Tribunal modifies order, directs AO to reexamine entries. Challenges dismissed, appeal accepted after COVID-19 delay.

The Tribunal modified the order of the ld. Pr. CIT directing the AO to reexamine the debit entries and the assessee's explanation. The challenges to the ld. Pr. CIT's competence and alleged violation of the law were dismissed. The appeal's delay, caused by the COVID-19 lockdown, was condoned, and the appeal was accepted for adjudication.

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Issues Involved:
1. Validity of the order passed by the ld. Pr. CIT under section 263 of the Income Tax Act, 1961.
2. Competence of the ld. Pr. CIT to pass an order under section 263 when the matter was pending before the ld. CIT(Appeals).
3. Alleged violation of clause (c) of Explanation 1 to sub-section 1 of section 263 by the ld. Pr. CIT.
4. Delay in filing the appeal and its condonation.

Issue-wise Detailed Analysis:

1. Validity of the order passed by the ld. Pr. CIT under section 263 of the Income Tax Act, 1961:
The appellant contended that the order passed by the ld. Pr. CIT was bad in law as the ld. AO had passed the order after due application of mind. The ld. AO had assessed a sum of Rs. 8,44,745/- being 10% of cash deposits as net income based on the bank statements and various debit entries. The ld. Pr. CIT, however, held that the whole amount of cash deposit should have been treated as unexplained under section 68, making the AO's order erroneous and prejudicial to the interest of Revenue. The Tribunal found that the AO's order was indeed erroneous as he did not bring the whole of the unexplained cash deposits to tax and failed to provide a basis for taxing only 10% of such deposits. The Tribunal directed the AO to verify the debit entries and consider the explanation of the assessee afresh, thereby modifying the order of the ld. Pr. CIT to this extent.

2. Competence of the ld. Pr. CIT to pass an order under section 263 when the matter was pending before the ld. CIT(Appeals):
The appellant argued that since an appeal against the AO's order was pending before the ld. CIT(Appeals), the ld. Pr. CIT was incompetent to pass an order under section 263. The Tribunal observed that although the assessee had filed an appeal before the ld. CIT(A), there was no record of the delay being condoned and the appeal being admitted for adjudication. Thus, the mere filing of an appeal did not act as an estoppel in the exercise of jurisdiction by the ld. Pr. CIT under section 263. Therefore, the Tribunal dismissed this ground.

3. Alleged violation of clause (c) of Explanation 1 to sub-section 1 of section 263 by the ld. Pr. CIT:
The appellant claimed that the ld. Pr. CIT violated clause (c) of Explanation 1 to sub-section 1 of section 263 as the matter was pending before the ld. CIT(A). The Tribunal noted that the appellant did not wish to press this ground and clarified that the powers of the ld. Pr. CIT extend to matters not considered and decided in an appeal. Since the appeal had not been admitted for adjudication, the doctrine of merger did not apply, and there was no bar on the exercise of jurisdiction by the ld. Pr. CIT under section 263. Hence, this ground was also dismissed.

4. Delay in filing the appeal and its condonation:
The appeal was filed with a delay of 143 days due to the COVID-19 lockdown. The appellant cited the relaxation provided by the Ministry of Law and Justice and the Ministry of Finance, extending the time for filing the appeal. The Tribunal, considering the prevailing situation and the relaxation provided, condoned the delay and admitted the appeal for adjudication.

Conclusion:
The Tribunal modified the order of the ld. Pr. CIT to the extent that the AO was directed to verify the debit entries and consider the explanation of the assessee afresh. The grounds challenging the competence of the ld. Pr. CIT and the alleged violation of clause (c) of Explanation 1 to sub-section 1 of section 263 were dismissed. The delay in filing the appeal was condoned, and the appeal was admitted for adjudication.

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