2022 (11) TMI 809 - AT - Income Tax

Revision u/s 263 by CIT - cash deposits during the demonetisation period - HELD THAT - Questionnaire issued by the AO along with notice u/s 142(1) of the Act includes the details of cash deposits during the demonetisation period as well the contention of the Ld. DR that submissions of the assessee filed after the conclusion therein which appears to be not in consonance with the facts on record. The details related to cash deposits in respect of demonetisation was very much before the AO. PCIT has not given proper opportunity for filing reply on behalf of the assessee and without giving hearing or any opportunity to file any details before him has passed the order under Section 263 of the Act. PCIT has not taken cognisance of the assessment proceedings wherein the details were called related to demonetization period and related cash deposits. The CBDT circular in respect of cash deposits in Rs. 500 and Rs.1000 denomination notes are permissible and, therefore, the assessee has justified his conduct in relation to cash deposits during demonetization period. Therefore, AO has rightly accepted the contention without giving any details thereto in the assessment order. Once the Assessing Officer is satisfied, it is not necessary to comment on the same in the assessment order. Thus, the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. Therefore, invocation of Section 263 provisions are not just and proper as the PCIT has not looked into the assessment proceedings and the documents filed before the Assessing Officer - Appeal of assessee allowed.

Summary

Issues:
Appeal against order invoking Section 263 of the Income Tax Act for Assessment Year 2017-18.

Analysis:
The appellant, a trading firm, filed a return of income for Rs.22,83,450/-. The Principal Commissioner of Income Tax (PCIT) noted cash deposits of Rs.1,32,11,370/- in old currency without justification. PCIT issued a notice for revision under Section 263, directing proper inquiries. The appellant contended that as a petrol pump business, they were allowed to accept old currency during demonetization. The PCIT's order under Section 263 was challenged.

The appellant argued that the Assessing Officer did inquire about cash deposits during demonetization. The PCIT invoked Explanation-2 to Section 263, deeming the order prejudicial to revenue. The appellant failed to submit during Section 263 proceedings. The PCIT did not provide a fair opportunity for the appellant to respond. The appellant cited relevant case laws to support their position.

After hearing both parties, the Tribunal found that the Assessing Officer did consider demonetization cash deposits. The PCIT did not give a proper chance for the appellant to present their case. The Tribunal noted that the Assessing Officer's acceptance of the cash deposits explanation was justified. The PCIT's order under Section 263 was deemed improper. The appeal was allowed, setting aside the PCIT's order.

In conclusion, the Tribunal ruled in favor of the appellant, finding the PCIT's invocation of Section 263 unjustified. The appellant's appeal against the order invoking Section 263 for the Assessment Year 2017-18 was allowed.