PRAMODA KUMAR BHUYAN,BHUBANESWAR vs. PR.CIT-1, BHUBANESWAR

It was submitted by the ld. AR that the original assessment in the case of the assessee was a limited scrutiny assessment on account of “Large cash deposits in the bank account(s) during the year”. It was also submitted that the original assessment came to be completed u/s.143(3) on 17.12.2019. It was the submission that the ld. Pr.CIT invoked his powers u/s.263 of the Act and issued show cause notice to the assessee in respect of two issues. It was the submission that the first issue was that during the course of assessment proceedings, it was found that there was Rs.58,58,484/- out of which the AO had made addition of Rs.20,68,000/- u/s.69 of the Act stating that the cash deposit in specified bank notes during the demonetization period are unexplained investment. Regarding the balance of Rs.37,90,484/-, the AO treated the same as assessee’s own trade receipt and estimated the net profit from such profit at 1%. It was the submission that the ld. Pr.CIT was of the view that the 1% was not required to be considered but the entire amount was liable to be treated as unexplained cash deposit of the assessee. It was further submitted that the second issue was in respect of the salary income from M/s Neelachal Filling Station and the assessee claimed that he was a partner but no salary and remuneration have been offered. It was the submission that in respect of the first issue, the ld. AO had already taken a view and had expressed his opinion and has brought to tax the income and estimated at 1%. It was the submission that in respect of second issue the AO could not have considered the issue insofar as it was a limited scrutiny and the issue of remuneration of salary from M/s Neelachal Filling Station was not an issue to which the ld. AO could have got into. It was the prayer that the order of the ld. Pr.CIT is liable to be quashed. In respect of first issue that the issue had already been considered and an opinion had already been formed by the AO and in respect of second issue there was a limited scrutiny and the AO could not have go beyond the such issue and in view of the decision of the Hon’ble Jurisdictional High Court in the case of Shark Mines & Minerals Pvt. Ltd., reported in [2023] 151 taxmann.com 71 (Orissa)[02-03-2023], in the case of limited scrutiny, ld. Pr.CIT could not treat the assessment order as erroneous on the issues which were not opened in the assessment proceedings.

In reply, ld.CIT-DR drew our attention to para 4.6 of the order of the AO, wherein the AO has categorically admitted that the assessee could not establish his claim with verifiable evidences such as books of accounts, return of income etc. from M/s Neelachal Filling Station, Chandikhol and, therefore, the AO’s treatment of Rs.37,90,484/- as the assessee’s own trade receipt was totally a wrong view. It was the submission that in respect of second issue in regard to the limited scrutiny and the salary and remuneration received from M/s Neelachal Filling Station, he relied upon the order of the ld. Pr.CIT.

We have considered the rival submissions. Admittedly, a perusal of the assessment order at para 4.6 clearly shows that the assessee has been unable to prove his partnership claim in respect of M/s Neelachal Filling Station. The assessee has also been unable to prove the source for Rs.37,90,484/- in his bank account. Thus, the action taken by the AO in estimating the income from such deposit is in fact, erroneous as the AO has not considered how this amount has been treated as income in the profit and loss account of the assessee, then obviously the same cannot be treated as receipt for estimation purposes. The AO has also failed to consider from where the assessee has received this money and for what purpose he has received it. In the absence of any explanation or proof, obviously it should have drawn the attention of the AO in regard to making the addition. Thus, it cannot be said that the AO has applied his mind or has formed his opinion on the issue.