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2019 (4) TMI 1520 - AT - Income TaxRevision u/s 263 - unexplained cash deposits - explanation of contra entries - deposit relates to cash sale of banana - offer in return on presumptive profit i.e. 8.06% - HELD THAT - A perusal of the assessment order on this issue shows that the Assessing Officer has applied his mind and taken a possible view on the basis of the various details filed by the assessee. No doubt, the ld.CIT may not agree with the view of the Assessing Officer. However, it cannot be said that it is a case of no inquiry or that the view taken by the Assessing Officer is not a possible view. It has been held in various decisions that only absence of an inquiry empowers jurisdiction to the CIT to invoke the revisional power u/s 263. However, when there is some inquiry and the ld.CIT does not agree with the extent of inquiry conducted by the Assessing Officer as sufficient, he cannot invoke the jurisdiction u/s 263. AO has taken a possible view on the issue relating to the deposits/credits in the bank account by treating the same on account of sale of banana and has applied the profit rate of 8.06%, therefore, the view taken by the AO cannot be termed as not a possible view. Since the same has been determined on the basis of various replies given by the assessee, therefore, CIT, in our opinion, is not justified in invoking the jurisdiction u/s 263 on the issue of bank deposits/credits in the bank account . The order passed u/s 263 by the ld.CIT is not sustainable in law. - Decided in favour of assessee.
Issues Involved:
1. Validity of invoking jurisdiction under Section 263 of the Income Tax Act. 2. Treatment of ?15,39,513/- as unexplained cash deposits. 3. Addition of two new issues by the CIT not mentioned in the original notice under Section 263. Issue-wise Detailed Analysis: 1. Validity of invoking jurisdiction under Section 263 of the Income Tax Act: The assessee challenged the order of the Principal Commissioner of Income Tax (PCIT) invoking jurisdiction under Section 263 of the Income Tax Act, 1961. The assessee argued that the CIT issued a notice under Section 263 for three issues but accepted two issues, leaving only the treatment of ?15,39,513/- as unexplained deposit for adjudication. The CIT, however, added two new issues not mentioned in the original notice, which the assessee contended was a violation of the provisions of Section 263, as it deprived the assessee of the opportunity of hearing. The tribunal agreed with the assessee, stating that the proceedings under Section 263 must be strictly confined to the notice issued and cannot extend beyond what is stated therein. 2. Treatment of ?15,39,513/- as unexplained cash deposits: The CIT contended that the assessee could not explain the source of ?15,39,513/-, and the Assessing Officer (AO) erroneously estimated profit on the same. The assessee argued that the AO, during the original assessment, accepted the explanation that the cash deposits were from the sale proceeds of bananas and applied a net profit rate of 8.06%. The tribunal found that the AO had indeed applied his mind and taken a possible view based on the details provided by the assessee. It was held that the CIT cannot invoke Section 263 merely because he disagrees with the AO’s view if it was a possible view. The tribunal concluded that the AO’s view was a possible one and thus, the CIT was not justified in invoking Section 263 on this issue. 3. Addition of two new issues by the CIT not mentioned in the original notice under Section 263: The CIT directed the AO to verify and pass appropriate orders on two new issues: the treatment of ?14.28 lakhs as unexplained contra entries and non-declaration of interest income. The tribunal noted that these issues were not included in the original notice under Section 263. Citing various judicial precedents, including the decision of the Delhi High Court in CIT vs. Contimeters Electricals (P) Ltd., the tribunal held that revision on grounds not proposed in the notice under Section 263 is invalid as it deprives the assessee of the opportunity of hearing. Consequently, the tribunal found the CIT’s actions in this regard to be unsustainable in law. Conclusion: The tribunal set aside the order passed by the CIT under Section 263, allowing the appeal filed by the assessee. The decision emphasized that the CIT’s jurisdiction under Section 263 must be confined to the issues mentioned in the notice and cannot extend beyond what is stated therein. The tribunal also upheld the AO’s view regarding the treatment of ?15,39,513/- as a possible view, thereby negating the CIT’s contention of the order being erroneous and prejudicial to the interests of the Revenue.
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