2023 (3) TMI 1372 - AT - Income Tax

Revision u/s 263 - cash deposited during the demonetization period - PCIT was of the view that the AO has accepted the explanation of cash deposits without proper verification and assessee has failed to furnish a satisfactory explanation regarding the source of cash deposited in bank - HELD THAT - As from the perusal of the order of the AO and details furnished by the assessee it is clear that the AO has done a proper verification of the details of cash deposited and has given a clear finding with respect to the same. The PCIT in his order has stated that the AO ought to have conducted further enquiry to check whether the deposits satisfy the test of section 68. This view of the ld. PCIT in our opinion is not the right reason for exercising revisionary powers u/s. 263 of Act as the error envisaged by Section 263 of the Act is not one that depends on possibility as a guess work but it should be actually an error either of fact or of law. As relying on the decision of Gabriel India Ltd 1993 (4) TMI 55 - BOMBAY HIGH COURT PCIT is not justified in setting aside the order of the AO and accordingly we hold that the order of the PCIT u/s. 263 is without jurisdiction and liable to be quashed. Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the notice issued under section 263 of the Act.
2. Justification of the Principal Commissioner of Income Tax (PCIT) invoking jurisdiction under section 263.
3. Merits of the case regarding the assessment of cash deposits during the demonetization period.
4. Condonation of delay in filing the appeal.

Summary:

1. Legality of the Notice Issued under Section 263:
The assessee argued that the notice issued for initiation of proceedings under section 263 was "bad in law" and lacked a Document Identification Number (DIN), thus deserving to be quashed.

2. Justification of PCIT Invoking Jurisdiction under Section 263:
The PCIT invoked section 263, stating that the Assessing Officer (AO) accepted the explanation of cash deposits during demonetization without proper verification, making the order "erroneous and prejudicial to the interest of the revenue." The PCIT noted discrepancies in the cash deposits and claimed the AO did not adequately verify the source of the cash deposited.

3. Merits of the Case:
The assessee contended that the AO conducted proper inquiries before concluding the assessment, including issuing various notices and receiving detailed responses from the assessee. The AO verified the cash book, bank statements, and other relevant documents. The Tribunal found that the AO had indeed conducted a thorough verification and that the PCIT's observations were factually incorrect. The Tribunal emphasized that the AO's order was not erroneous as it was based on a detailed examination of the evidence provided by the assessee.

4. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal with a delay of 234 days, explaining that the delay was due to an inadvertent error and circumstances beyond their control, including late receipt and internal mishandling of the order, and preoccupation of their Chartered Accountant with other time-sensitive filings. The Tribunal condoned the delay, citing principles from the Hon'ble Supreme Court and other judicial precedents, emphasizing that substantial justice should prevail over technical considerations.

Conclusion:
The Tribunal concluded that the PCIT was not justified in setting aside the AO's order under section 263, as the AO had conducted a proper verification of the cash deposits during the demonetization period. The Tribunal quashed the PCIT's order and allowed the appeal of the assessee.