2023 (1) TMI 165 - AT - Income Tax

Revision u/s 263 - whether interest income from his Saving Bank account was declared by him in his Return of income? - HELD THAT - As observed that revenue cannot disputed the fact that while making assessment specific queries were raised by the ld AO questioning the deposit of amounts in the bank account and taking rescue of section 44AD the assessee had sought immunity of explanation and offered income to be tax @8% u/s 44AD. Office note referred by AR explicitly determines the issue in favour of the assessee. However, RA has gone into the questions of facts about the source of the deposits and giving his own reasons concluded that the deposits were unaccounted/ concealed income. RA has not only examined the deposits but also the manner of withdrawal. The copy of register showing the sale of milk and buffalos have been discredited to reach a finding that the ld AO failed to make enquiry. The findings of ld Revisional Authority cannot be sustained as the enquiry in to the relevant issues is duly reflected in the assessment proceedings and only because the ld Pr. CIT being a higher authority and more wiser in experience considered that enquiry in some other aspects would have resulted in different opinion, does not give jurisdiction to exercise revisional power u/s 263. That being so the grounds raised are allowed and the impugned order of revisional authority is set aside. The appeal is allowed.

Summary

Issues Involved:
Assessment order under section 263 of the Income Tax Act 1961 challenged by the Assessee based on the revisional authority's findings.

Detailed Analysis:

Issue 1: Assessment Proceedings and Revisional Authority's Findings
The Assessee filed a return of income under section 44AD of the Act, but the Assessing Officer (AO) made an addition of Rs. 2 lakh due to discrepancies in the income calculation. The Revisional Authority found the assessment order erroneous and prejudicial to the Revenue's interest, primarily focusing on unexplained cash deposits in the Assessee's bank account. The Assessee explained the source of cash deposits from business receipts but failed to maintain proper records. The Revisional Authority considered the deposits unexplained, leading to a show-cause notice under section 263.

Issue 2: Grounds of Challenge by Assessee
The Assessee challenged the Revisional Authority's order on the grounds of being bad in law and reopening the case under section 263 of the Income Tax Act, 1961. The Assessee contended that the AO had conducted a detailed inquiry during assessment, citing specific queries and explanations related to cash deposits. The Assessee relied on the presumption clause under section 44AD and legal precedents to support their case.

Issue 3: Judicial Review of Revisional Authority's Findings
Upon review, the Tribunal noted that the AO had raised specific queries regarding cash deposits during assessment, and the Assessee had provided explanations based on section 44AD. The Tribunal emphasized that the Revisional Authority's findings lacked substantial evidence to deem the deposits as unaccounted income. The Tribunal highlighted that the Revisional Authority's additional inquiries did not override the AO's detailed assessment process. Ultimately, the Tribunal set aside the Revisional Authority's order, emphasizing that revisional power under section 263 should not be used merely based on differing opinions without substantial grounds.

In conclusion, the Tribunal allowed the Assessee's appeal, overturning the Revisional Authority's order and emphasizing the importance of thorough assessment procedures and substantial evidence in exercising revisional powers under the Income Tax Act.