2022 (11) TMI 1312 - AT - Income Tax

Revision u/s 263 - unaccounted cash credit under Section 68 - Assessee applied for the Direct Tax Vivad Se Viswas (DTVSV) scheme and has filed a letter before the CIT(A) for withdrawal of his appeal filed against the order passed under Section 143(3) - whether revision proceedings can be initiated when the assessee has opted for DTVSV? - HELD THAT - We notice that in assessee s case the issue of cash deposits during the demonetisation period have been considered by the AO in original assessment proceedings under Section 143(3) of the Act and the assessee has opted for DTVSV scheme for the additions made in this regard. Section 8 of DTVSV Act as quoted by the PCIT clearly mentions that the immunity is not available for any proceedings other than those in relation to which the declaration has been made. In the given case however the PCIT has initiated the revision proceedings u/s.263 on the same issue for which the assessee has already opted for DTVSV. It is also noticed the assessee has filed the necessary forms under the DTVSV scheme which have been accepted and therefore in our considered view the decision of the Hon ble Madras High Court is clearly applicable to the assessee s case. Accordingly we hold that the PCIT is not justified in initiating the impugned proceedings under Section 263 of the Act when the assessee has opted to settle the dispute under DTVSV scheme. We therefore quash the order of PCIT and allow the appeal in favour of the assessee.

Summary

Issues Involved:

1. Validity of proceedings initiated under Section 263 of the Income Tax Act, 1961.
2. Alleged error prejudicial to the interest of revenue.
3. Adequacy of the Assessing Officer's (AO) enquiry during the original assessment proceedings.
4. Applicability of the Direct Tax Vivad Se Vishwas Scheme (DTVSV) in relation to Section 263 proceedings.

Issue-Wise Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 263 of the Income Tax Act, 1961:

The assessee contended that the proceedings initiated under Section 263 were opposed to law and should be cancelled. The Principal Commissioner of Income Tax (PCIT) initiated revision proceedings stating that the AO did not obtain and verify the cash denomination details from all banks where the assessee had deposited cash during the demonetization period. The PCIT argued that the AO failed to conduct necessary inquiries and make required additions as per law, deeming the assessment order erroneous and prejudicial to the interest of revenue.

2. Alleged Error Prejudicial to the Interest of Revenue:

The assessee argued that there was no error prejudicial to the interest of revenue, as the AO had considered the issue in depth during the original assessment proceedings. Specific queries were raised, and the assessee provided all required details. The PCIT, however, noted discrepancies in the cash deposits and payments, including a cash payment in contravention of Section 40A(3), which the AO did not disallow.

3. Adequacy of the AO's Enquiry During the Original Assessment Proceedings:

The AO had called for details such as the computation of income, P&L Account, Balance Sheet, and bank account statements. The AO identified discrepancies in the closing cash balance and treated a sum of Rs. 92,838/- as unaccounted cash credit under Section 68, applying the tax rate under Section 115BBE. The PCIT argued that the AO did not verify the cash denomination details from all banks and failed to conduct necessary inquiries into the cash deposits and payments made during the demonetization period.

4. Applicability of the Direct Tax Vivad Se Vishwas Scheme (DTVSV) in Relation to Section 263 Proceedings:

The assessee had opted for the DTVSV scheme and argued that the issue of cash deposits during the demonetization period, which was part of the original assessment proceedings, could not be subject to revision under Section 263. The PCIT contended that the DTVSV scheme's benefits were limited to the specific declaration made by the assessee and did not extend to further additions made by the AO in consequence of the order. However, the Tribunal referred to the Hon'ble Madras High Court's decision in Gopalakrishnan Rajkumar vs. PCT, which held that once an assessee opts for the DTVSV scheme, proceedings under Section 263 cannot be initiated on the same issue.

Conclusion:

The Tribunal concluded that the PCIT was not justified in initiating proceedings under Section 263 when the assessee had opted to settle the dispute under the DTVSV scheme. The Tribunal quashed the PCIT's order and allowed the appeal in favor of the assessee, stating that the AO had already examined the details pertaining to the cash deposits during the assessment proceedings and made the necessary additions. The Tribunal emphasized that the DTVSV scheme's immunity extends to the issues for which the declaration was made, and the PCIT's revision proceedings on the same issue were not permissible.