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2023 (3) TMI 311 - AT - Income TaxRevision u/s 263 - Unexplained deposit of cash during the financial year - HELD THAT - Explanation were furnished in the context of specific notices issued by the AO calling for the explanation in support of cash deposit and the AO has examined the said explanations and has further carried out verification from the banks and after examining earlier years tax returns, has accepted the same in support of cash availability at the beginning of the year and deposit therefrom during the demonization period. We therefore find that the matter relating to source of cash deposits during the demonization period has been duly examined by the AO and he has taken all requisite steps calling for explanation from the assessee, issuing further notices where the earlier explanation was not acceptable and calling for further information and after carrying out independent examination from past year tax returns available on department's IT Portal and calling from the information from the bank has accepted the said explanation so furnished by the assessee. Amounts received by the assessee, pursuant to comprise and settlement as per various Courts orders , PCIT has accepted the fact that these Court orders are on record and the compensation amount as so stated therein and the parties to the compensation are thus not disputed. However, for the reason that the exact date of receipt of compensation is not discernable, the explanation of the assessee has been negated. We find that the date of the Court's order are clearly discernable from the records and one of the such order is dated 24/12/2015 and it can reasonably be presumed that the amount has been received by the assessee within a reasonable period pursuant to such Court order during the financial year 2015-16 in absence of any evidence that such Court order has not been honoured and complied with by the other party and which is not the case of the Revenue either. Regarding other receipts on maturity of insurance policies, sale of land etc, the factum of these transactions and necessary evidence on record has not been disputed by the ld. PCIT - Only reason why the ld. PCIT has not accepted the explanation of the assessee is that it is against human probability that the assessee would be keeping huge cash-in-hand for such long period of time and no evidence has been furnished. In this regard, we believe that the human probability has to be seen in context of surrounding circumstances of the assessee prevalent at the relevant point in time and a reasonable inference has to be drawn. In context of present assessee, after the death of her husband, the assessee was undergoing a difficult phase in her personal life and it must have took her time to gain understanding of business and financial dealings of her late husband, thereafter she took steps to recover money advanced to various parties by her husband, the cases were filed before the Courts and compromise/settlement reached and pursuant thereto, she has recovered the amount advanced by her late husband. Further, the trauma and pain in her life got further aggravated on account of divorce proceedings of her daughter. In the said background, if we see the assessee's explanation, we find that she has sufficiently explained and demonstrated the availability of cash which she kept in her possession instead of depositing the same with bank or any other relative/third party and thus, she has discharges the initial onus placed on her. Thus we are of the considered view that the matter has been duly examined by the AO and the assessment order so passed by him cannot be held as erroneous in so far as prejudicial to the interest of the Revenue. Decided in favour of assessee.
Issues Involved:
1. Limitation of the order passed under Section 263(1) of the Income Tax Act, 1961. 2. Legality of the notice and order under Section 263. 3. Jurisdiction of the Principal CIT under Section 263. 4. Erroneous and prejudicial nature of the assessment order regarding cash deposits during the demonetization period. 5. Basis of the proceedings and order under Section 263. 6. Examination of assessment records by the Assessing Officer (AO). 7. Source of deposits from the books of account. 8. Verification of information/details/documents by the AO. Detailed Analysis: 1. Limitation of the Order Passed Under Section 263(1): The assessee contended that the order passed by the Principal CIT under Section 263(1) was barred by limitation as the assessment order was passed on 19.03.2019, and the limitation expired on 31.03.2021. The order under Section 263(1) was passed on 27.03.2022, making it liable to be canceled. 2. Legality of the Notice and Order Under Section 263: The assessee argued that the notice issued under Section 263 and the subsequent order were illegal, bad in law, and against the facts of the case. The Principal CIT's order was challenged on the grounds of legality. 3. Jurisdiction of the Principal CIT Under Section 263: The assessee claimed that the Principal CIT exceeded his jurisdiction by issuing the notice under Section 263 and passing the order, as the case was taken for limited scrutiny under CASS. The Principal CIT was argued to have no authority to pass the order under Section 263. 4. Erroneous and Prejudicial Nature of the Assessment Order: The Principal CIT invoked Section 263 on the grounds that the assessment order for AY 2017-18 was erroneous and prejudicial to the interest of the Revenue due to unexplained cash deposits of Rs. 24,00,000 during the demonetization period. The assessee contended that the deposits were duly explained before the AO. 5. Basis of the Proceedings and Order Under Section 263: The assessee argued that the proceedings and the order passed by the Principal CIT under Section 263 were perverse as they were based on general observations and not specific to the facts of the case. The Principal CIT was said to have ignored the thorough examination of the assessment records by the AO. 6. Examination of Assessment Records by the AO: The assessee emphasized that the AO had thoroughly examined the assessment records for the year in question and the earlier two years (2015-16 and 2016-17). The Principal CIT ignored this fact while passing the order under Section 263. 7. Source of Deposits from the Books of Account: The assessee argued that the deposits were made from the books of account, which included sale proceeds of a plot (capital gain shown and tax paid). The Principal CIT failed to appreciate this fact. 8. Verification of Information/Details/Documents by the AO: The assessee contended that the AO had examined the amount received by the appellant through a recovery suit and compromise through court. Necessary information/details/documents were furnished by the assessee, examined, verified, and placed on record by the AO. Judgment: Limitation and Jurisdiction: The Tribunal examined the contention regarding the limitation and jurisdiction of the Principal CIT. The Tribunal found that the Principal CIT exercised his jurisdiction under Section 263 to examine the explanation and documentation submitted by the assessee regarding the cash deposits during the demonetization period. The Tribunal held that the Principal CIT's jurisdiction was not exceeded as the matter pertained to the assessment year 2017-18, and the explanation of the assessee regarding the opening cash-in-hand had to be verified. Erroneous and Prejudicial Nature of the Assessment Order: The Tribunal noted that the AO had conducted extensive inquiries and verification regarding the cash deposits during the demonetization period. The AO had issued notices under Sections 143(2) and 142(1), called for explanations, examined the submissions, and verified the information from independent sources. The AO had accepted the assessee's explanation regarding the cash deposits after due verification. Basis of the Proceedings and Order Under Section 263: The Tribunal found that the Principal CIT's order under Section 263 was based on audit objections and was a case of borrowed satisfaction. The Principal CIT did not independently apply his mind before initiating the proceedings under Section 263. The Tribunal held that the AO had conducted all necessary inquiries and verification, and the Principal CIT could not substitute the AO's view with his own. Examination of Assessment Records by the AO: The Tribunal acknowledged that the AO had thoroughly examined the assessment records for the relevant year and earlier years. The AO had verified the cash deposits, examined past year tax returns, and called for information from banks. The Tribunal found that the AO had taken all requisite steps and accepted the explanation of the assessee. Source of Deposits from the Books of Account: The Tribunal noted that the assessee had explained the source of cash deposits from the books of account, including sale proceeds of a plot. The AO had verified the explanation and accepted it after due examination. Verification of Information/Details/Documents by the AO: The Tribunal found that the AO had verified the information/details/documents furnished by the assessee regarding the recovery suit and compromise through court. The AO had examined and placed the necessary information on record. Conclusion: The Tribunal concluded that the assessment order passed by the AO was not erroneous or prejudicial to the interest of the Revenue. The Principal CIT's order under Section 263 was set aside, and the AO's order under Section 143(3) was sustained. The appeal of the assessee was allowed. Order Pronounced: The order was pronounced in the open Court on 20/02/2023.
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