2023 (10) TMI 128 - AT - Income Tax

Revision u/s 263 - Unexplained cash deposit to the bank account of assessee - HELD THAT - AO has made all necessary efforts and inquiry about the source of cash deposit to the bank account of assessee and thereafter accepted the claim of assessee explaining the source of cash deposit as fees received in cash from the students of Mount Litera School, which was run and owned by the trust in which assessee was top office bearer. The resolution reveals that the trustees agreed and resolved that till the bank account of trust is opened the amount of cash received as fees will be deposited to the personal saving account of the assessee. From copy of income and expenditure account for the year ended on 31.03.2016 it is clear that the trust has shown fee receipt during the year and said amount includes the cash deposit to the bank account of assessee with ICICI bank. Therefore when the impugned amount was included and shown in the income and expenditure account of trust then the factual position clearly reveals the source of cash deposited to the bank account of assessee. Therefore we are unable to see any valid reason to allege the assessment order as erroneous and prejudicial to the interest of revenue and hence we are inclined to hold that the ld. PCIT was not validly empowered to invoke revisionary provision of sec 263 - Decided in favour of assessee.

Summary

Issues:
The appeal against the order of PCIT, Dehradun for AY 2016-17 raises concerns regarding the application of mind by the Assessing Officer, the correctness of the assessment order under Section 143(3), and the observations made by the Principal Commissioner of Income Tax under Section 263.

Application of Mind by Assessing Officer:
The counsel of the assessee argued that the Assessing Officer properly considered the issue raised under Section 263, took a plausible view based on facts, and passed the assessment order under Section 143(3) without error or prejudice to revenue interests. The limited scrutiny assessment was initiated due to cash deposits in the bank account, and the Assessing Officer conducted sufficient inquiry, accepted explanations, and allowed the claim of the assessee regarding the source of cash deposit.

Correctness of Assessment Order:
The counsel emphasized that the Assessing Officer's detailed examination and acceptance of the explanation for cash deposits, supported by documentary evidence, demonstrated the non-prejudicial nature of the assessment order under Section 143(3). Various judgments were cited to argue against re-agitation of issues already addressed by the Assessing Officer, highlighting the validity of the original assessment.

Observations by PCIT under Section 263:
The counsel contended that the observations, inferences, and findings made by the Principal Commissioner of Income Tax under Section 263 were incorrect, unreasonable, and legally untenable. It was argued that the Assessing Officer had adequately addressed the issue of cash deposits, and the PCIT lacked valid grounds to invoke Section 263 for revision.

Decision:
After careful consideration of submissions and reviewing the factual matrix, the Tribunal found that the Assessing Officer had conducted necessary inquiries, accepted the explanation provided by the assessee, and correctly determined the source of cash deposits. Consequently, the revisionary order under Section 263 was set aside, and the original assessment order was restored. The appeal of the assessee was allowed, and the decision was pronounced in open court on 25.07.2023.