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2023 (6) TMI 267 - AT - Income TaxRevision u/s 263 - validity of AO's order accepting the cash sales and resultant declaration of profits under the PMGKY Scheme - HELD THAT - Matter relating to cash sales has been duly enquired into by the AO, specific queries has been raised from time to time, and after taking into consideration the submissions of the assessee, specific show-cause has been issued by the AO which shows due verification and application of mind by the AO, and thereafter, taking into considerations the directions of the Additional CIT who has again applied his mind and issued specific directions u/s 144A which takes into consideration the declaration of profits on cash sales and payment of taxes under the PMGKY Scheme besides other things, the assessment order has been passed by the AO. We therefore find that the matter has been thoroughly examined by the AO during the course of assessment proceedings and the ld PCIT has not stated as to how the findings so recorded by the AO accepting the cash sales and resultant declaration of profits under the PMGKY Scheme are erroneous in so far as prejudicial to the interest of the Revenue. The order of the ld PCIT is accordingly set-aside and that of the AO is sustained. Appeal of the assessee is allowed.
Issues Involved:
1. Legality of invoking Section 263 of the Income Tax Act, 1961. 2. Adequacy of enquiry conducted by the Assessing Officer (AO) during assessment proceedings. 3. Consideration of the Pradhan Mantri Garib Kalyan Yojana (PMGKY) Scheme 2016 in the assessment. 4. Validity of the Principal Commissioner of Income Tax (PCIT)'s findings on cash sales and sundry creditors. Summary: 1. Legality of Invoking Section 263: The Assessee challenged the invocation of Section 263 by the Ld. PCIT, arguing that the show cause notice did not specify how the assessment order was erroneous and prejudicial to the interest of the Revenue. The Tribunal noted that the PCIT's show cause notice lacked specific reasons and was ambiguous, making the invocation of Section 263 unsustainable. 2. Adequacy of Enquiry by AO: The Tribunal observed that the AO had conducted a detailed enquiry during the assessment proceedings, including issuing multiple notices under Sections 142(1) and 143(2), examining cash sales, and verifying sundry creditors. The AO also followed directions under Section 144A issued by the Additional CIT. The Tribunal found that the AO had thoroughly examined the sales and creditors, and the PCIT did not conduct any further enquiry or provide new evidence to prove the AO's order erroneous. 3. Consideration of PMGKY Scheme 2016: The Assessee had declared a super profit of Rs. 4.00 crores under the PMGKY Scheme 2016, which was accepted by the Department. The Tribunal held that once income is declared under the PMGKY Scheme, no further addition could be made. The PCIT failed to consider this aspect, rendering the revision order unsustainable. 4. Validity of PCIT's Findings: The Tribunal found that the PCIT's findings on cash sales and sundry creditors were inconsistent with the show cause notice. The PCIT's notice referred to post-demonetization sales, while the findings addressed pre-demonetization sales. Additionally, the issue of sundry creditors was not raised in the show cause notice, and no opportunity was provided to the Assessee to explain. The Tribunal concluded that the PCIT's order was passed without providing an opportunity of being heard, violating principles of natural justice. Conclusion: The Tribunal set aside the PCIT's order under Section 263, holding that the AO had conducted a proper enquiry and the PCIT failed to demonstrate how the assessment order was erroneous and prejudicial to the Revenue's interest. The appeal was allowed in favor of the Assessee. Consequently, the stay petition became infructuous.
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