2016 (5) TMI 98 - AT - Income Tax

Revision u/s 263 - unexplained advance from Shri Ram Singh and deposit of the cash in the bank account - Held that - Assessing Officer asked for the explanation of the assessee at assessment stage with regard to cash deposited in the bank account. The assessee furnished copies of the bank accounts for perusal of the Assessing Officer along with cash book in which cash was shown to have been received as advance against property from Shri Ram Singh. The agreement in question was also produced before the Assessing Officer for his perusal and the Assessing Officer recorded the statement of Shri Ram Singh in which Shri Ram Singh has confirmed entering into agreement to sell with the assessee and giving advance of ₹ 6,50,000. In his statement, he has also explained source of his income. The order-sheet recorded by the Assessing Officer at assessment stage clearly shows that the Assessing Officer asked the assessee to produce Shri Ram Singh for examination and the Assessing Officer recorded further in the order-sheet that the statement of Shri Ram Singh was recorded. It is not in dispute that the statement of Shri Ram Singh has initials of the Assessing Officer even as per the findings of the Commissioner of Income-tax. Therefore, there is no question of doubting the statement of Shri Ram Singh recorded at the assessment stage. These facts, therefore, clearly prove that the Assessing Officer examined this issue in detail at the assessment stage and accepted the explanation of the assessee with regard to advance from Shri Ram Singh and deposit of the cash in the bank account. The Assessing Officer, therefore, made proper enquiries at the assessment stage Assessing Officer passed the order in accordance with law and if the Commissioner of Income-tax did not accept the view of the Assessing Officer and wanted to take a different view, would not give rise to any occasion to proceed under section 263 of the Act merely on audit object. We, accordingly, set aside the order under section 263 of the Income-tax Act and quash the same. - Decided in favour of assessee

Summary

Issues:
Appeal against order under section 263 of the Income-tax Act, 1961 for the assessment year 2009-10.

Analysis:
The case involved an appeal by the assessee against an order under section 263 of the Income-tax Act, 1961, for the assessment year 2009-10. The Assessing Officer completed the assessment without proper enquiry into cash deposits made by the assessee. The assessee claimed the cash deposits were from an advance received for selling a plot of land, but the Assessing Officer did not verify the source of the funds adequately. The Commissioner of Income-tax found the assessment order erroneous and prejudicial to revenue, leading to the issuance of a notice under section 263. The Commissioner doubted the application of mind by the Assessing Officer and directed a fresh assessment with proper inquiries. The assessee appealed challenging the order under section 263.

Upon hearing both parties and examining the evidence, it was revealed that the Assessing Officer had indeed sought explanations from the assessee regarding the cash deposits and had examined the relevant documents, including the agreement and statements of the parties involved. The Assessing Officer had recorded the statement of the party providing the advance and had initiated necessary inquiries during the assessment stage. The Tribunal referenced the Supreme Court's decision in Malabar Industrial Co. Ltd. v. CIT, emphasizing that a mere difference of opinion does not make an order erroneous unless it is unsustainable in law. The Tribunal found that the Assessing Officer had conducted adequate inquiries, and the Commissioner's observations were inappropriate.

Moreover, the Tribunal noted that an audit objection had been raised on the same issue, but the Assessing Officer's subsequent actions indicated that the objection may have been dropped. The Tribunal cited the Punjab and Haryana High Court's decision in CIT v. Sohana Woollen Mills, highlighting that a different view or an audit objection alone does not render an order erroneous or prejudicial to revenue. Based on the facts and legal precedents, the Tribunal set aside the order under section 263 and restored the original assessment order passed by the Assessing Officer under section 143(3) dated July 21, 2011. Consequently, the appeal of the assessee was allowed, and the order was pronounced in the open court.