Revisionary order u/s 263 unsustainable because transaction was approved by AO after careful consideration

Fact and issue of the case

The captioned appeal has been filed by the assessee against the order of the Ld. Pr. Commissioner of Income Tax-1, Amritsar dated 25.03.2021 in respect of Assessment Year 2011-12 challenging therein the revisionary order u/s 263 of the Income Tax Act holding the assessment erroneous on lack of enquiries by the AO without appreciating the facts of the case and that the view taken by the Pr. CIT may be one of the possible view, that is not sufficient for assumption of jurisdiction u/s 263 of the Act.

Brief facts of the case are that the assessment has been completed by the erstwhile Income Tax Officer. Ward-3(5), Ferozepur under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 vide order dated 26.12.2018 at an income of Rs. 4,76,150/- against returned income of Rs 3,00,830/- declared in the return of income filed in response to notice u/s148 of the Act on 18.12.2018 after making addition of Rs. 1,75,322/ on account undisclosed interest on savings/deposits. The appellant’s case was reopened after recording reasons and obtaining necessary approval from Pr Commissioner of Income Tax, Bathinda that the assessee had deposited cash of Rs. 60,00,000/- in her savings bank account maintained with the Oriental Bank of Commerce during the financial year 2010-11 and that no return had been filed for the year under consideration under section 139(1) of the Act.

That the proposal for revision of assessment, order dated 12.2018 was submitted by the erstwhile Income Tax Officer, Ward 3(5), Zira through the erstwhile Additional Commissioner of Income Tax. Range 3, Ferozepur. On perusal of the proposal and the assessment record, the Pr. CIT observed that the assessment framed in this case was erroneously and prejudicial to the interests of the revenue. Accordingly, a show cause notice which was based on these observations drawn from the perusal of assessment record, is issued to the assessee vide this office DIN fv. Letter No. ITBA/COM/F/1 7/2020- 21/1031266404(1) on 05.03.2021. The relevant contents of the notice are reproduced as under:- The assessment for the that assessment for the assessment year 2011-12 was completed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 by ITO Ward 3(1), Ferozepur on 26.12.2018 at an income of Rs. 4.76.132 against returned income of Rs. 3,00,830/ – after addition of Rs. 1,75,322 on account of interest accrued on savings/deposits no disclosed in ITR. The case was reopened on the reasons that cash of Rs. 60,00,000/ was deposited in a saving hank account during the financial year 2010-12 and that no voluntary return of income for the assessment year 2011-12 has been filed. During the course of assessment proceedings, it was submitted that cash deposits were made out of sale proceeds of agriculture land sold by Sh. Charanjit Singh to whom the land belonging to the assessee’s family was transferred with a condition that he will transfer his land to assessee in turn which has not been happened. While examining the record, it is observed that the copy of registration deed dated 23.04.20 10 for Rs. 31,14,000/- has been filed during the course of assessment proceedings in respect of land measuring 55 knal 7 marla sold by Sh. Charanjit Singh S/o Sh. Shamsher Singh to Smt. Jasbir Knur. That your husband, Sh. Shinder Pal Singh has stated in his statement recorded during the course of assessment proceedings that the land under consideration teas transferred to Sh. Charanjit Singh by them and in turn Sh. Chimmjit Singh had to give some land to them, hut he refused to play his part. It was further stated that the land so transferred to Sh. Charanjit Singh teas sold by you along with Sh. Shinder Pal Singh and deposited the cash in the hank account out of sale consideration received, however, no copy of the said agreement was provided. Moreover, it is observed that the cash of Rs. 60 lakh was deposited which has been stated to be out of the sale proceeds of land but the sale consideration of the land was Rs. 31,14.000/- only. Thus, the source of rest of the amount of Rs. 28,86,000/ has remained unexplained. Further, no evidence in respect of transfer of property to Sh. Charanjit Singh (as stated in the statement by Sh. Shinder Pal Singh) is filed and also no evidence in support of the fact that the sale proceeds were not claimed by Sh. Charanjit Singh (being land on his name) viz. his bank account statement/confirmation in respect of the aforesaid transaction were not filed during the course of assessment proceedings. In view of the facts discussed above, the assessment framed in this case seems erroneous in so far as it is prejudicial to the interest of the revenue. In this context, I am directed by the worthy Pr. Commissioner of Income Tax-1, Amritsar to request you to show-cause as to why the assessment so framed may not be cancelled to be made afresh as per the provisions of section 263 of the l. T. Act, 1961 after affording reasonable opportunity of being heard.

The case was reopened on the reasons that the assessee had deposited cash of Rs. 60,00,000 in her saving bank account maintained with the Oriental Bank of Commerce during the financial year 2010-11 and that no voluntary return has been filed for the year under consideration. Thus, it was incumbent on the Assessing Officer to examine and inquire into the facts in the light of submissions of the assessee so as to determine the correctness of the claim of the assessee which is the very purpose of assessment. The Pr.CIT noted that absence of enquiry by the AO that goes to the very root of the exercise to determine the correct income assessable to tax and this failure of the Assessing Officer renders the assessment as erroneous and prejudicial to the interest of the revenue. The Pr. CIT supplemented its decision on lack of enquiry and incorrect application of mind by the AO with the judgements in the cases of Rampyari Devi Saraogi vs. CIT(SC) 671TR 84; (CIT v. Jawahar Bhatiacharjee [2012] 341 ITR 434 (Gauhati) HC FB and that Arvee International vs. Addl. CIT (ITAT, Mum) 101 ITD 495.

The Ld. Counsel submitted that the Ld. Pr. CIT has no valid and justified reason for initiating revisionary proceeding u/s 263 of the act and he challenged the revisionary order u/s 263 of the Income Tax Act holding the assessment erroneous on lack of enquiries by the AO being passed without appreciating the facts of the case and that the view taken by the Pr. CIT may be one of the possible view, that is not sufficient for assumption of jurisdiction u/s 263 of the Act.

Observation of the court

We have heard rival contentions, perused the material on record, impugned order, written submission and case law cited before us. It is seen that during the course of assessment proceedings, the assessee has filed documents required by the AO, in the form of bank statement of the assessee (APB, Pgs. 8-9), copy of the sale deed of the agriculture land dated 26.04.2010 (APB, Pgs.10- 12) to explain the disputed cash deposit in its bank account as above. Further, the AO has recorded the statement of Shinder Pal Singh husband of the assessee on 26.12.2018 (APB, Pgs.13-14). Thus, after having considered, all such documents, the Ld. AO framed assessment order u/s 143(3) r.w.s. 147 of the Act dated on 26.12.2018.

It is evident from the Assessment Order that the AO has consciously accepted the fact of a sale of agriculture land by the assessee, as source of income, other than the income disclosed by the assessee in her return of income for the disputed cash deposit in the bank account of the assessee. Meaning thereby that the source of cash deposit in the appellant bank account was out of sale consideration of agriculture land, and it has been duly accepted by the AO after verification of the documentary evidences filed before him as above. In our view, in the present case, all the facts have been independently verified by the Ld. AO. Thus, there appears to be merely a change of the opinion of the Ld. Pr. CIT in observing that there was incorrect application of mind by the AO by not carrying proper enquiry in the case of the assessee, and thus, a Show-Cause Notice (‘SCN’) dated 03.2021 was issued u/s 263 of the Act to the assessee (APB, Pgs.18- 19), on account of difference of opinion is bad in law.

In the case of Sh. Pappu Ram Saran (Supra) in ITA No. 1303/JP/2018, the ITAT Jaipur Bench has allowed appeal of the assessee by observing that there was a direct nexus between the transaction of sale and deposit in bank account of the assessee vide para 6 of the judgment. Further, in the case of Sh. Jagir Singh (Supra) in ITA No. 331/CHD/2019, the Chandigarh Tribunal has rendered similar decision vide para 20 of the judgment after following the judgment of Jaipur Bench in the case of ‘Sh. Pappu Ram Saran (Supra).

In the present case, there is a direct nexus between the transaction of sale and the cash deposited in the bank account of the assessee as the transaction of sale of land is registered on 26.04.2010 and the cash was also deposited by the assessee on the same date. Further, the Ld. AO has accepted the deal of sale of agriculture land with a conscious and independent application of mind. Under the facts and circumstances, we hold that the application of provision of section 263 of the Act, on account of difference in opinion of Pr. CIT is invalid and unwarranted.

In the above view, we accept the grievance of the assessee as Accordingly, the revision proceedings u/s 263 of the Act are held to be bad in law and as such, the impugned order u/s 263 of the Act is quashed.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 29.05.2023