2023 (4) TMI 95 - AT - Income Tax

Revision u/s 263 - Unexplained cash deposits - as per CIT AO considering figures of cash deposited in the bank account of the assessee short by Rs. 1,00,000/- - AO accepting the genuineness of the cash deposits from one of the parties on the basis of certain documents filed, which as per the Ld. PCIT were found to be missing in the case records - HELD THAT - CIT has not even cared to consider this contention/explanation of the assessee. He has simply taken all the material on record, and sent it to the AO for verification without himself applying his mind to it. We agree with assessee that this act of the ld. Pr. CIT goes against the very spirit of section 263 itself, which in very clear term states that in revisionary proceedings, the assessee is to be confronted with the error noted in the assessment order, given an opportunity of hearing, his contentions need to be considered and inquired into and only then, CIT has to arrive at his finding of error after considering all contentions and evidences furnished by the assessee. PCIT has given no finding as to why the assessment order was in error on the issue of cash deposit short considered by the AO. And with respect to the error relating to the issue of acceptance of source of cash deposit by the AO he has merely reiterated his earlier observation that no evidences proving the source as noted by the AO were found in the case record. Ignoring the explanation of the assessee, we find, the Ld. PCIT has simply reiterated his reason for assuming jurisdiction to revise the order of the AO, while finding the assessment order erroneous and causing prejudice to the Revenue. Merely because documents, noted by the AO to be produced by the creditor of source of cash deposit of Rs. 98.09 lacs in response to summons issued to him u/s. 131 were not found in the case records, that cannot be the reason for holding the assessment order to be in error for accepting the genuineness of the source of cash deposit. The fact of issuance of summons by the AO is not doubted or disputed by the Ld. PCIT. AO has also categorically noted relevant documents submitted by the depositor proving genuineness of the source of cash deposit. The Ld. PCIT has not found those documents in the case file. This cannot lead to the inference that no inquiry was conducted by the AO, as held by the Ld. PCIT. - Decided in favour of assessee.

Summary

Issues Involved:
1. Invocation of Section 263 of the Income Tax Act, 1961.
2. Assessment order under Section 143(3) deemed erroneous and prejudicial to the interests of the Revenue.
3. Verification and inquiry regarding cash deposits and the set-off amount of Rs. 98,09,203/-.

Summary of Judgment:

Issue 1: Invocation of Section 263 of the Income Tax Act, 1961
The assessee challenged the invocation of Section 263 by the Principal Commissioner of Income Tax (PCIT), arguing that the assessment order passed under Section 143(3) was neither erroneous nor prejudicial to the interests of the Revenue. The PCIT had found discrepancies in the cash deposits and the verification of the source of Rs. 98,09,203/-.

Issue 2: Assessment Order Under Section 143(3) Deemed Erroneous and Prejudicial to the Interests of the Revenue
The PCIT identified two main Issues:
- The AO considered cash deposits of Rs. 117.12 crores instead of Rs. 117.13 crores.
- The AO accepted the source of Rs. 98,09,203/- based on documents that were allegedly not available in the case records.

Issue 3: Verification and Inquiry Regarding Cash Deposits and the Set-Off Amount of Rs. 98,09,203/-
The assessee argued that the discrepancy in the cash deposit amount was due to a computational mistake and that the actual cash deposits were Rs. 113.66 crores. The assessee also contended that the necessary documents for the Rs. 98,09,203/- set-off were submitted during the assessment proceedings. The PCIT dismissed these contentions, stating that the details were not found in the AO's records, thereby necessitating further verification and inquiries.

Tribunal's Findings:
- The Tribunal found merit in the assessee's contention that the PCIT disregarded the explanation and evidence provided.
- The Tribunal noted that the assessee had clarified the computational mistake and substantiated it with the entire cash book.
- Regarding the Rs. 98,09,203/-, the Tribunal observed that the AO had noted satisfaction based on documents provided by the depositor in response to summons issued under Section 131. The PCIT did not dispute the issuance of summons but found the documents missing in the case records.
- The Tribunal held that the PCIT's act of not considering the assessee's explanation and merely sending the material for verification was against the spirit of Section 263.
- The Tribunal concluded that there was no finding of error in the AO's order causing prejudice to the Revenue.

Conclusion:
The Tribunal set aside the order passed by the PCIT under Section 263, allowing the appeal of the assessee. The decision was pronounced on 22nd March 2023 at Ahmedabad.