2023 (1) TMI 123 - AT - Income Tax

Tribunal rules in favor of assessee, quashing Pr.CIT's order under section 263.

The Tribunal ruled in favor of the assessee, quashing the ld. Pr.CIT's order under section 263 of the Act. It held that the ld. Pr.CIT's attempt to ... Revision u/s 263 - unexplained cash - assessee has deposited cash during the demonetization period - HELD THAT:- CIT goes on to hold that the source of the cash deposits as explained by the assessee was without any details and no examination was done. CIT further goes on to hold that the opening cash balance was not properly explained. Consequently the ld. Pr.CIT drew the conclusion that the amount of Rs.9 lakhs representing Rs.26 lakhs less Rs.17,01,700/- was unexplained. A perusal of CIT’s order shows that he has accepted the total turnover of the assessee at Rs.17,01,700/-. He has accepted the deposit in the bank during the demonetization period of Rs.26 lakhs, though the correct figure is Rs.26,50,000/-. When this is examined along with the assessment order passed u/s.143(3) of the Act on 26.12.2019, it shows that in assessment order in the second last paragraph the opening cash balance has been examined in total by the AO by verifying the returns of the earlier years. Thus, clearly the issues as has been proposed by the ld. Pr.CIT, has already been examined by the AO and the ld. Pr.CIT under the guise of revision u/s.263 is only proposing to force his opinion over that as arrived at by the ld. AO. This is not permissible in the revisionary proceedings u/s.263 of the Act. Consequently, the order passed u/s.263 of the Act by the ld. Pr.CIT stands unsubstantiated and the same is hereby quashed. Appeal of the assessee is allowed. Issues:1. Revision under section 263 of the Act regarding unexplained investment based on cash deposits during demonetization period.2. Examination of opening cash balance and gross income by Assessing Officer (AO) during original assessment.3. Validity of ld. Pr.CIT's order directing re-assessment based on unexplained investment.Analysis:1. The appeal pertains to a revision under section 263 of the Act by ld. Pr.CIT regarding an unexplained investment of Rs.9 lakhs by the assessee, derived from cash deposits during the demonetization period. Ld. Pr.CIT based this on the difference between total cash deposits and total sale proceeds. The AO had accepted the return filed by the assessee after examining the opening cash balance and gross income. The ld. Pr.CIT's order was challenged on the grounds that the AO had already examined these aspects, and the ld. Pr.CIT's revision was unwarranted. The Tribunal held that the ld. Pr.CIT's attempt to override the AO's findings was impermissible in revisionary proceedings under section 263 of the Act, ultimately quashing the order.2. The ld. AR argued that the AO had thoroughly examined the opening cash balance and gross income received by the assessee till a certain date during the original assessment. The AO had verified various financial documents provided by the assessee, including bank statements, deductions under section 80C, and financial statements. The ld. AR contended that the AO's assessment did not reveal any adverse findings. Additionally, the ld. AR highlighted that the ld. Pr.CIT's attempt to direct re-assessment based on unexplained investment was unfounded as the relevant aspects had already been addressed during the original assessment.3. On the other hand, the ld. CIT-DR supported the ld. Pr.CIT's order, emphasizing that the money lending business claimed by the assessee lacked documentary evidence and had not been adequately examined by the AO. The ld. CIT-DR argued that the unexplained investment of Rs.9 lakhs, as proposed by the ld. Pr.CIT, should have been taxed, which the AO allegedly failed to consider. However, the Tribunal noted that the ld. Pr.CIT's order did not provide sufficient grounds to overturn the AO's findings, especially considering that the relevant aspects had already been scrutinized during the original assessment.In conclusion, the Tribunal allowed the appeal of the assessee, ruling in favor of quashing the ld. Pr.CIT's order under section 263 of the Act. The Tribunal emphasized that the ld. Pr.CIT's attempt to impose his opinion over that of the AO was impermissible in revisionary proceedings, particularly when the AO had already examined the relevant aspects during the original assessment.