2020 (12) TMI 42 - AT - Income Tax

Tribunal upholds revision order due to erroneous assessment, directs fresh investigation into cash deposits.

Shri Deep Chand C/o Kalani & Co., Chartered Accountants Versus The Pr. CIT Aayakar Bhawan, Moti Doongri, Alwar.

Shri Deep Chand C/o Kalani & Co., Chartered Accountants Versus The Pr. CIT Aayakar Bhawan, Moti Doongri, Alwar. - TMI Issues Involved:1. Validity of the revision order passed under section 263 of the IT Act.2. Merits of the order passed by the Commissioner regarding the total turnover of the assessee.Issue-wise Detailed Analysis:1. Validity of the Revision Order Passed Under Section 263 of the IT Act:The assessee challenged the revision order dated 20.01.2020 by the Principal Commissioner of Income Tax (PCIT), Alwar, under section 263 of the IT Act for the assessment year 2010-11. The PCIT found the order passed by the Assessing Officer (AO) under section 143(3) read with section 147 to be erroneous and prejudicial to the interest of the revenue. The PCIT noted that the AO failed to conduct proper verification of the total deposits made by the assessee in the bank account, which amounted to Rs. 1,89,51,996/- (Rs. 1,40,11,085/- cash deposit + Rs. 49,40,991/- cheque deposit). The AO had computed net profit at 2.75% on a total turnover of Rs. 1,04,97,340/- without adequately investigating the source of the cash deposits.The assessee argued that the AO had conducted an enquiry by examining the books of accounts, supporting documents, and bank statements before assessing the income. The assessee contended that the PCIT cannot invoke section 263 merely because he disagrees with the AO's view, citing decisions from the Ahmedabad and Delhi Benches of the Tribunal. However, the PCIT pointed out that the AO's order was based on incomplete facts and lacked proper enquiry, rendering it erroneous and prejudicial to the revenue. The Tribunal upheld the PCIT's revision order, stating that the AO failed to verify the total deposits and determine the correct turnover, making the assessment order erroneous.2. Merits of the Order Passed by the Commissioner Regarding the Total Turnover of the Assessee:The assessee contended that the PCIT's direction to consider the total deposits of Rs. 1,89,51,996/- as the turnover was unjust and arbitrary. The assessee explained that part of the deposits represented earlier withdrawals and opening cash balances, which should not be treated as turnover. The PCIT, however, noted that the AO had not maintained proper books of account or conducted an audit as required under section 44AB, and thus, the source of deposits needed verification.The Tribunal agreed with the PCIT's decision to set aside the AO's order, directing the AO to pass a speaking assessment order after proper enquiry and verification of the deposits. The AO was instructed to consider the source of cash deposits, including earlier withdrawals, and ensure that the deposits were not utilized for other purposes. The Tribunal found no error in the PCIT's order but emphasized the need for the AO to verify the source of cash deposits.Conclusion:The Tribunal upheld the PCIT's revision order under section 263, finding the AO's assessment order erroneous and prejudicial to the revenue due to lack of proper enquiry and verification of the total deposits. The Tribunal directed the AO to conduct a thorough investigation and pass a fresh assessment order, verifying the source of cash deposits. The appeal was partly allowed for statistical purposes.