Gujarat High Court

Dayaram Brijbhukhandas vs The Principal Commissioner Of Income ... on 20 June, 2025

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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                         C/SCA/6332/2022                                      CAV JUDGMENT DATED: 20/06/2025

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                                                                            Reserved On   : 18/03/2025
                                                                            Pronounced On : 20/06/2025

                                    IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                      R/SPECIAL CIVIL APPLICATION NO. 6332 of 2022
                                                          With
                                      R/SPECIAL CIVIL APPLICATION NO. 6334 of 2022
                                                          With
                                      R/SPECIAL CIVIL APPLICATION NO. 6335 of 2022
                                                          With
                                      R/SPECIAL CIVIL APPLICATION NO. 6377 of 2022
                                                          With
                                      R/SPECIAL CIVIL APPLICATION NO. 6376 of 2022

                       FOR APPROVAL AND SIGNATURE:


                       HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                       and
                       HONOURABLE MR.JUSTICE D.N.RAY

                       ==========================================================

                                   Approved for Reporting                     Yes            No
                                                                                             ✓
                       ==========================================================
                                           DAYARAM BRIJBHUKHANDAS
                                                     Versus
                               THE PRINCIPAL COMMISSIONER OF INCOME TAX, VALSAD
                       ==========================================================
                       Appearance:
                       MR SN SOPARKAR, SENIOR ADVOCATE WITH MR B S SOPARKAR(6851)
                       for the Petitioner(s) No. 1 (SCA NOS.6332/2022, 6334/2022, 6335/2022)
                       MR TUSHAR HEMANI, SENIOR ADVOCATE WITH MS VAIBHAVI K
                       PARIKH for the Petitioner(s) No. 1 (SCA NOS.6377/2022,6376/2022)
                       MR NIKUNT RAVAL for the Respondent(s) No. 1
                       ==========================================================

                         CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                               and
                               HONOURABLE MR.JUSTICE D.N.RAY


                                                           CAV JUDGMENT

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(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. Heard learned Senior Advocate Mr. S.N.

Soparkar with learned advocate Mr. B.S.

Soparkar for the petitioner in Special

Civil Application No.6332/2022 and Special

Civil Application No.6334/2022 and Special

Civil Application No.6335/2022, learned

Senior Advocate Mr. Tushar Hemani with

learned advocate Ms. Vaibhavi Parikh for

the petitioner in Special Civil

Application No.6376/2022 and Special Civil

Application No.6377/2022 and learned

Senior Standing Counsel Mr. Nikunt Raval

for the respondent.

2. These petitions were heard together as

common issue challenging the notice under

section 263 of the Income Tax Act, 1961

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(For short "the Act") on the issue of cash

deposited in the bank accounts of the

petitioners after demonetization relevant

to Assessment Year 2017-2018 were raised.

3. For the sake of convenience Special

Civil Application No. 6332/2022 is treated

as the lead matter.

4. Facts of Special Civil Application

No.6332/2022 are that the petitioner, a

partnership firm, is engaged in the

business of manufacturing and trading of

gold and silver ornaments and gold

bullion.

5. The petitioner filed the return of

income declaring total income at Rs.

20,42,019/- on 30.10.2017 for Assessment

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Year 2017-2018.

6. Case of the petitioner was taken up

for scrutiny under Compulsory Manual

Selection on the issue of cash deposit

during demonetization period. Notices

under section 142(1) of the Act were

issued to examine the various issues

including the issue of nature and income

treatment of cash deposited during the

demonetization period which were replied

by the petitioner from time to time

providing all the information called for

by the Assessing Officer.

7. The assessment order under section

143(3) of the Act was passed on 31.12.2019

rejecting the books of accounts of the

petitioner by making addition of

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Rs.13,21,500/- and total income of the

petitioner was assessed at Rs.33,63,520/-.

8. The respondent Principal Commissioner

of Income Tax, Valsad (PCIT) thereafter

issued the impugned notice dated

19.03.2022 under section 263 of the Act.

9. Being aggrieved, the petitioner has

preferred this petition with a prayer to

quash and set aside the impugned notice

dated 19.03.2022.

10. So far as Special Civil Application

No. 6334/2022 and Special Civil

Application No.6335/2022 are concerned,

notice under section 263 of the Act

pertains to alleged abnormal deposit of

cash during the demonetization period

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after the assessment orders are passed

under section 143(3) of the Act conducting

complete scrutiny. Similarly in facts of

Special Civil Application No.6376/2022 and

Special Civil Application No. 6377/2022

are concerned, notice under section 263 of

the Act is issued, after proper inquiry

made by the Assessing Officer who passed

order under section 143(3) of the Act.

11. This Court while issuing the notice

has granted interim stay qua

implementation and operation of the

impugned notice.

12. Learned Senior Advocate Mr. S.N.

Soparkar for the petitioner submitted that

the impugned notice under section 263 of

the Act is without jurisdiction and is in

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gross violation of the fundamental rights

guaranteed Articles 14 and 19(1)(g) of the

Constitution of India.

13. It was submitted that the impugned

notice was issued on the ground that the

Assessing Officer completed the assessment

under section 143(3) of the Act without

carrying out proper verification on

various issues namely,

1) difference in value of assets shown in

the balance sheet and the value of assets

shown in the computation of income.

2) difference in value of purchases shown

in reply dated 07.09.2019 and the value

shown in the profit and loss account.

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3) nature of cash deposit made after

demonetization.

14. It was submitted that on all the three

issues, the respondent could not have

assumed jurisdiction as the assessment

order is neither erroneous nor prejudicial

to the interest of Revenue.

15. It was submitted that the value of

assets in the books of accounts and under

the Income Tax Act are bound to be

different due to difference in the rate of

depreciation under the Companies Act and

the Income Tax Act and so far as second

issue is concerned, the petitioner has

correctly disclosed the purchases in the

profit and loss account and break-up of

the purchases of gold bar and gold

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ornaments were also provided and there is

no discrepancy in view of break-up given

by the petitioner.

16. So far as cash deposit after

demonetization is concerned, it was

submitted that the return of income of the

petitioner was selected for manual

scrutiny specifically to examine the issue

of cash deposit during the demonetization

period and the Assessing Officer during

the course of regular assessment made

thorough inquiry on every aspects of the

cash deposited by the petitioner and its

nature and its impact on the income. It

was pointed out that the Assessing Officer

being dissatisfied by the replies of the

petitioner has rejected the books of

accounts and has made addition to the

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income on the basis of gross profit rate

of earlier years.

17. It was therefore, submitted that on

the very same issue of cash deposit, the

respondent could not have assumed

jurisdiction under section 263 of the Act

as the assessment order cannot be said to

erroneous and prejudicial to the interest

of the Revenue.

18. Learned Senior Advocate Mr. Soparkar

invited the attention of the Court to the

computation of total income in Form of

return of income to show the quantity

details reflected therein and reply filed

by the petitioner to the notices issued

under section 142(1) and 143(2) of the Act

wherein the petitioner has provided

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complete details regarding the bank

accounts and the cash deposited during the

year which was taken note of by the

Assessing Officer in the assessment order

dated 31.12.2019.

19. In support of his submissions,

reliance was placed on the decision of

this Court in case of JMC Projects (India)

Limited v. Principal Commissioner of

Income Tax (Central) reported in (2016) 67

taxmann.com 258 (Gujarat) wherein it is

held that powers under section 263 of the

Act cannot be exercised when no addition

has been made on the footing of the

premises which are not to the satisfaction

of the Commissioner and therefore,

additions cannot be made on better

premises with better reasoning or on

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different application of legal principles,

hence, it is held that Commissioner lacked

jurisdiction to issue notice under section

263 of the Act.

20. It was pointed out that this Court

entertained the writ petition against the

show cause notice issued under section 263

as the very foundation of the notice and

jurisdiction of the Commissioner to

exercise such powers was under challenge

and it was held that question of

relegating the petitioner to alternative

remedy or to permit the Commissioner to

complete the proceedings and thereafter to

direct the petitioner to take appeal route

would not arise. It was therefore

submitted that in the facts of the present

case, this petition may be entertained,

and the petitioner should not be relegated

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to alternative remedy by permitting the

Commissioner to complete the proceedings

and thereafter to direct the petitioner to

take appeal route.

21. Reliance was placed on the decision

of this Court in case of Aryan Arcade Ltd.

v. Commissioner of Income Tax reported in

(2017) 84 taxmann.com 293 (Gujarat) to

cannot be invoked to correct each and

every type of mistake or error committed

by the Assessing Officer and it is only

when an order is erroneous and prejudicial

to the interest of Revenue, the

Commissioner could have assumed the

revisional jurisdiction.

22. Reliance was placed on the decision of

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this Court in case of Commissioner of

Income Tax v. Kamal Galani reported in

(2018) 95 taxmann.com 261 wherein it is

held that once the Assessing Officer

carried out detailed inquiries, it was not

open for the Commissioner to reopen the

issues on mere apprehension and surmises

and therefore, Tribunal was justified in

setting aside the revision order in facts

of the said case. It was submitted that

the Hon'ble Supreme Court dismissed the

SLP arising out of said decision in case

of Commissioner of Income Tax v. Kamal

Galani reported in (2019) 110 taxmann.com

213 (SC).

23. Learned Senior Advocate Mr. Tushar

Hemani adopted the submissions of learned

Senior Advocate Mr. S.N. Soparkar and

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further submitted that in case of Siddhi

Infrabuild(P) Ltd. v. Principal

Commissioner of Income-tax reported in

(2025) 172 taxmann.com 232 (Gujarat) this

Court has held that the Principal

Commissioner could not have assumed the

jurisdiction when the Assessing Officer

has made inquiry with regard to an issue.

24. Learned Senior Standing Counsel Mr.

Nikunt Raval for the respondent submitted

that the impugned notices under section

263 of the Act are issued after income tax

department identified more than 60,000

persons/entities, some of them described

as "high-risk" under "Operation Clean

Money" and such entities were subjected to

scrutiny of their tax returns.

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25. It was submitted that such cases

include businesses claiming cash sales as

the source of cash deposits, such as

petrol pumps, jewelers and other essential

services like hospitals which were found

to be excessive compared with their past

profile or industry norms after the note-

swap was announced on November 8, 2016. It

was further submitted that various persons

including government or public sector

employees and others having huge black

money made fictitious high-value purchases

and thus layered or laundered funds using

petrol pumps, jewelers and other essential

services like hospitals.

26. It was therefore, submitted that

under such circumstances, cases of the

petitioners were selected for complete

scrutiny for verifying the business of the

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assessee and to see whether the huge cash

deposited in the bank represent genuine

business transactions or not as

demonetization was aimed at the

elimination of black money that casts a

long shadow of parallel economy on real

economy of the country and "operation

clean money" was one of the major steps

aimed at achieving this goal and also to

widen the tax base.

27. It was submitted that in some cases,

the Assessing Officer even after it was

observed that cash transactions shown by

the assessee are one time transactions and

non-genuine, accepted the income disclosed

by the assessee and taxed only a fraction

of such transactions and thereby the very

purpose of such scrutiny to unearth the

generation and conversion of black money

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was vitiated thwarting the efforts of the

Government in such direction.

28. It was submitted that in view of such

facts, the respondent PCIT has invoked the

revisional powers under section 263 of the

Act by issuing the impugned show cause

notices to the petitioners.

29. It was further submitted that

considering the facts of each case,

notices under section 263 of the Act was

issued, more particularly, relying upon

Explanation 2 to section 263 which

stipulates that for the purpose of section

263 of the Act, an order passed by the

Assessing Officer shall be deemed to be

erroneous insofar as it is prejudicial to

the interests of the Revenue, if in the

opinion of the Principal Commissioner of

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Income Tax, the order is passed without

making inquiries or verification which

should have been made.

30. It was therefore, submitted that in

view of facts of each petition, these

petitions are premature as the petitioners

are required to file reply to the show

cause notices which will be considered by

the respondent PCIT on merits and thereby

decide under the provisions of section 263

of the Act.

31. It was therefore, submitted that the

petitions are required to be dismissed as

the petitioners have alternative

efficacious remedy to challenge the order

passed under section 263 of the Act before

the Income Tax Appellate Tribunal as the

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impugned show cause notices clearly

demonstrates that on perusal of the

assessment record, the assessment orders

have been passed without making inquiries

and verification which ought to have been

made by the Assessing Officer prior to

allowing the reliefs and accepting the

cash deposits made by the petitioners

after demonetization.

32. Learned Senior Standing Counsel Mr.

Raval also referred to and relied upon SOP

issued by Central Board of Direct Taxes

being Instruction No.03/2017 dated

21.02.2017 to be followed by the Assessing

Officer for verification of cash

transactions relating to demonetization.

It was submitted that the Assessing

Officer has not followed such SOP while

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framing the assessment orders under

section 143(3) of the Act. Reference was

also made to Instruction No.04/2017 dated

03.03.2017 issued by CBDT prescribing

Template to be used for issue of notices

under section 133(6) of the Act in

appropriate cases for Online verification

of cash deposits.

33. It was submitted that the Assessing

Officer has failed to carry out the

verification as per the instructions

issued by CBDT and therefore, the impugned

notices are valid, and the Commissioner

has rightly invoked revisional powers

under section 263 of the Act.

34. In support of such submission,

reliance was placed on the decision of

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Hon'ble Madras High Court in case of

Hemalatha Rajan v. Deputy Commissioner of

taxmann.com 669 (Madras) wherein it is

held that the submission of the assessee

about the verification and scrutiny of the

facts by the Assessing Officer during the

scrutiny assessment order cannot be

accepted, as nothing has been stated as to

what inputs and documents have been

sought for under the scrutiny assessment

order from the assessee and what documents

have been filed by the assessee and

whether such documents have been perused

and verified to come to the conclusion to

confirm the income as admitted as per the

return. As the Assessing Officer in facts

of the said case failed to consider such

issues and the issues which were found out

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by revisional authority on the basis of

records of the petitioner which have not

been verified or scrutinised properly by

the Assessing Officer, that would be

prejudicial to the Revenue and therefore,

revisional powers under section 263(3) of

the Act have been rightly invoked.

35. Reliance was also placed on the

decision in case of Piyara Lal v.

Principal Commissioner of Income tax and

another (order dated December 01, 2017 in

Civil Writ Petition No. 27324 of 2017),

wherein the Hon'ble Supreme Court

dismissed the writ petition against the

show cause notice issued under section 263

of the Act and petitioner was advised to

submit objection against the show cause

notice and if any adverse order is passed,

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petitioner would have remedy against the

same in accordance with law.

36. Having heard the learned advocates for

the respective parties, it would be

germane to refer to section 263 of the

Act. Relevant extract of section 263 of

the Act reads as under:

"263. Revision of orders prejudicial to revenue.

(1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case

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justify, [including,--

                                                (i)   an    order   enhancing    or
                                                modifying    the   assessment    or

cancelling the assessment and directing a fresh assessment; or

(ii) an order modifying the order under section 92CA; or

(iii) an order cancelling the order under section 92CA and directing a fresh order under the said section].

xxxx Explanation 2.--For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,--

(a) the order is passed without making inquiries or verification which should have been made;

(b) the order is passed allowing

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any relief without inquiring into the claim;

(c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or

(d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person."

37. On perusal of the impugned show

cause notices issued under section 263 of

the Act, it is revealed that the

respondent PCIT has invoked revisional

powers under section 263 of the Act after

considering that the assessment orders

have been passed without making inquiry

and verification or without going through

return of income filed by the assessee in

each case. It is also observed by the

respondent PCIT that no inquiries have

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been made as per Instruction No.3/2017 and

Instruction No.04/2017 issued by CBDT by

the Assessing Officer regarding cash

deposit made by the petitioners which

ought to have been charged to tax by

applying tax rate under section 115BBE of

the Act but the same was wrongly

considered as unexplained amount as

inflated sales shown by the assessee

resulting into loss of revenue. It was

therefore, observed by PCIT that

assessment orders are erroneous and

prejudicial to the interest of Revenue.

38. The Hon'ble Apex Court in case of

Malabar Industrial Co. Ltd. v. CIT

reported in 243 ITR 83(SC) has held in

detail regarding powers and jurisdiction

of the PCIT to revise the order of

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Assessing Officer where the assessment has

already been made scrutinising the record

during the original assessment.

39. This Court in case of JMC Projects

(India) Limited (supra), rendered on

21.12.2015, in the facts of the said cases

has held that writ petition under Articles

226/227 of the Constitution is

maintainable when the question is the very

foundation of the notice and jurisdiction

of the Commissioner to exercise such

revisional powers by observing as under:

"9. The Commissioner does not dispute this aspect of the matter. Though in the impugned notice there is no such clear-cut admission to detailed assertion made by the petitioner in the petition backed by materials on record, there is no denial in the reply filed by the Commissioner. We would, therefore, proceed on

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the basis that against the proposed addition of Rs.105.36 crore suggested by the Commissioner in the impugned notice, the assessing officer under the same heads for the assessment years in question had made addition of Rs.123 crore to the income of the assessee. The crucial question, therefore, arises whether revisional powers under section 263 of the Act can be exercised. As held by the Supreme Court in the case of Malabar Industrial Co. Ltd. (supra), powers under section 263 of the Act would be available when an order of assessment is shown to be erroneous and prejudicial to the interests of the revenue. In other words, both the conditions, namely, that the order of assessment is erroneous and that is also prejudicial to the interests of the revenue must exist to give jurisdiction to the Commissioner to take an order of assessment in revision.

10. In the case of Commissioner of Income-tax v. Jawahar Bhattacharjee reported in (2012) 341 ITR 434, Full Bench of Gauhati High Court held that not holding such inquiry as is normal and not applying the mind to relevant material in making an assessment would be an erroneous assessment.

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11. In the case of Income-Tax Officer vs. DG Housing Projects Ltd. reported in 343 ITR 329, Division Bench of Delhi High Court held that, a finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. The matter cannot be remanded for a fresh decision to the assessing officer to conduct further inquiries without a finding that the order is erroneous.

12. As noted, Division Bench of this Court in case of Smt.Minalben S. Parikh (supra) held and observed that, if income in question has been taxed and legitimate revenue due in respect of that income had been realized, though as a result of order having been made in that respect, the Commissioner cannot exercise powers for revising the order under section 263 of the Act merely on the basis that the order under consideration is erroneous.

13. In view of such legal position, we are afraid, the Commissioner could not have issued the impugned notice seeking to revise the order of assessment on the premise that the assessing officer did not apply the correct

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parameters and though taxed the same income, by applying wrong methodology. We may recall, in the impugned order the Commissioner expressed prima facie opinion that the entire expenditure of Rs.105.36 crore was liable to be disallowed and added to the total income of the assessee. The assessing officer, instead of making specific addition, rejected the books of accounts by invoking section 145 (3) of the Act and estimated the G.P. for different years.

14. As noted, when tax additions were made which resulted into orders of assessment being framed levying tax on the same income, the orders of assessment cannot be stated to be prejudicial to the interests of the revenue. To the factual aspect, even the Revenue is unable to raise any contest. The apprehension of the revenue appears to be that if the logic adopted by the assessing officer is not accepted in appeal, the entire additions would be deleted. Under the circumstances, if the correct methodology, as suggested by the Commissioner in the impugned notice, is adopted, the additions would stand the test of law. In other words, the Commissioner desires that the order of assessment should be

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better written and flaws, if any, be ironed out. In our opinion, powers under section 263 of the Act are not meant for improving an order of assessment. As long as the income is assessed and tax as per the law levied, the order cannot be stated to be prejudicial to the interests of the revenue and, therefore, not revisable.

15. There is one more reason why we cannot share the apprehension of the revenue. When an order of assessment is framed and certain additions made resulting to levying of tax, two situations may arise. The assessee may accept such assessment and so far as the tax levied is concerned it would achieve finality. If the assessee is aggrieved by the order of assessment, he has a right to appeal to the appellate Commissioner under section 246 of the Act. Section 251 of the Act lays down the powers of appellate Commissioner. Sub-section (1) thereof provides, inter alia, that the Commissioner, while disposing of an appeal against the order of assessment, shall have the power to confirm, reduce and enhance or annul the assessment. Thus, once an appeal is filed by the assessee against an order of assessment, the appellate Commissioner while disposing of such appeal would

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have wide powers not only to annul the assessment or to reduce the assessment made by the assessing officer, but also to confirm or even enhance the assessment. In that view of the matter, we do not see any limitation on the power of the appellate Commissioner in the appeals filed by the present assessee in examining the real essence of the expenditure claimed by the assessee towards the payments made to the said controversial vendors. Merely because the assessing officer has made additions in a particular manner would not mean that the Commissioner (Appeals) would be confined to scrutiny of the methodology adopted by the assessing officer and to proceed either to confirm or to delete the additions, if such methodology is not found entirely satisfactory. Even without the aid of these wide powers, the appellate authority would have inherent power to uphold the additions on correct application of law and facts if sustainable even if on the reasoning of the assessing officer is not found correct. In other words, the appellate authority is not bound by the reasoning of the assessing officer and can through different route reach the same conclusion.

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16. Under the circumstances, we do not think that the powers under section 263 of the Act can be exercised when, though addition has been made, on the footing of the premises which are not to the satisfaction of the Commissioner and, therefore, to make additions on better premises with better reasoning or on different application of legal principles.

17. In the result, in our opinion, the Commissioner lacked jurisdiction to issue the impugned notice. When the question is the very foundation of the notice and jurisdiction of the Commissioner to exercise such powers, the question of relegating the petitioner to alternative remedy or to permit the Commissioner to complete the proceedings and thereafter to direct the petitioner to take appeal route does not arise."

40. The Hon'ble Apex Court thereafter,

recently while considering the challenge

to the show cause notice under section 263

of the Act in case of Piyara Lal (supra),

has held as under:

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"The petitioner has been served with a show-cause notice under Section 263(1) of the Income Tax Act, 1961 for re-assessment of his income in respect of the Assessment Year 2010-11. The show- cause notice dated 17/20.11.2017 (P-10) is self-speaking and self- explanatory. It requires the petitioner to show-cause as to why the order suggested therein be not passed for which objections have already been invited from the petitioner on or before 01.12.2017.

In our considered view, no writ petition is maintainable against a show-cause notice. The petitioner, if so advised, may submit objections against the show-cause notice and if any adverse order is passed, he shall have his remedy against the same in accordance with law.

The writ petition is dismissed as not maintainable. However, with a view to enable the petitioner to submit objections, it is directed that if the petitioner submits his objections by 05.12.2017, the same shall be considered on merits and in accordance with law."

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41. In the above decision of the Hon'ble

Apex Court, it is categorically held that

no writ petition is maintainable against

the show cause notice under section 263(1)

of the Act when notice is self-speaking

and self-explanatory and it is for the

petitioner to show cause as to why order

suggested therein be not passed by raising

the objection.

42. The Hon'ble Madras High Court also in

case of Hemalatha Rajan (supra) has held

that whether the documents filed by the

petitioner during the original assessment

have been perused and verified by the

Assessing Officer or not is required to be

considered by the PCIT during the course

of proceedings under section 263 of the

Act.

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43. In the facts of the present cases, it

is not in dispute that the petitioners

have made deposit of cash in their

respective bank accounts after the

demonetization and the details were

submitted by the petitioners before the

Assessing Officer for such deposits during

the year under consideration as sales made

during the period between October, 2016 to

8th November, 2016.

44. On perusal of the assessment record,

it is prima facie observed that

verification of cash sales/purchases as

per the instructions mentioned in CBDT

Instruction No.04/2017 dated 03.03.2017

has not been done by the Assessing

Officer. Instruction No.04/2017 refers to

the template to be used for issuance of

notices under section 133(6) of the Act

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which provides for submitting details of

transactions relating to cash deposit

during 9th November to 30.12.2016 as per

the SOP contained in Instruction

No.03/2017. Para No.5 of Instruction

No.03/2017 provides for conducting

verification which reads as under:

"5. CONDUCTING VERIFICATION

At the outset, it should be clearly understood that this exercise relates to preliminary verification of information only and the same should not be construed as conducting scrutiny or in-depth authentication. The entire process envisages end-to- end e-verification in which the concerned person would be required to electronically file his response on e- filing portal which shall be examined and monitored electronically by the tax department through Online Verification platform (ITBA). The two systems are harmonized in a manner so that the person under verification is not required to attend the Income-tax office personally under any circumstance and at any stage during the verification exercise. It has been endeavour of CBDT to identify and target the potential cases through e-

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verification so that possible instances of grievances arising from the process of verification are minimized.

5.1 The online verification should be focussed and limited to the issue under verification the outcome of which is either 'Acceptable' or 'Non- Acceptable'. The queries raised should be relevant and limited in number since this is a preliminary verification process only.

5.2 The Assessing Officer is required to verify each information record individually and take a decision about each record being 'Acceptable' (where the nature and source of cash deposit for that particular record is explained by the person under verification to the prima-facie satisfaction of the Assessing Officer) or 'Non-Acceptable' (where the Assessing Officer is not satisfied with the explanations offered by the person under verification based on the information available). For each 'Non- Acceptable' information record, the undisclosed income will have to be ascertained and recorded along with verification remarks on the portal (the format has been reproduced in the Verification Guide].

5.3 The information relating to cash transactions and response submitted by the person under verification will be

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visible to the Assessing Officer and his supervisory officers.

5.4 The Assessing Officer will also be able to send a request for additional information, if required. The information request would be communicated to the PAN holder with a Hyperlink for uploading the information. The uploaded information can also be downloaded by the Assessing Officer.

5.5 It is reiterated that no independent enquiry or third party verifications are required to be made by the Assessing Officer outside the online portal. Whatever information is necessary during verification, the same has to be collected through the person under verification using online platform only. Even telephonic queries are to be avoided.

5.6 While conducting verification, seeking additional information and drawing inference regarding source of deposits in bank or other accounts, for general and broad guidance of the AOs, the source specific verification guidelines has been given in the Annexure with a view to maintain consistent approach during verification. If the sources informed by the person under verification are other than those indicated in the Annexure, suitable parameters should be decided by the AO in consultation

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with the range head and Pr. CIT concerned.

5.7 It should be ensured that the communications made online with the persons under verification should be in very polite language without containing any element of threat or warning. No show cause of any kind should be given.

5.8 The verification of a particular case shall be complete only when:

(a) each information record reflected in that case gets verified and has been marked either as 'Acceptable' or 'Non-Acceptable' (with mentioning of undisclosed income in the latter category); and

(b) Approval has been given by the supervisory authority as prescribed at Para 7 of this instruction.

5.9 If no satisfactory explanation is provided, the undisclosed income may be quantified considering the facts of the case. Brief summary of verification may be mentioned under verification remarks.

5.10 The cases under the 'Non Acceptable' category would get escalated back to the Directorate of Systems and may lead to advance processing of such cases for further handling as cases involving possible

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tax- evasion.

5.11 In case the person under verification does not respond within the time frame prescribed, it might lead to a possible inference that the cash deposit under verification is prima-facie undisclosed and consequently the AO may treat these cases under the 'Non Acceptable' category with relevant remarks.

5.12 A holistic view should be adopted looking into the various aspects of the circumstances leading to deposit of cash (e.g. family-size, financial status and background of person) and uniformity in approach must be adopted while forming a view about quantum of undisclosed income."

45. On perusal of the above SOP, the

Assessing Officer was required to verify

the cash deposit made by the petitioners

in the bank account during the

demonetization period as per the Annexure

to the SOP which contains the details as

per the cash deposited out of earlier

income or savings, cash out of receipts

exempt from tax, cash withdrawn out of

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