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Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant/Assessee has challenged the order, dated 16.03.2022, passed by the Ld. Principal Commissioner of Income Tax, Mumbai - 6 [hereinafter referred to as „the PCIT‟] under Section 263 of the Income Tax Act, 1961 [hereinafter referred to as „the Act‟] whereby the Assessment Order, dated 07.12.2019, passed under section 143(3) of the Act was set aside as being erroneous in so far as prejudicial to the interest of revenue with the directions to make fresh assessment.
The Appellant has raised four grounds of appeal challenging the jurisdiction of the PCIT as well as the exercise of power of revision by the PCIT under Section 263 of the Act.
The relevant facts, in brief, are that the Appellant, a co-operative credit society, filed its return of income for the Assessment Year 2017-18 declaring „Nil‟ income on 12.10.2017. Assessment was
ITA No. 1002/Mum/2022 Assessment Year 2017-18 framed on the Appellant, vide order, dated 07.12.2019 under Section 143(3) of the Act at the total income of INR 41,23,830/- after denying deduction of INR 41,23,830/- claimed by the Appellant under Section 80P of the Act. Subsequently, notice under Section 263 of the Act was issued to the Appellant on 04.02.2022. The relevant extract of the aforesaid notice read as under:-
“2. On perusal of records, it is seen that your case was selected for scrutiny through CASS for verification of the issues as detailed below:- (i) Low income in comparison to very high investments appearing in balance sheet. (ii) Large deduction under chapter VIA from total income. (iii) Low income in comparison to high loans/advances/investment in shares appearing in balance sheet and (iv) Cash deposit during demonetization period. Assessment was completed u/s 143(3) of the Income Tax Act, 1961 (the „Act‟) on 07.12.2019 disallowing the deduction under chapter VIA u/s 80P(2)(a) and assessed income at Rs. 41,23,830/- Further, it is observed that while finalizing order assessing officer has not verified the issue of cash deposit during the demonetization period.
Therefore, it is considered that the order passed is erroneous in so far as it is prejudicial to the interest of revenue within the meaning of section 263 of the Income Tax Act, 1961.
In view of the above facts, you are hereby given an opportunity of being heard and show-cause as to why an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment within the meaning of section 263 of the Income Tax Act, may not be passed in your case.” (Emphasis Supplied)
The Appellant vide letter, dated 20.02.2022, filed reply/submission to the aforesaid notice (relevant extract of which has been reproduced in paragraph 3 of the order impugned by way of present appeal). The
ITA No. 1002/Mum/2022 Assessment Year 2017-18 PCIT, not being satisfied with the reply/submissions of the Appellant passed order under Section 263 of the Act setting aside the assessment with a direction to make a fresh assessment holding that the assessment order, dated 07.12.2019, passed under Section 143(3) of the Act was erroneous and prejudicial to the interest of revenue as the Assessing Officer had failed to make the necessary enquiry or verification. The relevant extract of the order, dated 16.03.2022, passed by the PCIT under Section 263 of the Act read as under:
“4.1 It is seen that one of the reason for selection the case for scrutiny was to examine the source of cash deposits made during the demonetization period i.e. 08.11.2016 to 31.12.2016 in old currency notes. While computing the assessment u/s 143(3), the AO has not examined this issue. The AO before completing the assessment should have examined the source of cash deposits made in the bank account of the assessee during demonetization period. 5. xx xx 6. In view the facts discussed in para 4.1, I am of the considered view that the assessment order dated 07.12.2019 passed by the AO has been passed without making enquiry and verification which should have made by him. Hence, the assessment order dated 07.12.2019 passed u/s 143(3) is erroneous in so far as prejudicial the interest of revenue. Therefore, the assessment order dated 07.12.2019 passed by AO u/s 143(3) is set aside the AO with a direction to make fresh assessment. While completing the fresh assessment the AO shall examine the source of cash deposits made in old currency notes during the demonetization period i.e. 08.11.2016 to 31.12.2016. Before completing the assessment a reasonable opportunity of being heard shall allowed to the assessee by the AO.” 5. Being aggrieved the Appellant/Assessee has preferred the present appeal against the order, dated 16.03.2022, passed by the PCIT under Section 263 of the Act.
When the matter was taken up for hearing, none appeared for the Appellant. The Ld. Departmental Representative appearing before 3
ITA No. 1002/Mum/2022 Assessment Year 2017-18 us drew our attention to letter, dated 05.08.2022, whereby the written submissions of the Appellant were placed on record. In view of the written submissions filed by the Appellant, we proceeded with the hearing to examine the issue on merits.
We have heard the Ld. Departmental Representative and given thoughtful consideration to the written submissions filed by the Appellant. We note that the Assessing Officer has in opening paragraph of the Assessment Order recorded as under:
“The return of income for A.Y. 2017-18 declaring ‟Nil” income was e- filed by the assessee on 12.10.2017. The case was selected for Completely Scrutiny under CASS for the reason of “Low income in comparison to high loans/advances/investment in shares appearing in balance sheet, High value receipt of cash shown from third parties in response data and Large deduction claimed under Chapter VI-A.” Subsequently statutory notice u/s 143(2) of the Income Tax Act, 1961 dated 11.08.2018 was issued through ITBA and served on the assessee. Thereafter, notices u/s 142(1) dated 28.01.2019, 08.02.2019 and 19.02.2019 were issued and served on the assessee.” (Emphasis Supplied)
Though the case of the Appellant/Assessee was also selected for detailed scrutiny for the reason of high value receipt of cash shown from third parties, in the assessment order there is no discussion in respect of the same. The assessment order only deals with the disallowance of claim of deduction of INR 41,23,830/- under Section 80P of the Act. In response to the notice, dated 04.03.2022 issued under Section 263 of the Act, the Appellant had filed reply/submission on 20.02.2022, and had stated therein that the cash deposited during demonetization period. (i.e. 09.11.2016 to 13.12.2016) was collected from the customers/member and the details of the same were submitted by the Appellant in the assessment proceedings. However, there is no material on record to suggest that any investigation/enquiry was made by the
ITA No. 1002/Mum/2022 Assessment Year 2017-18 Assessing Officer in relation to the same. No details of the inquiry/investigation conducted by the Assessing Officer have been stated in the assessment order, or the aforesaid reply/letter, dated 20.02.2022 or the written submissions filed before the Tribunal. The assessment order, dated 07.12.2019, was passed without making enquiry or verification which ought to have been made by the Assessing Officer in view of the fact that high value receipt of cash from third parties was one of the reasons for selection for scrutiny. The provisions of Clause (a) of Explanation 2 to Section 263 of the Act are clearly attracted in the facts of the present case. Thus, in our view, the PCIT was justified in exercising of powers of revision under Section 263 of the Act. We do not find merit in the grounds raised in the present appeal and the same are dismissed.
In result the present appeal is dismissed.
Order pronounced on 28.10.2022.
Sd/- Sd/- (Prashant Maharishi) (Rahul Chaudhary) Accountant Member Judicial Member म ुंबई Mumbai; दिन ुंक Dated : .10.2022 Alindra, PS
ITA No. 1002/Mum/2022 Assessment Year 2017-18 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदिकरण, म ुंबई / ITAT, Mumbai