2022 (6) TMI 686 - AT - Income Tax

Revision u/s 263 by CIT - unexplained cash deposits were made out of the sale proceeds of cotton seed cake - HELD THAT - Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT and in the case of CIT vs. Max India Ltd. 2007 (11) TMI 12 - SUPREME COURT - The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer examined the claim took one of the plausible views, the assessment order cannot be termed as an erroneous . Applying the above principles to the facts of the present case, no doubt in the present case the assessment was selected for limited scrutiny under CASS for the purpose of verification of cash deposits in Savings Bank Account are more than turnover. From perusal of the original assessment order, it would clearly indicate that the Assessing Officer merely accepted the explanation of the assessee that unexplained cash deposits were made out of the sale proceeds of cotton seed cake without examining any evidence. Similarly, the Assessing Officer estimated the gross receipts from the agricultural produce without examining the reasonableness of the yield of cotton per hectare. Thus, it is clear that the assessment order was passed by the Assessing Officer suffered from lack of necessary enquiries and the Explanation 2 to provisions of section 263 of the Act is squarely applicable to the present case. Hence, we uphold the order of revision passed by the ld. PCIT u/s 263 - Decided against assessee.

Summary

Issues:
Validity of assumption of jurisdiction under section 263 by the ld. PCIT.

The judgment deals with an appeal filed by the assessee against the order of the Principal Commissioner of Income Tax-1, Nashik (PCIT) for the assessment year 2015-16. The appellant, engaged in trading in cotton seed cake, had filed a return of income declaring Rs.2,96,460. The assessment completed by the Income Tax Officer included additions on business receipts and opening cash balance. The PCIT found the assessment order erroneous and prejudicial to revenue due to lack of verification and necessary inquiries by the Assessing Officer. The PCIT issued a show-cause notice under section 263, setting aside the assessment order and directing a de novo assessment. The appellant challenged this revision order in the present appeal.

The main issue in the appeal was the validity of the assumption of jurisdiction under section 263 by the PCIT. The power of revision under section 263 can be invoked if the assessment order is found to be erroneous and prejudicial to revenue. Referring to relevant Supreme Court decisions, the Tribunal noted that the error in the assessment order should not be debatable or based on a plausible view. In this case, the Assessing Officer failed to conduct necessary inquiries, accepting explanations without evidence and estimating gross receipts without verifying reasonableness. The Tribunal found the order of revision by the PCIT justified under section 263, as the assessment order lacked necessary inquiries, and upheld the revision order.

In conclusion, the Tribunal dismissed the appeal filed by the assessee, upholding the order of revision passed by the PCIT under section 263. The Tribunal found that the assessment order suffered from a lack of necessary inquiries, making it erroneous and prejudicial to revenue. Therefore, the grounds of appeal filed by the assessee were dismissed, and the appeal stood dismissed.