SUNITA JAIN,KAPURTHALA vs. PRINCIPAL COMMISSIONER OF INCOME TAX -1, JALANDHAR

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ITA 125/ASR/2023Status: DisposedITAT Amritsar17 July 2023AY 2017-187 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the PCIT, finding that the assessment order was erroneous and prejudicial to the interest of revenue due to the AO's lack of proper verification. The Tribunal noted that the AO failed to follow the Standard Operating Procedure (SOP) prescribed by the CBDT for verifying cash deposits during demonetization.

What were the facts?

The assessee, a petrol pump owner, deposited a significant amount of cash during the demonetization period. The PCIT initiated proceedings under Section 263, citing that the Assessing Officer (AO) had not adequately verified the source of these cash deposits. The assessee argued that the AO had already been provided with necessary documents and that the petrol pump business was permitted to make cash sales.

What were the issues?

Whether the PCIT was justified in exercising jurisdiction under Section 263 when the AO allegedly conducted adequate verification. Whether the AO's assessment order was erroneous and prejudicial to the revenue due to insufficient verification of cash deposits during demonetization.

Which sections of the Income-tax Act were involved?

Section 263,Section 143(3),Section 142(1),Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.

Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE

Hearing: 12.07.2023Pronounced: 17.07.2023

considered the assessment order as erroneous and prejudicial to the interest of the revenue as reason for absence of verification. The ld. PCIT set aside the assessment order and passed the order u/s 263. Being aggrieved assessee filed an appeal before us.

4.

The ld. AR submitted the written submission which are kept in the record.

The ld. AR first invited our attention in the notice u/s 142(1) of the ld. AO which is annexed APB page 20. Accordingly, the assessee complied the notice and the supportive documents with letter is annexed in APB pages 21 to 37. Further the notice was issued by the ld. AO on dated 11.09.2019, APB page 38.

The same notice was also complied by the assessee on dated 16.09.2019 and 26.09.2019.The replied letters are annexed in APB page 39 to 42. The ld. AR also drawn our attention in a letter dated 11.11.2019 where the assessee submitted the VAT return and the declared turnover which are duly annexed in APB pages 43 to 47.

5. The ld. DR vehemently argued and invited our attention in the assessment order. The relevant paragraph of the assessment order is duly reproduced as below:

“The assessee has filed his return of income for the Asstt. Year 2017-18 on 15.03.2018 declaring total income at Rs. 2,49,000/-

. The same was processed under section 143(1) of 4 the I.T. Act,1961 at the same figure. Thereafter, the case was selected for limited scrutiny through CASS. Notice under section 143(2) of the Income Tax Act, 1961 was issued on 09.08.2018 and duly served upon the assessee within stipulated period. Thereafter, notice under section 142(1) alongwith questionnaire were issued on 19.06.2019, 15.10.2019 and duly served upon the assessee calling for various details and information. In response to the notices, the assessee filed reply from time to time and placed on record.

2.

The case was selected for limited scrutiny on the following ground:-

“Cash deposits during demonetization period”

3.

During the course of assessment proceedings, while examining theexpenses it was found that the assessee has claimed expenses to the tune of Rs. 5,98,160/-which included expenses at Rs. 1,42,200 on account of recovery from HPCL. The assessee was requested to furnish evidence for such expenditure. In response to which the assessee stated that it was the recovery made by the company and was recovery for the July 2015 to September 2016. Since a part of expenditure i.e. July 2016 to March 2016 is not related to the year under consideration and the assessee is following mercantile system of accounting, the same is not allowed in the year under consideration. Thus, a disallowance of Rs. 87,120/-is made on this account, which is added to the taxable income of the assessee. Penalty proceedings u/s 270A have been initiated separately for under reporting the income.”

5.1 The ld. DR further invited our attention in relevant paragraph of the order of 263 in paragraph (iii)and(v) which are as below:

“iii). Post demonetization, persons depositing cash in banks were required to file an E-Response on the ITD portal owning up the cash/SBN deposited during demonetization and mention the source thereof. Ministry of Finance, CBDT, vide letter No. 225/363/2017-ITA.11 dated 05-March,2019 issued a SOP advising criteria for verification of the genuineness of the source of cash deposited declared in the E-Response. As per this SOP, the following points were to be examined.

- ratio of cash to credit sales,

- cash, sales made prior to 8.11.16, during demonetization period 9.11.16 to 31.12.16 and post 31.12.16

- cash sales made in the corresponding periods in the preceding FY 2015-16.

- any abnormal increase in cash sales or profit ratio during FY 15-16.

- Cash deposited in bank in the above periods during the FY2016-17 and FY 2015-16, etc....

Where the E-Response was not found to be satisfactory, the ITRs for AY 2017-18 relevant to the demonetization period were marked for scrutiny under CASS.

“...........................

..............................

(v). Related to above also was that cash deposit of Rs. 5,04,500/- was made by the assessee in Saving Bank Account No. 10045082239 with State Bank of India during the FY 2016- 17. Cash deposits of Rs. 1,50,000 were during the demonetization period; Rs.50,000/- each was deposited on 10.11 '016 , 10.11.2016 and 18.11.2016.

During the assessment proceedings, the Assessing Officer did not ask about the source of cash deposits made in the above Saving Bank Account. Nor did the assessee submit any explanation regarding the sources of cash deposits made in the saving account.

5.

The AO has thus omitted to examine the source of the cash deposits made during the demonetization period mentioned in para 4(i) above which was the reason for which the case had been selected for Complete Scrutiny.”

6.

We heard the rival submission and considered the documents available in the record. From the perusal of the records, it is clear that the assessee has supplied the documents and complied the details before the ld. AO during the assessment proceeding. But on the other hand, ld. AO had failed to honour the SOP of the CBDT vide letter No. 225/363/2017-ITA.2 dated 05.03.2019. The mode of verification duly prescribed by the CBDT to its officer. The assessment order was passed without verifying the G.P. ratio of the assessee in respect of other assessment years. In fact, there is significant deprivation of verification from the ld. AO. Due to absence of investigation in assessment, the order iscalled erroneous. Also order of assessment is prejudicial to the interest of revenue. The ld. PCIT had correctly considered the issues in the order passed u/s.263 of the Act. Hence, we are inclined in the observations made by the ld. PCIT in his order. Therefore, under these circumstances, we do not find any valid reason to interfere with the order passed by learned PCIT. Accordingly, the impugned order passed u/s.263 of the Act is upheld.

7.

In the result, appeal of the assessee is dismissed.

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