2024 (2) TMI 1226 - AT - Income Tax

Revision u/s 263 - unexplained cash deposits - As per CIT cash deposits in the bank account of the assessee not having been examined by the AO with respect to its source - HELD THAT - As the assessee had furnished an explanation regarding the source of cash deposit of Rs. 30 lakhs as being out of opening cash balance and out of cash withdrawals made in the month of April and May 2016, evidenced with necessary documentary evidences. What transpires thereafter from the order of the ld. PCIT is that he inferred that the Assessing Officer could not have been satisfied with the reply of the assessee and was not satisfied with the reply of the assessee, but by mistake had failed to make addition on account of this cash deposits AO s view of the cash deposits being duly explained not being a plausible view - We are unable to agree with the above findings of the ld. PCIT. That there were sufficient cash withdrawals for the deposits of Rs. 30 lakhs is not disputed. The judicial view in such circumstances has consistently been that where the cash deposits is explained out of cash withdrawals and there is no case of the Revenue of the cash withdrawn as having been utilized elsewhere, there is no reason for doubting the explanation of the assessee. It is not the case of the ld. PCIT that the cash withdrawn has been utilized elsewhere. Therefore, the acceptance of the explanation offered by the assessee to the Assessing Officer cannot be faulted or for that matter doubted. Onus of explaining the source of cash deposits was not discharged by the assessee - We are not in agreement with the same. The ld. PCIT has himself noted the deposits to have been made by banking channels. There arises, therefore, no question of any doubt regarding their sources which is through transparent sources only. Even otherwise, we failed to understand how the source of these deposits would in any way affect the genuineness of their withdrawals and subsequent re-deposits. Neither has the ld. PCIT demonstrated as to how the source of these deposits effect the genuineness of the subsequent deposits. Therefore, we are not in agreement with this finding of the ld. PCIT. AO by mistake failed to make this addition - There is no basis we find for the same. The assessment order has to be read as it is and there is no scope for drawing any inference or reading between the lines of an assessment order. Once an issue has been shown to be examined during the assessment proceedings and the assessment order does not reveal any addition made on account of the same, it is to be treated as having been accepted by the AO. Nothing can be added or subtracted from a detailed assessment order passed. Further, if it was a mistake by the AO and not having made addition of Rs. 30 lakhs, the AO could very well have exercised his power of rectification of mistake u/s 154 of the Act which has not been done in the present case. Thus we hold that the issue of cash deposits has been duly examined during the assessment proceedings and the AO has arrived at a plausible view of the source of the same having been duly explained from cash withdrawals and opening cash balance duly evidenced with documents, and there is, therefore, we hold that that no error in the assessment order - Decided in favour of assessee.

Issues Involved:

1. Validity of the order passed by the Principal Commissioner of Income-tax (PCIT) under Section 263 of the Income-tax Act, 1961.
2. Examination of cash deposits by the Assessing Officer (AO) during the scrutiny assessment.
3. Whether the assessment order was erroneous and prejudicial to the interest of revenue.
4. Adequacy of inquiry conducted by the AO regarding cash deposits.
5. Invocation of revision jurisdiction by PCIT despite the principle of merger with the CIT(A)'s order.

Summary:

1. Validity of the Order Passed by PCIT under Section 263:

The assessee challenged the PCIT's order dated 10.03.2022, which was passed in exercise of revisionary powers under Section 263 of the Income-tax Act, 1961, for the Assessment Year 2017-18, arguing that the order was "bad in law and required to be quashed."

2. Examination of Cash Deposits by the AO During Scrutiny Assessment:

The AO had scrutinized the cash deposits made by the assessee, which included Rs. 30 lakhs deposited prior to demonetization and Rs. 22 lakhs during the demonetization period. The AO made an addition of Rs. 22 lakhs but did not add the Rs. 30 lakhs deposited before demonetization, accepting the assessee's explanation that it was from prior withdrawals.

3. Whether the Assessment Order was Erroneous and Prejudicial to the Interest of Revenue:

PCIT found the assessment order erroneous for not examining the source of Rs. 30 lakhs deposited before demonetization. PCIT noted that the AO did not document any acceptance of the assessee's explanation, nor was there any Office Note indicating proper application of mind.

4. Adequacy of Inquiry Conducted by the AO Regarding Cash Deposits:

The PCIT argued that the AO failed to make proper inquiries and that the explanation provided by the assessee'withdrawals from the same bank account'was not plausible. The PCIT found it unusual for someone to withdraw cash without immediate need and then redeposit it. The PCIT also noted unexplained deposits in the bank account prior to withdrawals.

5. Invocation of Revision Jurisdiction by PCIT Despite the Principle of Merger:

The assessee contended that the assessment order had merged with the CIT(A)'s order, making revision under Section 263 impermissible. However, the PCIT held that the AO's failure to add Rs. 30 lakhs was a mistake, thus justifying the revision.

Final Judgment:

The Appellate Tribunal disagreed with the PCIT's findings, stating that the AO had indeed examined the cash deposits and accepted the explanation provided by the assessee, which was supported by documentary evidence. The Tribunal found no error in the AO's assessment order and held that the PCIT's order was not justified. The appeal of the assessee was allowed, and the PCIT's order was set aside.

Order Pronounced:

The appeal of the assessee was allowed, and the order was pronounced in the open Court on 23/02/2024 at Ahmedabad.

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