2024 (9) TMI 1049 - AT - Income Tax

Revision u/s 263 - huge cash deposits in the name of the company as well as in the name of its director - PCIT on examination of the record noted that AO had not properly examined the case and has not made addition on account of cash received from the in-laws of his brother by invoking the provisions of section 56(2) - HELD THAT - Since the assessee is a very small assessee and had duly explained before the AO regarding the source of cash deposits in a consolidated reply of all the three family members who stay together and which has also not been disputed by the PCIT, who only was of the opinion that the provisions of section 56(2) of the Act should have been invoked, therefore, we are of the considered opinion that no revisionary proceedings u/s 263 of the Act are warranted in the instant case. In the instant case, we find the AO had examined the source of cash deposits of all the three family members together which were submitted with supporting evidences and has applied his mind though not to the satisfaction of the PCIT. The submission of assessee that the 263 proceedings were initiated on the basis of audit objection could not be controverted by DR. Therefore considering the smallness of the amount involved and the assessee being a very small assessee who is not having any taxable income, the provisions of section 263 in our opinion, are not warranted and are quashed. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of proceedings initiated under Section 263 of the Income Tax Act.
2. Examination of the source of cash deposits by the Assessing Officer.
3. Applicability of Section 56(2) of the Income Tax Act concerning cash gifts received from non-relatives.

Detailed Analysis:

1. Validity of Proceedings Initiated 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, claiming that the assessment order passed by the Assessing Officer (AO) was "erroneous and prejudicial to the interest of Revenue." The PCIT argued that the AO failed to examine the applicability of Section 56(2) of the Act regarding cash gifts received by the assessee from non-relatives. The Tribunal found that the AO had examined the source of cash deposits and accepted the explanations provided by the assessee, including the cash gifts received from the in-laws of the assessee's brother. Therefore, the Tribunal concluded that the revisionary proceedings under Section 263 were not warranted.

2. Examination of the Source of Cash Deposits by the Assessing Officer:

During the assessment proceedings, the AO scrutinized the source of cash deposits made by the assessee and his family members. The assessee explained that the cash deposits were sourced from gifts received during the marriage of the assessee's brother, Prem Gaikwad. The AO accepted the explanations and supporting documents provided by the assessee, including affidavits and bank statements. The Tribunal noted that the AO had adequately examined the source of cash deposits and that the PCIT's claim of insufficient inquiry was not justified.

3. Applicability of Section 56(2) of the Income Tax Act Concerning Cash Gifts Received from Non-Relatives:

The PCIT argued that the cash gifts received from the in-laws of Prem Gaikwad should be taxed under Section 56(2) of the Act, as they do not fall within the definition of "relatives." However, the Tribunal found that the assessee had adequately explained the source of the cash deposits, including the gifts received from the in-laws. The Tribunal also noted that the AO had considered these explanations during the assessment proceedings. Given the smallness of the amount involved and the fact that the assessee had no taxable income, the Tribunal concluded that the provisions of Section 263 of the Act were not applicable.

Conclusion:

The Tribunal quashed the proceedings initiated under Section 263 by the PCIT, stating that the AO had conducted a sufficient inquiry into the source of cash deposits. The Tribunal also found that the PCIT's claim regarding the applicability of Section 56(2) was not justified, as the AO had already examined the issue. Consequently, all three appeals filed by the respective assessees were allowed. The Tribunal's decision emphasized that the revisionary proceedings under Section 263 were unwarranted in this case.