MAHESH ARVIND TILVE,MUMBAI vs. PR. CIT -17, MUMBAI

Brief facts of the case are that the Ld. PCIT, Mumbai – 17 while verifying the assessment order passed u/s 143(3) read with Section 147 of the Income Tax Act, 1961 (in short ‘Act’) observed that as per the assessment order dated 14.12.2018 determined the total income of Rs. 20,52,430/-. He observed that during the assessment, assessee has paid an amount of Rs. 3,75,000/- in cash for purchase of residential and commercial premises on 16.09.2010 during the Assessment Year: 2011-12 financial year 2010-11. He observed that during the course of search and seizure action conducted u/s 132 of the Act, on M/s Neptune Venture and Development Pvt. Ltd., it was established that such payments made in cash for purchase of properties by buyers is on money payment which is not recorded in the books of accounts. However, he observed that the AO had merely accepted the justification of cash payments on the basis of cash ledger, without making any link to bank account or any other reliable documents. He observed that the above issue was not considered by the AO while framing assessment order in this case. Therefore, the AO has passed the assessment order without making necessary enquiries and verification in these aspects which have been made to ascertain the relevant facts for the purpose of deciding the issue . Accordingly, he invoked Explanation 2 to sub-section 1 of Section 263 of the Act and treated the assessment order as erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, Ld. PCIT issued notice u/s 263 of the Act and in response, the assessee submitted that an amount of Rs. 3,75,000/- from cash in hand and during the assessment proceedings, the cash ledger showing opening balance of the cash in hand and withdrawal from banks were placed before the AO and revision proceedings u/s 263 of the Act is not justified after considering the submissions of the assessee.

Ld. PCIT observed that assessee has shown opening balance of Rs. 2,73,710/- and no documentary evidence was furnished to substantiate the above said opening cash balance and neither the AO has called for any details regarding the above. Further, he observed that during the assessment year, assessee has shown drawing of merely Rs. 75,400/- for the entire year. Therefore, by relying on several judicial decisions and justified the revision proceedings and he observed that the failure of the AO with regard to determining correct cash in hand without enquiry into the insufficient drawing of the assessee and accepted cash ledger without necessary investigation has to be recorded as erroneous in so far as it is prejudicial to the interest of the Assessment Year: 2011-12 revenue. Accordingly, he directed the AO to conduct the requisite enquiries to arrive at the correct conclusion as per law and frame the assessment order denovo.

Aggrieved, assessee is in appeal before us arising following grounds of appeal: “1. The Learned Pr. CIT, Mumbai-17 has erred in law and on facts and circumstances of the case in exercising its revisionary powers by passing Order u/s. 263 of the Act, in set aside the Assessing Officer’s Order dated 14-12-2018 passed w/s. 143(2) r.w.s. 147 of the Act, in respect of cash payments of Rs.3,75,000/made by the Appellant towards purchase of Car Parking Place from M/s. Neptune Ventures & Developers Pvt. Ltd.

On the other hand, Ld. DR relied upon the order passed by the Ld. PCIT.

Considered the rival submissions and material placed on record. He observed that the assessment was reopen specifically to verify the cash transactions and cash payment made by the assessee to the builder as on money and assessee has filed all the relevant information before the AO to explain the availability of cash and sources of the cash. AO has accepted the detailed submissions made by the assessee. On going through statements submitted by the assessee, we observed that assessee explained the source of cash even though drawings are less but still assessee has sufficient cash to make on money payment. Therefore, AO has accepted the submissions of the assessee and took the one of the possible view and there is no requirement of making further investigation and assessee has correlated the bank drawing in the cash book. Therefore, Ld. PCIT has initiated proceedings to verify the same issue, there is no substance in the views expressed by Ld. PCIT and merely relying in explanation to section 263(1) for substituting his other possible view, will not render the assessment order erroneous. We do not find any reason to upheld the revision proceedings and accordingly 263 order is set aside.

In the result, appeal filed by the assessee is allowed.