SHRI AJAYKUMAR DHANSUKHLAL PAREKH,,NA vs. ARIVS.THE PR. CIT,, VALSAD

This appeal filed by the Assessee is directed against the order of 1. Principal Commissioner of Income Tax, Valsad [in short “the PCIT”] dated 22-03-2017, for the assessment year 2007-08. Ground No.1 to 3 relates to passing the order u/s. 263 of the Act, 2. although the assessment order passed u/s. 144 r.w.s 147 of the Act was neither prejudicial to the interest of the revenue nor erroneous. Brief facts of the cases are that the AIR information revealed that the 3. assessee has deposited cash of Rs.35,56380/- in his savings bank account number ending 768, maintained with ICICI Bank, Navsari during the assessment year under consideration and the assessee has not furnished any return of income for that year. Therefore, the case was reopened u/s.147 of Mitali A. Parekh L/h. of Ajay D Parekh v. Pr. CIT, Valsad/ITA. 935/AHD/2017/A.Y.2007-08 Page 2 of 5 the Act and assessment was finalized on 31-03-2015 determining total income of Rs.1054580/-. On going through the record and perusal of the report of range head, it was noticed that the AO has not made any effort to find out the nature of business/profession being carried out by the assessee. Further, the AO has seriously erred in taking the amount of cash deposits of Rs.1054580/- instead of Rs.3556380/- as mentioned in the form for seeking approval u/s.151 for reopening of said assessment. The range had approved the reopening of cash in the basis of information that the cash deposited in the said bank account at Rs.3556380/- and further the assessee has not responded the query letter issued by the AO in this regard. The examination of record further revealed that the AO has not made enquiry with regard to real estate transaction of Rs.7428530/- carried out on 02-05-2006. In view of this, the order of the AO was found to be erroneous as well as prejudicial to the interest of revenue. Accordingly, a show-cause notice was issued by the assessee u/s.263 of the Act on 17-02-2017. It was explained by the assessee that the cash deposits of Rs.1054576/- has been explained to the AO and the assessee has also filed against the said order. The assessment was made u/s.144 of the Act, however the CIT(A) observed that the assessee has found to have deposited cash of Rs.35,56,380/- as against the amount of Rs.1054580/- taken by the AO. There was a complete non- application of mind on the part of the AO in the sense that he did not even bother to check the total of cash deposits during the year under consideration for which the assessment was reopened. The PCIT further observed that as per the mandate of the provisions of Section 263 of the Act, the AO has not only an adjudicator but also an investigator. He cannot Mitali A. Parekh L/h. of Ajay D Parekh v. Pr. CIT, Valsad/ITA. 935/AHD/2017/A.Y.2007-08 Page 3 of 5 remain passive in the face of a return which is apparently in order but calls for further inquiry. Therefore, after placing reliance on various case laws as discussed in the order of Section 263 of the Act, the assessment order of the AO dated 31-03-2015 was set-aside with a direction to be made afresh after giving proper/due opportunities to the assessee.

Being aggrieved, the assessee filed this appeal before this Tribunal. The ld. counsel submitted that the peak balance in the bank’s statement was at Rs.817730/- only against the addition of Rs.1054576/-. Therefore, the AO duly considered in the peak balance of bank account deposits. Further, regarding real estate transaction of Rs.7428530/- the assessee has not entered into any real estate transactions, however, the assessee has filed an appeal against the order of the AO in making addition of Rs.1054576/-. Hence, the action of the ld. CIT(A) for taking u/s.263 is not in accordance with law. Therefore, the PCIT was not justified invoking the provisions of Section 263 of the Act. The ld. counsel has placed reliance some case laws, as per paper book. Per contra, the ld. CIT(DR) supported the order of PCIT and submitted 5. that the AO has not enquired into the bank deposits which were mentioned for reopening of assessment which mentioned in the reasons for reopening of assessment. Hence, the order passed by the AO is prejudicial to the interest of the revenue as well as erroneous. We have heard the rival submissions and perused the material available 6. on record. The Provisions of section 263 empowers the PCIT to examine the record of any proceedings under the Act and if it is considered that any order passed by the AO has erroneous in so far as it is prejudicial to the