2020 (1) TMI 1395 - AT - Income Tax

Revision u/s 263 - Unexplained cash deposits - HELD THAT - Cash deposited was enquired by the Assessing Officer specifically vide his questionnaire to which the detailed explanation with evidences was submitted before the Assessing Officer by the assessee. After going through the evidences and submissions the Assessing Officer passed the Assessment Order. Assessing Officer has made all the inquiries and after verifying the documents/ material on record passed a reasoned Assessment Order. Commissioner does not have any locus standi to make further inquiry. The decision of the Hon ble Supreme Court in case of CIT vs. Max India Ltd 2007 (11) TMI 12 - SUPREME COURT , Malabar Industrial Co. Ltd. vs. CIT 2000 (2) TMI 10 - SUPREME COURT are aptly applicable in the present case as the Hon ble Apex Court wherein it is held that Section 263 has to be read in conjunction with the expression erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of the assessing officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income Tax Officer is unsustainable in law. Therefore, order u/s 263 of the Act in present appeal is not justified and is set aside herewith. Therefore, the order u/s 263 is passed by the Principal Commissioner of Income Tax is set aside. - Decided in favour of assessee.

Issues:
1. Jurisdiction under section 263 of the Income Tax Act, 1961
2. Cancellation of assessment order due to alleged unexplained cash deposits
3. Erroneous assessment order under section 153A/143(3)
4. Adequate opportunity of hearing in passing the impugned order
5. Legality, jurisdiction, and timing of the order under section 263

Jurisdiction under section 263 of the Income Tax Act, 1961:
The appeal was filed against the order passed by the Principal Commissioner of Income Tax, New Delhi under section 263 of the Income Tax Act, 1961. The original assessment was framed by the Assessing Officer under section 153A r.w.s. 143(3) of the Act, where detailed inquiries were conducted, and questionnaires were issued to the assessee. The Principal Commissioner issued a show-cause notice stating that no inquiries were made on account of cash deposits, deeming the assessment as erroneous and prejudicial to revenue. The Principal Commissioner directed the Assessing Officer to decide the issue afresh, leading to the appeal.

Cancellation of assessment order due to alleged unexplained cash deposits:
The assessee argued that during the relevant assessment year, cash business sales were accounted for, with VAT duly charged and deposited. The cash received from these sales was deposited in the bank account, supported by various documents like cash book, sales register, cash invoices, VAT returns, and bank statements. The Assessing Officer made inquiries specifically about cash deposits, and the assessee provided detailed explanations and evidence. The assessee contended that the cash deposits were from accounted cash sales of gold, supported by ledger entries, VAT returns, cash book, sales register, and auditor's report. The Assessing Officer accepted the return of income after thorough examination. The Tribunal found that the Assessing Officer had made all necessary inquiries and passed a reasoned assessment order, leading to the cancellation of the Principal Commissioner's order under section 263.

Erroneous assessment order under section 153A/143(3):
The Principal Commissioner alleged that the assessment order passed under section 153A/143(3) was erroneous and prejudicial to revenue due to lack of inquiries on cash deposits. However, the Tribunal noted that the Assessing Officer had indeed made inquiries and verified documents before passing the assessment order. The Tribunal emphasized that the Principal Commissioner's differing view was not sufficient to invoke section 263, as the assessment order was reasoned and based on inquiries conducted.

Adequate opportunity of hearing in passing the impugned order:
The assessee contended that the Principal Commissioner did not provide adequate reasons for deeming the explanation as untenable, despite the assessee submitting detailed evidence. The Tribunal found that the Principal Commissioner's order lacked justification for considering the explanation as inadequate. The Tribunal highlighted that the Assessing Officer had conducted thorough inquiries and the Principal Commissioner's order lacked a valid basis for deeming the assessment order erroneous.

Legality, jurisdiction, and timing of the order under section 263:
The Tribunal analyzed the legality and jurisdiction of the Principal Commissioner's order under section 263. It emphasized that the revisionary power under section 263 is triggered when an order is passed without proper inquiry or investigation. In this case, the Assessing Officer had conducted all necessary inquiries and passed a reasoned assessment order. The Tribunal cited relevant case laws to support its decision that not every loss of revenue constitutes an order prejudicial to revenue. The Tribunal set aside the Principal Commissioner's order under section 263, concluding that it was not justified.

In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the order passed by the Principal Commissioner of Income Tax under section 263.

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