2023 (4) TMI 807 - AT - Income Tax

Revision u/s 263 - Addition u/s 68 - cash deposits made into the bank account during the demonetization period under the provisions of section 115BBE - AO's order as 'erroneous as well as prejudicial to the interest of the revenue - HELD THAT - Hon ble Apex Court in Malabar Industries Ltd. vs. CIT 2000 (2) TMI 10 - SUPREME COURT wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 by the CIT. Twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. Jurisdictional condition as required u/s 263 of the Act to revise the order of the Assessing Officer is absent in assessee s case, since the order of the Assessing Officer cannot be termed as erroneous as well as prejudicial to the interest of the revenue . The whole cash deposit (After giving benefit as declared under PMGKY), the AO had in fact enquired the issue raised by ld PCIT. The Assessing Officer made adequate enquiry in respect of closing stock also. Thus Assessing Officer s order cannot be termed as erroneous as well as prejudicial to the interest of the revenue and therefore, jurisdictional condition as prescribed by statute for invoking revisional jurisdiction is absent and therefore, we are inclined to quash the impugned order of the ld. PCIT. Appeal of the assessee is allowed.

Issues Involved:
1. Setting aside of original assessment order.
2. Consideration of cash deposits during demonetization.
3. Taxation under section 115BBE.
4. Counter submissions to show cause notice.
5. Jurisdiction under section 263.

Summary:

Issue 1: Setting aside of original assessment order
The assessee contested the Principal Commissioner of Income Tax-Valsad (PCIT)'s decision to set aside the original assessment order and direct a fresh assessment. The PCIT believed that the Assessing Officer (AO) failed to make necessary inquiries and verifications, particularly regarding cash deposits during the demonetization period, leading to an erroneous and prejudicial order.

Issue 2: Consideration of cash deposits during demonetization
The PCIT directed the AO to reassess the cash deposits made during demonetization, noting discrepancies in the cash sales and deposits. The assessee argued that the AO had already made adequate inquiries and provided detailed responses during the original assessment, including VAT returns and sales records.

Issue 3: Taxation under section 115BBE
The PCIT instructed the AO to tax the cash deposits under section 115BBE, which imposes a higher tax rate on unexplained income. The assessee contended that the AO had already examined the cash deposits and sales, applying a reasonable gross profit rate, and that further taxation under section 115BBE was unnecessary.

Issue 4: Counter submissions to show cause notice
The PCIT observed that the assessee did not make any counter submissions to the issues raised in the show cause notice. However, the assessee provided evidence of detailed responses and inquiries made during the original assessment, arguing that the AO had sufficiently addressed the issues.

Issue 5: Jurisdiction under section 263
The assessee challenged the PCIT's jurisdiction under section 263, asserting that the original assessment was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal referenced several legal precedents, including the Supreme Court's decision in Malabar Industrial Co. Ltd. v. CIT, emphasizing that an order can only be revised if it is both erroneous and prejudicial to the revenue.

Conclusion:
The Tribunal concluded that the AO had made adequate inquiries and the original assessment was a plausible and legally sustainable view. The PCIT's order was quashed, and the appeal of the assessee was allowed. The Tribunal emphasized that mere differences in opinion or the absence of detailed discussion in the assessment order do not justify revision under section 263.

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