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Facts
The assessee's return for AY 2017-18 was scrutinized under Section 143(3) to examine cash deposits during demonetization. The assessee provided explanations and documentation for the cash deposits, which were accepted by the AO. However, the Pr. CIT invoked revisionary jurisdiction under Section 263, holding that the assessment was erroneous and prejudicial to revenue.
Held
The Tribunal held that the Pr. CIT erred in invoking Section 263 as the AO had considered the assessee's explanation and accepted one of the plausible views based on facts. The revisionary order was deemed an attempt to broaden the scope of inquiry beyond the AO's original assessment and was not sustainable.
Key Issues
Whether the Pr. CIT was justified in invoking Section 263 to revise an assessment order when the Assessing Officer had taken a plausible view based on the material available and after due application of mind?
Sections Cited
263, 143(3)
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Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रणवष� / Assessment Year: 2017-18 Shri Mohammad Munim Pr. CIT -1, (Prop. M.N.Enterprises) Ludhiana. बनाम/ Vs. No.976/1, Industrial Area-A Back side R.K. Machine Tools Bihari Colony, Ludhiana-141003. �थायीलेखासं./जीआइआरसं./PAN/GIR No. ALLPM-2247-D (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri Sudhir Sehgal (Advocate ) - Ld. AR ��थ�कीओरसे/Respondent by : Ms. Kusum Bansal (CIT )- Ld. DR सुनवाईकीतारीख/Date of Hearing : 20-03-2025 घोषणाकीतारीख /Date of Pronouncement : 24-3-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee assails invocation of revisionary jurisdiction u/s 263 by Ld. Pr. Commissioner of Income Tax, Ludhiana-1 (Pr.CIT) for Assessment Year (AY) 2017-18 vide impugned order dated 30-03-2022 in the matter of an assessment framed by Ld. AO u/s 143(3) of the Act on 12-12-2019. The registry has noted delay of 304 days in the appeal, the condonation of which has been sought by Ld. AR by way of condonation petition which is accompanied by an affidavit of the assessee. It has been submitted that the appeal was not filed on the wrong advice of earlier counsel. The assessee was not much educated and acted in good faith. Though Ld. CIT-DR opposed condonation of delay, however, keeping in mind the principles laid down by Hon’ble Apex Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors. (1987; (2) TMI 61 SC), we condone the delay and proceed for disposal of the appeal on merits.
The Ld. AR advanced arguments and made out a case of one of the possible views by Ld. AO. The Ld. CIT-DR also advanced arguments and submitted that Ld. AO failed to make requisite enquiries. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Revisionary Proceedings before lower authorities 3.1 From the facts, it emerges that the assessee’s return of income was scrutinized u/s 143(3) to examine the issue of abnormal increase in cash deposit during demonetization period. In response to various queries raised by Ld. AO, the assessee furnished various submissions on 28-11-2019 and 06-12-2019. It transpired that the assessee was doing trading of iron scrap. The books of accounts were duly audited by a Chartered Accountant. The assessee fully explained the nature and source of cash deposit in current account as maintained with HDFC bank as earlier withdrawals from the same account. Considering all these facts, the returned income was accepted and Ld. AO chose not to make any addition thereof in the assessment order. 3.2 Subsequently, upon perusal of case records, Ld. Pr. CIT alleged that the status of cheques was not clear. The assessee refuted the same and furnished date-wise cash withdrawals along with cash book, corresponding entry and corresponding bank statement showing cash withdrawals. In other words, the assessee furnished proper matching of the cheques with the cash withdrawals and entries thereof in the cash book. The assessee reiterated that cash deposits were out of earlier withdrawals. However, Ld. Pr. CIT alleged that this was required to be confirmed from the bank and it was to be ascertained as to who actually received this cash. The same was not done and it was not explained as to why the cash was withdrawn. The Ld. Pr. CIT also tabulated some of the details to establish that the credit in cash book was earlier than debit in the bank account. It was also not explained that despite having sufficient cash balance, why the cash was withdrawn. The withdrawal of cash and its holding period was unnatural which was not enquired into by Ld. AO. Accordingly, invoking Explanation-2 to Sec.263, the assessment was held to be erroneous and prejudicial to the interest iof the revenue. Finally, the order was set aside and Ld. AO was directed to pass fresh order. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 4. From the facts, it emerges that the assessee’s return of income for this year was scrutinized u/s 143(3) specifically to examine the sources of cash deposit during demonetization period. During The course of assessment proceedings, various queries were raised by Ld. AO calling for certain details from the assessee in this regard. In notice dated 30-08-2019 (Page Nos.24 to 30 of the paper-book), the assessee was, inter-alia, required to file copies of all bank statements along with copy of cash book. The assessee, in its reply dated 28-11-2019 furnished all these details which include bank statements, cash book, details of cash deposits and various other financial details in support of its claim as called for by Ld.AO. Upon perusal of all these details it could be concluded that nature and source of cash deposit was well documented by the assessee and after due consideration thereof, Ld. AO accepted the claim of the assessee with due application of mind. Accordingly, Ld. AO chose not to make any addition in the hands of the assessee while framing the assessment.
At the same time, it could be seen that the revisionary order merely intend the broaden the scope of enquiry for which the case was scrutinized. The Ld. Pr. CIT has merely raised apprehension on the basis of certain observations and alleged that proper enquiries were not made by Ld. AO. However, the impugned order is nothing but it merely intend to direct Ld. AO to conduct enquires in a particular manner which is beyond the revisionary jurisdiction u/s 263. The order cannot be revised on mere apprehension. The Ld. Pr. CIT, after considering the reply of the assessee, was required to establish as to how the order was erroneous and prejudicial to the interest of the revenue. In the absence of such a finding, revision is not justified.
Upon perusal of assessment order, it could be concluded that after having satisfied with the explanation as furnished by the assessee, Ld. AO chose to accept the returned income of the assessee. The Ld. AO had raised a specific query on sources of cash deposits which was duly substantiated by the assessee. Thus, it is a case of acceptance of one of the plausible views which was more on facts and the said view could not be said to be opposed to any law or statutory provisions. The Ld. AO, in our opinion, had taken one of the plausible views in the matter and therefore, Ld. Pr. CIT could not be said to be justified in substituting the view of Ld. AO with that of his own view. Simply because some further verification was required or simply because the verification was not done in a particular manner, the same could not justify revision of the order unless it was shown that the view of Ld. AO was erroneous or opposed to any law.
The Hon’ble Supreme Court in Malabar Industrial Co. Ltd. vs. CIT (supra) has held that the phrase 'prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. The said principal has been reiterated by Hon’ble Court in its subsequent judgment titled as CIT V/s Max India Ltd. (295 ITR 282). Similar principal has been followed in Grasim Industries Ltd. V/s CIT (321 ITR 92). The ratio of all these decisions is that where two views are possible and AO has preferred one view against another view, order could not be said to be erroneous or prejudicial to the interest of the revenue.
Therefore, on the given facts, the impugned revision of assessment order could not be sustained in law. We order so. The assessment as framed by Ld. AO stand restored back.
The appeal stands allowed in terms of our above order. Order pronounced on 24-3-2025.