2023 (12) TMI 976 - AT - Income Tax

Revision u/s 263 - as per CIT AO had not conducted any inquiries or verification in respect of cash deposit after 11.11.2016 in HDFC bank account at the time of finalization of assessment, which is against the Explanation 2 of Section 263(1) - HELD THAT - It is clearly seen from the SFT returns filed by the assessee u/s. 285BA of the Act, every cash transaction is reflected with the name of the person, with full postal address, nature of transaction and the amount of transaction, the same are placed before us by both Banks. As further seen from notices issued u/s. 142(1) that various details called for by the A.O. in above notices were duly complied with by the assessee by furnishing the details and also clarified with further details as requested by the AO. Thus in our considered opinion, the AO has made necessary enquiries before passing the assessment order. The other contention of the Ld. PCIT that the A.O. failed to verify the cash deposits in HDFC Account - The assessee also produced the bank statement of the above account, during the demonetization period. Perusal of the same clearly shows that there were no cash transaction in the above current account as alleged by the Ld. PCIT, whereas the entire transactions were done through either cheque or NEFT mode. So the very basis of invoking 263 on the ground that the cash deposits in HDFC Bank itself, is baseless. AO has made detailed enquiry before passing the assessment order on the cash transaction during the demonetization period. PCIT partially looking into the assessment records and initiated the Revision proceedings on the ground that the assessee failed to submit evidences in support of the cash deposits, which is factually incorrect. PCIT failed to consider the other reply letters filed by the assessee. Unless both the ingredients i.e order must be erroneous in nature; and the error must be such that it is prejudicial to the interest of Revenue are present in a given case, it is not legally permissible for a Commissioner to initiate suo motu proceeding under section 263 of the Act, the same has been upheld by Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd 2000 (2) TMI 10 - SUPREME COURT An assessment cannot be revised if there is no jurisdictional error in the order or if it has been passed after due application of mind or in case, where PCIT has a view different from that taken by A.O. Therefore we have no hesitation in quashing the Revision order passed by the Ld. PCIT. Thus the Grounds raised by the assessee are hereby allowed.

Summary

Issues Involved:

1. Initiation of proceedings under Section 263 of the Income Tax Act.
2. Verification of cash deposits during the demonetization period.
3. Validity of the assessment order under Section 143(3).
4. Alleged cash deposit in HDFC Bank account.
5. Consideration of submissions made by the assessee.

Summary:

1. Initiation of proceedings under Section 263 of the Income Tax Act:
The Principal Commissioner of Income Tax (PCIT) initiated proceedings under Section 263 of the Income Tax Act, 1961, against the assessee for the Assessment Year 2017-18. The PCIT found the assessment order passed under Section 143(3) to be erroneous and prejudicial to the interest of the revenue due to the lack of verification of cash deposits made during the demonetization period.

2. Verification of cash deposits during the demonetization period:
The PCIT noted discrepancies in the cash deposits, specifically mentioning that the Assessing Officer (AO) did not verify the Specified Bank Notes (SBN) deposited in various bank accounts amounting to Rs. 2,61,95,000/-. The PCIT also highlighted an unverified cash deposit of Rs. 46,19,001/- and a specific deposit of Rs. 7,16,001/- in HDFC Bank, which was not scrutinized during the assessment proceedings.

3. Validity of the assessment order under Section 143(3):
The assessee argued that a detailed inquiry was conducted by the AO, including issuing notices under Section 142(1) and receiving comprehensive replies with supporting documents. The assessee provided details of cash in hand, bank statements, and other relevant documents, asserting that the AO had duly verified the transactions before finalizing the assessment.

4. Alleged cash deposit in HDFC Bank account:
The assessee contended that no cash deposit of Rs. 7,16,001/- was made in the HDFC Bank account during the demonetization period, as all transactions were conducted via cheque or NEFT. The bank statements were submitted as evidence, which the PCIT allegedly overlooked.

5. Consideration of submissions made by the assessee:
The Tribunal observed that the AO had made necessary inquiries and verified the transactions. The PCIT's partial review of the assessment records and failure to consider all submissions led to an erroneous initiation of revision proceedings. The Tribunal emphasized that an assessment could not be revised if there was no jurisdictional error or if it had been passed after due application of mind.

Conclusion:
The Tribunal quashed the revision order passed by the PCIT, allowing the appeal filed by the assessee. The Tribunal concluded that the AO had conducted a thorough inquiry, and the PCIT's invocation of Section 263 was unjustified. The appeal was allowed, and the assessment order under Section 143(3) was upheld.