RAM BHAROS SHASHI,JODHPUR vs. ITO,WARD-1(4), JODHPUR

During the course of hearing, the ld AR submitted that the assessee is an individual assessed to tax regularly and his filed his return of income declaring income from salary, commission, rent and interest. That the case of assessee was selected for limited scrutiny for Shri Ram Bharos Shashi vs. ITO verification of “Cash Deposits” and accordingly, the AO had issued notice issued u/s 143(2) & 142(1) along with query letter. In response to such notice, the assessee had furnished complete details of cash deposits & relevant documents as required by the AO during the assessment proceedings. It was submitted that AO after due verification and examining the documentary evidences and explanations as furnished by assessee reached the conclusion that the cash deposits in the bank account are from verifiable sources. It was submitted that during the assessment proceedings, the assessee had furnished the financial statements for earlier years and the AO duly verified the same and no adverse material had been found and accordingly the AO accepted the income declared by the assessee.

It was further submitted that on 04/03/2021, the ld PCIT had issued a show cause notice u/s 263 of the Act and observed that the assessment order passed by the AO is erroneous as well as prejudicial to the interest of revenue. It was submitted that the assessee had furnished the reply in response to show cause notice and explained that the source of cash deposits which are supported with documentary evidences. Further, it was clarified that in the ITR, only the particulars of business are required to be reported. However the personal statement of affairs as maintained by the assessee are not reported but same was produced before the AO and the AO had verified and treated the same as genuine and accordingly the claim had been accepted. It was submitted that the ld PCIT without considering the submission and evidence furnished by the assessee in judicial manner has held the Shri Ram Bharos Shashi vs. ITO order passed by the ld AO as erroneous in so far as it is prejudicial to the interest of Revenue.

It was further submitted that the AO had exercised the quasi- judicial power vested in him in accordance with law and arrived at conclusion on the basis of legal & valid documentary evidences and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion and also there was no revenue loss as the source of cash deposits had been disclosed and offered for taxation as per provisions of law.

It was further submitted that the ld PCIT had not analyzed the documentary evidences and explanations available on record of AO in right perspective & judicial manner and made arbitrarily allegation that the balance sheets prepared for the AY 2014-15, 2015-16 and 2016-17 has got no authenticity and that the ld AO failed to examine and verify the source of cash in hand which got accumulated on 31.03.2014 and source of the cash available with the assessee in the year to get it deposited in the bank accounts. It was submitted that in the order passed u/s 263, the ld PCIT had not recorded any specific finding as to how the order passed by the ld AO is erroneous which resulted in loss of the Revenue and therefore the direction issued by him is totally illegal and beyond his jurisdiction.

It was further submitted that it is a settled position of law that revisionary powers of CIT u/s 263 can be invoked only when the assessment order is erroneous as well as prejudicial to the interest of Shri Ram Bharos Shashi vs. ITO the Revenue. Since in the case of assessee, the assessment order could not be established to be erroneous by Pr CIT. The sole ground of assumption of jurisdiction by the Pr. CIT was that the AO did not make proper enquiry. It was submitted that in the instant case, the same cannot be said to be erroneous and prejudicial to the interest of the Revenue since the AO was ceased of the matter and he has called upon the assessee to produce relevant material with regard to areas which were stated by the PCIT in his show cause notice. It was submitted that the ld PCIT was not specific as to the reasons why the assessment made by the AO was erroneous and prejudicial to the interest of the Revenue. The ld PCIT has not arrived at any independent finding for issuance of notice under s.

Further, a thorough enquiry has been conducted by the AO which comprised of questionnaire to which the assessee has submitted his reply, thereafter there is a notice under s. 142(1) with a query letter to which again the assessee has replied to the queries, so it is evident that there has been a detailed investigation and enquiry conducted by the AO. When such judicially exercise has been apparently made by AO, therefore the order of the AO cannot be branded as erroneous and prejudicial to the interest of the Revenue. It was accordingly submitted that the exercise of jurisdiction under s. 263 by the PCIT is not valid in eye of law and the order so passed therefore may be set-aside. In support of his contentions, the ld AR has relied upon various Courts and Tribunal decisions.

Per contra, the ld. CIT/DR submitted that a perusal of the record shows that during the year under consideration, the assessee has deposited cash of Rs. 72.34 lakhs in his bank account and a major part

We have heard the rival contentions and perused the material available on record. It is noted that the ld PCIT has issued the show-

Now coming to the reasoning so adopted by the ld PCIT, we find that though the ld PCIT has accepted the fact that the assessee has submitted the details of the transactions relating to cash deposits and withdrawals during the year as well as balance sheets and ITRs for the year under consideration and other two years, the claim of the assessee that cash deposits have also been made out of opening cash in hand has not been accepted for the reason that the assessee had not furnished any detail in Part A- BS of his ITR filed for the impugned assessment year i.e, A.Y. 2015-16 and secondly, the balance sheets for the three years including the year under consideration has no authenticity as the details mentioned therein have not been shown/declared in the respective ITRs. In this regard, the contention of the ld A/R is that in the ITR form, only the particulars of business are required to be reported, however the personal statement of affairs as maintained by the assessee are not required to be reported and during the assessment proceedings, these personal statement of affairs for three financial years showing the cash in hand and related transactions were submitted along with cash book, ledger, bank statements and copy of ITRs which has been duly verified by the AO and no adverse finding has been recorded by the AO.

The assessee has reported income from salary, commission, rent and interest during the year under consideration in his return of income. One may challenge whether the disclosure so made is adequate or not and what kind of disclosure and details to be furnished. In our view, however, the issue before us is not about the disclosure requirement and disclosure which is actually made by the assessee while filing his

In this regard, we find that during the course of assessment proceedings, the AO has issued notice u/s 142(1) dated 31.05.2017 asking for copy of return of income, computation of income, books of accounts, bank statements and to explain the nature and source of cash deposits in saving bank accounts maintained by the assessee. In response, the assessee has submitted copy of his return of income, computation of income, bank statements, personal cash book, ledger, copy of capital account and balance sheets for A.Y 2014-15, A.Y 2015- 16 and A.Y 2016-17 showing the opening and closing cash in hand and has also submitted the nature and source of cash deposits during the year under consideration. Infact, the ld PCIT has also acknowledged this fact that the details of transactions in respect of cash deposits and withdrawals have been duly submitted by the assessee during the assessment proceedings. The submissions so made have been examined by the AO as evident from clear affirmation thereof by the AO in the assessment order wherein the AO has stated that the A/R of the Shri Ram Bharos Shashi vs. ITO assessee has attended the proceedings from time to time and furnished his written submission alongwith copy of return, cash book, ledger, personal balance sheet, bank statements etc. and the submission furnished by the assessee has been examined and verified keeping in view the reasons for which scrutiny selection was initially done. We therefore find that the matter has been duly examined by the AO with focus on cash deposits and withdrawals transactions made by the assessee during the year for which the matter was selected for limited scrutiny. Further, where the AO has examined the personal cash book maintained by the assessee showing cash in hand, deposits and withdrawals made during the year and the opening and closing balances of cash in hand are duly reflected in the respective balance sheets of previous and subsequent years, we find that the AO has taken all reasonable steps as are expected to be taken to verify the subject transactions in terms of nature and source of such deposits.

It is also relevant to note that the balance sheets not just reflect the cash in hand rather reflect the state of affairs in terms of assets and liabilities as on the close of the financial year including the net results of the activities undertaken by the assessee during the year. Therefore, where the net results of the activities so undertaken has been accepted by the ld PCIT as reflected in the return of income in terms of net income and further, where no adverse finding has been recorded regarding the status of assets and liabilities, it would be incorrect to hold that the balance sheet is not authentic merely for the fact that the assessee has failed to report certain details in the return of income.

In light of aforesaid discussions and in the entirety of facts and circumstances of the case, we are of the considered view that the necessary enquiries and examination as reasonably expected have been carried out by the Assessing officer and he has taken a prudent, judicious and reasonable view after considering the entire material available on record and the order so passed u/s 143(3) cannot be held as erroneous in so far as prejudicial to the interest of Revenue. The impugned order passed by the ld PCIT u/s 263 is accordingly set aside and the order of the Assessing officer is sustained.