Loading judgment…
Facts
A search and seizure operation was conducted on the premises of M/s Bhargava Hospital. The PCIT set aside the AO's assessment order under Section 143(3), finding it erroneous and prejudicial to the revenue, primarily concerning cash found and claimed as cash in hand. The AO was directed to conduct proper enquiries.
Held
The Tribunal noted that after the PCIT's order, the AO passed a fresh assessment order accepting the assessee's contentions and returned income. The assessee thus no longer wished to pursue the appeal, and the appeal was allowed to be withdrawn and dismissed as withdrawn.
Key Issues
Whether the PCIT's revisionary order under Section 263 was justified when the subsequent assessment by the AO accepted the assessee's explanation, rendering the appeal academic?
Sections Cited
263, 143(3), 292C, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW ‘A’ BENCH, LUCKNOW
Before: SH. SUDHANSHU SRIVASTAVA & SH. NIKHIL CHOUDHARY
A.Y. 2019-20 M/s Bhargava Hospital, vs. PCIT (Central), 15/263, Civil Lines, Kanpur- Kanpur 208001 PAN: AADFB9824C (Appellant) (Respondent) Assessee by: Sh. Rakesh Garg, Advocate Revenue by: Sh. R.K. Agarwal, CIT DR Date of hearing: 07.05.2025 Date of pronouncement: 18.07.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: [ This is an appeal filed by the assessee against the order of the ld. PCIT (Central), Kanpur passed under section 263 of the Income Tax Act, 1961 on 20.04.2023, setting aside the order of the ld. AO under section 143(3) dated 28.05.2021 with certain directions. The grounds of appeal are as under: -
1. The PCIT erred in law as well as on facts in not appreciating that the issue of cash found was well examined by the AO as is evident from the notices issued by AO and replies submitted thereto.
2. The PCIT erred in law as well as on facts in not appreciating that the cash found was major query of the AO at each instance and was thoroughly examined by him.
3. The PCIT erred in law as well as on facts in not appreciating that the cash book found during search is an evidence u/s 292C and has to be considered as such, which showed that the cash belonged to the firm.
4. The PCIT erred in law as well as on facts in not appreciating that the order passed by AO u/s 143(3) was not an erroneous one as the AO has examined in details the M/s Bhargava Hospital A.Y. 2019-20 issues involved therein and had arrived at a conclusion exercising the quasi-judicial authority vested in him by law.
5. The PCIT erred in law as well as on facts in not appreciating that merely because the opinion of the PCIT is different from that of the AO, it does not render the order passed by AO erroneous, more so when the order passed by AO is in line with the law.
6. The PCIT erred in law as well as on facts in not appreciating that to take action u/s 263, the erroneous assessment must pertain to a defect, which is jurisdictional in nature and not to the judgment of the Assessing Officer.
7. The PCIT erred in law as well as on facts in not appreciating that for action u/s 263, two elements, namely, that the order is erroneous and it is prejudicial to the interests of the Revenue must co-exist, and when an Assessing Officer has several choices and he adopts one of the choices, it cannot be interfered with unless it is shown that the choice of exercise by the Assessing Officer is without application of mind or wholly contrary to the law.
8. The PCIT erred in law as well as on facts in not appreciating that though an order of assessment made by a primary authority may not be agreed to by a revisional authority, however, merely for the fact that the revisional authority disagrees with the findings of the primary authority, either in imposing liability or in refusing to impose any liability, such disagreement cannot be made a ground for interference with the order of the primary authority.
9. The PCIT erred in law as well as on facts in not appreciating that powers u/s 263 are to revise an order, whereas the order sought to be revised is itself void-ab-initio since no panchnama was issued in the name of assessee in respect of search on the assessee group rendering the entire proceedings bad in law.
10. That the appellant begs for admission of such additional grounds as may arise in the course of the proceedings before the Hon'ble Tribunal.”
The facts of the case are that a search and seizure operation was conducted on 30.11.2018 at the business and residential premises of the Bhargava Hospital group of cases at Kanpur. The case was centralized and the assessee filed a return of income of Rs.1,78,67,039/- which was assessed to tax under section 143(3) at the returned income. Subsequently, the ld. PCIT received a proposal of action under section 263 from the ld. AO. He called for the assessment records and came to the conclusion that the order passed under section 143(3) was erroneous in so far as it was prejudicial to the interest of Revenue because necessary enquiries or verifications to verify the correctness of the claims of the assessee had not been made M/s Bhargava Hospital A.Y. 2019-20 by the ld. AO. The basic point in question was that an amount of Rs. 2,44,09,000/- was seized from the residence and bank lockers of the partners of the assessee firm. Subsequently, the assessee submitted an explanation for the cash that was seized. However, the ld. PCIT noted that no documentary evidence could be furnished by the assessees in support of the said claim that the seized cash represented their cash in hand on the date of seizure. He observed that unexplained cash had been added back under section 69A in the hands of the partners of the assessee firm. However, the ld. AO made no enquiries in the case of the assessee wherein it was claimed that an amount of Rs.86.54 lacs was cash in hand, as per the books of accounts. Therefore, after giving an opportunity to the assessee, he recorded his conclusion that the assessee could not show that the cash receipts had been regularly deposited in the bank accounts and was the cash in hand as per the books of accounts. Since the assessee could not furnish any explanation to the source of cash found in replies during the assessment proceedings, the ld. AO was required to make proper enquiries of the same. However, as he had not made the proper enquiries, there was non- application of mind and this had rendered the order erroneous and prejudicial to the interest of Revenue in terms of clause (a) of explanation 2 under section 263 of the Income Tax Act, 1961. Accordingly, the ld. PCIT set aside the order passed by the ld. AO under section 143(3) and directed him to pass a fresh order after conducting proper enquiries.
Aggrieved with the said assessment order, the assessee came in appeal before us. However, on the appointed date of hearing, Sh. Rakesh Garg, Advocate (hereinafter referred to as the ld. AR) submitted before us that subsequent to the setting aside of the case by the ld. PCIT, the ld. AO on 19.03.2025 had passed the order under section 143(3) r.w.s. 263 in the case of the assessee and had accepted the returned income of the assessee, after considering the explanations furnished by it. It was, therefore, submitted that since the contention of the assessee stood accepted, M/s Bhargava Hospital A.Y. 2019-20 that no portion of the cash found of Rs.86.54 lacs were unexplained in the hands of the assessee, the assessee no longer wished to pursue the appeal against the order under section 263. Accordingly, it was prayed that the appeal may kindly be treated as withdrawn and dealt with accordingly.
On the other hand, Sh. R.K. Agarwal, ld. CIT DR (hereinafter referred to as the ld. DR) also submitted that now that the assessment order had been passed in pursuance to the order under section 263, and the submissions of the assessee had been accepted in such order, the appeal was rendered academic and infructuous. He, therefore, prayed that the appeal may be dismissed as such.
We have duly considered the facts and circumstances of the case. The case was set aside by the ld. PCIT for making proper enquiries with regard to the cash found of Rs.86.54 lacs that had been claimed to be cash belonging to the assessee, M/s Bhargava Hospitals. In subsequent assessment, the assessee has proven this issue to the satisfaction of the ld. AO and the assessment has been completed on returned income. Therefore, the assessee no longer has any grievance on this point. Considering the above, we allow the assessee to withdraw the appeal and we dismiss it as withdrawn.
In the result, the appeal of the assessee is dismissed.