Tribunal upholds assessment order, rejects revisionary order under section 263.

The Tribunal upheld the assessment order in favor of the assessee, ruling that the AO's inquiry into the unexplained cash credit was proper and not prejudicial to the Revenue. The Tribunal quashed the revisionary order under section 263, finding no violation of the "Audi Alteram Partem" principle as the assessee was given a fair hearing. The appeal was allowed with no costs imposed.

---

---

Issues Involved:
1. Whether the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue within the purview of section 263 of the Income-tax Act.
2. Whether there was a violation of the principle of "Audi Alteram Partem" during the revisionary proceedings.

Detailed Analysis:

Issue 1: Whether the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue within the purview of section 263 of the Income-tax Act.

The assessee, an architect and partner in M/s Konark Builders, filed a return of income for AY 2015-2016. The assessment was concluded with an addition of Rs. 3,17,414 as unexplained cash credit under section 68. The Principal Commissioner of Income Tax (PCIT) assumed revisionary jurisdiction under section 263, directing the AO for fresh adjudication due to the alleged non-conduction of due inquiry during the original assessment.

The Tribunal examined the facts and found that during the limited scrutiny assessment, the AO had indeed raised specific queries regarding the source of cash deposits. The assessee provided details of cash receipts from three sources: professional receipts, withdrawals from the partnership firm, and bank loans. The AO scrutinized these details and observed a negative cash difference of Rs. 3,17,414, which was brought to tax under section 68.

The PCIT, however, contended that the AO's order was erroneous and prejudicial to the Revenue due to the absence of inquiries into the source of cash receipts. The Tribunal noted that the PCIT relied on the Supreme Court judgment in Malabar Industrial Co Ltd Vs CIT, which emphasized the necessity of inquiry by the AO. The Tribunal clarified the distinction between "inquiry" and "enquiry," emphasizing that the AO had conducted a proper inquiry by scrutinizing the bank statements and other relevant documents.

The Tribunal concluded that the AO's assessment did not lack proper inquiry, and the discrepancies were duly taxed. Therefore, the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. Consequently, the Tribunal quashed the revisionary order passed by the PCIT under section 263.

Issue 2: Whether there was a violation of the principle of "Audi Alteram Partem" during the revisionary proceedings.

The Tribunal addressed the appellant's contention that the revision order was passed without providing due and proper opportunity. It was established that the PCIT had issued a show cause notice to the assessee, who attended and reiterated his submissions. The PCIT concluded the revisionary proceedings based on the records without necessitating further submissions.

The Tribunal observed that the due service of the show cause notice, fair hearing, and unbiased approach were evident from the records. Additionally, the assessee's counsel did not raise the issue of violation of the principle of "Audi Alteram Partem" during the hearing before the Tribunal. Therefore, the Tribunal dismissed this ground of appeal.

Conclusion:

The Tribunal allowed the appeal of the assessee, quashing the revisionary order passed under section 263. The assessment order was upheld as it did not suffer from any infirmity regarding the conduction of inquiry. The appeal was allowed with no order as to cost.

---