2019 (10) TMI 339 - AT - Income Tax

Revision u/s 263 - unexplained cash deposits - HELD THAT - From the perusal of the order sheet entries, it is seen that only effective date of hearing was 03.03.2017, wherein he has noted that Shri P.K. Jain, FCA filed representation and replies to the show cause notice and case is heard. Thus, nowhere the additional issues raised by him were ever confronted to the assessee. In any case, here scope of entire reassessment was based on the reasons recorded by the AO and Pr.CIT cannot travelled beyond the reasons to rope in other issues not falling in the reasons recorded. Thus, we agree with the contention of the learned counsel that any such direction is beyond the scope of re-assessment proceedings as the same cannot be raised in revisionary jurisdiction u/s 263. Hence, all other direction given by the PCIT is quashed. Even on the issue of cash deposit, as has stated above, Assessing Officer has duly examined not only all the persons who have given the advance to the assessee but also the entire cash flow statement, vis- -vis the assessee s computation of income and cash flow statement coming from Assessment Year 2009-10. Pr.CIT without finding any defect in the inquiry conducted by the Assessing Officer has simply cancelled the assessment order which cannot be sustained. In case he is of the opinion that Assessing Officer inquiry and verification is lacking, then it is incumbent upon the ld. Pr.CIT to himself conduct prima facie inquiry on his own so as to reach to a conclusion that, either the Assessing Officer s inquiry was not proper or there is any inherent lack of application of mind. Hon'ble Delhi High Court in the following cases - i) DIT vs. Jyoti Foundation 2013 (7) TMI 483 - DELHI HIGH COURT ii) CIT vs. Sunbeam Auto Ltd 2009 (9) TMI 633 - DELHI HIGH COURT ; and iii) ITO vs. D.G. Housing Projects Ltd, 2012 (3) TMI 227 - DELHI HIGH COURT has categorically held, the revising authority must make an inquiry before making a believe that assessment order was erroneous and without making any such inquiry he cannot remand back the issue once again to conduct the inquiry when Assessing Officer has conducted inquiry before conclusion of assessment. Thus we do not find that it is a fit case for cancelling the assessment for framing fresh even on the issue of examining the source of cash deposit, because what ld. Pr.CIT has directed the Assessing Officer to re-verify the receipt of advance from the persons which has been duly examined by the Assessing Officer in the manner discussed above. Accordingly, the impugned order u/s.263 is quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction under Section 263.
2. Examination of cash deposits.
3. Setting aside the reassessment order.
4. Principles of natural justice.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263:
The appeal was filed against the order dated 22.03.2017 by the Principal Commissioner of Income Tax (Pr. CIT), Ghaziabad, who assumed jurisdiction under Section 263 for the Assessment Year 2010-11. The assessee contended that the Pr. CIT erred in law and on facts by assuming jurisdiction under Section 263, claiming that the reassessment order dated 30-12-2014 was erroneous and prejudicial to the interest of revenue. The Pr. CIT's jurisdiction was invoked based on the Additional Commissioner of Income Tax's referral, which highlighted the failure of the Assessing Officer (AO) to examine the creditworthiness of persons from whom advances were claimed.

2. Examination of Cash Deposits:
The AO issued a notice under Section 148 to examine cash deposits totaling ?33,15,000 in the assessee's Savings Bank Account. The assessee explained the sources of these deposits, attributing ?4,50,000 to wood sales, ?26,00,000 to advances from various persons for property purchases, and ?2,65,000 as re-deposits of withdrawn cash. The AO conducted a detailed inquiry, including examining affidavits, bank statements, and recording statements from individuals who provided advances. The AO accepted the explanations and completed the assessment, accepting the returned income.

3. Setting Aside the Reassessment Order:
The Pr. CIT issued a show cause notice under Section 263, questioning the AO's failure to examine the creditworthiness of persons providing advances and other related issues. The assessee responded with detailed submissions and case laws. The Pr. CIT set aside the assessment order, directing the AO to re-verify the sources of cash deposits and examine additional issues not covered in the show cause notice or reasons recorded for reassessment.

4. Principles of Natural Justice:
The Tribunal observed that the Pr. CIT did not confront the assessee with additional issues raised during the revisionary proceedings, violating the principles of natural justice. The Tribunal emphasized that the Pr. CIT must confront the assessee with any new issues noticed during proceedings and cannot travel beyond the reasons recorded for reassessment. The Tribunal also noted that the AO had conducted a thorough inquiry into the cash deposits, and the Pr. CIT failed to find any defect in the AO’s examination. The Tribunal concluded that the Pr. CIT's directions were beyond the scope of reassessment proceedings and violated natural justice principles.

Conclusion:
The Tribunal quashed the order under Section 263, holding that the Pr. CIT's directions were beyond the scope of reassessment and violated natural justice principles. The appeal of the assessee was allowed, and the reassessment order was upheld.