2023 (4) TMI 1341 - AT - Income Tax

Revision u/s 263 - unexplained cash deposits - As per CIT while completing the assessment AO has not raised the issue of deposit of old bank notes for which no detailed enquiry had been conducted by the AO and AO has not called for the deposit receipt from the bank including the counterfoils and has not verified the cash deposited in the bank vis a via cash book, no cash flow statement has been filed by the assessee which could reflect the availability of cash with the assessee - HELD THAT - Both the parties have not disputed the fact mentioned in the assessment proceeding about the act of the assessee in depositing a sum of Rs. 51.60 lac in the bank account during the period of demonetization. Out of the cash so deposited a sum of Rs. 16.80 lac was consisting of high value notes of Rs. 500 and Rs. 1000. The ld. PCIT in his order contended that the ld. AO has not properly addressed the issue while completing the assessment. Even the ld. DR did not place anything further to support the any specific error on the part of the assessee. As perused the assessment order and the relevant submission on the issue that the assessee has given details in the assessment proceeding at four instance so as to support the fact that inquiry in relation to the generation of the cash by the assessee is verified by the ld. AO. It is also not disputed by the PCIT or ld. Sr. DR for the balance amount deposited in the demonetized period which is that out of 51.60 lacs but disputed only for an amount Rs. 16.80 lac being the demonetized currency. There is no evidence or material that has been observed by the PCIT from the details so placed on record by the assessee in the assessment proceeding to disbelieve the averments about the source of the said demonetized currency. Merely the PCIT said that in his opinion the ld. AO has not properly addressed the issue. The observation so made is very general and routine without pinpointing any specific defect the action of the PCIT u/s. 263 is nothing but a review of the order of the ld. AO. Merely, the ld. AO has not specifically written that he has verified the cash of demonetized currency will not hold the assessment erroneous or prejudicial to the interest of the assessee. Even we find that the assessee has submitted all the details to substantiate the deposit of the cash be it may the demonetized currency. When the source of total cash deposited during the demonetization period to the extent of Rs. 51.60 lac is examined and not disputed by the ld. PCIT, how the part of that cash consisting of Rs. 16.80 lac being the demonetized currency for which the PCIT contended that ld. AO has not the addressed issue is not the correct observation and by that observation the order of the ld. AO cannot be considered as erroneous or prejudicial to the interest of revenue and thereby invoking of the provision u/s. 263 is unwarranted. Assessee appeal allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of the revisionary jurisdiction exercised by the Pr. Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal with a delay of 220 days, citing reasons such as lack of proper advice from the local counsel and the eventual realization of the right to appeal only upon receiving a notice under Section 142(1) from the NFAC, New Delhi. The assessee argued that the delay was bona fide and unintentional, supported by an affidavit.

The tribunal acknowledged the delay and noted that under Section 253(5) of the Income Tax Act, it has the power to admit an appeal filed beyond the period of limitation if there is a "sufficient cause." The tribunal referred to several judicial precedents, including the Hon'ble Supreme Court's decisions in Vijay Vishin Meghani vs. DCIT and Collector, Land Acquisition vs. MST Katiji, which emphasized a liberal approach to condonation of delay to serve the ends of justice.

The tribunal concluded that the assessee had acted diligently and the delay was not due to negligence or malafides. Therefore, the tribunal condoned the delay of 220 days and admitted the appeal for adjudication on merits.

2. Validity of the Revisionary Jurisdiction Exercised by the PCIT under Section 263:
The assessee challenged the order of the PCIT, arguing that the original assessment order dated 09.05.2019 was passed after due verification of books of accounts and information supplied during the assessment proceedings. The assessee contended that the PCIT's assumption of revisionary jurisdiction under Section 263 was unwarranted and based on incorrect observations.

The tribunal examined the facts and found that the Assessing Officer (AO) had indeed conducted inquiries and verified the cash deposits made during the demonetization period. The AO had issued multiple notices and called for various documents, including the cash book, bank book, and sales and purchase records, which were duly examined.

The PCIT's order stated that the AO had not properly addressed the issue of cash deposits in old banknotes and had not conducted a detailed inquiry. However, the tribunal noted that the AO had made inquiries at four instances and recorded satisfaction after examining the relevant records. The tribunal emphasized that the PCIT's observation was general and did not pinpoint any specific defect in the assessment records.

The tribunal referred to judicial precedents, including the Hon'ble Supreme Court's decisions in Malabar Industrial Co. Ltd. vs. CIT and CIT vs. Max India Ltd., which held that an order cannot be considered erroneous or prejudicial to the interests of the revenue merely because the PCIT disagrees with the AO's view if the AO has adopted one of the permissible courses of action.

The tribunal concluded that the PCIT's invocation of Section 263 was unwarranted, as there was no specific error or defect in the AO's assessment. Therefore, the tribunal quashed the order passed by the PCIT under Section 263.

Conclusion:
The tribunal allowed the appeal of the assessee, condoning the delay in filing the appeal and quashing the PCIT's order under Section 263. The tribunal emphasized the importance of substantial justice over technicalities and found that the AO had conducted a proper inquiry and verification during the assessment proceedings.