2018 (5) TMI 2109 - AT - Income Tax

Revision u/s 263 by CIT - unexplained cash deposits - As per CIT AO not made addition of cash deposits in IDBI Bank and in Axis Bank and not made any enquiry regarding acquisition of shares - case was reopened u/s.147 and assessment was made under section 143(3) read with section 147 - HELD THAT - We find that the assessee has disclosed bank account with IDBI in her balance sheet filed along with return of income, and same are claimed as cash sales, which have been accepted by the AO after making enquiry, therefore, same cannot be treated as undisclosed. Similarly, with regard to investment in shares, we find that Pr.CIT has not pointed out that which shares are held by the assessee - in consequent to proceeding under section 263, an assessment order was passed wherein the AO has not made any addition on account of investment in shares but made some other deposits which are still not clear. Thus, we find that the AO has made enquiry and taken a plausible view after application of mind. The order passed by the AO, in our opinion, shall be deemed to be erroneous in so far as it prejudicial to the interest of the Revenue, if the Pr.CIT would have specifically pointed out that which of inquiries or verification should have been carried out by the AO in this regard and the AO failed to carry out those inquiries and verification as desired by the Pr. Commissioner of Income-tax. Since the Pr.CIT has not suggested the basis of inquiry or verification to be carried out by the AO, the order passed by the AO cannot be deemed to be erroneous in so as far as it is prejudicial to the interest of the Revenue. AO has considered cash deposits as unexplained and considered the same in the case of Shri Ankit V. Parekh and made addition on this account by estimating profit @ 8%. It may also be noted that assessment was reopened for verification of these very deposits, therefore, it was incumbent on the AO to make such enquiry in respect of these issues. In view of these facts and circumstances, we find that the AO has made due enquiries. Since we find that the AO had made enquiries regarding cash deposits in bank account and taken a view and considered for addition and accepted the version of the assessee that bank account with IDBI was disclosed and not made any addition on this treating it as disclosed and on shares as no investment in shares was found to have been made by the assessee. Thus, the view taken by the AO was plausible view, which cannot be disturbed by the ld. Commissioner of Income-tax - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the ex-parte order passed under Section 263 of the Income Tax Act.
2. Whether the assessment order was erroneous and prejudicial to the interest of the Revenue.
3. Adequacy of the inquiries conducted by the Assessing Officer (AO) regarding cash deposits and investment in shares.

Issue-wise Detailed Analysis:

1. Validity of the ex-parte order passed under Section 263 of the Income Tax Act:
The Principal Commissioner of Income Tax (Pr.CIT) issued a notice under Section 263 on 10.03.2017, fixing the hearing for 14.03.2017. The assessee requested an adjournment, which was denied, and a subsequent hearing was fixed for 21.03.2017. However, no one attended, and the Pr.CIT passed the order based on the show cause issued. The Tribunal noted that the Pr.CIT did not provide sufficient time for the assessee to respond, which could be considered premature.

2. Whether the assessment order was erroneous and prejudicial to the interest of the Revenue:
The Pr.CIT held that the AO's failure to add cash deposits of ?10,93,460 in IDBI Bank and ?12,99,800 in Axis Bank, and to investigate the acquisition of shares worth ?50,63,754, rendered the assessment order erroneous and prejudicial to the interest of the Revenue. However, the Tribunal emphasized that for the Pr.CIT to invoke Section 263, both conditions—erroneous and prejudicial to the Revenue—must be satisfied. The Tribunal found that the AO had indeed made inquiries regarding the cash deposits and the shares, and accepted the explanations provided by the assessee. The Tribunal concluded that the AO's view was a plausible one and that the Pr.CIT did not provide specific directions on what further inquiries were needed.

3. Adequacy of the inquiries conducted by the Assessing Officer (AO) regarding cash deposits and investment in shares:
The Tribunal noted that the AO had reopened the assessment based on AIR information and conducted inquiries into the cash deposits and the investment in shares. The AO accepted the assessee's explanation that the cash deposits with IDBI Bank were from sales proceeds and that the account was disclosed in the balance sheet. Regarding the Axis Bank deposits, the AO made an addition of ?6,41,280 by estimating an 8% profit on the deposits in the joint account with the assessee's son. The Tribunal found that the AO had made due inquiries and accepted a plausible view, which could not be deemed erroneous simply because the Pr.CIT had a different opinion.

Conclusion:
The Tribunal concluded that the AO had made detailed inquiries and accepted the explanations provided by the assessee regarding the cash deposits and the investment in shares. The Tribunal held that the twin conditions for invoking Section 263—erroneous and prejudicial to the interest of the Revenue—were not satisfied. Therefore, the Tribunal quashed the Pr.CIT's order under Section 263 and allowed the appeals of the assessee for the assessment years 2007-08 and 2008-09.

Final Judgment:
The appeals of the assessee were allowed, and the orders passed under Section 263 of the Act were cancelled. The Tribunal pronounced the order in open court on 30.05.2018.