2023 (11) TMI 976 - AT - Income Tax

Revision u/s 263 - return filed by the assessee was selected for limited scrutiny through CASS - difference in closing stock compared to the return of income of the previous year and cash deposits reported in SFT-14 - HELD THAT - As on perusal of the assessment order, we find that during the course of assessment proceedings, AO has questioned about the correct valuation of stock alone. In the assessment order, AO has not made any mention towards enquiry about the cash deposit as reported in SFT 14. Thus, we are of the opinion that the assessment order is very cryptic without speaking about the verifications made by the AO for which the return filed by the assessee was selected for Scrutiny . Against the notice u/s 263 of the Act, before the ld. PCIT, the assessee has explained that the assessee was engaged in real estate business and sold plots during the year for a total consideration and the same has not been reflected in the bank account of the assessee for the reason that the sale proceeds of the plots are cash sales only. On an overall examination of the records, PCIT has correctly observed that no proper examination/verification was done by the AO while passing the assessment order u/s 143(3) on the above issue and the AO had passed the order without application of mind. We find no reason to interfere with the order passed by the PCIT and accordingly, the appeal filed by the assessee is dismissed.

Summary

Issues:
The appeal involved the delay in filing due to Covid-19 pandemic, assessment of total income, correctness of valuation of stock, examination of cash deposits, invoking section 263 of the Income Tax Act.

Delay in Filing Appeal:
The appeal was delayed by 51 days due to the Covid-19 pandemic, which was condoned, and the appeal was admitted for adjudication.

Assessment of Total Income:
The assessee filed the return for the assessment year 2016-17 with total income of Rs. 10,28,290. The Assessing Officer assessed the total income at Rs. 15,32,334 by making an addition of Rs. 6,33,334.

Correctness of Valuation of Stock:
The Assessing Officer questioned the correct valuation of stock, and the assessee agreed to an additional sum towards business income. However, the assessment order did not address the verification of cash deposits as reported in SFT-14.

Examination of Cash Deposits:
The assessment order did not mention any verification of the cash deposits reported in SFT-14, which was one of the reasons for the selection of the return for scrutiny.

Invoking Section 263:
The Principal Commissioner of Income Tax found the assessment order to be erroneous and prejudicial to the interest of Revenue. The order was set aside, directing the Assessing Officer to reexamine the issues after affording an opportunity to the assessee.

Judgment:
The Tribunal upheld the decision of the Principal Commissioner of Income Tax, stating that the Assessing Officer did not conduct proper examination or verification before passing the assessment order. The appeal was dismissed, affirming the order passed under section 263 of the Income Tax Act.