2024 (1) TMI 492 - AT - Income Tax

Revision u/s 263 - deposits during demonetization unexplained - assessment best judgment basis u/s 144 - as per CIT details pertaining to cash was not furnished and the cash deposits were not verified properly and AO made addition on account of stock but leaving the core issue of cash deposits during demonetization which was the primary reason for reopening the assessment - HELD THAT - From the stated facts, it emerges that an assessment was framed in the case of the assessee on best judgment basis u/s 144 since the assessee failed to file the requisite details as called for by AO. Assessee only filed partial details. The case was reopened to verify the issue of cash deposit during demonetization period. However, since the assessee filed only partial details, AO considered the trading result of the assessee and finding discrepancies in the same to the extent of Rs. 240.85 Lacs, added the same to the income of the assessee. The bank statements were called for by Ld. AO u/s 133(6) and Ld. AO duly noted the cash deposit made by the assessee in its bank accounts. After considering material on record as well as submissions filed by the assessee, AO chose to make addition on account of trading result and thought it fit not to make any addition on the issue of cash deposit. Assessment was framed on best judgment basis since the assessee failed to file the requisite details. In such a case, the assessment has been made to the best of judgment of AO and therefore, that judgment of AO could not be held to be erroneous though it may be prejudicial to revenue. Once the assessment is on best judgment basis, CIT could not substitute the judgment of AO and impose another view on him. The second pertinent fact is that the assessee has assailed the reassessment proceedings before first appellate authority which was pending for adjudication at the time of revision of the order. As decided in Smt. Renuka Philip 2018 (12) TMI 129 - MADRAS HIGH COURT when larger issue was pending before CIT(A), the revisionary authority could not exercise jurisdiction u/s 263. Following this decision, similar ratio has been laid down in CIT vs. VAM Resorts and Hotels Pvt. Ltd 2019 (8) TMI 1418 - ALLAHABAD HIGH COURT The cited decision of Chennai Tribunal is also on similar lines and supports the case of the assessee. Thus we would hold that the impugned revision u/s 263 was bad-in-law and the same is therefore, liable to the quashed. Decided in favour of assessee.

Summary

Issues Involved:
The judgment involves the invocation of revisionary jurisdiction under section 263 by the Principal Commissioner of Income Tax, the validity of the notice issued under section 148 of the Act, and the overlapping of jurisdiction between revisionary authority and appellate authority.

Assessment Proceedings:
The assessee filed a return of income declaring Rs. 1.05 Lacs and deposited cash during demonetization, leading to the reopening of the case. The Assessing Officer found discrepancies in the trading results, leading to an addition of Rs. 240.85 Lacs to the income. The AO did not make any addition on the issue of cash deposits. The assessment was framed on a best judgment basis due to the incomplete details provided by the assessee.

Revisionary Proceedings:
The Principal CIT held the assessment order as erroneous and prejudicial to the assessee's interest due to the non-verification of cash deposits during demonetization. The CIT set aside the assessment, directing the AO to examine the cash deposits. The assessee challenged this decision, citing various case laws, but the CIT upheld the revision, stating that the issue of cash deposits was not properly examined by the AO.

Findings and Adjudication:
The Tribunal noted that the assessment was made on a best judgment basis, and the CIT could not substitute the AO's judgment. The assessee had an appeal pending before the first appellate authority during the revision, invoking the principle that the CIT cannot exercise jurisdiction when a larger issue is pending before the appellate authority. Citing judicial precedents, the Tribunal held that the revision under section 263 was without jurisdiction and quashed the same, allowing the appeal.

Conclusion:
The Tribunal found the revision under section 263 to be bad-in-law and quashed it, following the principle that the revisionary authority cannot exercise jurisdiction when a larger issue is pending before the appellate authority. The appeal was allowed accordingly.