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2024 (4) TMI 930 - AT - Income TaxRevision u/s 263 - Order of AO is erroneous in so far as prejudicial to the interest of revenue - Addition u/s 68 as receipt of cash from depositors unexplained - lack of enquiry on the part of AO - HELD THAT - It is settled position of law that while framing an assessment, the AO has dual role, i.e., he is an investigator and also an adjudicator of the matter. If the AO failed to carry out the investigation, vis-a-vis, the facts of the case, then such is a case of lack of enquiry and the order of the AO can be termed as erroneous. While acting as an adjudicator, if the AO took some view which is contrary to law or the AO failed to consider the provisions of law of income tax, then also such an order is erroneous. If the assessment proceedings are erroneously conducted and the revenue is suffering loss then such an order falls under the ambit of the provisions of section 263. Similarly, if the AO failed to consider the provisions of Income-tax or formed a view which is contrary to law, then such an order also falls under the ambit of section 263. When we analyse the facts of the present case in the light of above principles of law, then we are of the firm view that it is a case where the order of AO is erroneous in so far as prejudicial to the interest of revenue. In the present case, certain facts are very strange such as the assessee does not even know the name and contact details of the persons who have deposited cash in his saving bank account. The assessee has also denied about the details of goods purchased for customers and sent to customers. Assessee has shown his inability to provide the details such as invoices of goods, transport bilties etc. Therefore, it is a clear cut case of lack of enquiry. There was complete inaction on the part of the AO and hence, the order of assessment is erroneous in so far as prejudicial to the interest of revenue. In this era of digitalization, where even a vegetable vender is using digital mode of payment, huge cash transaction creates doubt in the mind of a person of common prudence. However, a suspicion, howsoever, is strong, cannot partake the character of evidence and hence, solely on the basis of suspicion, an action cannot be justified. But in the circumstances of the present case, the AO has failed to conduct any enquiry to dislodge the suspicious cash transactions. AO is duty bound to carry out proper investigation of facts and then to form a plausible view on such facts. Moreover, the assessee would get full opportunity in set aside assessment proceedings to justify the receipt of cash from depositors in the light of provisions of section 68. So far as the contention of the assessee that for the assessment year 2014-15, the assessee was also assessed u/s. 143(3) and no revision has been made in that case by the Revenue, though the modus operandi of the assessee in that year was the same, is concerned, this contention of the assessee is of no relevance because it is settled position of law that principle of res judicata is not applicable to the Income-tax proceedings and each year is a separate year. Hon ble Supreme Court in the case of Distributors (Baroda) Pvt. Ltd. 1985 (7) TMI 1 - SUPREME COURT has held that to perpetuate an error is not heroism. We are of the firm view that it is a case of lack of enquiry on the part of the AO and hence, PCIT has correctly exercised his jurisdiction u/s. 263 of the Act. Decided against assessee.
Issues Involved:
1. Whether the order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interests of revenue. 2. Whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking powers u/s 263 of the Income Tax Act. 3. Whether the lack of enquiry by the AO constitutes grounds for invoking section 263. Summary: Issue 1: Erroneous and Prejudicial Order by AO The assessee filed a return of income declaring Rs. 4,00,480/-. The case was selected for limited scrutiny to examine "whether the cash deposit has been made from disclosed sources." The AO completed the assessment without making any enquiry regarding the cash deposits of Rs. 13,39,75,217/- in the assessee's bank accounts. The assessee claimed these deposits were from customers for purchasing glass bangles. The PCIT observed that the AO failed to conduct any enquiry, thus rendering the order erroneous and prejudicial to the interests of revenue. Issue 2: Justification for Invoking Section 263 The PCIT invoked section 263, arguing that the AO's failure to investigate the cash deposits made the order erroneous and prejudicial to the interests of revenue. The assessee contended that the AO had made a conscious decision after examining the necessary evidence. However, the Tribunal found that the AO did not conduct any enquiry into the cash deposits, thus justifying the PCIT's invocation of section 263. Issue 3: Lack of Enquiry by AO The Tribunal noted that the AO did not make any enquiries regarding the details of parties from whom cash was received or the transactions involved. The assessee admitted that no such details were provided during the assessment proceedings. The Tribunal emphasized that the AO's role includes being both an investigator and an adjudicator. The failure to investigate constitutes a lack of enquiry, making the order erroneous and prejudicial to the interests of revenue. Conclusion The Tribunal upheld the PCIT's action u/s 263, concluding that the AO's lack of enquiry rendered the assessment order erroneous and prejudicial to the interests of revenue. The appeal was dismissed, with the observation that the assessee would have the opportunity in the set-aside assessment proceedings to justify the cash deposits. Order Pronounced The appeal was dismissed, and the order was pronounced in the open court on 22.04.2024 at Agra, U.P.
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