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Facts
The assessee filed an income tax return, and the case was selected for scrutiny regarding cash deposits and immovable property purchases. The Assessing Officer (AO) completed the assessment Under Section 143(3), making additions for unexplained cash deposits (Under Section 69A) and differences in long-term capital gains. Subsequently, the Pr.CIT invoked revisional powers Under Section 263, deeming the AO's order erroneous and prejudicial for not properly examining Section 56(2)(x) and the source of property purchases.
Held
The Tribunal found that the AO had conducted a detailed inquiry, called for and examined all necessary details, and made additions. Consequently, the AO's order was neither erroneous nor prejudicial to the interest of the revenue. Therefore, the Pr.CIT's invocation of revisional powers Under Section 263 was unjustified.
Key Issues
Whether the Pr.CIT was justified in invoking revisional powers Under Section 263 by alleging 'lack of enquiry' when the Assessing Officer had already conducted a thorough examination and made additions during the original assessment.
Sections Cited
263, 143(3), 144B, 69A, 56(2)(x)
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Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER V. DURGA RAO, JM:
The captioned appeal is filed by the assessee against order of the Learned Pr.Commissioner of Income Tax, Visakhapatnam-1 [hereinafter in short “Ld.Pr.CIT”] vide DIN & Order No. ITBA/COM/F/17/2024-25/1075122760(1) dated 27.03.2025 for the A.Y. 2021-22.
Haresh Kumar Lalwani 2. Brief facts of the case are that, assessee is an individual filed his return of income declaring a total income of Rs. 10,10,260/ which includes long term capital gains of Rs. 8,19,153/- and income from house property of Rs. 3,26,665/-. Subsequently, the case of the assessee was selected for scrutiny in respect of cash deposits and purchase of immovable property and the Ld. AO has completed the assessment under section 143(3) r.w.s. 144B of the Act on 19.12.2022 determining the total income of Rs.73,71,744/- by making addition of Rs.35,80,000/- towards unexplained cash deposits under section 69A of the Act and Rs.27,81,484/- towards addition on difference in long term capital gains.
Subsequently, Ld.Pr.CIT by exercising power conferred under section 263 of the Act, he has noted that on examination of the record, it was noticed that the order passed by the Ld. AO is erroneous and prejudicial to the interest of the revenue, in the order of the Ld.Pr.CIT he noted as under: - “1. On perusal of the assessment record, it is found that the assessee along with 7 other family members had purchased properties, where there was a difference between market value and the purchase agreements. Hence, the differential amount of Rs. 45,40,750/- comes under the ambit of Section 56(2)(x) of the IT Act.
2. It is noticed from the assessment order that the assessing officer considered an amount of Rs. 28,20,000/- received by way of cheques towards sale of property vide document No.5621/2020 and also an amount of Rs.40,000/- received towards sale of property vide document no.5620/2020 and credited to PNB A/c No. 481000100059918. However, it is seen from the said bank account that the entire amounts were not used for the purchase of the properties. The evidence for sources of purchase to the extent of Rs.28,60,000/- has not been properly verified by the A.O., and thus the Assessing Officer erred in allowing the amount of Rs.28,60,000/- as source of purchase.”
Page No. 2 Haresh Kumar Lalwani 4. The Ld.Pr.CIT has issued notice under section 263 of the Act dated 23.10.2023 and called explanation from the assessee. In response to the notice issued by the Ld.Pr.CIT, the assessee filed all the details which were filed before Ld. AO and explained that the Ld. AO has examined all the issues and all the details were filed before the Ld. AO and requested for dropping of the proceedings.
However, Ld.Pr.CIT came to the conclusion that the Ld. AO has not properly examined section 56(2)(x) of the Act and also the sources of purchase of the immovable property to the tune of Rs. 28,60,000/- and directed the Ld. AO to examine properly.
On being aggrieved, assessee carried the matter before the Tribunal by raising following grounds of appeal: -
“1. The order passed Us. by the Ld. Pr. Commissioner of Income Tax (PCIT-1), Visakhapatnam-1 is illegal, invalid and bad in law; 2. The Ld. PCIT-1 ought to have consider order passed U/s. 143(3) r.w.s. 144B by the assessing officer in which all the issues were discussed and considered all the issue at the time of assessment proceedings and the assessing officer has considering all the aspect and made addition, therefore order passed Us. 263 by the PCIT-1 is unjustified, unwarranted and excessive; 3. The Ld. PCIT-1 ought to have considered order passed U/s. 143(3) r.w.s. 144B by the assessing officer is not erroneous and not prejudicial in the interest of revenue. Therefore order passed U/s. 263 is unjustified, unwarranted and excessive; 4. The Ld. PCIT-1 erred in not considering that the assessing officer has made addition of Rs. 45,40,750/-U/s. 56(2)(x) after verification and test
Page No. 3 Haresh Kumar Lalwani checked the details submitted by the assessee during the course of assessment proceedings, therefore again making enquiry is unjustified, unwarranted the excessive; 5. The Ld. PCIT-1 erred in considering that the assessing officer has already inquired the source of Rs. 28,60,000/-for purchase of property and verified from the details submitted by the assessee, therefore inquiring the same is illegal, invalid and bad in law; 6. The Ld. PCIT-1 erred in not considering that the assessing officer has already determined total income at Rs. 73,71,744/- by the assessing officer inquiring the all the issues and discussed during the course of assessment proceedings, therefore order passed is unjustified, unwarranted and excessive; 7. The Ld. PCIT-1 erred in neither considering the valuation report submitted by the assessee and referring the matter for further inquiries to assessing officer, therefore order passed is illegal, invalid and bad in law; 8. The Ld. PCIT-1 has not considered the entire written submission of the assessee and passed the order Us. 263 without going into merits of the case, therefore the order passed is unjustified, unwarranted and excessive; 9. The appellant seeks permission to add any other ground of appeal or amend or alter the aforesaid ground of appeal.”
The Ld. Counsel for the assessee submitted that the issue on which 263 notice issued by the Ld.Pr.CIT was already considered by the Ld. AO and passed a detailed order, additions already made and submitted that once Ld. AO has made a detailed enquiry and addition was made and again Ld.Pr.CIT cannot invoke 263 proceedings on the ground that lack of proper enquiry. He relied on the decision of the CIT v. Gabrial India Ltd., [(1993) 203 ITR 108 (BOM)]. He also pointed out from the paper book Page No. 81, notice issued by the Assessing Officer calling all the details, the same is reproduced below: -
Page No. 4 Haresh Kumar Lalwani “1. Computation of total income for the period.
A brief note regarding the nature of business activities carried out by you during the year. If any change occurred during the period, it should be indicated.
3. Copies of final account statements for the period i.e. balance-sheet, profit & loss a/c etc. including notes and annexures thereto.
Bank statements of all bank accounts for the period 5. Please furnish details of movable/immovable properties purchased/sold during the year. Please also furnish capital gain calculations of the properties sold and source of investments of the properties purchased during the year under consideration with supporting documents. Please also furnish the relevant bank statements properly highlighting the above transactions, 6. Please justify the difference in the sale consideration and circle value/DLC value of the properties sold/purchased during the year, if any 7. As per the information available with this office, you have purchased an immovable properties amounting to Rs. 12,33,61,000/- Please explain the source of this investment with documentary evidences. Moreover, as per TDS statement, you have received Sales consideration on sale of immovable property amounting to Rs. 33,97,714/- during the year under consideration. Please furnish capital gain calculation thereon with supporting documents.
8. Please furnish details of all the bank accounts) held during the year as under:
Sr.NO Name Address Account Bank MICR Type of of the of Bank holder(s) Account Code bank Bank name Number account
In response to the notice issued by the Ld. AO, assessee filed all the details, paper book Page No. 88 to 90 in respect of purchase of immovable property. In Page No. 94, again Ld. AO called details from the assessee which is pointed by the Ld. Counsel for the assessee. Page No. 94 to 95 particularly the Ld. AO has called bank details and details of immovable property purchased during the year.
Page No. 5 Haresh Kumar Lalwani In response to that assessee filed bank statements as well as details of immovable property which is at Page No. 96 to 100 of the paper-book and submitted that the Ld. AO after calling all the details and examining the same, assessment was completed. Therefore, the order passed by the Ld. AO cannot be said that lack of enquiry and further examination is not required and submitted that order passed under section 263 is invalid.
On the other hand, Ld. Departmental Representative [hereinafter in short “Ld. DR”] submitted that no application of mind and no enquiry was made by the Ld. AO and therefore he strongly supported the order passed by the Ld.Pr.CIT.
We have heard both the sides and gone to the orders of the authorities 10. below. In this case the assessee has filed return of income. Subsequently, the case was selected for scrutiny with regard to purchase of immovable properties as well as cash in bank account. Ld. AO also made an addition in respect of the both the issues. On very same issue, the Ld.Pr.CIT has invoked 263 proceedings and he came to the conclusion that there is a lack of enquiry by the Ld. AO and the order passed by the Ld. AO is erroneous and prejudicial to the interest of the revenue and directed the Ld. AO to redo the enquiry and pass fresh assessment order.
We have considered the arguments of both the sides; we have gone through the paper book filed by the assessee at Page No. 81 of paper book where Ld. AO called all the details in respect of bank deposits and also in respect of purchase of Page No. 6 Haresh Kumar Lalwani immovable property. The assessee has filed all the details in respect of purchase of immovable property at Page Nos. 88 to 91 of the paper book and the Ld. AO issued again notice which is at page no. 94 of the paper book wherein at Sl.No. 4 and 5 specifically asked bank statements and also details of immovable property purchased during the year. In response to that assessee has filed detailed letter and also details of purchase of immovable property and also bank details which is evidenced from the paper book page no. 96 to 100. After considering the paper book and also the details filed by the assessee in respect of purchase of immovable property as well as the bank statements the Ld. AO came to the conclusion that there is unexplained cash deposit of Rs.35,80,000/- under section 69A of the Act and difference of capital gains of Rs.27,81,484/-. We have also examined all the details filed by the assessee in the paper book as pointed by the aforesaid paper book details particularly which are at Page No. 88 to 100, we come to the conclusion that Ld. AO after examining all the details filed by the assessee passed the assessment order. We find that there is no lack of enquiry in this case. Therefore, once Ld. AO examined all the details and passed the assessment order by making an addition, it is not open to the Ld.Pr.CIT to issue again 263 directives to Ld. AO to make a further enquiry. In this context, the Hon’ble Bombay High Court in the case of CIT v. Gabrial India Ltd., (supra) said that there must be material available on record called for by the Commissioner to satisfy him, prima facie, that the order passed by the Ld. AO is erroneous and prejudicial to the interest of the revenue and there must be material available with the Ld. CIT
Page No. 7 Haresh Kumar Lalwani for exercising his revisional jurisdiction and the same cannot be exercised on whims and caprice. In the present case, the orders passed by the Ld. AO neither erroneous nor prejudicial to the interest of the revenue and therefore it is not a fit case to invoke section 263 of the Act, thus, we quash the order passed by the Ld.Pr.CIT dated 27.03.2025.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 17th June, 2025.