2021 (12) TMI 871 - AT - Income Tax

Revision u/s 263 by CIT - source of cash deposited into the bank account of the assessee - agreement to sell was entered into by the assessee with Shri Sunil Khasa for sale of 20% share in the house, whereas as per the records submitted by the assessee, the house in question was transferred in the name of the assessee - assessee was not the owner of the above-said property at the time of execution of agreement to sell. He further observed that in the agreement to sell, the property was mentioned as a plot but actually it was a duplex house. He, therefore, observed that there was clearly lack of inquiries by the AO - HELD THAT - CIT had proceeded on the wrong footing that the assessee had deposited the amount of ₹ 19 lacs in the account and further that the assessee had entered into an agreement to sell for 20% share in the house with Shri Sunil Khasa, whereas, the case of the assessee from the very beginning has been that the amount of ₹ 19 lacs was not deposited by her in the joint bank account, rather the amount in question was deposited by the other/second account holder i.e. her husband, namely Shri Surender Singh Taxak. When the assessee had explained that the account was a joint account and the amount was deposited by the second account holder, then in our view, the AO should have dropped the proceeding against the assessee and issued notice to the second account holder, i.e. the husband of the assessee - AO continued with the proceedings, wherein the assessee duly explained the source of cash deposited even by the second account holder. Whatever may be the shortcomings/discrepancies relating to the agreement to sell 20% portion of the house, that could have been taken into consideration in the assessment proceedings in the case of the second account holder i.e. the husband of the assessee. Once the assessee had explained that she has not deposited any amount in the joint account and further the second account holder had in clear term admitted that the amount was deposited by him, the assessee, in our view, was absolved of her liability to further explain about the transaction. However, the Ld. Pr. CIT proceeded on wrong footing that the aforesaid explanation relating to the agreement to sell 20% share in the house pertain to the assessee. Even it was explained that the father of the husband of the assessee was paralytic and was not in good health and, therefore, the agreement to sell was executed by the husband of the assessee i.e. the second account holder. The compulsion for execution of agreement to sell was also explained as installment was due of ₹ 17.25 lacs towards the Noida Authority/Developer and that the husband of the assessee was in dire need of money for which he obtained ₹ 19 lacs from his friend Shri Sunil Khasa and in lieu of that, he executed agreement to sell of 20% share of the house. The father-in-law of the assessee expired after some time and thereafter the house in fact, was transferred in the name of the husband of the assessee on 01.04.2015. The above facts show that the AO had duly made appropriate inquiries and even recorded the statement of Shri Sunil Khasa, who admitted that he had given ₹ 19 lacs to the husband of the assessee. In view of the above discussion, it is held that the Ld. Pr. CIT wrongly exercised his revision jurisdiction u/s. 263 of the Act. The impugned order passed by the Ld. Pr. CIT u/s. 263 of the Act being bad in law, is not sustainable and the same is accordingly, quashed - Decided in favour of assessee.

Summary

Issues:
Assessment under section 263 of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the order of the Principal Commissioner of Income Tax, Panchkula, pertaining to the assessment year 2011-12 under section 263 of the Income Tax Act. The assessee contested the jurisdiction of the Principal Commissioner under section 263, arguing that the original assessment order did not meet the criteria of being erroneous or prejudicial to revenue. The Principal Commissioner set aside the assessment order, directing a fresh assessment due to alleged lack of thorough inquiries by the Assessing Officer (AO). The Principal Commissioner questioned the ownership of a property mentioned in an agreement to sell, leading to the conclusion that the assessment order was erroneous. However, the Tribunal found that the AO had conducted necessary inquiries, including recording statements, and the Principal Commissioner had wrongly assumed that the cash deposits were made by the assessee. The Tribunal held that the Principal Commissioner's order was legally flawed and quashed it, allowing the assessee's appeal.

The case involved a cash deposit in a joint bank account, with the assessee explaining that the deposit was made by the other account holder, her husband. The Assessing Officer accepted the explanation after conducting inquiries. However, the Principal Commissioner invoked section 263, alleging lack of proper inquiry and erroneous assessment. The Tribunal observed that the Principal Commissioner's conclusions were based on a misunderstanding that the cash was deposited by the assessee and that she was involved in an agreement to sell a property. The Tribunal noted that the husband of the assessee had made the deposit and executed the agreement, absolving the assessee of any liability. The Tribunal concluded that the Principal Commissioner's order was unjustified, as the AO had appropriately investigated the matter, including recording statements, and the revision order was based on incorrect assumptions.

The Tribunal emphasized that the Principal Commissioner's revision order under section 263 was unfounded, as the AO had diligently verified the transaction and the source of funds. The Tribunal highlighted that the Principal Commissioner's misconceptions about the ownership of the property and the agreement to sell were incorrect, as the husband of the assessee was responsible for the transaction. The Tribunal held that the Principal Commissioner's order lacked legal merit and was unsustainable, leading to the allowance of the assessee's appeal against the revision order. The Tribunal quashed the Principal Commissioner's order, ruling in favor of the assessee.

In conclusion, the Tribunal found that the Principal Commissioner's exercise of revision jurisdiction under section 263 was erroneous and lacked legal basis. The Tribunal determined that the Assessing Officer had conducted appropriate inquiries, and the Principal Commissioner's conclusions were based on misinterpretations regarding the ownership and transactions involved. Consequently, the Tribunal allowed the assessee's appeal, quashing the Principal Commissioner's order issued under section 263 of the Income Tax Act.