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2020 (2) TMI 113 - AT - Income TaxRevision u/s 263 - CIT set aside the assessment order to examine the issue of source of cash deposit by the assessee and for initiating the penalty u/s 271D - HELD THAT - The order of the A.O. may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the A.O. to decide whether the order was erroneous. This is not permissible. An order is erroneous, unless the CIT held and records reason why it is erroneous. An order will become erroneous because on remit, the A.O. may decide that order is erroneous. Therefore, CIT must after recording reasons, hold that order is erroneous the jurisdictional pre-condition stipulated is that CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It was further observed that the material, which the CIT can rely includes not only the records as it stands at the time when the order in question was passed by the A.O. but also record as it stands at the time of the examination by the CIT. Nothing appears/prohibits CIT from collecting and relying new/additional material which evidence to show and state that the order of the A.O. is erroneous. We find that Ld. CIT in the present case has not carried out any enquiry of his own has merely set aside the assessment to the file of the A.O. to re-examine issue of source of cash deposited by the assessee. Therefore, it is contrary to the guidelines as mandated in the Hon'ble Delhi High Court in the case of ITO Vs. DG Housing Projects Ltd. 2012 (3) TMI 227 - DELHI HIGH COURT coupled with the fact that the assessee during the assessment proceedings had submitted evidences in support of sale of jewelleries and receipt of gift. Moreover, the issue of examination of source of gift was not subject matter of the scrutiny. Therefore, the decision of the Ld. CIT invoking provisions of section 263 of the Act is not justified and cannot be sustained under the facts and circumstances of the present case. We therefore, set aside the impugned order and allow the grounds raised by the assessee.
Issues Involved:
1. Validity of the order passed under section 263 of the Income Tax Act, 1961. 2. Whether the Assessing Officer (AO) conducted required enquiries/investigations. 3. Treatment of gifts received by the appellant from family members. 4. Whether the assessment order was erroneous and prejudicial to the interest of the revenue. Detailed Analysis: 1. Validity of the Order Passed Under Section 263 of the Income Tax Act, 1961 The appellant contended that the provisions of section 263 can be invoked only when the twin conditions are satisfied, i.e., the order should be both erroneous and prejudicial to the interest of the Revenue. The appellant argued that the order passed by the AO was neither erroneous nor prejudicial to the interest of the Revenue. The Principal Commissioner of Income Tax (Pr. CIT) set aside the assessment order, directing the AO to re-examine the issue of the source of cash deposits and to initiate penalty proceedings under section 271D of the Act. 2. Whether the Assessing Officer (AO) Conducted Required Enquiries/Investigations The appellant argued that the AO conducted adequate enquiries regarding the sources of cash deposits, including gifts received from family members. The AO made specific enquiries about how the losses were mitigated and accepted the explanations provided by the appellant. The AO made additions where he found the evidence unsatisfactory, indicating that he applied his mind to the issue. The Pr. CIT, however, held that the AO did not make thorough enquiries, which led to the order being erroneous and prejudicial to the interest of the Revenue. 3. Treatment of Gifts Received by the Appellant from Family Members The appellant received gifts from various family members to mitigate the losses incurred in share trading. The AO enquired into these gifts and accepted the explanations and documentary evidence provided by the appellant, except for two gifts of ?50,000 each from the appellant’s wife and father, which were added back to the income. The Pr. CIT treated these gifts as loans and directed the AO to refer the matter for penalty proceedings under section 271D of the Act. 4. Whether the Assessment Order was Erroneous and Prejudicial to the Interest of the Revenue The Pr. CIT invoked section 263, stating that the AO's order was erroneous and prejudicial to the interest of the Revenue due to inadequate enquiries. The appellant argued that the AO conducted necessary enquiries and that the Pr. CIT did not bring any new evidence to show that the AO's order was erroneous. The Tribunal noted that the AO had made specific enquiries and had applied his mind, and therefore, the order could not be held to be erroneous merely because the Pr. CIT had a different opinion. Conclusion: The Tribunal found that the AO had conducted adequate enquiries and that the Pr. CIT did not provide sufficient reasons to show that the AO's order was erroneous and prejudicial to the interest of the Revenue. The Tribunal set aside the order passed under section 263, allowing the appeal filed by the appellant.
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