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2022 (12) TMI 757 - AT - Income TaxRevision u/s 263 - cash as deposited into the bank account subsequent to announcement of demonetization - HELD THAT - We find from the assessment order that the AO has verified bank account statements, VAT returns, audit report with final accounts schedules and has confirmed that the assessee has explained the cash deposits made in the bank account to the satisfaction of the Ld. AO. I In these circumstances of the case, we find that the Ld. Pr. CIT has erred in invoking the provisions of section 263 of the Act treating the order of the Ld. AO as erroneous insofar as it is prejudicial to the interest of the Revenue. We therefore are inclined to quash the order of the Ld. Pr. CIT passed U/s. 263 of the Act thereby upholding the order of the Ld. AO. Appeal filed by the assessee is allowed.
Issues:
1. Jurisdiction of Principal Commissioner under section 263 of the Income Tax Act. 2. Verification of sources for cash deposits during demonetization period. 3. Assessment based on low GP ratio. Jurisdiction of Principal Commissioner under section 263: The appeal was filed against the order of the Principal Commissioner of Income Tax under section 263 of the Income Tax Act. The Principal Commissioner found the assessment order to be erroneous and prejudicial to the interest of the Revenue. The Principal Commissioner issued a show cause notice to the assessee, who responded with the required information. However, the Principal Commissioner was not convinced with the replies and directed a re-assessment by the Assessing Officer after necessary inquiries and verifications. The assessee challenged the order of the Principal Commissioner on the grounds that the conditions of "error" and "prejudice to the interests of the Revenue" were not satisfied in the original assessment order. Verification of sources for cash deposits during demonetization period: The assessee had deposited cash amounting to Rs. 27 lakhs during the demonetization period. The Principal Commissioner raised concerns about the sources of these cash deposits. The Authorized Representative submitted relevant bank statements and other documents before both the Assessing Officer and the Principal Commissioner to demonstrate the sources of the cash deposits. The Authorized Representative argued that the books of account and bank statements were verified during the assessment proceedings. It was also highlighted that the percentage of yield and sales details were disclosed in the financial statements. The Authorized Representative provided evidence that the cash deposits were accounted for in the cash book maintained by the assessee. Ultimately, it was found that the Assessing Officer had verified the sources of cash deposits to his satisfaction, and the Principal Commissioner erred in invoking section 263 of the Act. Assessment based on low GP ratio: The case involved scrutiny of the assessee's return of income, particularly focusing on the low Gross Profit (GP) ratio declared by the assessee for the assessment year. The Assessing Officer computed the GP at 6.62% and made an addition to the income returned by the assessee. The Principal Commissioner, upon examination, found the assessment order to be erroneous and prejudicial to the Revenue's interest. The Principal Commissioner directed a re-assessment by the Assessing Officer after necessary inquiries and verifications. The Tribunal, after considering all submissions and evidence, found that the Assessing Officer had verified the relevant documents and that the Principal Commissioner's order under section 263 was unwarranted. Consequently, the Tribunal allowed the appeal filed by the assessee. In conclusion, the Tribunal set aside the order of the Principal Commissioner under section 263 of the Income Tax Act, upholding the original assessment order passed by the Assessing Officer. The detailed analysis of the issues highlighted the importance of proper verification of sources, adherence to legal procedures, and the necessity of satisfying conditions for invoking jurisdiction under section 263.
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