2021 (11) TMI 46 - AT - Income Tax

Revision u/s 263 - lack of inquiry/inadequate inquiry - whether case of difference of opinion ? - assessee's case had been reopened u/s 147 - Unexplained cash deposits - as per CIT AO had not conducted inquiries which were required to be done in the present case - HELD THAT - Assessee's justification for the cash deposited in his bank account, as having been received from one Shri Pradeep Singh for leasing out his agricultural land to him for 10 years substantiated by an affidavit, is contradicted by the nakal jamabandi of the said land for the period which records the assessee as cultivator of the land. Clearly these are contradictory facts, with the affidavit stating Shri Pradeep Singh as cultivator, while the Revenue records showing the assessee as the cultivator and controverting his claim that he had leased out his land to Shri Pradeep Singh. We agree with the Revenue that this contradict ion should have prompted further inquiry by the AO regarding the genuineness of the claim of the assessee that he had received amount by leasing out his land to Shri Pradeep Singh. The documents on record by no stretch justify the acceptance of the claim of the assessee by the AO. No person of sound and logical mind could have, in the circumstances, found the claim of the assessee justifiable in the light of the conflicting documents before the AO - AO, therefore, not proceeding with conducting further inquiry on the issue and having accepted the claim of the assessee, the order passed by the AO we agree with the ld. PCIT, is erroneous and prejudicial to the interest of the revenue. In the present case, it is not a case of difference of opinion but infact it is clear that the opinion of the AO was one which was not justified by the evidences on record and therefore, the finding of error by the Ld.Pr. CIT on account of lack of inquiry/inadequate inquiry by the AO on the issue is, we hold, in accordance with law for the purpose of exercising revisionary jurisdiction u/s 263 of the Act. The order of the Ld. Pr.CIT is accordingly upheld. - Decided against assessee.

Summary

Issues:
1. Revisionary jurisdiction under section 263 of the Income Tax Act, 1961.
2. Adequacy of inquiry conducted by the Assessing Officer.
3. Acceptance of explanation without proper verification.
4. Contradictory documents submitted by the assessee.
5. Application of Explanation-2 to Section 263.

Issue 1: Revisionary Jurisdiction under Section 263:
The appeal was filed against the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961. The assessee raised grounds questioning the legislative jurisdiction of the PCIT and the validity of the order passed by the PCIT.

Issue 2: Adequacy of Inquiry Conducted by the Assessing Officer:
During the hearing, the counsel for the assessee argued that the Assessing Officer had conducted sufficient inquiry into the cash deposit issue, including accepting explanations and supporting documents. However, the PCIT found the inquiry inadequate, pointing out discrepancies in the documents submitted by the assessee and the lack of verification by the AO. The PCIT held that the AO's failure to conduct necessary inquiries rendered the assessment order erroneous and prejudicial to the revenue.

Issue 3: Acceptance of Explanation without Proper Verification:
The PCIT highlighted that the AO accepted the explanation provided by the assessee without conducting further verification, despite discrepancies in the documents submitted. The PCIT emphasized the importance of proper verification to ensure the genuineness of the claims made by the assessee.

Issue 4: Contradictory Documents Submitted by the Assessee:
The PCIT pointed out contradictions between the affidavit submitted by the assessee and the 'nakal jamabandi' of the land, indicating that the AO should have conducted further inquiry to clarify these discrepancies. The PCIT concluded that the contradictory facts warranted additional investigation by the AO.

Issue 5: Application of Explanation-2 to Section 263:
The PCIT invoked Explanation-2 to Section 263, which states that an order passed without conducting necessary inquiries or verifications can be deemed erroneous and prejudicial to the revenue. The PCIT found that the AO's failure to verify conflicting information in the documents justified the exercise of revisionary jurisdiction under Section 263.

In conclusion, the Appellate Tribunal upheld the PCIT's order, stating that the lack of proper inquiry by the AO rendered the assessment order erroneous and prejudicial to the revenue. The grounds of appeal raised by the assessee were dismissed, and the appeal was ultimately rejected.