2023 (4) TMI 237 - AT - Income Tax

Tribunal overturns Commissioner's decision under Income-Tax Act, emphasizing need for valid grounds.

Smt. Sudha Modi Versus The PCIT-1 Bhopal

The Tribunal allowed the appeal, finding the Principal Commissioner's invocation of Section 263 of the Income-Tax Act arbitrary and erroneous. The ... Revision u/s 263 - unexplained deposit of cash by the assessee during demonetization period - whether order passed by the Ld. AO erroneous so as to prejudicial to the interest of the Revenue due to lack of enquiry? - HELD THAT:- We find that in this case proper and adequate enquiry has been conducted by the Ld. AO in regard to the entire aspect of the matter, particularly, the Court case relating to the dispute on the land and the orders passed by different judicial forums and upon adequate examination of the records placed by the assessee, the assessment was completed. Simply because the money was deposited during demonetization the same cannot lead to the conclusion of having any ingenuine plea of the assessee as narrated above - order passed by the Ld. PCIT quashing the order passed by the Ld. AO holding it erroneous and prejudicial to the interest of the Revenue due to lack of adequate enquiry is not sustainable in the eye of law. Decided in favour of assessee. Issues Involved:1. Validity of invoking Section 263 of the Income-Tax Act, 1961 by the Principal Commissioner of Income Tax (PCIT).2. Adequacy of the Assessing Officer's (AO) enquiry during the scrutiny assessment.Summary:1. Validity of invoking Section 263 of the Income-Tax Act, 1961:The appeal was directed against the order dated 25.02.2022 by the PCIT-1, Bhopal under Section 263 of the Income-Tax Act, 1961, which sought to reassess the income of the assessee for the Assessment Year 2017-18. The PCIT found the AO's order dated 29.11.2019 to be erroneous and finalized without proper enquiry or verification, thus invoking Section 263 to direct a reassessment. The Tribunal held that the PCIT's invocation of Section 263 was arbitrary, whimsical, and erroneous. The Tribunal emphasized that the PCIT must show that the AO's enquiry was not conducted properly, which was not demonstrated in this case.2. Adequacy of the Assessing Officer's (AO) enquiry during the scrutiny assessment:The AO had conducted a detailed scrutiny assessment, including issuing notices under Sections 143(2), 133(6), and 142(1) of the Act, and summoning the assessee. The AO examined the source of the cash deposit of Rs. 11,08,000/- during demonetization, which the assessee claimed was from a disputed land sale transaction. The AO found the explanation and supporting documents satisfactory and accepted the returned income. The Tribunal noted that the AO made sufficient enquiry into the matter, including the pending court proceedings regarding the land dispute. The Tribunal referenced the judgment in the case of Sh. Narayan Tatu Rane Vs. ITO, highlighting that the PCIT does not have unfettered powers to revise orders simply because they disagree with the AO's conclusions. The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the interests of the revenue, and the PCIT's order invoking Section 263 was quashed.Conclusion:The Tribunal allowed the appeal filed by the assessee, finding that the AO had conducted adequate enquiry and the PCIT's invocation of Section 263 was unjustified and not sustainable in law. The order dated 25.02.2022 by the PCIT was thus quashed.