Revision order under Section 263 quashed for superficial enquiry on specified bank note deposits

ITAT Cuttack quashed Pr. CIT's revision order u/s 263 regarding deposit of specified bank notes. The tribunal held that Pr. CIT conducted only superficial enquiry without proper examination of assessment records. Applying precedents from Deepak Kumar Garg and Orissa State Police Housing cases, the tribunal found Pr. CIT lacked basis to conclude AO failed to examine bank note deposits adequately. The direction for re-examination of already examined issues was held impermissible under Section 263. Assessee successfully proved specified bank notes were deposited and recorded in cash book, which Pr. CIT failed to refute.

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Issues:
Appeal against order of ld. Pr.CIT for assessment year 2017-2018 regarding deposit of specified bank notes during demonetization period.

Analysis:
The appeal was filed by the assessee against the order of the ld. Pr.CIT, Bhubaneswar-1, pertaining to the assessment year 2017-2018. The issue revolved around the deposit of specified bank notes during the demonetization period between 09.11.2016 & 31.12.2016. The AO had completed the assessment under section 143(3) of the Act without making any additions based on the evidence produced by the assessee. However, the ld. Pr. CIT initiated proceedings under section 263 of the Act to revise the assessment order due to discrepancies in the deposited amounts as per information obtained under section 133(6) of the Act. The assessee contended that the deposits were part of business transactions recorded in the books of accounts and had provided explanations supported by the cash book. The ld. Pr. CIT, without adequately considering the assessee's explanation, directed the AO to reexamine the issue, leading to the appeal.

The CIT-DR argued that there was a lack of proper enquiry by the AO, specifically regarding the cash book maintained by the assessee and the closing cash balance. The CIT-DR relied on legal precedents to support the contention that insufficient enquiry by the AO rendered the assessment order erroneous and prejudicial to the revenue's interest, justifying the invocation of section 263 of the Act. The assessee, on the other hand, cited a decision of the Hon'ble Jurisdictional High Court emphasizing the necessity of a subjective view based on a proper enquiry by the CIT before revising an assessment order under section 263 of the Act.

The Tribunal analyzed the submissions of both parties and the legal principles cited. It noted that the ld. Pr. CIT had not conducted any independent enquiry before setting aside the assessment order and directing a reexamination of the issue already examined by the AO. The Tribunal emphasized that the ld. Pr. CIT's order lacked a proper basis for concluding that the specified bank notes' deposits had not been adequately examined by the AO. Drawing parallels with the legal precedent, the Tribunal held that the ld. Pr. CIT's order did not meet the requirements of section 263 of the Act, as it essentially directed a reexamination of an already scrutinized issue, which was impermissible. Consequently, the Tribunal allowed the appeal of the assessee, quashing the order passed under section 263 of the Act.

In conclusion, the Tribunal's decision highlighted the importance of a thorough and independent enquiry by the CIT before revising an assessment order under section 263 of the Act. It underscored the necessity of a valid basis for concluding that the original assessment was erroneous and prejudicial to the revenue's interest, as mandated by the legal provisions and judicial precedents.

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