2015 (1) TMI 911 - AT - Income Tax

Short surrender of cash - revision u/s 263 as AO finalized the assessment without giving any finding with respect to short disclosure of cash to the extent of ₹ 76,76,080/- - Held that - The Assessing Officer gave the reasonable opportunity of being heard on short disclosure of income in the return on account of cash, which has been replied by the assessee and considered by the Assessing Officer with detailed evidences. It is true that he has not given detail findings in his order but does not mean, has not considered the assessee s reply on this count. The appellant also explained this difference before the DDIT at the time of search, which has been again reiterated before the Assessing Officer at the time of assessment and also during the course of 263 proceedings. The statement recorded U/s 132(4) of the Act is an evidence under the Income tax proceedings but is rebuttable. The appellant had calculated the difference of cash on the basis of cash sales bill book which had not been considered during the search proceedings. The learned CIT DR had not found any defect in the computation made by the appellant regarding cash sales and receipts not posted up to 20/10/2009, payment remained/posted up to 20/10/2009. Mainly cash sales at Lalkothi branch, cash sales as per machine at Lalkohti shop, mainly cash sales at Ajmer Road branch, cash sales as machine at Ajmer Road shop, sales worked out from seized material, cash sales as per bill book No. 3101 to 3200, recovery from debtors, payment for expenses and payment for purchases, therefore, we do not find Assessing Officer s order erroneous and prejudicial to the interest of the revenue. Accordingly, the order of the learned CIT passed U/s 263 of the Act is set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the CIT's order declaring the AO's order as erroneous and prejudicial to the revenue.
2. Verification and short surrender of cash amounting to Rs. 76,76,080.
3. Adequacy of the AO's assessment process and findings.

Issue-wise Detailed Analysis:

1. Legality of the CIT's Order:
The assessee challenged the CIT's order dated 21/2/2014, which held the AO's order under Section 143(3) dated 29/12/2011 as erroneous and prejudicial to the interest of the revenue. The CIT's order was considered illegal and bad in law by the assessee, who sought its quashing.

2. Verification and Short Surrender of Cash:
During a search operation on 20/10/2009, the assessee admitted to an undisclosed income, including a surrender of Rs. 34,60,400 for loans advanced to relatives. However, in the return filed for A.Y. 2010-11, the assessee disclosed only Rs. 5,36,063 of the surrendered amount. The AO scrutinized the return and accepted the explanation provided by the assessee, which included detailed calculations and justifications for the discrepancies found during the search.

The CIT found that out of the Rs. 2 crores surrendered, only Rs. 1,02,00,000 was declared in the return, with the remaining Rs. 76,76,080 not accounted for. The CIT held that the AO's failure to add this amount to the income was erroneous and prejudicial to the revenue. The CIT emphasized that the AO did not verify the cash sales and deposits adequately, nor did he provide a clear finding on the short disclosure of cash.

3. Adequacy of the AO's Assessment Process and Findings:
The assessee argued that the AO had conducted a detailed inquiry and accepted the cash position as per the books, which showed a balance of Rs. 83,86,096 after incorporating unrecorded cash sales and payments. The AO's acceptance of this explanation was based on detailed workings and evidence provided by the assessee. The assessee contended that the AO's order should not be considered erroneous merely because it lacked detailed discussion on this issue.

The tribunal examined the rival contentions and the material on record. It was noted that the AO had provided a reasonable opportunity for the assessee to explain the short disclosure of income and had considered the detailed evidence presented. The tribunal found no defects in the computation of cash sales and receipts provided by the assessee, which were not posted up to the date of the search. The tribunal concluded that the AO's order was not erroneous and prejudicial to the revenue.

Conclusion:
The tribunal set aside the CIT's order passed under Section 263 of the Act, thus allowing the assessee's appeal. The tribunal held that the AO's assessment was conducted with due verification and was not erroneous or prejudicial to the interest of the revenue. The order was pronounced in the open court on 16/01/2015.