As AO blatantly failed to check the nature and source of the transaction, revision under Section 263 is justified
Fact and issue of the case
The present appeal filed by the assessee is directed against the order passed by the Principal Commissioner of Income Tax, Raipur-1(for short ‘Pr. CIT’) u/s. 263 of the Income Tax Act, 1961 (for short ‘the Act’) dated 18.03.2021, which in turn arises from the order passed by the A.O. u/ss. 143(3)/147 of the Act, dated 11.12.2018 for A.Y. 2015-16. The assessee has assailed the impugned order on the following grounds of appeal before us:
Ld. Pr. CIT erred in invoking the provisions of Sec.263 and in setting aside the assessment order for fresh enquiry. Order passed u/s.263 is unsustainable and is passed without properly appreciating the facts and evidences on record. The assessment order is neither erroneous nor prejudicial to the interest of the revenue.
The appellant reserves the right to add, amend or modify any of the ground/s of appeal.”
The case of the assessee was reopened by the A.O u/s.147 of the Act on the basis of following “reasons to believe”-
“Reasons recorded u/s.147 read with section 142(2), issue of notice U/s.148 of I.T Act, 1961
The assessee did not file the return for the relevant assessment year.
As per the information available in this office, a total cash of Rs.15,00,000/- has been deposited in the saving bank account and Cash Transaction of Rs. 28,00,000/- total of Rs. 43,00,000/- during the F.Y. 2014-15 relevant to A.Y. 2015-16.
The above amounts constitute the part of the total income of the assessee and therefore should have brought under tax net by filing return income for the said assessment year. However, the assessee has not filed the same.
In view of the above, I have reason to believe that the income in the said case, has escaped the assessment for the assessment year 2015-16 amounting to Rs.43,00,000/-under section 147 of I.T.Act,1961. For taxing the said amount, issue of notice u/s.148 is necessary. Accordingly, necessary approval u/s. 151(1) of the 1.T Act may be accorded at your end.
Date : 24.08.2017
Sd/-
Pradeep Kumar Ramteke
Income Tax Officer-2, Ambikapur”
Notice u/s.148 of the Act dated 08.06.2018 was issued to the assessee. In compliance, the assessee filed his return of income declaring an income of Rs.4,74,190/-. Thereafter, the A.O had framed the assessment vide his order passed u/ss. 143(3)/147 of the Act dated 11.12.2018 accepting the assessee’s returned income.
The Pr. CIT after culmination of the assessment proceedings called for the assessment records of the assessee. The Pr. CIT observed that though the case of the assessee was reopened for verifying nature and source of the cash deposits in his bank account amounting to Rs.15 lacs and Rs.28 lacs, but the A.O had failed to carrying out any verifications and summarily accepted the unsubstantiated explanation of the assessee Accordingly, the Pr. CIT vide his order passed u/s. 263 of the Act dated 18.03.2021 held the order passed u/ss. 143(3)/147 dated 11.12.2018 as erroneous in so far it was prejudicial to the interest of the revenue, and set-aside the assessment order with a direction to the A.O to re-adjudicate the same afresh after affording an adequate opportunity of being heard to the assessee.
The assessee being aggrieved with the order passed by the Pr. CIT u/s. 263 of the Act dated 18.03.2021 has carried the matter in appeal before us.
Observation of the court
We have given a thoughtful consideration and are unable to persuade ourselves to concur with the contentions advanced by the Ld. AR. As observed by us hereinabove, nothing discernible from the record which would reveal that the A.O while framing the assessment had carried out any verification as regards the nature and source of cash deposits of Rs.15 lacs and Rs.28 lacs in the assessee’s bank account. Strangely, though the case of the assessee was reopened to bring to tax the unexplained cash deposits aggregating to Rs.43 lacs, which the AO at the stage of such reopening was of the belief had escaped assessment, but he had thereafter while framing the assessment blatantly failed to call for the requisite details and make necessary enquiries as regards the nature and source of the aforementioned cash deposits and had summarily accepted the returned income of the assessee. In fact, the claim of the Ld. AR that the assessee had never made any cash deposit of Rs.28 lacs (supra) in his bank account further strengthens the case of the department. If the claim of the Ld. AR is correct, then we are unable to fathom as to what verification about the cash deposits aggregating to Rs. 43 lacs (supra) had been carried out by the A.O while framing the assessment. It is not the case of the A.O that the assessee had never made any cash deposits of Rs.28 lacs (out of 43 lacs in his bank account). Carrying the contention of the Ld. AR further, i.e. the assessee had during the year under consideration not made any cash deposit of Rs.28 lac (supra) in his bank account, we are unable to comprehend that if that be so, then on what basis it was observed by the A.O in his assessment order that he had verified the nature and source of the cash deposits aggregating to Rs.43 lacs (supra) in the assessee’s bank account.
Be that as it may, we are of the considered view that as there is a gross failure on the part of the A.O to verify the nature and source of the cash deposits aggregating to Rs.43 lacs, which in itself had formed the very basis for reopening of the assessee’s case u/s.147 of the Act, therefore, the Pr. CIT in exercise of the powers vested with him as per “Explanation 2” of Section 263 of the Act had rightly set-aside his order with a direction to reframe the assessment after carrying out necessary verifications. We, thus, in terms of our aforesaid observations finding no infirmity in the view taken by the Pr. CIT u/s. 263 of the Act, uphold his order.
In the result, appeal of the assessee is dismissed in terms of our aforesaid observations.
Order pronounced in open court on 03rd day of August, 2023.
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
Santosh-Pandey-Vs-PCIT-ITAT-Raipur-2
