VARADARAJ SUMATHI,ARCOT vs. ITO, WARD 2, VELLORE

This appeal filed by the assessee is directed against the order of the ld. Principal Commissioner of Income Tax/CIT-8, Chennai, dated 12.03.2020 relevant to the assessment year 2010-11 passed under section 263 of the Income Tax Act, 1961 [“Act” in short].

The appeal was filed by the assessee with a delay of 507 days in filing the appeal before the Tribunal due to outbreak of Covid-19 pandemic. Accordingly, the delay in filing the appeal is condoned and admitted the appeal for adjudication.

Facts are, in brief, that the assessee filed her return of income for the assessment year 2010-11 on 21.08.2017 declaring total of ₹.2,77,756/-. The case was selected for scrutiny and assessment was completed under section 143(3) r.w.s. 147 of the Act dated 26.10.2017 determining total income of the assessee at ₹.7,07,970/- by disallowing cash deposit of ₹.4,20,000/-.

Subsequently, the ld. PCIT, by exercising power conferred under section 263 of the Act, issued show-cause notice on 20.01.2020 to the assessee on the ground that the Assessing Officer has not examined the cash deposit and the order passed by the Assessing officer is erroneous and prejudicial to the interest of Revenue within the meaning of the provisions of section 263 of the Act. It was submitted before the ld. PCIT that the assessee was engaged in the business of money lending business and the deposits in the bank account were on account of proceeds of that business. The ld. PCIT, after considering the explanation, directed the Assessing Officer to redo the assessment in accordance with law. The relevant portion of the order is extracted as under: “6. I have carefully considered the facts/arguments of the AR of the assessee and the assessment order in question. It is seen from the records that the Assessing Officer has not properly verified the books of accounts and bank accounts of the assessee at the time of assessment proceedings. Further the sources/genuineness of the cash deposits of Rs.91,64,147/- in SB account maintained with ICICI bank have not been called for and examined. Hence, in my considered view, the order passed u/s 143(3) r.w. sec. 147 dated 26.10.2017 is erroneous in so far as it is prejudicial to the interest of revenue. Thus, the conditions for invoking revisional jurisdiction u/s 263 of the Act are satisfied and I hold that the assessment order passed u/s 143(3) of the Act can be subjected to revision u/s 263 of the Act. 7. Hence, the Assessment Order is hereby set aside with a direction to the AO to examine the books of accounts maintained by the assessee for the money lending business and verify the details of the banks accounts and the sources for the cash deposit of Rs.91,64,147/- of the assessee while making fresh assessment order within the stipulated time after providing sufficient opportunities to the assessee. The assessee has full liberty to present any material which was not submitted earlier before the Assessing Officer at the time of assessment proceedings.”

On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the case of the assessee was selected for scrutiny and reopened the assessment for the purpose of verifying the bank deposit. Therefore, the ld. PCIT cannot invoke provisions of section 263 of the Act to verify the deposits once again. He further submitted that the assessee is in the business of money lending and the proceeds from the business were deposited in the bank account and strongly supported the order passed by the Assessing Officer.

On the other hand, the ld. DR strongly supported the revision order passed under section 263 of the Act.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessee has deposited an amount of ₹.91,64,147/- in her SB account maintained with ICICI Bank. The Assessing Officer asked the assessee to produce the sources of cash deposit. The assessee furnished copy of bank account statement and Form 26AS for the year ending 31.03.2010. Despite reasonable opportunities given to the assessee, she could not offer explanation for the source of cash deposits with evidence. In the situation, the Assessing Officer presumed that the assessee has no explanation to offer on the issue involved in this case and accordingly, a sum of ₹.4,20,000/- being the deposit of the highest value made during the above period was treated as unexplained income chargeable to tax. In this case, we find that the assessee has deposited an amount of ₹.91,64,147/-. The assessee has not given any explanation. Therefore, the Assessing Officer has taken an amount of ₹.4,20,000/- being the deposit of the highest value made during the above period was treated as unexplained income without any basis or any provisions of the Act. In fact, it is an admitted fact that the assessee has not been able to explain the source for the deposit of ₹.91,64,147/- either before the Assessing Officer during the course of assessment proceedings as well as before the ld. PCIT during the course of revision proceedings. Therefore, the ld. PCIT has rightly held that the order passed by the Assessing Officer under section 143(3) r.w.s. 147 of the Act dated 26.10.2017 is erroneous and prejudicial to the interest of Revenue. Thus, the ld. PCIT has rightly set aside the assessment order passed by the Assessing Officer and directed the Assessing Officer to redo the assessment afresh in accordance with law. Accordingly, we find no infirmity in the revision order passed under section 263 of the Act. Hence, the grounds raised by the assessee are dismissed.

Moreover, in this case, the assessee has not been able to establish that she is engaged in money lending business. Further, once the case is selected for scrutiny, it does not mean that section 263 of the Act cannot be invoked. The provisions of section 263 of the Act can be invoked when the Assessing Officer has not examined the issue and no proper enquiry was made or any investigation has been carried out. Therefore, the revision order passed under section 263 of the Act is found to be correct.

In the result, the appeal filed by the assessee is dismissed. Order pronounced on the 12th October, 2022 in Chennai.