SHRI HITESHKUMAR PATEL,,ANAND vs. THE PR. CIT-1, VADODARA

This appeal is filed by the assessee against order dated 21.03.2022 passed by the PCIT, Vadodara-1 for the Assessment Year 2017-18.

The assessee has raised the following grounds of appeal :-

The assessee is a real estate dealer, developer and derives income from business and rent on properties. The assessee filed return of income on 07.11.2017 showing current year loss at (-) Rs.46,38,276/-. Subsequently, the case was selected for complete scrutiny and notice under Section 143(2) of the Assessment Year: 2017-18 Page 2 of 5 Income tax Act, 1961 was issued on 09.08.2018. Thereafter, notice under Section 142(1) of the Act with questionnaire was issued on 12.03.2019. In response to the said notices, the assessee furnished details/documents which were verified by the Assessing Officer. After verifying the same, the Assessing Officer held that the assessee had not deducted tax at source on interest payments to the tune of Rs.1,15,270/- and, therefore, disallowed the same under Section 40(a)(ia) of the Act. The PCIT observed that during the year under consideration the assessee claimed to have received gift of Rs.2,00,00,000/- on 02.04.2016 from his sister and introduced the same as addition to his proprietor’s capital for the year under consideration. In support of his claim of receipt of gift of Rs.2,00,00,000/-, the assessee furnished only a copy of the Bank statement for the month of April 2016 in respect of Bank Account in the name of his sister. The PCIT observed that the source of capital of Rs.2,00,00,000/- introduced in the capital account of the assessee in the form of gift during the year under consideration remains unexplained and noticed that the Assessing Officer has neither made any addition on this issue nor made any verification or enquiry regarding identity and creditworthiness of the donor and genuineness of the transaction under Section 68 of the Act. The PCIT invoked Section 263 of the Act and issued notice dated 28.02.2022 which was replied by the assessee vide submissions dated 07.03.2022. After taking cognisance of the same, the PCIT set aside the directions of the Assessing Officer and directed the Assessing Officer to pass fresh Assessment Order after taking into consideration the issues as mentioned in the order passed under Section 263 of the Act dated 21.03.2023.

Being aggrieved by the Order under Section 263 of the Act, the assessee filed appeal before us.

The Ld. AR submitted that at the time of assessment proceedings under Section 143(3) of the Act the assessee has categorically given the details and replied the query of the Assessing Officer vide submissions dated 30.11.2019 thereby stating that the increase in capital, the bifurcation given in the Balance Sheet categorically mention that the addition of Rs.4,00,07,975/- was on account of opening balance of Rs.7,975/- of HDFC Credit Card (recorded in books on opening date), Rs.2,00,00,000/- being Gift received from sister Sushmaben Patel Assessment Year: 2017-18 Page 3 of 5 (copy of her NRE Bank Account for the relevant period from where the amount was received) and Rs.2,00,00,000/- being the amount of disclosure made by the assessee in Income Disclosure Scheme 2016 (the details of which were already with the Department). This explanation clearly gives the idea that the query was raised by the Assessing Officer related to increase in capital, as query 4(D) more specifically vide notice dated 12.03.2019 issued under Section 142(1) of the Act. The Ld. AR relied upon the decision of Hon’ble Apex Court in the case of PCIT vs Shreeji Prints (P.) Limited (2021) 130 taxmann.com 294(SC). The Ld. AR also relied upon the decision of Hon’ble Gujarat High Court in the case of Bhavesh Chandrakantbhai Bhatt vs. ACIT (R/Special Civil Application No.8240 of 2024). The Ld. AR submitted that NRE Account has to be from the foreign account and not that of Indian account holder and, therefore, the assessee has already shown the NRE Account and since the Assessing Officer has already made the enquiries in detail related to large increase in capital and towards gift received by the assessee and accepted the genuineness, creditworthiness and identity of the said gift while passing the Assessment Order under section 143(3) of the Act, the same cannot be considered as erroneous or prejudicial to the interest of Revenue as envisaged under Section 263 of the Act.

The Ld. DR relied upon the order of the PCIT passed under Section 263 of the Act. The Ld. DR further submitted that the Assessing Officer has not conducted any enquiry and only rendered Bank Account of the assessee. As relates to the decisions referred by the Ld. AR, the Ld. DR submitted that the Hon’ble Gujarat High Court’s decision will not be applicable in assessee’s case as the NRE Account is that of the assessee and not that of other person. The Assessing Officer should have referred the FDR transaction but has not made any enquiry. The Ld. DR relied upon the decision of Hon’ble Apex Court in the case of CIT vs Amitab Bachchan (order dated 11.05.2016) whereby it is held that even if the Assessing Officer applies mind and decides not to assess the expenditure as unexplained under Section 69C of the Act because the assessee withdrew the claim for deduction, the CIT is entitled to revise the assessment on the ground that the matter needs further investigation.

In the result, appeal of the assessee is allowed.