2022 (10) TMI 150 - AT - Income Tax

Revision u/s 263 by CIT - Case of the assessee was selected for limited scrutiny for the purpose of verification of cash deposits during the year - HELD THAT - As noticed that the assessee has submitted the details as called for by the AO from time to time. However, in the assessment order, the AO has not brought out any details of verification of cash deposits carried out by him during the course of assessment and he has passed a non-speaking order accepting the explanation given by the assessee. The source of cash deposits from safe custody account was not questioned by the AO by calling for ledger accounts etc., nor has the assessee submitted any details in this regard during the assessment proceedings. In the present case, limited scrutiny was to be done for verification of cash deposits and the source of cash deposits from the safe custody account is not examined by the AO by calling for relevant details from the assessee. The AO ought to have examined the same to go into the root of these deposits whereas in the instant case, the AO has not questioned the information supplied by the assessee with regard to the source of cash deposits into the safe custody account and has simply accepted those details without further enquiry. In such circumstances, it cannot be said that the AO has made any enquiry or taken a particular view by application of mind on the issue. As relying on the ratio laid down by the Hon ble Delhi High Court in the case of Gee Vee Enterprises 1974 (10) TMI 29 - DELHI HIGH COURT , we hold that there is no infirmity in the impugned order passed by the PCIT u/s. 263 of the Act. Appeal by the assessee is dismissed.

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Remanding the matter back to the Assessing Officer (AO) without specific findings.
3. Alleged errors in the original assessment order.
4. Change of opinion by the Principal Commissioner of Income Tax (PCIT).
5. Adequacy of enquiries conducted by the AO.
6. Explanation of cash deposits in the bank account.
7. Validity of the PCIT's directions.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:
The assessee contended that the PCIT erred in assuming jurisdiction under Section 263 of the Income Tax Act. The PCIT considered the order of assessment to be erroneous and prejudicial to the interests of the revenue due to the AO's failure to conduct necessary enquiries regarding the source of cash deposits. The Tribunal upheld the PCIT's jurisdiction, citing the Delhi High Court's ruling in Gee Vee Enterprises v. ACIT, which emphasized the duty of the AO to investigate the facts stated in the return when circumstances provoke an inquiry.

2. Remanding the matter back to the AO without specific findings:
The assessee argued that the PCIT remanded the matter back to the AO without giving any special finding of error in the original order. The Tribunal noted that the PCIT issued a show cause notice and considered the assessee's submissions but found inconsistencies and lack of reliable evidence regarding the source of cash deposits. Thus, the PCIT's decision to remand the matter was justified.

3. Alleged errors in the original assessment order:
The assessee claimed there were no errors in the original assessment order that could prejudice the revenue's interest. The PCIT identified that the AO did not properly verify the source of cash deposits, making the assessment order erroneous and prejudicial to the revenue. The Tribunal agreed with the PCIT's assessment.

4. Change of opinion by the PCIT:
The assessee contended that the PCIT's order was based on a change of opinion, which is impermissible under Section 263. The Tribunal clarified that the PCIT's order was not a change of opinion but rather a correction of the AO's failure to conduct necessary enquiries, as required by law.

5. Adequacy of enquiries conducted by the AO:
The PCIT held that the AO did not make proper enquiries regarding the cash deposits. The Tribunal observed that the AO accepted the assessee's explanation without further investigation, particularly concerning the "safe custody account." The Tribunal upheld the PCIT's view that the AO's enquiries were inadequate.

6. Explanation of cash deposits in the bank account:
The assessee argued that the cash deposits were fully explained. The PCIT found inconsistencies in the cash in hand declared in the Income Tax Return and the audited Balance Sheet for the relevant assessment years. The Tribunal noted that the AO failed to verify these discrepancies and accepted the PCIT's conclusion that the source of cash deposits was not satisfactorily explained.

7. Validity of the PCIT's directions:
The assessee requested that the PCIT's directions be quashed. The Tribunal, relying on the Delhi High Court's decision in Gee Vee Enterprises, held that the AO's failure to make necessary enquiries rendered the assessment order erroneous. Consequently, the PCIT's directions were valid and justified.

Conclusion:
The Tribunal dismissed the appeal by the assessee, upholding the PCIT's order under Section 263 of the Income Tax Act. The Tribunal emphasized the AO's duty to conduct thorough enquiries and investigations, particularly when circumstances provoke such actions. The decision reinforces the importance of detailed verification by tax authorities to ensure the accuracy and integrity of assessment orders.

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