M/S KHETASI RATANSI PATEL,LATUR vs. PRINCIPAL COMMISSIONER OF INCOME-TAX -1, NASHIK

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ITA 240/PUN/2022Status: HeardITAT Pune21 December 2022AY 2017-185 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the AO failed to conduct proper inquiry regarding the source of cash deposits during demonetisation, especially concerning recoveries from bad debts in earlier years. The PCIT's order to revise the assessment was therefore justified.

What were the facts?

The assessee deposited Rs. 52,50,000 in cash during the demonetisation period, claiming it was from cash in hand and collections from debtors. The Assessing Officer (AO) accepted this without proper verification. The Principal Commissioner of Income Tax (PCIT) invoked Section 263, deeming the assessment order erroneous and prejudicial to revenue.

What were the issues?

Whether the assessment order was erroneous and prejudicial to the interest of revenue due to the AO's lack of inquiry into the source of demonetised cash deposits. Whether the PCIT correctly invoked Section 263.

Which sections of the Income-tax Act were involved?

Section 263

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE

Before: SHRI R.S. SYAL & SHRI PARTHA SARATHI CHAUDHURY

For Respondent: Shri Keyur Patel, CIT-DR

PER R.S. SYAL, VP: This appeal filed by the assessee is directed against the order dated 21-03-2022 passed by the ld. PCIT u/s.263 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2017-18. 2. Briefly stated, the facts of the case are that the assessee filed return declaring total income of Rs.1.50 crore and odd. The case was selected for complete scrutiny on the reasons, including “abnormal increase in cash deposits during demonetisation period as compared to the pre-demonetisation period”. The assessment was completed by making a nominal addition of Rs.62,717/-, which is unrelated with the cash deposits during the demonetisation period.

1.

The ld. PCIT observed that the assessee deposited cash of Rs.52,50,000/- during demonetisation period. During the course of assessment proceedings, the assessee submitted the sources of cash deposits as – out of cash in hand at Rs.29,50,000/-; and out of collection from debtors at Rs.23.00 lakh. The AO accepted the assessee’s contention. After entertaining the explanation tendered by the assessee in response to notice u/s.263, the ld. PCIT held the assessment order to be erroneous and prejudicial to the interest of the Revenue for lack of examination of the source of cash deposited during demonetisation period. Aggrieved thereby, the assessee has preferred the appeal before the Tribunal.

3.

Notice for hearing of the appeal was issued for the first time fixing the case on 13-07-2022, when the assessee remained unrepresented. The matter was adjourned for 22-08-2022. On that date, again, the assessee remained unrepresented. The matter was adjourned from time to time for 11-10-2022, 10-11-2022, 29-11-2022 and today, i.e., 21-12-2022. The assessee did not put in appearance on any of the hearing notices given by the Tribunal. As such, we are proceeding to dispose off the appeal ex parte qua the assessee.

4.

It is seen that the assessment was taken up for scrutiny on the grounds, inter alia, the verification of cash deposited during demonetisation period. The assessee had deposited Rs.52,50,000/- during the period. The source of cash was stated to be recoveries from bad debts amounting to Rs.13,18,012/- for the year F.Y. 2016- 17 and Rs.20,36,719/- for the F.Y. 2015-16. The assessee did not furnish any evidence about the recoveries of bad debts in cash.

Neither any confirmation from debtors was placed on record nor any other evidence. The AO accepted the genuineness of the source of cash deposits. The CBDT issued guidelines dated 13-06-2019 about the manner of examination of cash deposits during demonetisation period. The AO did not take into consideration any such guideline. He simply placed the submissions of the assessee on record and accepted the genuineness without carrying out any independent verification. He did not examine as to how the cash deposited in the bank account during demonetisation period emanated from recoveries from bad debts for the earlier years and availability of cash in hand. In our considered opinion, the ld. PCIT committed no mistake in declaring the assessment order to be erroneous and prejudicial to the interest of the Revenue for lack of inquiry by the AO on this issue and eventually remitting the matter to his file for re-deciding the issue after allowing opportunity of hearing to the assessee. We, therefore, approve the impugned order.

5.

In the result, the appeal is dismissed. Order pronounced in the Open Court on 21st December, 2022.

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