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2025 (2) TMI 533 - AT - Income TaxRevision u/s 263 - cash deposit unexplained - AR contended that source of cash deposit was advance received in respect of agreement to sale which his faster had entered into on 30.4.2015. That sale deed was not finally executed in lieu of the buyers agreed to cultivate the land for three years - It is a case of PCIT in his impugned order that this document was unregistered document and further AO has failed to conduct third party verification on genuineness of transaction leading to availability of cash in the hand of Assessee - HELD THAT - Assessee brought to the Notice of the ld. PCIT that both the documents i.e. FARD in respect of land holdings and agreement to sell were duly furnished before the ld. A.O. and that both the document s besides others were examined and verified by the ld. A.O. in manner known to law and that assessment order was passed u/s 143(3) accepting the return of income without making any addition. Thus we hold that very basis and foundation of Show Cause Notice was successfully assailed by the Assessee and ld. PCIT erred in passing the impugned order u/s 263 of the Act. We conquer with the contention canvassed by the Ld. AR and we hold that it is now fairly settled that orders cannot travails beyond the scope of Show Cause Notice. We therefore hold order to be illegal and not proper on this score. It is passed in violation of principle of natural justice too. PCIT has erred in law by holding that queries raised during Revision proceedings u/s 263 remained unverified and the order was passed by the AOwithout making enquiries or verification which should have been made and has resulted in claim being allowed without enquiring into it. We hold that said findings is erroneous and not proper as Assessee had furnished all documents before AO in support of his case and that the same were examined and verified. PCIT had failed and omitted to state that which documents produced before ld. A.O. went unverified and was not examined. The very foundation of impugned order was Show Cause Notice and absence of two documents on record of ld. A.O. i.e. FARD and Agreement to sell which successfully has been established before us was on record of ld. A.O. Hence we have no hesitation in holding that entire eddifice of impugned order collapses and it deserves to be set asides. Appeal of Assessee is allowed.
ISSUES PRESENTED and CONSIDERED
The core issues considered in this judgment were:
ISSUE-WISE DETAILED ANALYSIS 1. Legality of the Assessment Order under Section 143(3) The legal framework under Section 143(3) mandates that the Assessing Officer conduct a thorough examination of the Assessee's return of income and accompanying documents. The Court noted that the Assessee was repeatedly issued notices during the assessment proceedings, and the Assessee duly responded with the required information and documentation. The Assessing Officer examined and verified these submissions before accepting the return of income without any additions. The Court found no legal infirmity in this process, as the Assessing Officer had exercised due diligence. 2. Revision under Section 263 The legal framework under Section 263 allows the PCIT to revise an assessment order if it is erroneous and prejudicial to the interests of the Revenue. The PCIT issued a show cause notice alleging that the Assessee failed to furnish certain documents during the assessment proceedings, specifically the FARD (landholding document) and the agreement to sell, which were crucial for verifying the source of cash deposits. However, the Assessee demonstrated that these documents were indeed submitted and verified during the assessment proceedings. The Court concluded that the foundation of the PCIT's show cause notice was successfully challenged by the Assessee, rendering the revision order under Section 263 unjustified. 3. Scope of the Show Cause Notice The Court observed that the PCIT's order under Section 263 included findings beyond the scope of the original show cause notice, particularly regarding the investments made by the Assessee's sister. These findings were not part of the initial notice, and the Assessee was not given an opportunity to respond to these new issues. The Court held that this expansion of scope violated the principles of natural justice and rendered the PCIT's order improper. 4. Principles of Natural Justice The Court emphasized the importance of adhering to the principles of natural justice, which require that an Assessee be given a fair opportunity to respond to all allegations and findings. The PCIT's failure to provide such an opportunity, particularly regarding issues not mentioned in the show cause notice, constituted a breach of these principles. SIGNIFICANT HOLDINGS The Court established several core principles in its judgment:
In conclusion, the Tribunal set aside the impugned order under Section 263, allowing the Assessee's appeal and affirming the validity of the original assessment order under Section 143(3). The Tribunal's decision underscored the necessity for tax authorities to adhere to procedural fairness and the legal standards for revising assessment orders.
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