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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Ms. SUCHITRA KAMBLE & SHRI WASEEM AHMED
PER SUCHITRA KAMBLE, JUDICIAL MEMBER :
This appeal is filed by the assessee against the order dated 07.03.2022 passed by the PCIT, Rajkot-1 for the Assessment Year 2017-18.
The assessee has raised the following grounds of appeal:
“1. That the Ld. PCIT has wrongly invoked provision of section 263 of the IT Act and wrongly held that order passed by the AO is erroneous and prejudicial to the interest of the Revenue. The Ld. PCIT has travelled beyond jurisdiction and wrongly passed order u/s.263 of the I.T. Act, 1961.
2. The Ld. PCIT has erred in invoking the revisionary powers by stating that the AO has failed to enquire and examine the source of cash deposit made during demonetization period by the assessee during the course of assessment proceedings.
3. That, the Ld. PCIT has erred in invoking the revisionary powers by giving directions to the Ld. AO for applying provisions of section 115BBE of the IT Act, with respect to addition made on account of unexplained income.
Assessment Year: 2017-18 Page 2 of 5
4. The Ld. PCIT has wrongly invoked explanation 2 to section 263 of the IT Act, 1961.
5. That, the Revision u/s.263 is made on the basis incorrect legal provisions and therefore the order u/s.263 is bad-in-law.”
The return of income for Assessment Year 2017-18 was filed on 16.10.2017 declaring total income of Rs.38,800/-. The assessment was completed under Section 143(3) of the Income Tax Act, 1961 on 19.12.2019 at Rs.8,27,506/- thereby making addition in respect of cash sales/deposits during the demonetisation period. The PCIT observed that the assessee has deposited cash of Rs.5,18,82,000/- in various bank accounts during the demonetisation period from 09.11.2016 to 30.12.2016 and during 12 months sales was Rs.13,68,43,067/- which included total sales in 10 months, i.e. April to Sept and December to March, of the firms total sales which was Rs.4,83,98,805/- (35.37%) and for remaining 2 months total sales Rs.8,84,44,262/- (64.63%). The PCIT observed that the Assessing Officer, therefore, derived inflated cash sales at Rs.2,70,10,480/- and addition at 2.92% on said inflated cash sales of Rs.7,88,706/- was made. The assessee was engaged in the business of manufacturing and trading of gold and silver ornaments and gold bullion during the year under consideration. The PCIT observed that the assessee has deposited cash of Rs.40,65,000/- into bank account maintained with Union Bank, Rs.51,00,000/- into Bank account maintained with the Veraval Mercantile Co-op Bank Limited, Rs.1,84,94,000/- into bank account maintained with Union Bank & Rs.2,42,23,000/- into bank account maintained with Punjab & Sindh Bank during the demonetisation period from 09.11.2016 to 30.12.2016. The PCIT issued show cause notice under Section 263 of the Act dated 17.01.2022 and called for the said details and asked to explain as to why the said amount should not be treated under Section 68 by the Assessing Officer during the assessment year. After taking into account the submissions filed by the assessee, the PCIT directed the Assessing Officer to make fresh assessment after conducting necessary verification and enquiry and after providing proper opportunity of hearing to the assessee.
The Ld. AR submitted that the assessee is engaged in the business of manufacturing and trading of gold and silver ornaments and gold bullion. Vide notice
Assessment Year: 2017-18 Page 3 of 5 under Section 142(1) of the Act dated 26.11.2018, the Assessing Officer called for various details for bank accounts, unsecured loans, details of expenditures, debtors and creditors information, GP & NP details, purchase sales details, stock register and any other details. Vide notice under section 142(1) of the Act dated 17.08.2019 the Assessing Officer again called for cash deposits related to large cash deposits, copy of cash books, books of accounts, chart of cash deposits for all banks and details of income earned as per 26AS. Vide notice under Section 142(1) of the Act dated 14.10.2019, the Assessing Officer called for specific details of cash deposit and comparison of cash deposit in the year 2015-16 and 2016-17. Vide notice under Section 142(1) dated 09.11.2019, the Assessing Officer called for specific details of VAT returns for comparison of sales, details of month wise cash sales and total sales, monthly stock register with quantity and value, source of cash on hand as on 08.11.2016 along with supporting details for cash deposited during demonetisation period and cash book with day today cash balance. The assessee has filed detailed reply in response to notices thereby filing following details: a) Copy of bank statements b) GP/NP details c) Day to day stock register d) Expenses details e) Related Party Transactions f) Unsecured loan details g) Debtors/creditors details along with confirmation and creditors/debtors h) Explanation for source of cash deposit in each bank account i) Copy of reply filed with Investigation Wing during the course of investigation along with the list of transaction wise cash sales j) Cash deposit comparison of 2015-16 and 2016-17 k) Table showing month wise sales as per VAT return, sales as per books of accounts, cash sales of the month and cash deposit during that month. l) Confirmation from some of the parties to whom cash sales have been made m) The copy of all written submissions was enclosed.
4.1 After taking cognisance of all these documents with the submissions made during the hearing at the stage of assessment proceedings, the Assessing Officer has Assessment Year: 2017-18 Page 4 of 5 verified each and every aspects in detail related to cash deposit during demonetisation period and proper adjudication of inflated cash sales and addition in respect of 2.92% on the said inflated cash sales was justifiably made by the Assessing Officer. Thus, the Ld. AR submitted that the PCIT has not taken cognisance and simplicitor imposed his own view/opinion which amounts to second opinion/change of opinion and is not coming under the purview of Section 263 of the Act.
Ld. DR submitted that the Assessing Officer while taking cognisance of all the details has not seen proviso to Section 68 as per which whole unexplained sales was treated as income under section 68 of the Act which resulted in understatement of the income, therefore, the PCIT has rightly invoked Section 263 and mentioned that the applicability of provisions of Section 115BBE would have been examined on this issue and thus the PCIT has rightly exercised revisionary jurisdiction under Section 263 of the Act. Ld. DR relied upon the order under Section 263 of the Act.
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has submitted details related to cash deposits after replying notices issued under Section 142(1) of the Act on various occasions by the Assessing Officer during the assessment proceedings. The assessee has given detailed comparison of that of earlier Assessment Year and the relevant A.Y. that is 2017-18 related to cash deposit. In fact, month wise sales as per VAT return, sales as per books of account, cash sales of the month of cash deposit during demonetisation month was thereon recorded and the Assessing Officer has taken a probable percentage of 2.92% related to inflated cash sales and thus it cannot be held as erroneous and prejudicial to the interest of Revenue and cannot be treated as underassessment of income. The PCIT has given the opinion which amounts to his change of opinion or review for which the Assessing Officer has rightly taken his percentage thereby adding the total inflated cash sales not complying Section 68 of the Act cannot be termed as erroneous and prejudicial to the interest of Revenue when all the aspects leads to the justification of cash deposit and the same cannot be treated as unexplained sales. In fact, sales were properly explained by the assessee and thus the power exercised by the PCIT under Section 263 amounts to review of assessment order which is not permissible under the Income Tax Statute.
Assessment Year: 2017-18 Page 5 of 5 7. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on this 14th day of September, 2022.