2014 (10) TMI 1022 - AT - Income Tax

Revision u/s 263 - investment made by the assessee in the construction of the function hall - HELD THAT - Survey u/s 133A was carried on in the case of the assessee, during the course of which the assessee was found to have made investment in the construction of a function hall. During the assessment proceedings, the issue relating to the said investment made by the assessee was examined by the AO and the explanation of the assessee in respect of source of the said investment with reference to the entries made in his two bank accounts maintained with IndusInd Bank and State Bank of Hyderabad was partly accepted and partly rejected by the AO. Assessee has filed copies of the written submissions made by the assessee before the Assessing Officer during the course of assessment proceedings and it is worthwhile to reproduce the relevant portion thereof, as contained in letter dated 13.10.2011. As during the course of assessment proceedings before the AO as well as relevant portion of the as order passed by the AO dealing with the said explanation/submission, entries in the bank account of the assessee maintained with IndusInd Bank were not only considered by the assessing officer, but the source of deposits found to be made in the said bank account as explained by the assessee as the money received by him from his son and daughter in law in USA through proper banking channel was accepted by the AO, after applying his mind. Therefore, cannot be said that the source of deposits found to be made in the bank account of the assessee with IndusInd Bank was not verified by the AO and there was an error in the order of the AO, as alleged by the CIT in his impugned order u/s 263. If the learned Commissioner contemplates that the AO should have enquired into the source of funds in the hands of the son and daughter-in-law of the assessee, the same, in our opinion, would amount to verifying the source of source, which is not permissible. As such, considering all the facts of the case, we are of the view that there was no error in the assessment made by the AO as alleged by the learned Commissioner in his impugned order passed under S.263 - Appeal of the assessee is allowed.

Summary

Issues:
Assessment under Section 263 of the Income Tax Act, 1961 - Source of funds for construction of function hall - Verification of deposits in bank accounts - Error in assessment by Assessing Officer.

Analysis:
The appeal was filed against the order of the Commissioner of Income-tax VI, Hyderabad under Section 263 of the Income Tax Act, 1961. The assessee, an individual engaged in retail cloth business, had invested in a centralized air-conditioned function hall. The Assessing Officer computed the total income after making additions for unexplained cash deposits in the bank account. The Commissioner noted a failure to verify deposits in the bank account with IndusInd Bank, Kodad, leading to an erroneous assessment prejudicial to revenue. The Commissioner set aside the assessment, directing a reevaluation. The assessee contended that the source of deposits was explained as funds from abroad, duly verified by the Assessing Officer. The Commissioner disagreed, citing lack of verification of remittances from abroad, necessitating authentication for evidential value.

The Commissioner's order was challenged before the Tribunal. The assessee argued no error in the assessment, emphasizing the verification of bank account deposits by the Assessing Officer. The Departmental Representative contended insufficient verification of funds transferred from abroad. The Tribunal observed a survey conducted, investments made, and explanations provided during assessment. The written submissions highlighted funds received from abroad and utilized for construction. The Assessing Officer's order acknowledged the source of deposits from abroad, indicating proper consideration. The Tribunal concluded that the Assessing Officer adequately verified the source of deposits, rejecting the Commissioner's claim of errors. Verifying the source of source was deemed impermissible. Consequently, the Tribunal allowed the appeal, setting aside the Commissioner's revision of the assessment order.

In conclusion, the Tribunal found no error in the assessment made by the Assessing Officer regarding the source of funds for the function hall construction. The Commissioner's order under Section 263 was set aside, and the appeal of the assessee was allowed.