2021 (10) TMI 4 - AT - Income Tax

Tribunal Allows Appeal, Sets Aside Revision Order

Sri Vuppala Raj Kumar Versus Income Tax Officer Ward-1, Siddipet

The Tribunal condoned the delay in filing the appeal due to unintentional circumstances. The assessment order was revised under section 263 to treat cash ... Revision u/s 263 by CIT - Addition of unexplained cash credit u/s 68 - Estimation of income - HELD THAT:- On account of the assessees’ inability to produce any evidence in support of the cash deposits that the Assessing Officer has proceeded to treat the total of the cash deposits also as the turnover of the assessee and estimate the income thereon at 12% as against 5.5% initially done by the Assessing Officer. It is, therefore, clear that the Assessing Officer has followed the directions of the CIT to verify the sources of the cash deposits and thereafter, on the inability of the assessee to explain the same, the AO has adopted one of the possible views i.e., to treat the cash deposits as business receipts and to estimate the income at a percentage of the cash deposits or to make an addition of the entire deposits u/s 68. AO has deemed it fit and proper to treat the cash deposits as the business receipts of the assessee and to estimate the income thereon at 12%. Therefore, it cannot be said that the assessment order u/s 143(3) r.w.s. 263 dated 27.10.2014 is erroneous. By not bringing to tax the entire cash deposits u/s 68 of the Act, the assessment order may be said to have been prejudicial to the interest of the Revenue. But, for a valid revision, both the conditions i.e. the assessment order being erroneous and also being prejudicial to the interest of the Revenue are to be satisfied. - Decided in favour of assessee. Issues:Delay in filing appeal before the Tribunal, Condonation of delay, Assessment proceedings under section 143(3) and 263 of the IT Act, Treatment of cash deposits as business receipts, Revision of assessment order, Prejudicial to the interest of Revenue.Analysis:1. Delay in filing appeal before the Tribunal:The assessee filed an appeal for the A.Y 2009-10 against the order of the CIT-7, Hyderabad, dated 25.01.2016 under section 263 of the IT Act. The delay in filing the appeal was 165 days, and the assessee sought condonation of the delay due to unintentional and inadvertent circumstances beyond their control. The Tribunal, after considering the circumstances, condoned the delay.2. Assessment proceedings under section 143(3) and 263 of the IT Act:The Assessing Officer completed the assessment u/s 143(3) estimating the net profit at 5.5% of the turnover and interest received from the bank. Subsequently, the CIT directed the Assessing Officer to enquire into the sources of cash deposits, leading to a revised assessment under section 263 estimating the profit at 12% of cash deposits. The CIT further directed to bring an amount as unexplained cash credit u/s 68 of the IT Act.3. Treatment of cash deposits as business receipts:The assessee, engaged in the sale of various items, failed to provide evidence for cash deposits, resulting in the Assessing Officer treating the deposits as business receipts and estimating income at 12%. The Tribunal noted that the Assessing Officer followed directions to verify sources and adopted a possible view, justifying the treatment of cash deposits as business receipts.4. Revision of assessment order and Prejudicial to the interest of Revenue:The CIT revised the assessment order under section 263, directing the inclusion of cash deposits as unexplained credits u/s 68. However, the Tribunal found that the conditions for a valid revision were not met as the assessment order was not erroneous, and the interest of Revenue was not prejudiced. Consequently, the order under section 263 was set aside, and the assessee's appeal was allowed.This comprehensive analysis highlights the key issues involved in the legal judgment, covering aspects such as delay in filing the appeal, assessment proceedings, treatment of cash deposits, revision of assessment order, and the impact on the Revenue's interest.