2022 (12) TMI 1120 - AT - Income Tax

Tribunal overturns Revisional Authority's order under Section 263, deeming assessment not prejudicial.

The Tribunal allowed the Assessee's appeal against the Ld. Revisional Authority's order under Section 263. It held that the assessment order was not ... Revision u/s 263 - Reopening of assessment u/s 147 - Addition being profit working out on cash deposits - surrendering a profit @8% on the balance unexplained cash deposited by applying provisions of section 44AD - HELD THAT:- AO has considered surrendered income - The assessment order reflects that AO had taken into account the peak credit balance factor also. Thus, there appears to be an erroneous exercise of jurisdiction by Ld. Revisional Authority as the issue was thoroughly examined by the Ld. AO and taking into consideration the facts and circumstances assessment order was passed. There is force in the submission of AR, that when Ld. AO had examined the issue of deposit of cash and accepted it to be business income then Ld. PCIT was in error in setting aside the assessment order on the ground that one part of the income was assessed as per P & L account and the other part of income was assessed as per the provisions of section 44AD of the Act, because as such there was no loss of revenue and rather the P & L Account profit percentage being lower, the revenue only gained. That being so, the assessment order cannot be considered to be one prejudicial to the interest of revenue and accordingly invoking of the jurisdiction u/s 263 by Ld. PCIT is not justified. The ground raised are decided in favour of the appellant. The appeal of assessee is allowed. Issues:1. Appeal against order u/s 263 by Assessee2. Consideration of entire cash deposit as unexplained income3. Application of Section 44AD and P & L Account in assessment4. Validity of invoking revisional powers by Ld. PCITAnalysis:Issue 1: Appeal against order u/s 263 by AssesseeThe Assessee appealed against the order u/s 263, dated 30.03.2019, passed by Ld. Pr. CIT(A), Ghaziabad, challenging the assessment order dated 13.12.2016 passed u/s 147/143(3) of the Income Tax Act, 1961 by the Assessing Officer, ITO, Ward-1(1), Ghaziabad. The Assessee contended that the assessment order was not prejudicial to the interest of revenue, as the Ld. AO had already made an addition based on the cash deposits surrendered as sales. The Assessee raised various grounds of appeal against the order of Ld. PCIT, questioning the validity and jurisdiction of invoking Section 263.Issue 2: Consideration of entire cash deposit as unexplained incomeThe Ld. Revisional Authority considered the entire cash deposit of Rs. 25,65,812/- as unexplained income, disagreeing with the Assessee's submission that the deposit was related to a Kirana business belonging to Ankur Jain HUF. The Revisional Authority observed discrepancies in the bank accounts used for transactions and concluded that the cash deposit should be treated as unexplained income. The Assessee argued that the transactions belonged to the HUF business, even though the account was in the individual's name.Issue 3: Application of Section 44AD and P & L Account in assessmentThe Ld. Revisional Authority found fault with the Ld. AO for accepting some income based on the Profit and Loss Account and applying Section 44AD for the rest. The Revisional Authority directed the Ld. AO to enhance the income by considering the entire cash deposit as unexplained income under Section 68 of the Act. The Assessee contended that the assessment order was not erroneous, as the Ld. AO had already added 8% of the cash deposits as sales, and the peak credit balance factor was also considered.Issue 4: Validity of invoking revisional powers by Ld. PCITUpon hearing both parties, the Tribunal noted that the Ld. AO had thoroughly examined the issue of cash deposit and accepted it as business income. The Tribunal found that there was no loss of revenue, as the assessment order was based on facts and circumstances. Therefore, the Tribunal held that the Ld. PCIT erred in setting aside the assessment order and invoking Section 263, as it was not prejudicial to the interest of revenue. The appeal of the Assessee was allowed, and the impugned order of the Ld. Revisional Authority was set aside.This detailed analysis covers the key issues raised in the legal judgment, providing a comprehensive understanding of the case and the Tribunal's decision.