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2025 (3) TMI 20 - AT - Income TaxRevision u/s 263 - unexplained money u/s 69A r.w.s. 115BBE - non-application of mind by the AO to reach on the conclusion leading thereby an erroneous order u/s 147 - HELD THAT -Reopening assessment u/s 147 assessee was required to furnish necessary information and explanations qua the cash deposited in her bank account to the tune and interest income. The reopening was done for the reason that as per available information with the department huge cash amounts were deposited by the assessee whereas ROI for the relevant AY was not submitted. During the course of reassessment proceedings notice u/s 142(1) were issued twice and the onus to respond towards such notices was duly complied by the assessee. No further explanations were sought by the AO shows that the AO was satisfied with the submissions of the assessee and therefore the assessment was completed accepting the returned income of the assessee. Revisionary proceedings u/s 263 were initiated which were led only for the reason that the assessee has a surplus of Rs. 16 lac as opening cash balance which was subsequently deposited in the bank account in piecemeal manner on 92 occasions @ Rs. 25, 000/- each. Such deposits surely have the reason for Ld. PCIT to revisit the assessment however the amount proposed to be treated as unexplained money u/s 69A was mostly emanating from the opening cash balance. The amount escaped assessment pertains to AY 2012-13 and not relevant for the year under consideration. On the basis of such information the department may have adopted the recourse available with them to reopen the income escaping assessment u/s 147 for the AY 2012-13. However in the present case wherein enquires are made explanations are offered and a plausible view has been adopted which cannot be set to be without application of mind by the Ld. AO who had initiated the revisionary proceedings by issuing the notice u/s 148 and completed the assessment u/s 147. In such a scenario we observed that specific inquiries as expected from the Ld. AO were made and after receipt of necessary information explanation and compliances by the assessee a plausible view have been taken and the retuned income was accepted therefore the initiation of revisionary proceedings u/s 263 are not according to settled principle of law as laid down in the case of PCIT vs Mukesh Chand 2023 (10) TMI 1064 - GUJARAT HIGH COURT Thus order of Ld. PCIT u/s 263 was under misconception that the Ld. AO had not conducted necessary inquiries on the issue or there was non-application of mind by the AO to reach on the conclusion leading thereby an erroneous order u/s 147 thus the order passed u/s 263 being bereft of merits cannot sustain in the eyes of law hence quashed. Appeal of the assessee stands allowed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include: 1. Whether the assessment order under section 147 read with section 144B of the Income Tax Act, 1961, for the Assessment Year 2013-14, was erroneous and prejudicial to the interest of the revenue, justifying the invocation of section 263 by the Principal Commissioner of Income Tax (PCIT). 2. Whether the PCIT's order to make a fresh assessment de novo was permissible under the law, given the absence of specific factual findings on the merits of the cash deposits issue. 3. The applicability of section 69A concerning unexplained money, particularly in relation to the opening cash balance and subsequent cash deposits made by the assessee. ISSUE-WISE DETAILED ANALYSIS 1. Assessment Order's Validity under Section 147/144B - Legal Framework and Precedents: Section 147 allows for the reassessment of income if the Assessing Officer (AO) has reason to believe that income has escaped assessment. The PCIT can invoke section 263 if the order is erroneous and prejudicial to the revenue's interest. - Court's Interpretation and Reasoning: The Tribunal examined whether the AO conducted proper inquiries and applied their mind to the facts. It was noted that the AO issued notices under sections 142(1) and 143(2), and the assessee provided detailed responses, including financial documents and explanations for cash deposits. - Key Evidence and Findings: The AO had accepted the assessee's explanations for cash deposits and completed the assessment without making additional inquiries, indicating satisfaction with the provided information. - Application of Law to Facts: The Tribunal found that the AO had conducted specific inquiries and adopted a plausible view based on the information provided by the assessee, which does not render the assessment order erroneous. - Treatment of Competing Arguments: The Tribunal considered the PCIT's argument that the AO's inquiries were inadequate but concluded that the AO's actions were sufficient under the circumstances. - Conclusions: The Tribunal held that the assessment order was neither erroneous nor prejudicial to the revenue's interest, thus invalidating the PCIT's invocation of section 263. 2. PCIT's Order for Fresh Assessment - Legal Framework and Precedents: Section 263 empowers the PCIT to revise an assessment order if it is erroneous and prejudicial to the revenue's interest. However, the PCIT must provide specific factual findings to justify such action. - Court's Interpretation and Reasoning: The Tribunal emphasized that the PCIT failed to provide specific findings on how the AO's acceptance of cash deposits was erroneous. The PCIT's order lacked substantive reasoning, merely directing a fresh assessment without addressing the merits. - Key Evidence and Findings: The PCIT's order was based on the observation of a large opening cash balance and frequent cash deposits, but without concrete findings on their erroneous nature. - Application of Law to Facts: The Tribunal found that the PCIT's directive for a de novo assessment lacked legal basis due to the absence of specific findings on the alleged errors. - Treatment of Competing Arguments: The Tribunal considered the department's argument that the AO's inquiries were insufficient but found no substantive evidence to support this claim. - Conclusions: The Tribunal concluded that the PCIT's order for a fresh assessment was not permissible under the law, given the lack of specific findings on the merits. 3. Applicability of Section 69A - Legal Framework and Precedents: Section 69A pertains to unexplained money, requiring the assessee to provide satisfactory explanations for ownership and source of funds. - Court's Interpretation and Reasoning: The Tribunal noted that the PCIT proposed treating the unexplained cash as income under section 69A, but this was primarily based on the opening cash balance, not the cash deposits during the relevant year. - Key Evidence and Findings: The Tribunal found that the cash deposits were explained through a day-to-day cash book, and the opening balance pertained to a prior assessment year. - Application of Law to Facts: The Tribunal determined that the unexplained money under section 69A could not be applied to the opening cash balance from a previous year without reopening that year's assessment. - Treatment of Competing Arguments: The Tribunal considered the department's position but found the PCIT's reliance on section 69A misplaced, as it did not pertain to the assessment year in question. - Conclusions: The Tribunal concluded that section 69A was inapplicable to the facts of the case, as the opening cash balance was not relevant to the assessment year under consideration. SIGNIFICANT HOLDINGS - Verbatim Quotes of Crucial Legal Reasoning: The Tribunal stated, "The initiation of revisionary proceedings u/s 263 are not according to settled principle of law as laid down by Hon'ble Gujarat High Court in the case of PCIT vs Mukesh Chand." - Core Principles Established: The Tribunal reaffirmed that section 263 requires specific findings of error and prejudice to the revenue's interest, and a plausible view taken by the AO cannot be revised without substantive grounds. - Final Determinations on Each Issue: The Tribunal quashed the PCIT's order under section 263, holding that the assessment order under section 147/144B was neither erroneous nor prejudicial to the revenue's interest, and section 69A was inapplicable to the opening cash balance.
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