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Facts
The Revenue discovered Rs.16,11,700/- in the assessee's UCO Bank saving account. The AO reopened the assessment under Section 147 and, after inquiry into the source of deposits (husband's egg trading business), estimated profit at 8.17% of deposits, determining taxable income at Rs.1,35,770/-. Subsequently, the Pr. CIT invoked Section 263, finding the AO's order erroneous and prejudicial to the revenue due to alleged lack of proper inquiry, and directed a fresh assessment.
Held
The Tribunal found that the Pr. CIT failed to properly read the bank statement, which indicated systematic deposits and withdrawals characteristic of a small-time trader, and that the AO had justifiably drawn conclusions. The Tribunal noted that the peak amount in the account was less than the addition already made by the AO. Therefore, the Tribunal concluded that the assessment order was not erroneous or prejudicial to the Revenue, and Section 263 was not attracted.
Key Issues
Whether the Commissioner of Income Tax was justified in invoking Section 263 to set aside the assessment order on the grounds that it was erroneous and prejudicial to the revenue due to the AO's alleged failure to conduct proper inquiry into bank account deposits.
Sections Cited
263, 143(3), 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
The assessee is in appeal against the order of Commissioner of Income Tax [in short ‘the CIT’] dated 18.03.2021 passed under Section 263 of the Income Tax Act for assessment year 2011-12.
The Registry has pointed out that appeal is time barred by 49 days, however, we find that this period falls A.Y.2011-12 2 within the Covid period which has already been condoned by the Hon'ble Supreme Court, therefore, this appeal is to be treated as within time.
A perusal of the record would reveal that in this case the Revenue was able to lay its hands on a Saving Bank Account with UCO Bank wherein a sum of Rs.16,11,700/- was found to be deposited. The assessment of the assessee was reopened. Thereafter, ld. AO has passed an assessment order under Section 143(3) read with Section 147 on 13.09.2018. He was of the view that husband of the assessee was trading in eggs. He died on 12.07.2012.
The amounts were given by him for depositing in the bank account. He perused the bank account and found that there were systematic deposits and withdrawals, therefore, he estimated the profit at 8.17% of the total deposits and determined the taxable income at Rs.1,35,770/-.
The ld. CIT perused the record and found that assessment order is erroneous which has caused prejudice to the Revenue. He was of the view that assessment of the assessee was reopened for making an enquiry about the A.Y.2011-12 3 source of deposits of Rs.16,11,700/- in the UCO Bank. The ld. AO failed to conduct any enquiry, therefore, ld. CIT took cognizance under Section 263 of the Act. He, after hearing the assessee, set aside the assessment with a direction that ld. AO should pass a fresh assessment order after conducting the fresh enquiry.
With the assistance of ld. Representative, we have gone through the record carefully. The bank statement with UCO Bank has been placed on record at page Nos. 8 to
We have perused the statement with the assistance of both the representatives. Perusal of this bank statement would reveal that ld. Commissioner has miserably failed to read this statement. It provides that on 18.03.2010, a sum of Rs.1,000/- was deposited. By 26.03.2010, total cash was deposited at Rs.41,894/-. Out of that, Rs.41,000/- was withdrawn. Prior to that also, Rs.6000/- was also withdrawn. Therefore, it revealed to us that systematic small amounts have been withdrawn which were again deposited in this bank account. It reveals that a small time trader has been taking out the money for purchasing A.Y.2011-12 4 the goods and again depositing the money. The ld. AO has appreciated this statement and thereafter arrived at the conclusion that profit @ 8.17% of the total deposit is to be treated as income of the assessee. To our mind, the AO has justifiably drawn the conclusions. It is more important that Revenue is taking only deposit figures and not giving credit to the withdrawals made out of these accounts.
Where the account is being used for deposits and withdrawals, then at the most the peak amount is to be worked out for estimating the income of the assessee and if we peruse, then peak amount is only Rs.67,542/- which was deposited on 03.07.2010 and withdrawn on 14.07.2010. At the most, this addition can be made but against that AO has already made an addition of Rs.1,35,770/- which is also on the higher side. Therefore, we are of the view that no case is made out for taking action under Section 263 of the Act. There is no prejudice to the Revenue by the assessment order. Accordingly, appeal of the assessee is allowed and the impugned order passed under Section 263 is quashed.
ITA No.173/CHD/2021 A.Y.2011-12 5
In the result, appeal is allowed.
Order pronounced on 22.01.2025.