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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 31.01.2022 passed by the PCIT, Rajkot-1 for the Assessment Year 2017-18.
The assessee has raised the following ground of appeal:
“1. The grounds of appeal mentioned hereunder are without prejudice to one another.
2. The order passed by Pr. Commissioner of Income Tax, Rajkot-1 (hereinafter referred as to the “PCIT”) is bad in law, invalid and requires to be quashed, the same may kindly be quashed.
3. The Ld. PCIT erred in law and on facts in arriving at a conclusion to the effect that the assessment order passed by the AO was erroneous as well as prejudicial to the interest of the revenue on the ground that such order was passed without making proper enquiries related to source and availability of cash deposited during demonetization period to extent of Rs.52,79,832/-. Therefore, the order passed by PCIT is requires to be quashed and may kindly be quashed.
4. The learned Pr. CIT erred on facts as also in law in setting aside the assessment order dated 30.12.2019 passed u/s. 143(3) of the I.T. Act,
Assessment Year: 2017-18 Page 2 of 5 directing the AO to pass a fresh assessment order. The order passed u/s. 263 of the Act by the learned Pr. CIT is totally unjustified on facts as also in law therefore the same may kindly be quashed.”
Return of income for Assessment Year 2017-18 was filed on 15.01.2018 declaring total income of Rs.6,45,540/-. The case was selected for scrutiny under CASS and the assessment was completed under Section 143(3) of the Income Tax Act, 1961 on 30.12.2019 determining total income of Rs.28,93,698/- after addition of Rs.22,47,158/- under Section 40(a)(ia) of the Act. The PCIT observed that the assessee deposited large cash of Rs.1,14,19,000/- of old currency during the demonetisation period in his bank account on various dates from cash balance as on 09.11.2016 of Rs.1,24,01,250/- and assessee submitted that this cash balance was on account of earlier cash withdrawal from the bank account of Rs.2.22 Crores for the period 01.04.2016 to 08.11.2016. The PCIT observed that the assessee however, failed to justify/authenticate cash of Rs.52,79,832/- brought in his books on various dates during the year under consideration. The PCIT issued show cause notice under Section 263 of the Act on 01.07.2021. The assessee filed submissions before the PCIT which was taken on record by the PCIT. The PCIT passed order dated 31.01.2022 under Section 263 of the Act thereby set aside the assessment for fresh assessment in respect of the issues discussed and directed the Assessing officer to consider and frame the assessment only after conducting proper enquiries/verification on the issues involved.
Being aggrieved by the order under Section 263 of the Income Tax Act, 1961 the assessee filed appeal before us.
The Ld. AR submitted that the assessment order under Section 143(3) of the Act is neither erroneous nor prejudicial to the interest of Revenue as the cash deposits made in the bank account during the period 01.04.2016 to 18.12.2016 has been specifically mentioned in the reply given before the Assessing Officer during the assessment procoeedings. The Ld. AR further submitted that during the course of assessment proceedings, the Assessing Officer has specifically called for complete details of cash deposited in the bank account in the chart mentioned in notice 28.11.2019. Further, the Assessing Officer also called for details of cash deposited in Assessment Year: 2017-18 Page 3 of 5 the bank account during the demonetisation period by show cause notice dated 25.12.2019. The assessee in turn vide letter dated 27.12.2019 and 28.12.2019 respectively furnished the replies to the said show cause notices and explained the cash deposits. The Assessing Officer has not pointed out any adverse event in the said cash deposit. The Assessing Officer has finalised the assessment after due application of mind wherein addition to the tune of Rs.22,47,158/- was made for violation of provisions of Section 40(a)(ia) of the Act. Thus, verification was already done and the PCIT by taking into account the same addition has implied his view/opinion which amounts to change of opinion and is not permissible under the Income Tax Act. The Ld. AR relied upon the decision of the Hon’ble Supreme Court in the case of Parshuram Pottery Works Co. Ltd. Vs. ITO, 106 ITR 1, CIT vs. Greenworld Corporation, 314 ITR 81 and the decision of Hon’ble Karnataka High Court in the case of CIT vs. Gokuldas Exports, 333 ITR 214. The Ld. AR also relied upon the decision of the Tribunal in the case of Torrent Pharmaceuticals Ltd. Vs. DCIT, 97 taxmann.com 671 (Ahmedabad Tribunal). The Ld. AR further submitted that clause (a) of Explanation-2 to Section 263 of the Act does not deter the assessment process in the facts and the context of the case. Thus, the foundation for exercise of revisional jurisdiction by invoking the clause (a) of Exaplanation-2 to Section 263 is missing in the present case. The Ld. AR also relied upon the decision of Hon’ble Gujarat High Court in the case of CIT vs. Arvind Jewellers, 259 ITR 502.
The Ld. DR submitted that the PCIT has rightly exercised the revisionary power under Section 263 of the Act as the Assessing Officer has not taken into account the authenticity of the cash of Rs.52,79,832/-. The Ld. DR further submitted that in fact the assessee has shown inflow of cash on various dates from cash withdrawals from bank in its cash book but such corresponding cash withdrawals are not shown in the bank statement. The PCIT pointed out that although the assessee has shown cash withdrawals from the bank account on the various dates but some of them were found no cash withdrawals or rest of the debits of the cheques issued as per the bank statement. This aspect was never verified by the Assessing Officer and thus the assessment order is erroneous as well as prejudicial to the interest of Revenue. The Ld. DR relied upon the order under Section 263 of the Act passed by the PCIT.
Assessment Year: 2017-18 Page 4 of 5 7. We have heard both the parties and perused all the relevant material available on record. The show cause notice issued under Section 263 of the Act has categorically pointed out the failure on the part of the assessee in respect of justification/authenticity of cash of Rs.52,79,832/- brought in the assessee’s books on various dates during the Assessment year 2017-18 but the said aspect of exercising 263 by the PCIT has already been verified by the Assessing Officer at the time of assessment under Section 143(3). In fact, the observations by the PCIT that the corresponding cash withdrawal are not shown in the bank statement appears to be incorrect after going through the records/documents submitted by the assessee during the assessment proceedings. Once the Assessing Officer has pointedly asked the query related to complete details of cash deposits in bank account and the details of cash deposits in the bank account during the demonetisation period through notice dated 28.11.2019 and 25.12.2019, for which the assessee has given the replies dated 27.12.2019 & 28.12.2019 with the proper details of bank statement and its corresponding cash deposits then the said exercise cannot be stated as not doing proper enquiry on the part of the Assessing Officer. Thus, in fact the PCIT while exercising 263 has taken a second opinion and is overriding the actual scope of Section 263 of the Act thereby reviewing the assessment order which is not permissible as per Section 263 of the Act. Thus, the order under Section 263 of the Act does not sustain.
In the result, appeal of the assessee is allowed. Order pronounced in the open Court on this 14th day of September, 2022.