2023 (3) TMI 549 - AT - Income Tax

Validity of assumption of jurisdiction u/s 263 by the ld. PCIT - case was selected under limited scrutiny for the purpose of verification of cash deposits - whether the Assessing Officer had examined the items which were subject matter of revision during the course of original assessment proceedings? - HELD THAT - As gone through the assessment order passed consequent to the order u/s 263, wherein, the Assessing Officer only made addition in respect of cash deposits as the appellant had failed to offer any explanation in support of the sources for cash deposits, despite reasonable opportunity to the appellant. Moreover, the appellant also could not demonstrate before us that this issue was examined by the Assessing Officer during the course of assessment proceedings and took a plausible view. This fact only goes to prove that neither the Assessing Officer had enquired into the sources of cash deposits nor the appellant had offered any explanation in support of the sources for cash deposits. This clearly goes to prove the Assessing Officer had failed to examine this issue during the course of original assessment proceedings, which rendered the assessment order erroneous and prejudicial to the interests of the Revenue. In these circumstances, we are of the considered opinion that the ld. PCIT was justified in exercising the power of revision vested with him u/s 263 of the Act. Therefore, we do not find any merit in the appeal filed by the assessee.

Summary

Issues:
1. Validity of assumption of jurisdiction u/s 263 by the ld. PCIT.

Analysis:
The appeal before the Appellate Tribunal ITAT Pune involved the validity of the assumption of jurisdiction under section 263 by the ld. PCIT. The ld. PCIT had issued a show-cause notice to the assessee pointing out various discrepancies in the assessment order for the year 2015-16. The ld. PCIT concluded that the Assessing Officer failed to examine crucial items during the assessment proceedings, rendering the assessment order erroneous and prejudicial to the Revenue's interests. The discrepancies included increased capital investments, unverified unsecured loans, claimed expenditures for relatives, failure to assert personal use of vehicle, and unverified cash deposits. The ld. PCIT set aside the assessment order and directed a reassessment after affording the appellant an opportunity to be heard.

Upon receiving the show-cause notice, the appellant contended that since the case was selected for limited scrutiny regarding cash deposits, the verification of other items was not required. However, the ld. PCIT rejected this argument, stating that the non-verification of crucial items made the assessment erroneous and prejudicial to the Revenue. The Tribunal noted that the Assessing Officer had not examined the sources of cash deposits and the appellant failed to provide explanations, indicating a lack of scrutiny in the original assessment proceedings. The Tribunal upheld the ld. PCIT's decision to exercise revisionary powers under section 263, citing precedents that an assessment order cannot be considered erroneous if the Assessing Officer took a plausible view, which was not the case here. Consequently, the Tribunal dismissed the appeal filed by the assessee, affirming the validity of the ld. PCIT's jurisdiction under section 263.

In conclusion, the Tribunal's detailed analysis emphasized the importance of thorough examination and verification of all relevant items during assessment proceedings to avoid erroneous orders. The decision highlighted the necessity for Assessing Officers to take plausible views supported by evidence and for appellants to provide explanations to maintain the integrity of the assessment process and protect the Revenue's interests.