SAROJ SINGH, AMBIKAPUR,SURGUJA vs. PRINCIPAL COMMISSIONER OF INCOME TAX, RAIPUR-1, RAIPUR

The present appeal filed by the assessee is directed against the order passed by the Pr. Commissioner of Income Tax, Raipur-1 (for short ‘Pr. CIT’) u/s. 263 of the Income Tax Act, 1961 (for short ‘Act’) dated 09.03.2021, which in turn arises from the order passed by the A.O. u/ss.143(3)/147 of the Act, dated 10.12.2018 for A.Y. 2015-16.

At the very outset of hearing of the appeal, we may herein observe that the present appeal involves a delay of 409 days. On being confronted with the aforesaid fact the Ld. Authorized Representative (for short ‘AR’) for the assessee took us through a letter dated 16.06.2023. Elaborating on the reasons leading to the aforesaid delay, it was submitted by the Ld. AR that delay of 388 days (out of 409 days) pertained to the period which was covered by the order of the Hon’ble Apex Court in Suo Moto Writ Petition (Civil) No.3 of 2020 dated 23.03.2020, which thereafter was modified vide further order(s) dated 08.03.2021, 27.04.2021, 23.09.2021 and 10.01.2022. As regards the delay of balance period of 21 days, it was submitted by the Ld. AR that the same was on account of lapse of his earlier counsel who at the relevant point of time due to certain health issues had failed to advise him for assailing the order passed by the Pr. CIT u/s.263 of the Act before the Tribunal. Elaborating on his aforesaid

Per contra, the Ld. Departmental Representative (for short ‘DR’) did not raise any objection to the seeking of condonation of delay involved in filing of the present appeal by the assessee.

Having given a thoughtful consideration to the reasons leading to the effective delay of 21 days involved in filing of the present appeal, we are of the considered view that as the same had occasioned on account of 4 Saroj Singh Vs. Pr. CIT, Raipur- bonafide reasons which by no means could be attributed to any intentional lapse of the assessee, therefore, the same merits to be condoned.

Controversy involved in the present appeal lies in a narrow compass i.e., sustainability of the order passed by the Pr. CIT u/s.263 of the Act, wherein he had set-aside the order passed by the A.O u/ss.143(3)/147 of the Act dated 10.12.2018, for the reason that he had without carrying out any enquiries and in absence of supporting documentary evidence summarily accepted the claim of the assessee as regards the source of cash deposits of Rs.13.20 lacs in his bank account, though the same had formed the very basis for reopening of his case u/s.147 of the Act.

Ostensibly, the case of the assessee was reopened u/s.147 of the Act, for the reason that though he had during the year carried out cash transactions of Rs.13.20 lacs in a month in his bank account but had not filed his return of income for the said year, Page 4 of APB. Assessment was, thereafter, framed by the A.O vide his order passed u/ss.143(3)/147 dated 10.12.2018, wherein he had accepted the returned income of the assessee as such.

The Pr. CIT after culmination of the assessment proceedings, called for the assessment records of the assessee. On a perusal of the records, it was observed by the Pr. CIT that though the case of the assessee was 5 Saroj Singh Vs. Pr. CIT, Raipur- reopened for the reason that he had during the year carried out cash transactions of Rs.13.20 lacs (supra) in a month, but the A.O without carrying out the bare minimum verifications on the said aspect had accepted the unsubstantiated claim of the assessee that the cash deposits were sourced from his business of trading of forest produce. Observing, that the failure of the A.O to carry out necessary verifications on the aforesaid issue i.e. maintainability of the claim of the assessee as regards the source of the cash deposits of Rs.13.20 lacs (supra) in his bank account, had rendered his order passed u/ss.143(3)/147 of the Act as erroneous in so far it was prejudicial to the interest of the revenue, the Pr. CIT vide his order passed u/s.263 of the Act dated 09.03.2021 set-aside the same with a direction to the A.O to re-adjudicate the said issue after conducting necessary verifications and affording an adequate opportunity of being heard to the assessee.

The assessee being aggrieved has assailed the order passed by the Pr. CIT u/s.263 of the Act dated 09.03.2021 in appeal before us.

We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record.

As is discernible from the records, it transpires that though the case of the assessee was reopened for the reason that he had during the year carried out cash transactions of Rs.13.20 lacs in a month, but the A.O while framing the assessment had not carried out necessary verifications on the aforesaid issue which in itself formed the very basis for initiation of proceedings u/s.147 of the Act. The aforesaid factual position can safely be gathered from a perusal of the assessment order passed by the A.O u/ss. 143(3)/147 of the Act dated 10.12.2018 a/w. reply filed by the assessee to the notice issued by the A.O. u/s. 142(1) of the Act dated 28.09.2018. Although it is the claim of the Ld. AR that the assessee in the course of assessment proceedings had stated before the A.O that he had during the year under consideration carried on the business of trading in forest produce and reference of the same can be traced in the assessment order, but we are afraid that the same cannot be stretched to infer that the assessee had furnished details as regards the source out of which cash deposits of Rs.13.20 lacs were made by him in his bank account.

In our considered view, as the A.O in the course of assessment proceedings had at no stage queried about the source of cash deposits of Rs.13.20 lacs in the assessee’s bank account, therefore, there was no occasion for the assessee to have furnished the requisite explanation a/w. supporting documentary evidence on the said issue. The claim of the Ld.

At this stage, we may herein observe that it is not only the case of the Pr. CIT that the A.O had failed to verify the authenticity of the assessee’s claim that the cash deposits of Rs.13.20 lacs in his bank account were sourced from his business of trading of agricultural and forest produce, but also the fact that the said explanation of the assessee had been accepted by the A.O in absence of any satisfactory documentary evidence. As it is a matter of fact borne from record that the A.O while framing assessment had summarily accepted the explanation of the assessee and had not carried out any verification on the aforesaid issue, i.e. source of the cash deposits of Rs.13.20 lacs in his bank account, though the same had formed the very basis for reopening of the assessee’s case u/s.147 of the Act, therefore, as per “Explanation 2” of Section 263 of the Act the order passed by the A.O u/ss. 143(3)/147 of the Act dated 10.12.2018, as observed by the Pr. CIT and, rightly so, is to be deemed to be erroneous in so far it is prejudicial to the interest of the revenue u/s. 8 Saroj Singh Vs. Pr. CIT, Raipur- 263 of the Act. Our aforesaid conviction that failure of the A.O to carry out necessary verification while framing assessment and summarily accepting the explanation of the assessee would render the order passed by him amenable for revision u/s.263 of the Act is supported by the Judgment of the Hon’ble Supreme Court in the case of Deniel Merchants (P) Ltd. Vs. ITO, (2018) 95 taxmann.com 366 (SC).

We, thus, considering the facts involved in the present case before us r.w the aforesaid position of law, find no infirmity in the view taken by the Pr. CIT, and thus uphold his order passed u/s.263 of the Act dated 09.03.2021. Thus, grounds of appeal raised by the assessee are dismissed in terms of our aforesaid observations.

In the result, appeal of the assessee is dismissed in terms of our aforesaid observations. Order pronounced in open court on 14th day of July, 2023.