Appeal partly allowed, CIT's order upheld on cash deposits, issue of cost of acquisition excluded

The appeal was partly allowed. The Tribunal upheld the Pr. CIT's order regarding the cash deposits but modified it to exclude the issue of the cost of acquisition, which was already under appeal before the CIT(A). The delay in filing the appeal was condoned, and the validity of the show-cause notice and the assumption of jurisdiction by the Pr. CIT were upheld.

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Issues Involved:
1. Delay in filing the appeal.
2. Validity of show-cause notice issued under Section 263.
3. Assumption of jurisdiction by the Principal Commissioner of Income Tax (Pr. CIT).
4. Examination of cash deposits in the assessee's bank account.
5. Determination of cost of acquisition for plots of land sold during the year.

Detailed Analysis:

1. Delay in Filing the Appeal:
The assessee filed the appeal with a delay of 10 days. The delay was attributed to the time taken to seek legal opinions from local counsel in Alwar and another counsel in Jaipur. The delay was not intentional, and the Revenue did not raise any specific objections. Considering the bonafide of the assessee and the fact that this was the first stage to challenge the order, the delay was condoned.

2. Validity of Show-Cause Notice Issued Under Section 263:
The assessee challenged the validity of the show-cause notice issued under Section 263, arguing that it was signed by the ITO (Technical) and not by the Pr. CIT. The Tribunal referred to multiple Supreme Court decisions, including Rampyari Devi Sarogi vs. CIT and CIT vs. Electro House, which clarified that Section 263 does not require a specific notice to be served as in Section 148. The requirement is to give the assessee an opportunity of being heard. The Tribunal concluded that the issuance of the show-cause notice by the ITO (Technical) for and on behalf of the Pr. CIT did not affect the assumption of jurisdiction by the Pr. CIT.

3. Assumption of Jurisdiction by the Principal Commissioner of Income Tax:
The assessee argued that the proceedings under Section 263 were initiated based on a proposal from the ITO, Ward-1(1), Alwar, and not by the Pr. CIT himself. The Tribunal found that the Pr. CIT had examined the assessment records and, after being satisfied that the order was erroneous and prejudicial to the Revenue, directed the issuance of the show-cause notice. This was in line with the decision in Smt Sumitra Devi Khirwal vs. CIT, where the Calcutta High Court held that the Commissioner could act on records placed before him by subordinates.

4. Examination of Cash Deposits in the Assessee's Bank Account:
The Pr. CIT found that the Assessing Officer (AO) had not conducted adequate enquiries regarding the cash deposits of Rs. 1,40,25,000 in the assessee's bank accounts. The AO had accepted the source of the deposits based on affidavits and statements from a few persons without verifying the availability of plots and the genuineness of the transactions. The Tribunal agreed with the Pr. CIT that the AO's order was based on incorrect assumptions and lacked proper verification. The matter was remanded to the AO for fresh examination.

5. Determination of Cost of Acquisition for Plots of Land Sold During the Year:
The AO had allowed the entire cost of acquisition for the whole land against the plots sold during the year. The Tribunal found this erroneous, as the cost should be proportionate to the plots sold. However, since the assessment order was already under appeal before the CIT(A) regarding the long-term capital gain, including the cost of acquisition, the Pr. CIT could not assume jurisdiction under Section 263 for this matter. The Tribunal modified the Pr. CIT's order to exclude this issue from his jurisdiction.

Conclusion:
The appeal was partly allowed. The Tribunal upheld the Pr. CIT's order regarding the cash deposits but modified it to exclude the issue of the cost of acquisition, which was already under appeal before the CIT(A). The delay in filing the appeal was condoned, and the validity of the show-cause notice and the assumption of jurisdiction by the Pr. CIT were upheld.

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