MADHURI DILIP GAIKWAD,PUNE vs. PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL, PUNE

On being asked by the Assessing Officer, the assessee in a consolidated reply dated 30.03.2022 filed the following details: “For the remaining amount of Rs.50,91,200/- the assessee has stated that Cash Gift of Rs.40.00 lakhs was received from in-laws of Prem Gaikwad and Rs.17,54,003/- received from relatives and friends on the occasion of marriage ceremony of Prem Gaikwad. In support, she has enclosed copy of Gift deed dt.23.09.2016 by in-laws of Prem Gaikwad, saving account statement and loan account statement. Further, the assessee submitted list of relatives and friends. The assessee claimed receipt of cash gifts of Rs.17,54,003/- from relatives and friends on occasion of marriage of Prem Gaikwad, The details are as under: Sr. No. Name Gift Amount (Rs.) 1 K V Desai 151000 2 Shankar Kalbhor 151000 3 Yashwant Gaikwad 200000 4 Laxman Magar 350001 5 Shubham Garg 51001 6 Sandip Daddikar 51001 7 Ravindra Gaikwad 200000 8 Kalyan Kate 150000 9 Rajesh Shinde 150000 10 Dnuaneshwar Gaikwad 100000 11 Vishwajit Gaikwad 200000 Total 17,54,003 In support, the assessee has submitted affidavits/ITR/7'12 extracts of persons from Sr.No.1 to 5, totaling to Rs.9,03,002/-. Hence the assessee could explain the source of cash deposits of Rs.49,03,002/-, out of remaining amount of Rs.50,91,200/-. Hence, Cash deposits of Rs.1,88,198/- remained explained.”

It was explained that they have offered Rs.15,82,500/- under the PMGKY scheme and copy of challan for taxes paid under PMGKY scheme in respect of all three family members were filed. So far as the balance amount of Rs.50,91,200/- is concerned, the assessee filed various details. The Assessing Officer after considering the explanation given by the assessee accepted the source of cash deposit of Rs.3,71,000/- in the hands of the present assessee, Rs.5,44,500/- in the hands of Madhuri Gaikwad but made addition of Rs.1,88,198/- u/s 69A of the Act in the hands of Prem Dilip Gaikwad by recording as under: “6. Scrutiny proceedings of other family members viz. Madhuri Gaikwad and Prem Gaikwad are also underway. They have explained source of cash deposits in bank accounts generated from cash gifts received on occasion of wedding ceremony of Shri Prem Gaikwad. Still difference amount of Rs.1,88,198/- is not explained by any member of family. In absence of any reply, the AO added the difference amount of Rs.1,88,198/- in the hands of Prem Gaikwad, since the same is received on occasion of wedding ceremony of Prem Gaikwad.

Subsequently, the PCIT on examination of the record noted that the Assessing Officer had not properly examined the case and has not made addition on account of cash received from the in-laws of his brother i.e. Prem Dilip Gaikwad by invoking the provisions of section 56(2) of the Act. He, therefore, was of the opinion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. He thereafter issued a show cause notice u/s 263 of the Act on 10.01.2024, the contents of which have been reproduced by the PCIT in the body of the order and which reads as under: “02. In the above mentioned case, on verification of case records for A.Y. 2017-18 it has been observed that the assessee had not filed return of income for AY 2017- 18. Accordingly, proceedings u/s 147 of the Income Tax Act, 1961 (hereinafter referred as 'the Act') were initiated and notice u/s 148 of the Act was issued. In response, the assessee filed return of income on 19.02.2022 declaring income at Rs.180/- only. The scrutiny assessment was completed u/s 143(3) r.w.s 147 of the Act on 31.03.2022 by accepting returned income.

In response to the same, the assessee filed his submissions, according to which the Assessing Officer had examined the issue during the course of assessment proceedings, therefore, the revisional proceedings u/s 263 of the Act should be dropped. The assessee also relied on various case laws. However, the PCIT was not satisfied with the arguments advanced by the assessee. He noted that the issue of applicability of provisions of section 56(2) of the Act was not at all examined / verified / enquired by the Assessing Officer. Further, the assessee had not submitted the details regarding the source of cash deposited in his case. From the various details furnished by the assessee during the course of assessment proceedings, he noted that nowhere it was mentioned as to how much gift was received by the assessee from the in-laws of his brother Prem Gaikwad. He noted that the assessee before him made a fresh claim that only Rs.50,000/- was gifted to him by his brother’s in-laws on the occasion of his brother’s marriage and the amount of Rs.3 lacs deposited was out of cash gifts received by his brother which was subsequently given to him. The assessee submitted a fresh affidavit from his brother regarding the same. He, therefore, held that the assessee had not submitted these details before the Assessing Officer during the course of assessment proceedings and the Assessing Officer also did not carry out proper examination / verification / enquiries during the course of assessment proceedings on these issues of source of cash deposits in his bank account and the applicability of section 56(2) of the Act. Thus, the order passed by the Assessing Officer has become erroneous and prejudicial to the interest of Revenue. He accordingly set aside the order passed by the Assessing Officer for examining the issue in detail while framing the fresh assessment order.

Aggrieved with such order of the PCIT, the assessee is in appeal before the Tribunal by raising the following grounds of appeal:

The Ld. Counsel for the assessee submitted that the assessee and his brother are staying together with their parents. The assessee has received cash from his brother which he had received from the in-laws at the time of his marriage, out of which he had given an amount of Rs.3 lacs to the assessee. In the consolidated reply given before the Assessing Officer, all the three assessees have explained the source of such cash deposits which was received on the occasion of Prem Gaikwad’s wedding from his in-laws. She submitted that the amount was received by Prem Gaikwad who in turn, had given various amounts to the assessee and Ms. Madhuri Dilip Gaikwad. She submitted that the cash gift given by Prem Gaikwad to Vaibhav Gaikwad and Madhuri Dilip Gaikwad was explained before the PCIT by filing a fresh affidavit which he should have considered, considering the smallness of the amount. Since the Assessing Officer in the instant case has examined the issue and has taken a possible view and it is not a case of lack of enquiry, therefore, the PCIT is not justified in invoking the provisions of section 263 of the Act. She submitted that the revision proceedings were initiated on account of audit objection which is beyond the jurisdiction of PCIT. Relying on various decisions, she submitted that the 263 proceedings initiated by Ld. PCIT are not in accordance with law.

The Ld. DR on the other hand strongly supported the order of the PCIT. He submitted that when the assessee has received more than Rs.50,000/- from the in- laws of Prem Gaikwad who is not a related party, the provisions of section 56(2) of the Act should have been invoked by the Assessing Officer which he failed to do and therefore, the PCIT was fully justified in invoking the revisionary powers conferred upon him u/s 263 of the Act. He accordingly submitted that the grounds raised by the assessee should be dismissed.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case on the basis of information gathered during the course of survey and post survey enquiries that the assessee has made cash deposits in the bank and had not filed his return of income, reopened the assessment u/s 147 of the Act. The assessee in response to the same filed the return of income declaring the total income of Rs.180/-. During the course of assessment proceedings, the Assessing Officer asked the assessee to explain the source of cash deposits of Rs.3,71,000/- during pre and post demonetization period, to which the assessee in a consolidated explanation gave the source of cash deposit of Rs.51,27,200/- in the bank accounts of the family members. The Assessing Officer after examining the various details, made addition of Rs.1,88,198/- in the hands of Prem Dilip Gaikwad but no addition was made in the hands of Vaibhav Gaikwad and Madhuri Dilip Gaikwad. We find the PCIT after examining the records noted that when the cash gifts received by the various family members, the provisions of section 56(2) of the Act should have been invoked by the Assessing Officer as they are not related persons as per section 56(2) of the Act and therefore, the order has become erroneous and prejudicial to the interest of Revenue, for which he set aside the order to the file of the Assessing Officer for examining the issue afresh and after providing due opportunity of being heard to the assessee.

We find the assessee before the PCIT had explained that he has received Rs.50,000/- from the in-laws of Prem Gaikwad and an amount of Rs.3 lacs was received from Prem Gaikwad out of the cash gifts received by him and for which an affidavit from Prem Gaikwad was also filed before him. Since the assessee is a very small assessee and had duly explained before the Assessing Officer regarding the source of cash deposits in a consolidated reply of all the three family members who stay together and which has also not been disputed by the PCIT, who only was of the opinion that the provisions of section 56(2) of the Act should have been invoked, therefore, we are of the considered opinion that no revisionary proceedings u/s 263 of the Act are warranted in the instant case. In the instant case, we find the Assessing Officer had examined the source of cash deposits of all the three family members together which were submitted with supporting evidences and has applied his mind though not to the satisfaction of the PCIT. Further, the submission of Ld. Counsel for the assessee that the 263 proceedings were initiated on the basis of audit objection could not be controverted by the Ld. DR. Therefore, under the facts and circumstances of the case and considering the smallness of the amount involved and the assessee being a very small assessee who is not having any taxable income, the provisions of section 263 of the Act in our opinion, are not warranted. We, therefore, set aside the order of the PCIT and the proceedings initiated u/s 263 of the Act are quashed.

Identical grounds have been raised in other two appeals. We have already decided the issue and the grounds raised in have been allowed. Following similar reasoning, proceedings initiated u/s 263 of the Act in the other two appeals are also quashed. All the three appeals filed by the respective assessees are accordingly allowed.

In the result, all the three appeals by the respective assessees are allowed.