2023 (3) TMI 1346 - AT - Income Tax

Assessing Officer's Order Upheld, Principal Commissioner's Decision Annulled

The Tribunal set aside the Principal Commissioner of Income Tax's order, ruling that the Assessing Officer had conducted sufficient inquiries during the ... Revision u/s 263 by CIT - Cash deposited in bank account unexplained - As per CIT assessee failed to provide explanation in respect of sources of funds introduced as capital and creditworthiness of the lender - HELD THAT:- AO specifically called for the details in the specified format as per the CBDT Circular to examine the cash deposits made by the assessee and the assessee had given a detailed reply explaining the circumstances and the sources for cash deposits by producing details of purchases, sales, cash book, stock registers, VAT return etc., and the increase in demand of gold during that period being wedding season when compare to the corresponding previous year. All these details and explanation were also produced before the Ld. Pr.CIT, however, the Ld. Pr.CIT in her order observed that even during the revision proceedings assessee has failed to provide the documentary evidences to prove its contention which is entirely contrary to record. The Ld. Pr.CIT had made no efforts to examine the evidences and replies furnished by the assessee explaining the anomalies pointed out by the Ld. Pr.CIT. Thus we set aside the order of the Ld. Pr.CIT passed u/s 263 - Grounds of appeal of the assessee are allowed. Issues Involved:1. Whether the assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of the Revenue.2. Whether the AO failed to make meaningful and logical enquiries regarding cash deposits during the demonetization period.3. Whether the AO failed to verify the source of capital introduced by the partners into the partnership firm.Summary of Judgment:Issue 1: Erroneous and Prejudicial Assessment OrderThe assessee challenged the order of the Principal Commissioner of Income Tax (Pr.CIT), Delhi, which held that the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue. The Pr.CIT directed the AO to make a fresh assessment denovo. The Tribunal observed that the AO had indeed made enquiries and called for specific information in the prescribed format during the assessment proceedings. The Tribunal held that the mere absence of detailed reasoning in the AO's order does not imply a lack of enquiry.Issue 2: Enquiry into Cash Deposits during DemonetizationThe Pr.CIT observed that the AO failed to verify the source of cash deposits during the demonetization period, especially the abnormal increase in cash sales. The Tribunal noted that the AO had issued notices and called for detailed information, including month-wise cash sales, cash deposits, and stock registers, which the assessee furnished. The Tribunal concluded that the AO had conducted adequate enquiries and that the Pr.CIT did not point out any specific errors in the AO's findings.Issue 3: Verification of Capital Introduced by PartnersThe Pr.CIT also observed that the AO failed to verify the source of capital introduced by the partners into the partnership firm. The Tribunal found that the assessee had provided complete details, including confirmations, bank statements, and income tax returns of the donor, Smt. Vijaya Laxmi Verma. The Tribunal held that the AO had examined these details during the assessment proceedings, and the Pr.CIT did not conduct any further enquiry to prove the AO's findings erroneous.Conclusion:The Tribunal set aside the order of the Pr.CIT, holding that the AO had made adequate enquiries during the assessment proceedings. The Tribunal emphasized that the Pr.CIT should have conducted minimal enquiry before concluding that the AO's order was erroneous and prejudicial to the interest of the Revenue. The appeal of the assessee was allowed, and the order passed by the Pr.CIT under section 263 of the Act was quashed.Order Pronounced:The judgment was pronounced in the open court on 24/03/2023.