIT v. Shipra Estate Ltd. [2010] 35 SOT 256 (Delhi) for the proposition that where the Assessing Officer acting in accordance with law frames an assessment order the same cannot be branded as erroneous simply because according to the Commissioner order should have been written more elaborately. Reliance was also placed on the case law of the Punjab and Haryana High Court in the case of CIT v. Deepak Mittal [2010] 324 ITR 411 (P&H), for the proposition that where the Assessing Officer had examined the details and had held that the assessee was engaged in the process of manufacturing of products and, accordingly, granted the deduction under section 80-IB, the order of the learned Commissioner of Income-tax for revision was held to be not valid. Reliance was also placed on the decision of the Income-tax Appellate Tribunal, Amritsar Bench, in the case of Roshan Lal Vegetable Products Pvt. Ltd. v. ITO [2011] 9 ITR (Trib) 431 (Amritsar) in ITA No. 6(Asr)/2010, for the proposition that where the relevant issues have duly been considered and adjudicated by the Assessing Officer while making the assessment, the Commissioner of Income-tax is not competent to readjudicate the same issue by invoking the provisions of section 263. The learned authorised representative further placed his reliance on the case law of CIT v. Kelvinator of India Ltd. reported in [2011] 332 ITR 231 (Delhi), for the proposition that where the Assessing Officer has taken one of the possible views with which the Commissioner of Income-tax does not agree, the order cannot be termed as erroneous and prejudicial to the interests of the Revenue. Further, reliance was placed on the caselaw of CIT v. Max India Ltd. reported in [2007] 295 ITR 282 (SC), for the proposition that where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree it cannot be treated as erroneous or prejudicial to the interests of the Revenue. The learned authorised representative also placed his reliance on the decision of the honourable Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT reported in [2000] 243 ITR 83 (SC), for the proposition that every loss of the revenue in an assessment order passed by the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue and further for the proposition that the provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer.
4. As regards the assessment order 2007-08, the learned authorised representative submitted that the learned Commissioner of Income-tax has not passed a separate order and has passed order for the assessment year 2007-08 holding that the facts of the case for the assessment year 2007-08 are similar to the assessment year 2008-09 and, therefore, this order cannot be said to be valid order.
5. The learned Departmental representative, on the other hand, submitted that the assessee after coming to know that the Assessing Officer had certain information had filed the revised returns which were beyond the statutory period of time and the Assessing Officer accepted the revised return and accepted the submissions of the assessee that he was engaged in retail trade without any enquiry. The learned Departmental representative submitted that the Assessing Officer should have examined as to whether the ingredients of section 44AF, were met and he was to see as to whether the turnover of the assessee was within the prescribed limits as per section 44AF. He submitted that the Assessing Officer did not initiate any such enquiry and also did not enquire as to whether the business was whole seller or retailer. He further submitted that no enquiry regarding co- relation between the so-claimed business and deposit in the bank account were made and, therefore, the order of the Assessing Officer was erroneous and prejudicial to the interests of the Revenue.
6. The learned authorised representative in his rejoinder submitted that necessary enquiry was conducted by the Assessing Officer and in this respect our attention was invited to a copy of the order-sheet placed at the paper book pages 7 and 8 for the assessment year 2008-09. The learned authorised representative submitted that, vide the order-sheet entry dated October 18, 2010, the Assessing Officer had asked to submit a cash flow statement and sales tax, VAT return for which a detailed reply was filed, vide letter dated November 11, 2010, and after considering the replies and reply filed on November 11, 2010, the Assessing Officer had completed the assessment. The learned authorised representative submitted that in this reply dated November 11, 2010, the assessee had relied upon the case law of the Income-tax Appellate Tribunal, Amritsar Bench, for the proposition that where the assessee claims income under section 44AF, no further enquiries can be made. Therefore, the learned authorised representative argued that the Assessing Officer had completely applied his mind.
7. We have heard the rival parties and have gone through the material placed on record. We find that the learned Commissioner of Income-tax has issued a notice under section 263, vide show-cause notice dated November 25, 2011. For the sake of convenience the contents of the notice as reproduced in the order under section 263 are reproduced herein.
"The undersigned called for and examined the records. A show- cause notice dated November 25, 2011, was issued to this assessee both for the assessment year 2007-08 and the assessment year 2008- 09. The show-cause notice is reproduced as under :
In your case, two separate assessments for the assessment years 2007-08 and 2008-09 have been completed by the Income-tax Officer, Ward 5(4), Amritsar, vide two separate orders dated December 30, 2010, and November 30, 2010, at an income of Rs. 3,40,197 and Rs. 5,09,510, respectively. The proposal has now been received from the Income-tax Officer, Ward 5(4), Amritsar, under section 263 of the Income-tax Act, 1961, stating that the assessment framed is erroneous as well as prejudicial to the interests of the Revenue.
2. The report submitted by the Assessing Officer has been considered. I have also perused the assessment records for the above mentioned two assessment years. The following facts emerge there from :
(i) The original return for the assessment year 2008-09 was filed on December 31, 2008, declaring an income of Rs. 1,06,870.
(ii) The case for the said assessment year was selected for scrutiny on the basis of CASS and notice under section 143(2) was issued on August 17, 2009, i.e., to verify your bank deposits in the IDBI Bank.
(iii) You have filed revised returns for the assessment years, i.e., 2007-08, 2008-09 on June 24, 2010, declaring an income of Rs. 3,00,197 and Rs. 4,49,510. The basis of revision of income has been attributed to the following reasons appended to the revised return as under :
'2. The revised return is being filed suo motu in order to declare the income which I had failed to declare in the original return on account of personal and family reasons. I have been given counsel by my well-wishers that I should come out with clean conscience and put my tax affairs in accordance with the Income-tax Act, 1961. The income declared was derived from retail trade of gems and diamond pieces from Gujarat towns. The customers of gem came to me to purchase gems for astrological remedies. Diamond pieces purchased by me were of less than 1 carat each.
(i) Income original filed Rs. 1,06,872.
(ii) Sale of gems and diamonds-Cash deposited Rs. 18,05,250 (offered under section 44AF)-Maximum estimate sale Rs. 25,00,000.
(iii) Minimum profit at 5 per cent. under section 44AF Rs. 1,25,000
(iv) Maximum estimated profit from business Rs. 3,32,000.
(iv) The revised returns have been filed only after the issue of notice under section 143(2) for the assessment year 2008-09. You attended the office on June 18, 2010, and submitted a written reply. At that time you were not aware of the factual position of the case. On that date, when you came to know that deposits in your IDBI A/c. No. 113960 amounting to Rs. 16,85,260 could not be reflected in the original return of income, you immediately filed the revised returns on June 24, 2011, for this year, preceding and succeeding assessment years also.
(v) The basis of filing the revised return, i.e., 'retail trade of gems' has at no point of time been enquired into by the Assessing Officer and whereas you have also been bound twisting from the main issue of verification of your business in retail trade by seeking shelter of section 44AF of the Income-tax Act, 1961, that you are not required to maintain the books of account.
(vi) The compliance with the provisions of section 143(2), i.e., to prove the correctness of your return revised for all these years which is the mandatory requirement of this section has, therefore, remained untouched during the course of assessment proceedings for both the assessment years 2007-08 and 2008-09 for which the onus laid upon you to appear and to produce evidence in support of your revised return filed on June 24, 2011. The vital issue of the case has, therefore, remained totally untouched and the assessment has been framed in haste.
3. In view of the above, the assessments for the assessment years 2007-08 and 2008-09 framed by the Income-tax Officer, Ward 5(4), Amritsar, vide orders dated December 30, 2010, and November 30, 2010, being erroneous in so far as it is prejudicial to the interests of the Revenue are, therefore, required to be revised. You are hereby given an opportunity of being heard and to submit your reply in the matter on December 7, 2011'."
To the abovesaid notice the assessee filed a reply wherein he reiterated that in the case the income is offered under section 44AF, no further questions are required to be asked as none of the provisions of section 28 to section 43(c) are applicable for determination of income from profits of business as the assessee is not required to maintain any books of account as required under section 44AA of the Act. However, the learned Commissioner of Income-tax passed the order under section 263 cancelling the assessment order passed by the Assessing Officer and directed the Assessing Officer to make a fresh assessment. From the contents of the show-cause notice, we find that the objection of the learned Commissioner of Income-tax was that the basis of filing of a revised return was not enquired by the Assessing Officer. In this respect, we find that the Assess ing Officer first enquired about the income under section 44AF, vide notice dated August 31, 2010, placed at the paper book page 62 wherein the Assessing Officer, vide question No. 3 had required the assessee to the following query.
"3. Please furnish the detail of business in respect of which income has been declared under section 44AF explaining, inter alia, the source of investment made in the said business."
In reply to the above question, the assessee filed a reply, vide letter dated September 14, 2010, placed at the paper book page 66 wherein the assessee submitted as under :
"Kindly note that I am not maintaining any regular books of account. However, my all my assets and liabilities are evident from my statement of affairs/balance-sheet. I may repeat here that I am not required to maintain books regarding the salary and share of profit, etc., from the firm. But regarding the income under section 44AF, it is outside the purview of section 44AA."
We further find that, vide the order-sheet entry dated October 18, 2010, the assessee was asked to file a cash flow statement and copy of sales tax/VAT return and in reply the assessee filed a letter dated November 11, 2010, wherein again a detailed reply was filed and wherein the assessee relied upon the decision of the Income-tax Appellate Tribunal, Amritsar Bench, in the case of Smt. Saviti alias Sweety Sekhir v. ITO (ITA No. 548 (Asr)/2008) for the assessment year 2005-06. For the sake of completeness the reply of the assessee as placed in the paper book pages 68 to 70 is made part of this order and is reproduced below :
"Apropos of the above, the above assessment proceedings are in progress before your esteemed self. The questionnaire had been issued by you which have been duly replied to, vide letter dated September 14, 2010, along with the annexure referred to therein. On the last date of the hearing it was enquired by you from me that I should furnish a cash flow statement, returns of sales tax and state ment. In reply, I submit as under :
I have already stated in paragraph 2 of my letter October 18, 2010, about the non-applicability of section 44AA regarding the maintenance of books of account which have been specifically excluded as per section 44AF. Further, the non obstante clause at the beginning of section 44AF also excludes the applicability to section 28 to section43C. Therefore, permit me to say with all due respect that your queries with regard to business income offered under section 44AF are not legally called for. We are supported in this contention by the decision of the Amritsar Bench of the Income-tax Appellate Tribunal in the case of Smt. Saviti alias Sweety Sekhir v. ITO (ITA No. 548 (Asr)/2008) for the assessment year 2005-06. Your attention is invited to paragraph 4 to 4.3 of the said order which is being reproduced hereunder :
'4. The learned counsel drew our attention to section 44AF of the Income-tax Act and submitted that section 44AF is applicable to the assessee engaged in retail trade in any goods or merchandise whose turnover was more than Rs. 40 lakhs and the assessee is required to offer a sum not less than five per cent. of the total turnover as income of the assessee under the head "Profits and gains of business or profession" subject to other conditions laid down in the section. He submitted that there is no necessity of maintaining books of account as enumerated under section 44AA(2) of the Act and if the assessee is maintaining books of account, she is entitled to claim deduction as per the books of account and then the assessee need not offer any income as per section 44AF of the Act. He submitted that in the present case, the assessee is not required to maintain books of account and the Assessing Officer is not justified in calling the books of account. He further submitted that once the Assessing Officer accepted the income declared by the assessee under section 44AF of the Act once again made the addition with regard to the deposit in the bank account, which is highly improper and is liable to be deleted.
4.1 Further, he submitted that the impugned deposits in the bank account at Rs. 24,38,100 which is already included in the turn over declared by the assessee at Rs. 25,00,000 and making addition once again towards deposit in the bank account will result in double addition, which is against the principles of section 44AF of the Act.
4.2 The learned Departmental representative, on the other hand, relied on the orders of the authorities below.
4.3 We have heard both the parties and perused the material placed on record. The first question for our consideration is that whether the assessee can be said to have not engaged in the retail business of trading in textile/fabrics and applicability of section 44AF of the Act. According to the assessee, she is engaged in the retail trade of the textile/fabrics and offered the turnover of Rs. 25,00,000 for taxation at five per cent. and this amount of 5 per cent. at Rs. 1,25,000 is considered as income of the assessee. The fact of income at five per cent. on the turnover of Rs. 25 lakhs is not disputed by the Assessing Officer. In addition to this Rs. 1,25,000 the assessee also offered Rs. 1,00,000 towards peak in the said bank account and thus the total income offered was at Rs. 2,25,000. The Assessing Officer after accepting this amount of Rs. 22,500, made further addition of Rs. 24,38,100. The reason given by the Assessing Officer is that the assessee has not furnished details of payments received under section44AF then such assessee has to maintain books of account and other documents as required under section 44AA of the Act. In the present case, the assessee admittedly, stated before the lower authorities that the assessee is engaged in the business of retail sale of textile/fabrics and turnover is less than Rs. 40 lakhs and profit declared at five per cent. of the total turnover to be accepted as income of the assessee. The Assessing Officer accepted this portion of the assessee. Later on the Assessing Officer cannot go against this and made further addition on account of deposit in the bank account. The assessee when said that the deposit in the bank account represent the turnover and the only five per cent. is income as per section44AF, the Assessing Officer is not justified in treating the entire deposit in the bank account as income of the assessee unless having any evidence that the assessee is not retail trader. The Assess ing Officer never said that the assessee is not entitled for the benefit of section 44AF. After accepting the income of the assessee under section 44AF, it was not possible for the Assessing Officer to treat the deposit in the bank account as income of the assessee. Once the Assessing Officer accepted the assessment of the assessee on presumptive manner at five per cent. of the total turnover as income of the assessee then the Assessing Officer cannot apply the provisions of section 28(2) to section 43 of the Act and also other sections 68, 69, 69A, 69B, 69C and 44AF of the Act, 1961. Accordingly, these grounds of appeal of the assessee are allowed. Had the Assessing Officer wanted to the assess the deposits in the bank account as unexplained income of the assessee, he should have excluded the income declared by the assessee under section 44AF of the Income-tax Act, 1961. He cannot assess both income declared by the assessee under section 44AF of the Act and, thereafter, bring the deposit in the bank account as unexplained income of the assessee which is nothing but double addition."
Regarding the stock tally, I am to submit that I am not required any day-to-day stock tally as already clarified above and in the previous letter dated October 18, 2010.
Though I am not required to do so, but in the spirit of co-operation I am enclosing herewith the cash flow statement from April 1, 2007, to March 31, 2008, correlated to deposits and withdrawals of cash to and from various bank accounts maintained by me.
I have furnished all the information that was legally tenable to be required of me and I am sure you will find it in order."
Therefore, from the above queries of the Assessing Officer and the replies filed by the assessee from time to time we find that the Assessing Officer has made sufficient enquiries in this respect and only after being satisfied about the claim of the assessee under section 44AF and after going through the case law of the Amritsar Tribunal in thecase of Smt. Saviti alias Sweety Sekhir v. ITO (supra) had completed the assessment. Therefore, this is a casewhere the Assessing Officer had made sufficient enquiries which to the best of his knowledge and belief were necessary, therefore, the action under section 263 was not warranted. The honourable Income- tax Appellate Tribunal Delhi Bench in the case of Addl. CIT v. Shipra Estate Ltd. [2010] 35 SOT 256 (Delhi) has held that where the Assessing Officer acting in accordance with law frames an assessment order, the same cannot be branded as erroneous simply because according to the Commissioner, the order should have been written more elaborately. In the case of Roshan Lal Vegetable Products Pvt. Ltd. v. ITO [2011] 9 ITR (Trib) 431 (Amritsar) in ITA No. 6(Asr)/2010 (ITAT-Amritsar) it has been held that where the relevant issues have been duly adjudicated by the Assessing Officer while making the assessment, the Commissioner of Income-tax is not competent to readjudicate the same issue by invoking the provisions of section 263. The honourable Supreme Court in the case of CIT v. Max India Ltd. reported in [2007] 295 ITR 282 (SC) has held that where two views are possible and the Assessing Officer has taken one of the views with which the Commissioner does not agree it cannot be treated as erroneous or prejudicial to the interests of the Revenue unless the view taken by Assessing Officer is unsustainable in law. We find that in the present cases the Assessing Officer had made sufficient enquiries and on the basis of the reply of the assessee and his reliance on the case of the Income-tax Appellate Tribunal, Amritsar Bench in the case of Smt. Saviti alias Sweety Sekhir v. ITO (supra) has completed the assessment and has accepted the claim of the assessee under section 44AF of the Act. The view taken by the Assessing Officer was a plausible view as it was based upon a judgment of the Income-tax Appellate Tribunal Amritsar Bench in the case of Smt. Saviti alias Sweety Sekhir v. ITO (supra) and, therefore, these are not cases fit for proceedings under section 263 of the Act.
8. As regards the objection of the learned Commissioner of Income-tax that the Assessing Officer had taken cognizance of the revised returns whereas the revised returns were beyond the specified period, we find that in the assessment year 2007-08 the Assessing Officer had regularised the revised return by issuing notice under section 148, therefore, for the assessment year 2007-08 it cannot be said that the Assessing Officer had taken cognizance of the revised return because in this assessment year revised return on the basis of the reply from the assessee had become return filed under section 148 of the Act. The fact of issuing of notice under section 148 is mentioned in the assessment order itself. However, in the assessment year 2008-09, we find that no such regularisation under section 148 has been mentioned in the assessment order and, therefore, in this year the revised return was after the prescribed period of time. The due date for filing the revised return in this year is March 31, 2010, whereas the revised return has been filed on June 24, 2010. Therefore it is correct that the Assessing Officer should not have taken cognizance of the revised return as the assessee had filed the revised return beyond the prescribed period of time. But the question remains that whether the Assessing Officer could have ignored such revised return. It was not even necessary on the part of the assessee to file the revised return as he could have claimed during the assessment proceedings itself that the bank deposits reflected the turnover of the assessee from retail trade because the claim of the assessee being engaged in retail trade was open to scrutiny and the Assessing Officer had carried sufficient enquiries in this respect. Therefore, these are not the cases where no enquiry has been done. There is a difference between lack of enquiry and no enquiry. The honourable Delhi High Court in the case of CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi) in this respect has held as under (page 179) :
"We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of the learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expend iture in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on this issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between 'lack of inquiry' and 'inadequate inquiry'. If there was any inquiry, even inadequate that would not be itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of 'lack of inquiry' that such a course of action would be open."
In the present cases, the Assessing Officer has completed the assessments after accepting the submissions of the assessee that the bank deposits reflected the turnover from retail business whereas in the opinion of the learned Commissioner of Income-tax the additions should have been made under section 69 of the Act.
9. The honourable Supreme Court in the case of Max India Ltd. [2007] 295 ITR 282 (SC) has held that where two views are possible and the Assessing Officer has taken one of the views with which the Commissioner does not agree it cannot be treated as erroneous or prejudicial to the interest of the Revenue unless the view taken by Assessing Officer is unsustainable in law.
10. In view of the above facts and circumstances of the case and judicial precedents, we are in agreement with the arguments of learned authorised representative that the Assessing Officer had passed orders after due application of mind and these are not the cases fit for action under section263.
11. In view of the above, the appeals filed by the assessee are allowed.