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TMI Blog2023 (7) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... s.3,85,80,075/- made in the bank accounts is erroneous in so far as it is prejudicial to the interests of revenue within the meaning of section 263 of the I.T. Act and need to be adjudicated afresh. 3. As transpires from orders of the authority below, the revisionary jurisdiction was exercised by the ld.Pr.CIT on the order passed by the AO in the present case under section 143(3) of the Act, noting that the despite the assessee not substantiating with evidences, the source of cash deposited during demonetisation period of Rs.3,85,80,075/- and the AO not being satisfied with the reply of the assessee, he had still gone to make an addition of only 20% of the cash so deposited, when he should have added back the entire amount of cash deposited during this period.The show cause notice issued in this regard by the ld.Pr.CIT for initiating proceedings under section 263 of the Act placed before us at PB page no.103 to 105, bringing out the above facts as under: 4. As also finding of the ld.Pr.CIT at para 5 and 5.1 of his order is as under: "5. I have carefully considered the facts of the case, assessment records and written reply furnished by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of Section 68 of the Act as ruled out by the Hon'ble Supreme Court in the case of SumatiDayal Vs. CIT (1995) 214 ITR 801. Since the assessee fails to prove to the satisfaction of the Assessing Officers, the source and nature of the amount of cash credits, AO is entitled to draw an inference that the entire credit entry represents income taxable in the hands of the assessee." 5.1. From the above, it is clear that the Assessing Officer was not satisfied with the explanation furnished by the assessee in respect of the nature and source of cash deposit made during the period of demonetization. However, despite, being not satisfied as regards the nature and source of such cash deposit of Rs.3,85,80,075/- made during the demonetization period of 09/11/2016 to 30/12/2016, the Assessing Officer has made addition of only 20% of such deposit as unexplained cash credit u/s 68 of the IT. Act, to the total income for the year under consideration. Here, it is pertinent to mention that in respect of any sum credited (in this case Rs.3,85,80,075/-), once in the opinion of the Assessing Officer, the explanation offered by the assesses is not satisfactory, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready considered together with the issues discussed hereinabove also. Needless to mention that while passing the fresh assessment order, consequent to this order under section 263 of the I.T. Act, the Assessing Officer shall grant reasonable and sufficient opportunity of being heard to the assessee." 6. We have heard both the parties, and we have also gone through the assessment order passed in the case, under section 143(3) dated 19.12.2019, paper book filed by the ld.counsel for the assessee running into 132 pages and contentions of both the ld.counsel for the assessee and the ld.DR before us. After going through the above, and carefully considering all material and facts before us, we find that the impugned order passed by the ld.Pr.CIT under section 263 of the Act is not sustainable in law. As noted above, and as is evident from the order of the ld.Pr.CIT, his finding of the error was in relation to cash found deposited in the bank account of the assessee to the tune of Rs.3.85 crores during demonetization period and as per the ld.Pr.CIT, the AO had disallowed only 20% of the same, when - i) the assessee's explanation that the cash sales so de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce but in fact was attributable to the scale and manner of conducting business by the assessee ,having huge turnover ,all majorly in cash. He had explained the increase in turnover as compared to the preceding year in the year of demonetization, which is the impugned year in the present case .And had also explained the reason for turnover not increasing in the same proportion in the succeeding year. However, we have noted, the AO was not completely satisfied with this reply of the assessee, noting that during the period of demonetization ,i.e 01st to 8th November 2016 , there was abnormal increase in turnover, and therefore, he went to treat 20% of the cash deposit as unexplained credits. Taking note of the fact the assessee had established that majority of its sales were made in cash which was deposited in bank, but noting the fact that during demonetization period, the assessee had shown substantially larger increase in turnover, he therefore, considering it fit,to treat only 20% of the total cash deposits as unexplained. His finding at page-7 and 8 of the order is as under: 8. Even before the ld.Pr.CIT the assessee reiterated c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation was substantiated that the majority of sales made by the assessee was in cash, but it was only vis-à-vis abnormal incremental sales made during the demonetization period, the AO refused to agree with the assessee. Also the finding of the ld.Pr.CIT therefore that the AO completely disagreed with the assessee regarding its explanation and found the explanation of the assessee to be unsatisfactory for the entire cash deposits, is also incorrect. As noted above, the AO was dissatisfied not with the explanation of the entire cash deposits, but only partially in view of the abnormal increase in the sales shown by the assessee during that period. 11. In view of the above, the finding of the ld.Pr.CIT that the entire cash deposits during the demonetization ought to have been treated as unexplained credit under section 68 of the Act, we hold, could not have been inferred from the facts on record, and there is no error as such in the order of the AO in this regard. The order passed by the ld.Pr.CIT under section 263 of the Act holding the assessment order erroneous so as to cause prejudice to the Revenue is therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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