2023 (9) TMI 475 - AT - Income Tax

Revision u/s 263 - specific evidence of cash payment and payments through two third party cheques - information in the Insight Portal regarding cash payments was downloaded and kept in the assessment record and CIT concluded that despite having access to this information, the AO failed to get an explanation from the assessee on the issue and did not bring to tax this unaccounted income - HELD THAT - As contended by Ld. AR that issue was examined thoroughly by Ld. AO has no substance. It is not a case of AO holding one of the views, here is a case where false and contradictory stand of the assessee was left out of examination. The findings of Ld. PCIT with regard to directions issued to ld. AO to tax the amount representing the cash utilities for discharge of credit card bills and being cheques issued by third parties in favour of the assessee s credit card bills, being one from unexplained sources chargeable to tax u/s 68 r.w.s.115BBE of the Act, requires no interference. Disallowance of LTCG on sale of shares - Merely raising the queries during assessment in a general manner and getting replies of the same cannot give rise to presumption of application of due diligence and a judicious examination of issue by the ld. AO as not a word in regard to issue is reflected in the assessment order. The conclusion of no enquiry drawn by Ld. PrCIT requires no interference. The Assessing Officer had fallen in duty to show that the inquiry which was initiated by raising queries was taken to a reasonable end so as to draw a conclusive inference in favour of the assessee. The findings of Ld. PCIT of LTCG claim being one liable to brought under tax u/s 68 r.w.s 115BBE requires no interference. Whether Section 263 does not give powers to the PrCIT to enhance the assessment and to pass an order of assessment itself? - In the case in hand although the queries were raised by ld. AO and which were responded by the assessee, the assessment order though does not show any reason for not making the addition but Ld. PrCIT has duly examined both the issues to establish, that additions should have been made. Thus, Ld. PCIT was in its right to modify the conclusion of ld. AO qua not making the additions in the assessment by making the additions. The power of modifying the assessment has in its ambit making or correcting any additions, left out or not made by the AO, though ought to be made in the assessment proceedings. The same may or may not be by way of enhancement. It is not a case of two views, as the assessment order does not reflect any view of the Assessing Officer. There can be a presumption of an official act to have been done in due course and to justify the view but the same is rebuttable by establishing the non application of mind, as done by Ld. Pr CIT. The grounds raised have no substance and the appeal of assessee is dismissed.

Summary

Issues Involved:
1. Source of cash payments towards credit card bills.
2. Genuineness of Long Term Capital Gains (LTCG) claimed as exempt under Section 10(38) of the Income Tax Act.

Summary:

Issue 1: Source of Cash Payments Towards Credit Card Bills

The assessee filed a return of income for A.Y. 2017-18 declaring an income of Rs. 18,93,020/-, which was selected for scrutiny. The Ld. PrCIT observed that the case was selected to examine large cash payments made towards credit card bills, specifically Rs. 5,35,500/- to ICICI Bank. The AO failed to make a meaningful enquiry into this issue during the assessment proceedings. The Ld. PrCIT initiated proceedings under Section 263, finding that the AO did not bring to tax the unaccounted income from these cash payments. During the revision proceedings, the Ld. PrCIT found that the assessee's explanation of the cash source was inconsistent and insufficient. The Ld. PrCIT concluded that the cash payments and payments through third-party cheques (Rs. 3,34,750/-) represented the assessee's undisclosed income, as the assessee failed to provide a satisfactory explanation.

Issue 2: Genuineness of LTCG Claimed as Exempt Under Section 10(38)

The Ld. PrCIT observed that the assessee claimed LTCG of Rs. 38.26 lakhs, primarily from shares of M/s. Gateway Distributors Limited, which raised doubts due to abnormal profits of 1700% and the company's lack of business activities. The AO allowed the exemption without a detailed enquiry. The Ld. PrCIT found that the shares were later amalgamated with Monotype India Limited, which also had no significant business activities. The Ld. PrCIT concluded that the LTCG was not genuine, relying on the preponderance of probability principles and the investigation reports indicating price rigging by Mr. Naresh Jain. The Ld. PrCIT directed the AO to bring the LTCG under tax as undisclosed income under Section 68 read with Section 115BBE.

Conclusion:

The Ld. PrCIT concluded that the assessment order was erroneous and prejudicial to the Revenue's interests. The AO failed to make necessary enquiries into the sources of cash payments and the genuineness of LTCG. The Ld. PrCIT directed to tax Rs. 5,35,500/- as unexplained cash payments and Rs. 3,34,750/- as third-party cheque payments under Section 68 read with Section 115BBE. Additionally, the LTCG of Rs. 35,10,447/- was brought to tax as undisclosed income. The assessee's appeal was dismissed, confirming the Ld. PrCIT's findings and directions.