Tribunal Invalidates Section 263 Notice, Allows Assessee's Appeal

The Tribunal found that the Assessing Officer's order was not erroneous or prejudicial to the Revenue's interest. The Principal Commissioner's notice under section 263 was deemed invalid due to the Assessing Officer's order being void ab initio. Consequently, the Tribunal canceled the Principal Commissioner's order and allowed the assessee's appeal in ITA No. 353/VIZ/2018. Similar reasoning applied in ITA No. 354/VIZ/2018, leading to the allowance of both appeals on August 7, 2019.

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Issues:
Appeals against orders of Principal Commissioner of Income Tax for Assessment Year 2016-17 - Seizure of cash during vehicle surveillance - Source of cash - Assessment made under section 143(3) - Pr.CIT issued notice under section 263 - Errors in assessment order - Application of sections 69A and 115BBE - Verification of sources for acquisition of vehicles under section 142(1)(iii) proviso (b).

Analysis:
The appeals were against separate orders of the Principal Commissioner of Income Tax for the Assessment Year 2016-17, involving the seizure of cash during vehicle surveillance. The case was selected for scrutiny manually, and the Assessing Officer noted the cash found in possession of the assessee and another individual. The sources of the cash were questioned, leading to the seizure of the amount. The Assessing Officer completed the assessment under section 143(3) after the assessee failed to substantiate the source of cash. Subsequently, the Principal Commissioner issued a notice under section 263, citing errors in the assessment order. These errors included not invoking section 69A for unexplained money and not applying section 115BBE for special tax rates. Additionally, the verification of sources for vehicle acquisition was questioned under section 142(1)(iii) proviso (b).

The Assessing Officer had made detailed enquiries and additions to the total income of the assessee based on the seized cash. However, the Tribunal found that the order passed by the Assessing Officer was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal also noted that the order of the Assessing Officer being void ab initio rendered the notice issued by the Principal Commissioner under section 263 invalid. Consequently, the Tribunal canceled the order passed by the Principal Commissioner and allowed the appeal of the assessee in ITA No. 353/VIZ/2018.

In ITA No. 354/VIZ/2018, the facts and circumstances were similar to ITA No. 353/VIZ/2018, leading to the Tribunal's decision to apply the same reasoning. As a result, both appeals filed by the assessees were allowed, and the orders were pronounced in open court on August 7, 2019.

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