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Facts
The Principal Commissioner of Income Tax (PCIT) passed an order under Section 263, setting aside the Assessing Officer's (AO) assessment order. The PCIT believed the AO had not conducted adequate inquiry into cash deposits totaling Rs. 4,18,39,194/-. The assessee appealed this order, arguing that the initial information regarding cash deposits was incorrect and that the AO had indeed conducted sufficient verification.
Held
The Tribunal held that the PCIT had assumed jurisdiction under Section 263 on a wrong premise, as the actual cash deposits were Rs. 2,04,97,097/-, not Rs. 4,18,39,194/-. The Tribunal found that the Assessing Officer had already made necessary inquiries and the assessee had satisfactorily explained the source of these deposits.
Key Issues
Whether the PCIT was justified in invoking Section 263 when the initial factual premise regarding the amount of cash deposits was incorrect and the AO had already conducted necessary inquiries.
Sections Cited
Section 263 of the Income Tax Act, 1961, Section 147, Section 144B, Section 148, Section 142(1), Section 143(2), Section 194H, Section 1941, Section 276CC
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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN & SHRI RATNESH NANDAN SAHAY
Assessee represented by Shri R.R. Mittal, C.A. Department represented by Shri Shrawan Kumar, CIT-DR Date of hearing 05/03/2025 Date of pronouncement 28/03/2025 O R D E R PER: BENCH 1. This appeal by the assessee is directed against the order of the learned Principal Commissioner of Income Tax, Dhanbad [in short, the ld. PCIT] passed under Section 263 of the Income Tax Act, 1961 (in short, the Act) dated 26/12/2022 for the Assessment Year (AY) 2013-14.
In this case, the assessment under Section 147 r.w.s. 144B of the Act was passed on 24/09/2021. In the assessment order it has been mentioned that the assessee had made cash deposits of ₹ 4,18,39,194/- in his bank account maintained with United Bank of India, Ranchi during the F.Y. 2012-13. On the basis of such information, the case of assessee was reopened under Section 147 of the Act after recording reasons and getting approval from the competent authority, notice under Section 148 of the Act was issued to the assessee on 13/03/2020. In response to that, the assessee filed its return of income on 19/03/2020 declaring loss of ₹ 26,32,390/-. Statutory notices under Section Sriram Marketing Services Vs PCIT 142(1) and 143(2) of the Act were issued to the assessee from time to time and were duly served on the assessee. In response to that, the assessee filed its reply which was duly considered by the Assessing Officer who accepted the income declared by the assessee and no addition was made on the issue of deposits in the said bank accounts.
However, the ld. PCIT vide its order for the A.Y. 2013-14 passed under Section 263 of the Act dated 26/12/2022, set aside the order of Assessing Officer dated 24/09/2021 on the ground that the Assessing Officer did not make any enquiry or investigation to ascertain the nature, source and genuineness of ₹ 2,68,72,976/- and directed the Assessing Officer to make a fresh assessment on the issues discussed above because it has resulted in an order which was erroneous and prejudicial to the interests of revenue.
The appellant has challenged the impugned order of the ld. PCIT dated 26/12/2022 on the following grounds of appeal:
1. On the facts and circumstances of the case, the order passed by the ld. Principal Commissioner of Income Tax is bad in law, void ab initio without jurisdiction as the order u/s 263 is passed by the Ld. PCIT is not based on a correct appreciation of law and facts.
2. On the facts and circumstances of the case, the order passed u/s 263 by ld. PCIT, may be quashed and set aside on the ground that the ld. PCIT did not consider the submission by the appellant in the proceeding u/s 263.
3. On the facts and circumstances of the case, the Ld. PCIT is not correct in initiating revision proceeding based on his opinion and start fishing and roving inquiries in matters or orders which are already concluded.
4. The ld. PCIT, even in the notice u/s 263 has not specifically brought on record under the given facts and circumstances why the assessment order is erroneous or what enquiry was not done by the Assessing Officer (NFAC) so as to be prejudicial to the interest of the Revenue when on the contrary all the facts were scrutinized by the Assessing Officer (NFAC) and he has arrived at a plausible opinion on the application of mind.
5. The Ld. PCIT erred in not accepting the fact that, where the claim was allowed by the AO after raining queries and on being satisfied with the explanation of the assessee. Such a decision cannot be held to be "erroneous" simply because in his order he did not meet the expectation of the Learned. PCIT.
6. Other grounds if any, would be urged at the time of hearing."
During the course of hearing before us, the learned counsel for the appellant submitted before the Bench that there was a discrepancy in the amount of cash deposits as claimed by the department and claimed by the assessee. As per the department, the cash deposit was at ₹ 4,18,39,194/- but as per the assessee, the cash deposit was at ₹ 2,04,97,097/-. Accordingly, this Bench vide its order dated 17/01/2025 asked the ld. CIT-DR to place on record that whether the actual cash deposits claimed to have been made by the assessee was at ₹ 4,18,39,194/- or ₹ 2,04,97,097/-. In compliance to the Bench's direction, the department has filed details of cash deposits made by the appellant in the United bank of India (Now Punjab National Bank) which is given as under:
Details of cash deposits in bank a/c of MIS. Shriram Marketing Services PAN: AAFFS5061G during F.Y. 2012-13 with United Bank of India (Now Punjab National Bank) as per account statement provided by the bank. Sl. Date of cash A/c No. Amount deposited No. deposit 1 31.08.2012 2,00,000 2 0755250020184' 28.02.2013 3,65,000 3 28.02.2013 10,000 4 10.04.2012 20,000 5 21.04.2012 10,000 6 30.04.2012 9,50,000 7 02.05.2012 9,64,387 8 02.05.2012 10,000 9 03.05.2012 5,00,000 10 05.05.2012 4,00,000 11 09.05.2012 15,500 12 14.05.2012 8,000 13 19.05.2012 9,50,000 14 22.05.2012 9,50,000 15 23.05.2012 7,25,000 16 11.06.2012 9,50,000 17 15.06.2012 9,50,000 18 18.06.2012 9150,000 19 20.06.2012 10,000 20 02.07.2012 10,000 21 09.07.2012 6,00,000 22 10.07.2012 6,75,730 23 11.07.2012 100, 000 24 23.07.2012 9,50,000 ' 0059050048595 25 27.07.2012 9,50,000 26 14.08.2012 9,50,000 27 17.09,2012 9,00,000 28 10.10,2012 2,93,000 29 22.11.2012 5,00,000 30 10.12.2012 11,000 31 29.12.2012 2,00,000 32 17.01.2013 20,000 33 14.02.2013 10,000 34 28.02.2013 10,000 35 06.03.2013 10,000 36 13.03.2013 5,00,000 37 15.03.2013 11,000 38 15.03.2013 15,480 39 15.03.2013 5,00,000 40 16.03.2013 5,00,000 41 19.03.2013 5,00,000 42 20.03.2013 9,00,000 43 21.03.2012 5,00,000 44 22.03.2013 5,00,000 45 30.03.2013 5, 00,000 46 22.03.2013 1,00,000 47 26.03.2013 43,000 '0838250020543 Total 2,04,97,097 As per reported submitted by the ld. CIT-Departmental Representative, the amounts come to ₹ 2,04,97,097/- 6. The learned senior counsel , on the other hand, has made a written submission, explained the position in detail as under: " The assessee is a partnership firm and was filling the regular Income Tax return till AY. 2011-12, there were huge losses in the whole group, and bank accounts became NPA proceeding for recovery was initiated by the Banks and all businesses came to stand still in the whole group. Partners in this firm went into a deep Depression and the whole business operation collapsed in July 2013. Due to the said reason returns for the AY 201314 and subsequent years could not be filed. During the period under consideration, the Firm was dealing in Mobil Lubricants, BSNL recharge coupons and Trading of Iron Ores.
Sriram Marketing Services Vs PCIT Subsequently, notice U/s 148 was received for escapement of income on 13/03/2020 based on the AIR information regarding the deposit of cash in the Bank account of the firm and deduction of TDS on Commission and Rent during the Assessment Year. In compliance with the notice U/s 148 return was filed on 19/03/2020. The Reason as communicated to us for the escapement of income was "The assessee failed to file its return of Income. An aggregate amount of Rs.41839194/- was deposited in cash into the assessee's bank account. TDS was made u/s 194H out of the payments to the assessee by Bharat Sanchar Nigam Ltd. TDM, Dumka. From the TDS data, it is evident that an aggregate amount of Rs.705980/- was paid towards commission or brokerage to the assessee by Bharat Sanchar Nigam Ltd. TDM, Dumka during the F.Y. 2012-13. Also, an amount aggregating to Rs.26166996/- was paid to the assessee during F.Y. 2012-13 towards rent, by the administrator of Orissa Cooperative Housing Corporation, Keuta, Sahi Choudhary Bazar, Katak Orissa- 753001, out of which TDS was made u/s 1941. Since the assessee did not file the return for the A.Y. 2013-14, the entire amount of payment received by it during such F.Y., which was Rs.2,68,72,976/-, may be treated as income escaped assessment." From the perusal of Para 2 of the Assessment order, it can be seen based on the information, the case was reopened u/s 147 after recording reasons and getting approval from the competent authority. Notice u/s 148 of the I.T. Act, 1961 was issued to the assessee on 13.03.2020. The assessee filed its return of income on 19.03.2020 declaring income of Rs. (-) 26,32,390/-. Thereafter, notices u/s 142(1) of the I.T. Act, 1961 were issued to the assessee on 04.02.2021 and 28.07.2021 requesting him to furnish the requisite information in connection with the assessment proceedings. Thereafter, notice u/s 143(2) of the Act was issued on 25.022021 and was duly served on the assessee. In response to these notices, the assessee filed its response which has been carefully perused. After considering the facts and circumstances of the case, the material available on record, reply filed by the assessee in response to notice u/s 142(1) of the Income Tax Act, 1961, the explanation/ reply of the assessee is accepted and no addition is made on the above-mentioned issues. Therefore, the returned income of the assessee was accepted by the Assessing Officer at the National Faceless Assessment Centre Delhi. On the receipt of the order, the assessee made an application to the Assessing officer for the withdrawal of the prosecution case u/s 276CC for not filing of return of Income filed in 2017. The assessing officer sent the letter to the standing counsel of the department for his opinion on 06/09/2022 and the same was sent to PCIT, Dhanbad for direction. Copy enclosed at the page.
Sriram Marketing Services Vs PCIT Show Cause notice U/s of 263 of the I. T. Act, 1961 for the A.Y. 2013-14 against order u/s 147 r.w.s 143(3) dated 16/11/2022 was received from Principal Commissioner of Income Tax, Dhanbad. A detailed reply was filed, however PCIT, Dhanbad ignored the submission made and passed order U/s 263. While passing the order PCIT ignored the fact that the case was assessed by NFAC and all the details and submissions were filed on the e-filling portal and duly verified by the Assessing officer. Aggrieved by the above order assessee has filed this appeal." The learned counsel, therefore, has made argument that it is not a fit case where action under Section 263 of the Act was required to be passed as the necessary enquiry, verification were made by the Assessing Officer while passing the order under Section 147 read with section 143(3) of the Act. Since the information on the basis of which the case was reopened was found to be incorrect as has been confirmed by the revenue, the order passed by the Assessing Officer is not an erroneous one and prejudicial to the interest of revenue and therefore, the impugned order passed under Section 263 may be quashed. The learned counsel for the assessee also placed reliance on the various decisions of the Hon'ble courts and the Tribunal in support of its claim that the impugned order under Section 263 should not have been passed in this case.
We have considered the rival submissions of the both the parties and it is found that the ld. PCIT has assumed jurisdiction under Section 263 on a wrong premise as cash deposits in the bank accounts were not Rs. 4,18,39,194/- but was Rs. 2,04,97,097/-. As the necessary enquiries have already been made by the Assessing Officer under NFAC and the assessee has already explained the source of that deposits to the satisfaction of the AO/NFAC who has clearly recorded in assessment order as under: 6