2018 (8) TMI 1188 - AT - Income Tax

Revision u/s 263 - source of cash deposits in his bank account/s - CIT observed that no proper enquiry can be said to have been made by the AO, who completed the assessment in haste, and without proper application of mind. - Held that - No satisfactory answer to any of the foregoing was forthcoming even before us, even as, as explained, it is the non-enquiry by the AO that is the relevant or material. The withdrawal of petty amounts, despite abundant cash-in-hand, only points out to the cash flow statement being not correct or complete, requiring further verification. There is no finding by the AO on this. In fact, the affidavit from Sh. Yash Pal states of his having withdrawn the amount, though unable to purchase the vehicle arranged by the assessee for him. That is, the money was withdrawn by him on own account and not for and on behalf of the assessee. The version before the AO was clearly different. The third area of enquiry, as pointed out by the ld. Pr. CIT, is most striking. This is as, again, without doubt, purchase of a second-hand car is not generally paid for in advance. It could no doubt be so in a particular case, as where the vehicle is identified, and the proposed buyer apprehends loss of opportunity on account of the car dealer (middle-man) not having enough funds to purchase the vehicle. That is, an advance to facilitate the purchase, closing the deal, while in the instant case the purchase remains pending for over eleven months from the date of advance Further still, the advance of Sh. Rajan Ghai has not been adjusted against any car purchased by him, but against that by his brother Sh. Gagan Ghai, i.e., as explained. The explanation, on the very face of it, is unconvincing and needs further enquiry, which is what the ld. Pr. CIT has directed. Decision of CIT sustained - Decided against the assessee.

Issues Involved:
1. Invocation of Section 263 of the Income-tax Act, 1961.
2. Lack of proper enquiry by the Assessing Officer (AO).
3. Specific aspects of assessment requiring further verification.

Issue-wise Detailed Analysis:

1. Invocation of Section 263 of the Income-tax Act, 1961:
The assessee challenged the order under Section 263 of the Income-tax Act, 1961, issued by the Principal Commissioner of Income Tax (Pr.CIT), Jalandhar-1, which held the assessment for AY 2011-12 as erroneous and prejudicial to the interests of the Revenue. The assessee did not seriously dispute the assumption of jurisdiction but argued that the AO had conducted a proper examination during the assessment.

2. Lack of Proper Enquiry by the Assessing Officer (AO):
The assessee contended that the AO had made proper enquiries during the assessment, and thus, the revisionary proceedings were unwarranted. The Departmental Representative (DR) argued that the AO completed the assessment in haste without proper application of mind. The tribunal referenced judicial precedents, emphasizing that lack of enquiry renders an order erroneous and prejudicial to the interests of the Revenue. The tribunal cited the Apex Court's decision in Malabar Industrial Co. Ltd. vs. CIT, which laid down a four-way test for orders being erroneous and liable for revision, including lack of inquiry.

3. Specific Aspects of Assessment Requiring Further Verification:
The tribunal examined whether the AO had conducted proper enquiry and verification, focusing on three specific aspects:

(a) Continuous Cash Withdrawals:
The Pr.CIT noted that the assessee continued to withdraw cash from bank accounts despite having sufficient cash-in-hand, which was not critically analyzed by the AO. The tribunal found that the AO failed to investigate this aspect, which indicated that the cash flow statement might not be correct or complete.

(b) Inclusion of Cash Withdrawn by Yash Pal:
The Pr.CIT observed that the AO did not verify the genuineness of the transaction involving ?1,00,000 withdrawn by Yash Pal. The tribunal noted discrepancies in the assessee's explanation, requiring further verification.

(c) Cash Received as Advance for Purchase of Cars:
The Pr.CIT highlighted that the AO did not independently verify the authenticity of affidavits filed by Vinod Kumar, Gagan Ghai, and Rajan Ghai, who allegedly paid advances for car purchases. The tribunal found the explanation unconvincing and noted that the AO did not conduct proper enquiry into these transactions.

The tribunal concluded that the AO did not make proper enquiries and verification, leading to the material on record being insufficient for reasonable and objective satisfaction. Consequently, the tribunal upheld the Pr.CIT's order, finding no infirmity in the directions issued.

Conclusion:
The tribunal dismissed both the assessee's appeal and the Revenue's cross-objection, affirming the Pr.CIT's order and emphasizing the necessity of proper enquiry and verification in the assessment process. The order was pronounced in the open court on July 31, 2018.

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