2023 (11) TMI 228 - AT - Income Tax

Revision u/s 263 by CIT - lack of enquiry proved or not? - As per CIT AO didn't enquire about the source of cash deposit as emanated from undisclosed sources - HELD THAT - We find that apart from the cash receipts on account of professional income, the Appellant is also having enough cash withdrawals during the year under consideration. Meaning thereby that the view of the Pr. CIT that the cash deposited by the Appellant in his bank account is out of the undisclosed sources is vague and without any basis. AO has accepted the genuineness of the cash deposited in the bank account after a conscious and independent application of mind. We hold that the Ld. PCIT s action of invoking the provision of section 263 of the Act has been on account of difference in opinion of Pr. CIT which is held to be as invalid under law. If there was an enquiry, even inadequate, that would not, by itself, give occasion to the PCIT to pass order under section 263, merely because he has a different opinion in matter; it is only in case of 'lack of inquiry' that such a cause of action can be open. See NARAIN SINGLA case 2015 (10) TMI 2371 - ITAT CHANDIGARH Thus merely difference of opinion by itself would not give occasion to the Commissioner to pass orders under Section 263 of the said Act. Therefore, the impugned order held to be bad in law and the same is as such quashed - See ANIL KUMAR SHARMA 2010 (2) TMI 75 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Adequacy of inquiries/verification by the Assessing Officer (AO).
3. Application of Explanation 2 of Section 263 of the Act.

Summary:

1. Jurisdiction under Section 263 of the Income Tax Act:
The assessee contested that the Principal Commissioner of Income Tax (Pr. CIT) erred in assuming jurisdiction under Section 263 of the Income Tax Act. The Pr. CIT set aside the AO's order to frame the assessment de novo, claiming the AO failed to verify the source of a cash deposit of Rs. 23,33,250/- in Punjab National Bank, Mansa. The Tribunal found that the AO had indeed made specific inquiries regarding the source of this deposit during the assessment proceedings, thus the Pr. CIT's invocation of Section 263 was invalid.

2. Adequacy of inquiries/verification by the Assessing Officer (AO):
The Tribunal noted that the AO had specifically queried the assessee about the source of the cash deposit and received a detailed reply. The AO accepted the returned income after due application of mind and verification. The Tribunal observed that the cash deposits were scattered throughout the year, not bulk deposits, and were supported by professional income and cash withdrawals, thereby dismissing the Pr. CIT's claim that the deposits were unexplained.

3. Application of Explanation 2 of Section 263 of the Act:
The Tribunal held that the Pr. CIT's action was based on a difference of opinion rather than a lack of inquiry. It reiterated that if there was an inquiry, even if inadequate, it would not justify the invocation of Section 263 merely because the Pr. CIT had a different opinion. The Tribunal supported its decision by citing relevant case law, including "NARAIN SINGLA vs. PCIT" and "CIT vs. ANIL KUMAR SHARMA," which established that a mere difference of opinion does not warrant revision under Section 263.

Conclusion:
The Tribunal concluded that the AO had made adequate inquiries and verified the source of the cash deposits. The Pr. CIT's invocation of Section 263 was deemed invalid, and the appeal filed by the assessee was allowed. The impugned order was quashed, and the Tribunal pronounced the order in the open court on 06.07.2023.