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2018 (12) TMI 1718 - AT - Income TaxRevision u/s 263 - cash deposits in the bank account of the assessee - HELD THAT - Complete books of accounts were also required along with the bills, vouchers, stock registers, and other relevant records maintained by the assessee for the year. AO further asked month - wise details of purchases and sales made during the year. As per letter placed assessee submitted the copy of the bank account to the assessing officer. Further vide a letter assessee explained regarding sales and cash deposit in bank accounts submitting that the assessee is holding license and selling liquor for human consumption to retail customers. The products were delivered as a mint, half bottles/BS et cetera whereas the sale price ranges from ₹ 50 to ₹ 1000 depending upon the quantity of liquor. It was further stated that the cash collected from retail customers and deposited in the bank account on the same day or alternate days. Assessee also produced vide same letter the cashbook for the relevant period. Assessee also placed the copy of the bank account with Jammu and Kashmir bank which was submitted along with that letter. Therefore assessee gave complete explanation about the cash deposit in the bank account with the Jammu and Kashmir bank and also demonstrated the cash realized on sale of goods. Undisputedly the sale of goods have also been shown on the credit side of the profit and loss account, the cash has been generated out of the sale and same has been deposited in the bank account. The above fact has been verified by the learned assessing officer with respect to the cashbook, sales book and bank account of the assessee. On perusal of the order u/s 263 of Commissioner of income tax does not show that what kind of further enquiry the learned assessing officer should have done on the issue of cash deposit into the bank account of the assessee. Principal Commissioner of income tax did not say what other enquiry on this aspect the learned assessing officer should have been made. According to us so far as the cash deposit is concerned in the Jammu and Kashmir bank by the assessee. AO has made all possible enquiries to verify the source of cash deposit. According to us on this account. The order of the learned Commissioner of income tax passed under section 263 of the income tax act is not sustainable. AO has failed to verify the cash payment made for purchase of goods which are not in conformity with the provisions of section 40A (3) - HELD THAT - It is apparent from the audit objection filed before us at page number 30 of the paper book that the case of the assessee was selected for the scrutiny to verify only the cash deposit in the bank account of the assessee. The issue before us is whether assessing officer has made any enquiry with respect to the above purchases. Though, AO has obtained the explanation of the assessee with respect to the purchases made by the assessee in cash, whether the learned assessing officer is required to make any such enquiry or not is also an issue. This because of the reason that the learned assessing officer was only required to verify the cash deposit in the bank account of the assessee. In this respect instruction dated 29/12/2015 issued by the central board of direct taxes is very relevant. Apparently the selection of the scrutiny in case of the assessee was also only on the parameters of AIR information. According to para number 2 (iii) the scope of enquiry should be limited only on that aspect only. In such cases, the assessing officer are also directed to confine themselves by questionnaire only to the specific issues pertaining to AIR data and further the wider scrutiny in those cases can only be conducted as per the guidelines and procedures stated in instruction number 7/2014. Therefore according to us when the learned assessing officer was not required to enquire on those issues such as purchases in cash more than specified sum, CIT was not correct in holding that the learned assessing officer has not made due inquiries on that ground as the verification of the purchases exceeding specified limit in cash was not an issue before the assessing officer. Naturally, he should not have made any enquiry on that aspect. Even though the AO has raised the specific questions on that aspect and verified the requisite detail. Therefore, it cannot be said that the order of the learned assessing officer is erroneous and prejudicial to the interest of the revenue on this ground also. According to us the order of the CIT in assuming jurisdiction u/s 263 holding that the order of the learned assessing officer passed under section 143 (3) of the act is erroneous and prejudicial to the interest of the revenue is not correct. Accordingly, the order passed by the learned CIT is unsustainable. - Appeal of the assessee is allowed.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Adequate opportunity of hearing and principles of natural justice. 3. Limitation, legality, and jurisdiction of the order under Section 263. 4. Verification of cash deposits in the bank account. 5. Purchases made in cash exceeding the limit prescribed under Section 40A(3). Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The appeal was filed against the order under Section 263 of the Income Tax Act, 1961, passed by the Commissioner of Income Tax (CIT), which held the original assessment order by the Income Tax Officer as erroneous and prejudicial to the interest of the revenue. The CIT's order was based on the grounds that the assessee made purchases in cash totaling ?131.24 lakhs in violation of Section 40A(3) and had unexplained cash deposits of ?103.94 lakhs in the bank account. The Tribunal noted that the CIT did not specify what further inquiries should have been made by the Assessing Officer (AO) regarding the cash deposits, and concluded that the AO had made all possible inquiries to verify the source of cash deposits. Therefore, the jurisdiction under Section 263 was not correctly assumed by the CIT. 2. Adequate Opportunity of Hearing and Principles of Natural Justice: The assessee contended that the CIT erred in passing the impugned order without granting an adequate opportunity of hearing and without considering the principles of natural justice. The Tribunal did not explicitly address this issue in detail but focused on the adequacy of the inquiries made by the AO during the original assessment proceedings. 3. Limitation, Legality, and Jurisdiction of the Order under Section 263: The assessee argued that the order under Section 263 was barred by limitation, illegal, without jurisdiction, and contrary to law and facts. The Tribunal primarily focused on whether the AO conducted due inquiries and whether the CIT's assumption of jurisdiction was justified. The Tribunal concluded that the AO had indeed conducted necessary inquiries and that the CIT's order was unsustainable. 4. Verification of Cash Deposits in the Bank Account: The AO had issued a questionnaire during the assessment proceedings, and the assessee provided explanations and documents, including the cashbook and bank statements, to justify the cash deposits. The Tribunal found that the AO had verified the source of cash deposits through these documents. The CIT's order did not specify any additional inquiries that should have been made, leading the Tribunal to conclude that the AO had adequately verified the cash deposits, and the CIT's order on this ground was not sustainable. 5. Purchases Made in Cash Exceeding the Limit Prescribed under Section 40A(3): The CIT held that the AO failed to verify the cash payments for purchases exceeding the limit prescribed under Section 40A(3). However, the Tribunal noted that the case was selected for scrutiny specifically to verify the cash deposits in the bank account, not the purchases. The AO had still obtained explanations regarding the cash purchases, and the Tribunal found that the AO was not required to make further inquiries beyond the scope of the scrutiny selection. Therefore, the CIT's order on this ground was also found to be incorrect. Conclusion: The Tribunal concluded that the CIT's assumption of jurisdiction under Section 263 was not justified, as the AO had made all necessary inquiries regarding the cash deposits and purchases. The order passed by the CIT was deemed unsustainable, and the appeal of the assessee was allowed. The Tribunal's decision was pronounced in the open court on 20/12/2018.
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