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2020 (3) TMI 1074 - AT - Income TaxRevision u/s 263 - unaccounted income earned from Vyapam scam - A.O has not examined the real source of the surrendered income allegedly represented by the assessee having earned unaccounted professional receipts which were invested in short term advances in the form of Hundis which matured during the year - HELD THAT - In the instant case, the Learned Assessing officer has raised number of queries regarding the issues now sought to be revised by the CIT which were replied by the assessee through detailed submissions supported by relevant documents and other evidence coupled with legal propositions and decisions. It is also pertinent to note that the AO has passed a detailed order / note sheet entry while dealing and adjudicating the issues. There must be some prima facie material on the record to show that the order is unsustainable in law and the tax which was legally eligible has not been imposed. The present case is neither a case of no enquiry nor is a case where the AO, failed to make necessary enquiry and the assessment order was passed after making detailed inquiry and application of mind. Hon ble High Court of Delhi in the case of CIT vs. DLF Ltd. 2012 (9) TMI 626 - DELHI HIGH COURT laid down the ratio that it is not mere prejudice to the Revenue or a mere erroneous view which can be revised u/s 263 of the Act but also there should be the element of unsustainability in the order of the assessing officer, which empowers the commissioner to issue notice and to proceed to pass an appropriate order. In ARVIND JEWELLERS. 2002 (7) TMI 50 - GUJARAT HIGH COURT when the assessee had produced relevant material and offered explanation in pursuance of notices u/s 143(2) and 142(1) of the Act and after considering the material and explanations, the AO had come to a definite conclusion. Their Lordship further held that in this situation, since the material was there on record and the said material was considered by the AO and a particular view was taken, the mere fact that a different view can be taken should not be the basis for a valid action u/s 263 of the Act and therefore, dismissing the appeal of the revenue the Hon ble High Court held that the order u/s 263 of the Act was not justified and valid. In the light of above judgments and applying the facts of the instant case and perusal of the assessment order, paper book and the note-sheet of the assessment proceedings show that the AO has raised several queries by way of note sheet entries and notices. In the instant case wherein we have examined each and every issue raised by Ld. PCIT in the light of the reply filed by the assessee, information called by the Ld. A.O and the finding in the assessment order, we are of the considered view that under the given facts and in law the view taken by the AO in the order passed u.s143(3) of the Act dated 24.3.2015 seems to be reasonable and plausible which cannot be held as legally unsustainable and not in accordance with law. In our view it is passed with complete application of mind and thus it can neither be held as erroneous nor prejudicial to the interest of revenue. Therefore Ld. PCIT under the given facts and circumstances of the case erred in assuming jurisdiction u/s.263 of the Act since the Ld. A.O has made sufficient enquiry by way of questionnaire to which detailed reply have been filed from time to time and the Ld. A.O in the interest of revenue have also made addition of ₹ 7,74,12,941/- to the income disclosed by the assessee. A.O has applied his mind and therefore the assessment order is not vitiated on the ground that the order is erroneous and prejudicial to the interest of revenue because no enquiry were undertaken. Accordingly we find merit in the contention of the learned senior counsel for the assessee and are of the considered view that Ld. PCIT grossly erred in invoking the provisions of Section 263 of the Act on the basis of issues raised in the show cause notice. Thus the order of Ld. PCIT of setting aside the assessment order u/s 143(3) of the Act under consideration are beyond the scope of Section 263 of the Act and hence not valid and we accordingly quash the relevant order passed by Ld. PCIT u/s 263 of the Act dated 30.3.2017 and restore the assessment order u/s 143(3) dated 24.3.2015. - Decided in favour of assessee Unexplained credit u/s 68 - income surrendered during the year- HELD THAT - Assessee is entitled for the telescoping benefit of the income surrendered during the year to the cash deposited in the bank account and thus find merit in the contention of the Ld. Senior Counsel for the assessee that the source of cash deposits is the maturity proceeds of hundis during the year which were made out of the unaccounted surrendered income offered to tax in the return of income for Assessment Year 2012-13. We therefore set aside the finding of Ld. CIT(A) and find no justification in the action of the Ld. A.O making addition u/s 68 of the Act for unexplained cash credit. We accordingly delete the addition and allow the sole ground No.2 raised by the assessee.
Issues Involved:
1. Legality and jurisdiction of the order passed under Section 263 of the Income Tax Act. 2. Justification for invoking Section 263 on already taxed income. 3. Non-initiation of penalty on disallowed interest expenditure. 4. Examination of the source of surrendered income and its linkage to the Vyapam scam. 5. Verification of deductions claimed under Chapter VI-A and investments in movable and immovable properties. 6. Examination of unexplained cash deposits in the bank account under Section 68. Issue-Wise Detailed Analysis: 1. Legality and Jurisdiction of the Order Passed Under Section 263: The assessee challenged the order passed under Section 263 of the Income Tax Act, contending that the Principal Commissioner of Income Tax (PCIT) exceeded his jurisdiction. The PCIT issued a show cause notice citing that the assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of revenue. The Tribunal observed that the AO had conducted detailed inquiries and verification during the assessment proceedings, and the assessment order was passed after due consideration of the submissions made by the assessee. The Tribunal concluded that the PCIT erred in invoking Section 263 as the AO had made sufficient inquiries, and the assessment order was neither erroneous nor prejudicial to the interest of revenue. 2. Justification for Invoking Section 263 on Already Taxed Income: The PCIT contended that the AO should have examined the real source of the surrendered income and its linkage to the Vyapam scam. The Tribunal noted that the AO had already made an addition for unexplained cash deposits, treating it as income from the Vyapam scam. The Tribunal held that the PCIT could not invoke Section 263 merely to make further inquiries on already taxed income, and the AO had acted within his jurisdiction by making necessary inquiries and additions. 3. Non-Initiation of Penalty on Disallowed Interest Expenditure: The PCIT raised an issue regarding the non-initiation of penalty under Section 271(1)(c) for disallowed interest expenditure. The Tribunal observed that the assessee had filed a revised return before the case was selected for scrutiny, rectifying the interest expenditure. The Tribunal held that the AO was justified in not initiating the penalty as the revised return was filed voluntarily, and there was no intention to conceal income or furnish inaccurate particulars. 4. Examination of the Source of Surrendered Income and Its Linkage to the Vyapam Scam: The PCIT alleged that the AO did not examine the source of the surrendered income and its linkage to the Vyapam scam. The Tribunal noted that the AO had issued a detailed show cause notice and conducted inquiries regarding the source of the surrendered income. The AO had made an addition for unexplained cash deposits, treating it as income from the Vyapam scam. The Tribunal concluded that the AO had made adequate inquiries, and the PCIT's contention was not justified. 5. Verification of Deductions Claimed Under Chapter VI-A and Investments in Movable and Immovable Properties: The PCIT contended that the AO did not properly verify the deductions claimed under Chapter VI-A and investments in movable and immovable properties. The Tribunal observed that the assessee had provided necessary documents and explanations during the assessment proceedings, and the AO had duly considered them. The Tribunal held that the PCIT's contention was not justified as the AO had made sufficient inquiries and verification. 6. Examination of Unexplained Cash Deposits in the Bank Account Under Section 68: The AO made an addition for unexplained cash deposits in the bank account under Section 68, treating it as income from the Vyapam scam. The Tribunal noted that the assessee had surrendered unaccounted income during the survey, which was invested in hundis. The maturity proceeds of these hundis were deposited in the bank account. The Tribunal held that there was a direct nexus between the surrendered income and the cash deposits, and the assessee was entitled to the telescoping benefit. The Tribunal deleted the addition made under Section 68, concluding that the AO's action was not justified. Conclusion: The Tribunal quashed the order passed under Section 263, holding that the AO had made sufficient inquiries, and the assessment order was neither erroneous nor prejudicial to the interest of revenue. The Tribunal allowed the appeals filed by the assessee and deleted the addition made under Section 68 for unexplained cash deposits. The Tribunal also dismissed the appeal arising out of the order passed under Section 263 as infructuous.
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