2022 (6) TMI 1063 - AT - Income Tax

Revision u/s 263 by CIT - assessee was selected for scrutiny for the reason that the ash deposits in savings bank account(s) is more than the turnover and issued notice under section 143(2) - HELD THAT - AO noted that there was cash deposits in various bank for which, the assessee has explained that all the cash deposits at various banks are fee receipts collected from students towards uniforms fee, note book fee, school van fee and building fee. AO has verified all the details with reference to the receipts, registers, etc. It is an admitted fact that nowhere in the assessment order it is mentioned that the regular school term-fees/tuition fees collected were deposited in assessee s personal account. After examining and verifying all the details and registers, etc., during the financial year, the Assessing Officer has determined 8% of total cash deposits as assessee s income and brought to tax. Moreover, after further verification of bank statements, the Assessing Officer has noted that the assessee has interest receipts of Rs. .8,55,736/- and the same was also treated as income of the assessee and brought to tax. Thus, we find error in the assessment order passed by the Assessing Officer. In view of the above, the revision order passed by the ld. PCIT/CIT under section 263 - Appeal of assessee allowed.

Summary

Issues:
Delay in filing appeal due to COVID-19 pandemic, Assessment of income based on cash deposits and interest receipts, Validity of revision order under section 263 of the Income Tax Act.

Analysis:
1. Delay in filing appeal due to COVID-19 pandemic: The appellant filed an appeal against the order of the Principal Commissioner of Income Tax for the assessment year 2015-16, which was delayed by 121 days due to the COVID-19 pandemic. The Tribunal condoned the delay and admitted the appeal for adjudication, considering the exceptional circumstances.

2. Assessment of income based on cash deposits and interest receipts: During the assessment proceedings, it was observed that the appellant, an individual, had cash deposits and interest receipts in various bank accounts. The Assessing Officer estimated 8% of total cash deposits as the appellant's income and added it to the total income. Additionally, interest receipts were also added to the total income. The Principal Commissioner of Income Tax issued a notice under section 263, questioning the assessment order's correctness.

3. Validity of revision order under section 263 of the Income Tax Act: The Principal Commissioner contended that the Assessing Officer did not properly examine the issue of cash deposits and interest receipts, leading to an erroneous assessment order. The appellant, as the managing trustee of an educational trust, collected fees from students and deposited them in personal accounts instead of the school account. The Tribunal noted that the regular school term fees were not deposited in the appellant's personal account, and after verifying the details, found errors in the assessment order. Consequently, the revision order under section 263 was deemed incorrect, and the appeal by the appellant was allowed.

In conclusion, the Tribunal overturned the revision order under section 263, highlighting the proper examination of the appellant's income sources and the error in the initial assessment order. The appeal was allowed in favor of the appellant, emphasizing the importance of accurate assessment procedures and the verification of income sources in tax matters.