2022 (8) TMI 1538 - AT - Income Tax

Validity of revision order passed u/s 263 - unexplained income due to cash transactions - appeal preferred by the assessee u/s 250 of the Act before the CIT(A) is pending - Case of the assessee was reopened by issuing notice u/s 148 on the basis of the assessee entering into the financial transactions and absence of proper explanation the same was treated as unexplained income and added 2.5% of the cash transactions As per CIT(A) whole cash transaction was required to be added to the total income of the assessee which particular fact was not examined by the AO rendering the order erroneous as well as prejudicial to the interest of revenue - HELD THAT - It appears from the records that Ld. AO has examined each and every aspect of the matter after analyzing the entire set of documents submitted by the assessee as demanded by Revenue which is reflecting in the order passed by the Ld. AO. In that view of the matter we do not justify the remand order to be sustainable particularly when the appeal has been preferred by the assessee against the said order passed by the Ld. AO. We further note that the Ld. CIT(A) is yet to decide the order either way and therefore, we do not find any reason to initiate and proceed against the said order passed by the Ld. AO under Section 147 of the Act taking recourse of the provision of law under Section 263 of the Act by holding the order passed by the Ld. AO erroneous and prejudicial to the interest of Revenue. In our considered opinion, the same is premature. No reason/basis of the impugned proceeding under Section 263 of the Act when the appeal preferred by the assessee u/s 250 of the Act before the CIT(A) is pending against the order passed by the Ld. AO under Section 147 of the Act which has been sought to be revised by the Ld. PCIT in the garb of the provision of Clause (c) of Explanation 1 of Section 263 of the Act. The same is, thus, found to be unsustainable and therefore, quashed. Assessee's appeal is, therefore, allowed.

Summary

Issues:
1. Reopening of assessment under Section 148 of the Income Tax Act.
2. Allegation of unexplained income due to cash transactions.
3. Jurisdiction of Principal Commissioner of Income Tax under Section 263.
4. Pending appeal before Commissioner of Appeal and its impact on Section 263 proceedings.
5. Interpretation of statutory bar under Section 263 during the pendency of appeal.
6. Consideration of judgments by the High Courts in similar cases.

Analysis:

The judgment pertains to an appeal filed by the assessee against the order passed by the Principal Commissioner of Income Tax-1, Rajkot under Section 263 of the Income Tax Act, 1961. The case involves the reopening of the assessment under Section 148 based on financial transactions, where the assessee's total income was initially declared at Rs. 2,89,450 and later revised to Rs. 3,74,870. The allegation of unexplained income of Rs. 1,70,27,660 due to cash transactions led to the addition of Rs. 4,25,691 by the Assessing Officer (AO). The Principal Commissioner of Income Tax (PCIT) initiated proceedings under Section 263, contending that the entire cash transaction amount should have been added to the total income, which was not examined by the AO, rendering the order erroneous and prejudicial to revenue.

During the appeal hearing, the assessee argued that a larger issue was pending before the Commissioner of Appeal, and therefore, the PCIT could not invoke jurisdiction under Section 263. The assessee relied on judgments by the Madras High Court and Allahabad High Court to support this argument. The Departmental Representative (DR) supported the orders passed by the authorities below.

The Appellate Tribunal noted that the AO had examined all aspects after analyzing documents submitted by the assessee. The Tribunal found the PCIT's order premature as the appeal before the Commissioner of Appeal was pending. The Tribunal referenced the judgments cited by the assessee, emphasizing the statutory bar under Section 263 during the pendency of an appeal. The Tribunal highlighted the importance of considering the available record at the time of examination by the Commissioner of Income Tax.

Ultimately, the Tribunal found the PCIT's proceedings under Section 263 unsustainable and quashed them, allowing the assessee's appeal. The decision was based on the statutory bar during the pendency of the appeal before the Commissioner of Appeal, as supported by the judgments cited during the proceedings.

In conclusion, the appeal filed by the assessee was allowed, and the Tribunal pronounced the order in open court on 31/08/2022.