2022 (12) TMI 383 - AT - Income Tax

Revision u/s 263 by CIT - cash paid / deposited unexplained - assessee along with two co-owners had purchased immovable property AND while making this payment, the assessee paid an amount partly in cash and paid the balance amount through banking channels - observation of the Ld.Pr.CIT that while making payment through banking channels, the assessee made deposit in cash in Corporation Bank to obtain Demand Draft in favour of the seller - HELD THAT - Contention of the assessee is that the cash paid / deposited was out of the balance available in her books, but she had not submitted any evidence to substantiate her claim and the AO has not verified the above details, therefore the Ld.Pr.CIT set aside the orders passed by the AO as deemed to be erroneous and prejudicial to the interest of the revenue. The contention of the assessee is that the AO has examined all the details filed by the assessee. Upon perusal of the assessment order, the AO has not mentioned anything about the verification of cash deposits / cash payment made by the assessee to the seller. In the absence of such enquiry, we are of the view that the order passed by the Ld.AO is prejudicial to the interest of the revenue. Therefore, we do not find any infirmity in the order passed by the Ld.Pr.CIT to examine the cash payments / deposits made by the assessee in order to purchase the immovable property. Hence, the grounds raised by the assessee are dismissed.

Summary

Issues:
- Revision of assessment order under section 263 of the Income Tax Act, 1961 based on unexplained investment.
- Verification of sources for cash payments made towards purchase of immovable property.
- Adequacy of evidence submitted by the assessee to substantiate claims.
- Jurisdiction of the Principal Commissioner of Income Tax to set aside the assessment order.

Revision of Assessment Order under Section 263:
The appeals were filed against the order of the Principal Commissioner of Income Tax (Pr.CIT) under section 263 of the Income Tax Act for the Assessment Year 2016-17. The Pr.CIT observed that the assessee had purchased vacant land along with co-owners, making cash payments without sufficient explanation for the sources of funds. The Pr.CIT found the assessment order passed by the Assessing Officer (AO) to be erroneous and prejudicial to the revenue's interest. Consequently, the Pr.CIT directed the AO to redo the assessment with proper verification and evidence gathering.

Verification of Sources for Cash Payments:
The assessee contended that the cash payments were made from the balance available in her books, but failed to provide documentary evidence to support this claim. The AO did not verify these details, leading the Pr.CIT to set aside the assessment order. The Tribunal upheld the Pr.CIT's decision, emphasizing the necessity of examining the cash payments and deposits made by the assessee for the property purchase. The lack of verification by the AO rendered the original assessment prejudicial to revenue interests.

Adequacy of Evidence Submitted by the Assessee:
The assessee argued that all required information and documents were submitted during the assessment proceedings, including details of property purchase and sources of funds. However, the failure to provide concrete evidence for the cash payments led to the assessment order being deemed erroneous. The Tribunal noted that the AO did not mention verifying the cash transactions, supporting the Pr.CIT's decision to set aside the original assessment.

Jurisdiction of the Principal Commissioner of Income Tax:
The Tribunal considered the jurisdiction of the Pr.CIT to revise the assessment order under section 263 based on the lack of verification of cash payments. The Pr.CIT's decision was upheld, emphasizing the need for proper examination of financial transactions to ensure accuracy and prevent revenue loss. The Tribunal dismissed the appeals, affirming the Pr.CIT's directive for reassessment with thorough verification.

In conclusion, the Tribunal upheld the Pr.CIT's decision to set aside the assessment order due to unexplained cash payments, highlighting the importance of substantiating claims with concrete evidence to avoid prejudicing revenue interests. The appeals were dismissed, reinforcing the necessity for meticulous verification of financial transactions in assessments.