2022 (11) TMI 417 - AT - Income Tax

Revision u/s 263 by CIT - case was selected for scrutiny through CASS - Non examination of issues cash deposits made in the bank account of the assessee during demonetization period - HELD THAT - Though the case of the Appellant/Assessee was also selected for detailed scrutiny for the reason of high value receipt of cash shown from third parties, in the assessment order there is no discussion in respect of the same. The assessment order only deals with the disallowance of claim of deduction under Section 80P - In response to the notice, issued u/s 263 Appellant had filed reply/submission on 20.02.2022, and had stated therein that the cash deposited during demonetization period. (i.e. 09.11.2016 to 13.12.2016) was collected from the customers/member and the details of the same were submitted by the Appellant in the assessment proceedings. There is no material on record to suggest that any investigation/enquiry was made by the Assessing Officer in relation to the same. No details of the inquiry/investigation conducted by the Assessing Officer have been stated in the assessment order, or the aforesaid reply/letter, or the written submissions filed before the Tribunal. The assessment order was passed without making enquiry or verification which ought to have been made by the AO in view of the fact that high value receipt of cash from third parties was one of the reasons for selection for scrutiny. The provisions of Clause (a) of Explanation 2 to Section 263 of the Act are clearly attracted in the facts of the present case. Thus, in our view, the PCIT was justified in exercising of powers of revision under Section 263 - Decided against assessee.

Summary

Issues:
Challenge to order under Section 263 of the Income Tax Act, 1961 regarding fresh assessment due to errors in the previous assessment.

Analysis:
The appeal challenged the order passed by the Ld. Principal Commissioner of Income Tax under Section 263 of the Income Tax Act, setting aside the assessment order from 2019 as erroneous and prejudicial to the interest of revenue. The Appellant raised grounds questioning the jurisdiction and exercise of power by the Principal Commissioner. The Appellant, a co-operative credit society, had filed its return of income for the Assessment Year 2017-18 declaring nil income. The assessment was framed, denying a deduction claimed under Section 80P of the Act. The notice issued under Section 263 highlighted issues such as low income compared to high investments, large deductions, and cash deposits during demonetization. The Principal Commissioner set aside the assessment order, directing a fresh assessment due to the failure of the Assessing Officer to verify crucial aspects, such as the source of cash deposits during demonetization.

The Appellant's reply to the notice was deemed unsatisfactory by the Principal Commissioner, leading to the order for a fresh assessment. The Principal Commissioner emphasized that the original assessment lacked necessary inquiry and verification, particularly regarding cash deposits during demonetization. The Appellant challenged this decision through the present appeal. Despite the absence of representation by the Appellant during the hearing, the Tribunal considered written submissions before dismissing the appeal. The Tribunal noted discrepancies in the original assessment, where issues like high value cash receipts were not adequately addressed. The Appellant's explanation regarding cash deposits was not supported by any investigation or inquiry findings by the Assessing Officer. Consequently, the Tribunal upheld the Principal Commissioner's decision, stating that the provisions of Section 263 were rightly applied, and the appeal was dismissed.

In conclusion, the Tribunal upheld the order for a fresh assessment, emphasizing the importance of thorough verification and inquiry by the Assessing Officer. The decision highlighted the necessity for proper examination of all relevant aspects, especially those flagged during scrutiny, to ensure accurate assessments and protect the revenue's interests.