2022 (6) TMI 934 - AT - Income Tax

Revision u/s 263 - Unexplained cash deposits in the bank during demonetarization period - HELD THAT - As limited scrutiny case being selected under CASS for examination of cash deposits made in the bank during demonetarization period and, therefore, the authorities below ought to have restricted their examination and enquiries limited for the purpose of cash deposits made by the appellant during the period of demonetarization only. By expanding the scope of scrutiny beyond the issue of cash deposits during demonetarization period, amounts to exceeding the jurisdiction by the PCIT without following the prescribed procedure and the administrative guidelines under the law. After considering the documentary evidences filed by the assessee in compliance to the enquiries caused by the AO and scrutiny of the documents in respect of the cash deposits, AO has accepted the cash deposits in the bank during the period of demonetarization made by the appellant as duly explained. AO to his satisfaction accepted the cash deposits in the bank account of the assessee during the period of demonetarization as explained money in accepting the returned income of the assessee under section 143(3) - In our view, the ld. PCIT was not justified in adversely commenting on the said cash deposits of the assessee and adopting a divergent view where two views are possible that too on the issues of agricultural income and unsecured loans, which were not even parameters of selection of the case for scrutiny under CASS. The case laws relied upon by the ld. PCIT are distinguishable on the peculiar facts of the case. Respectfully following the Hon ble Rajasthan High Court in the case of CIT vs. Ganpat Ram Bishnoi ( 2005 (8) TMI 106 - RAJASTHAN HIGH COURT no presumption can be down by the PCIT that the matter has not been enquired into by the AO. Accordingly, we hold that the invocation of jurisdiction by the PCIT is not sustainable. The order passed by the PCIT u/s 263 is hereby set aside. Appeal of assessee allowed.

Summary

Issues:
1. Validity of order passed under section 263 of the Income Tax Act, 1961.
2. Assessment of unsecured loans and agricultural income.
3. Adequacy of enquiry conducted by Assessing Officer (AO).

Issue 1: Validity of order under section 263:
The appeal challenged the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961. The appellant contended that the PCIT erred in holding the assessment order as void ab-initio and prejudicial to the interest of revenue. The PCIT raised concerns regarding the acceptance of agricultural income and unsecured loans without adequate supporting details. However, the appellant argued that the AO conducted thorough enquiries and verifications before accepting the returned income.

Issue 2: Assessment of unsecured loans and agricultural income:
During the revisionary proceedings under section 263, the PCIT questioned the genuineness of unsecured loans and agricultural income declared by the assessee. The PCIT highlighted discrepancies in the documentation provided by the assessee, leading to the conclusion that certain amounts remained unexplained. The appellant defended the assessment by providing detailed documentary evidence to support the unsecured loans and agricultural income, emphasizing that the AO had accepted the explanations after due enquiry.

Issue 3: Adequacy of enquiry conducted by AO:
The appellant argued that the AO conducted a comprehensive enquiry before passing the assessment order. The AO issued notices under relevant sections, raised queries, and the appellant provided specific information regarding unsecured loans and cash deposits during the demonetization period. The appellant contended that the PCIT's observations regarding the casual manner of assessment were unfounded, as the AO had applied due diligence. The appellant cited case laws to support the argument that the PCIT's intervention was unwarranted.

In the detailed analysis, it is evident that the PCIT's revisionary proceedings under section 263 extended beyond the scope of the initial scrutiny under CASS, focusing on aspects such as agricultural income and unsecured loans not covered by the selection criteria. The Tribunal found that the AO had conducted a satisfactory enquiry into the issues under scrutiny and accepted the explanations provided by the assessee. The Tribunal emphasized that the PCIT's intervention was unwarranted, as the AO had applied due diligence in assessing the relevant aspects. Citing precedent, the Tribunal set aside the PCIT's order under section 263, thereby allowing the appeal of the assessee.