2018 (8) TMI 1547 - AT - Income Tax

Revision u/s 263 - unexplained cash deposit - Held that - CIT is correct in invoking jurisdiction u/s 263 of the Act. Coming to the main contention of the assessee with respect to the explanation to introduce u/s 263 of the Act though there cannot be any quarrel that the CIT cannot revise each and every order, if enquiries are not carried out as per his wisdom. In such cases, it should be the wisdom of the Ld. Assessing Officer, and if the enquiries conducted are reasonable then the CIT despite explanation (2) to Section 263, cannot revise orders passed by the AO. However, if there is no iota of any enquiry made by the AO then it cannot be said that the power of the revision invoked by the Ld.CIT is unsustainable. In the present case, when the A.O even did not care to obtain necessary documentary evidence to reconcile the amount of cash deposit with the explanation of the assessee where a short fall ₹ 1 lac is shown and accepted the explanation of receipt of ₹ 5 lacs from the wife of the assessee without any documentary evidence, then, non fault can be found with the order of the Ld. CIT. In view of this, we uphold the order of the CIT passed u/s 263 dated 11/2/2016 holding that the assessment order passerby the AO u/s 143(3) of the Act on 28/2/2014 is erroneous and prejudicial to the interest of the Revenue. Appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Cancellation of the assessment under Section 263 by the CIT and directing fresh verification by the AO.
2. Rejection of the explanation provided by the assessee during the proceedings under Section 263.

Issue-wise Detailed Analysis:

1. Cancellation of the assessment under Section 263 by the CIT and directing fresh verification by the AO:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (CIT) Noida, which was passed under Section 263 of the Income Tax Act, 1961. The CIT held that the assessment order passed by the Income Tax Officer (ITO) was erroneous and prejudicial to the interest of the Revenue. The CIT noted that the assessee had deposited ?10,10,000 in his savings bank account but did not provide sufficient material to substantiate the sources of these deposits. The assessee claimed that ?4,10,000 was received from various customers and ?5,00,000 was received as a housing loan from his wife. However, the CIT found discrepancies and insufficient documentation to support these claims. The CIT also noted a difference of ?1,00,000 for which no explanation was given. Consequently, the CIT issued a show-cause notice under Section 263 and, after considering the assessee's reply, concluded that the AO did not adequately verify the sources of the cash deposits and directed the AO to make fresh verification.

2. Rejection of the explanation provided by the assessee during the proceedings under Section 263:
The assessee contested the CIT's order, arguing that the AO had already examined the issue during the original assessment proceedings. The assessee provided explanations for the cash deposits, including a cash flow statement of his wife, which was submitted before the CIT. However, the CIT found that the explanations were not substantiated with adequate documentary evidence. Specifically, the CIT noted that the wife of the assessee did not have sufficient cash on hand to give to the assessee and that the deposits from customers were not supported by detailed records. Additionally, the CIT found that the AO failed to inquire into the full amount of ?10,10,000, as the assessee only explained ?9,10,000. The CIT also found that the AO allowed a deduction under Chapter VI-A without any documentary evidence, which was partially incorrect.

Judgment:
The Tribunal upheld the CIT's order, agreeing that the assessment order was erroneous and prejudicial to the interest of the Revenue. The Tribunal noted that the AO did not make adequate inquiries or verification regarding the cash deposits and the deduction claimed under Chapter VI-A. The Tribunal emphasized that the AO should have conducted reasonable inquiries, especially given that the case was selected for scrutiny to examine the cash deposits. The Tribunal dismissed the assessee's appeal and upheld the CIT's direction for fresh verification by the AO.

Conclusion:
The Tribunal concluded that the CIT was correct in invoking jurisdiction under Section 263 of the Income Tax Act, as the AO failed to make necessary inquiries and verifications, making the assessment order erroneous and prejudicial to the interest of the Revenue. The appeal of the assessee was dismissed.