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2020 (6) TMI 194 - AT - Income TaxRevision u/s 263 - non-verification of source of cash deposit made during financial year 2013-14 - HELD THAT - We find that the assessee is having a taxable income and exempted income during the year which majorily comprise of profit from partnership firm totalling to ₹ 2,96,41,668/- and had sufficient cash in hand on various dates during the year out of which the amounts were deposited in the bank account. The major source of cash deposited in the amount received from the partnership firm. All these details of cash received from partnership firm and the amount deposited is the bank account were placed before assessing officer and after examination of these details assessment was completed. AO in the body of the assessment order did not record any observation regarding the transaction of cash deposits in the bank but the questionnaire issued during the course of assessment proceedings and various replies filed by the assessee shows that during the course of assessment proceeding specific query is raised regarding cash deposits in bank, calling of bank statements and other statement. To this specific query there is a specific reply given by the assessee which demonstrates that after receiving the information the AO had applied his mind on these transactions. More over the ld. CIT(A) has given a swiping statement that transaction between the assessee and the partnership firm (wherein assessee is partner) was exclusively through banking channel without rebutting the entries made in the cash book by the assessee duly supported by other independent evidence. As relying on ANIL KUMAR SHARMA 2010 (2) TMI 75 - DELHI HIGH COURT since sufficient enquiry has been conducted by the Ld. AO during assessment proceedings with regard to the issues raised by the Ld. Pr. CIT in the show cause notice issued u/s 263 of the Act and thus hold that Ld. Pr. CIT erred in assuming jurisdiction u/s 263 of the Act and inferring that the assessing officer has not conducted enquiry. - Decided in favour of assessee.
Issues Involved:
1. Legality and jurisdiction of notice and order under section 263 by the Principal Commissioner of Income Tax (Pr. CIT). 2. Whether the assessment order under section 143(3) was erroneous and prejudicial to the interest of Revenue. 3. Verification of cash deposits amounting to ?29,40,000/- in the bank account. 4. Examination of details and evidence provided during the assessment proceedings. Detailed Analysis: 1. Legality and Jurisdiction of Notice and Order under Section 263: The assessee challenged the notice and order issued under section 263 by the Pr. CIT, claiming they were "illegal, bad in law, and without jurisdiction." The Tribunal examined whether the Pr. CIT had the authority to invoke section 263 and concluded that the Pr. CIT erred in assuming jurisdiction under this section. It was determined that the assessment order passed by the assessing officer was neither erroneous nor prejudicial to the interest of revenue, thus quashing the Pr. CIT's order. 2. Erroneous and Prejudicial to the Interest of Revenue: The Pr. CIT contended that the assessment order was erroneous and prejudicial to the interest of revenue because the assessing officer did not verify the source of cash deposits amounting to ?29,40,000/-. The Tribunal found that the assessing officer had conducted a detailed inquiry into the source of these deposits, including examining the cash book, capital accounts, and other relevant documents. The Tribunal referenced several judicial precedents, including CIT vs. Mehrotra Brothers and Krishna Capbox (P.) Ltd., to support the view that an assessment order cannot be considered erroneous if the assessing officer has conducted an inquiry and applied his mind, even if the inquiry was not elaborately documented in the assessment order. 3. Verification of Cash Deposits: The Pr. CIT observed that the assessing officer did not verify the cash deposits during the assessment proceedings. However, the Tribunal noted that the assessing officer had issued a notice under section 142(1) requesting details about cash deposits, to which the assessee responded with comprehensive documentation, including bank statements and cash book entries. The Tribunal found that the source of the cash deposits was adequately explained as being from the partnership firms in which the assessee was a partner, and there were no negative balances in the cash book. 4. Examination of Details and Evidence: The Tribunal reviewed the evidence provided by the assessee during the assessment proceedings, which included detailed replies, bank statements, and cash book entries showing regular transactions of cash receipts and payments. The Tribunal concluded that the assessing officer had conducted a thorough inquiry and was satisfied with the explanations provided by the assessee. The Tribunal emphasized that the absence of detailed discussion in the assessment order does not imply non-application of mind by the assessing officer, referencing the judgment in CIT vs. Anil Kumar Sharma. Conclusion: The Tribunal held that the Pr. CIT was not justified in invoking section 263 as the assessing officer had conducted sufficient inquiry into the source of cash deposits. The assessment order dated 08.11.2016 was neither erroneous nor prejudicial to the interest of revenue. Consequently, the Tribunal quashed the Pr. CIT's order under section 263 and restored the original assessment order under section 143(3). Result: The appeal of the assessee was allowed, and the order pronounced in the open Court on 01.06.2020.
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