2023 (9) TMI 775 - AT - Income Tax

Tribunal rules in favor of assessee in appeal on delay condonation and assessment revision

The Tribunal allowed the appeal filed by the assessee concerning the condonation of delay and the revision of assessment by the Principal Commissioner of ... Revision u/s. 263 - As per CIT AO has wrongly estimated profit rate @ 8% on the differential cash deposit - HELD THAT:- AO while framing assessment has categorically noted that there is a difference between the cash sales and cash deposits into the bank and the explanation of the assessee before AO was that the difference between cash sales and cash deposits into his bank account was due to cash deposited out of collection from debtors being credit sales being executed, other collections etc. Hence, it was stated that the difference between cash deposit in the bank account is on account of cash sales or recovery from earlier year and hence, AO has taken a possible view and estimated the net profit on the differential cash deposit treating the same as sales. AO has taken one of the possible views and hence, we find no infirmity in the assessment order and we find no error or prejudice in the order of the AO. Therefore, the order of PCIT is set aside and restore the order of the AO. Appeal filed by the assessee is allowed. Issues:The appeal involved the condonation of delay and the revision of the assessment by the Principal Commissioner of Income Tax (PCIT) for the assessment year 2017-18.Condonation of Delay:The appeal was time-barred by 57 days, but the delay was condoned as the reason provided by the assessee for the delay was deemed reasonable. The delay was unintentional and due to misplaced appeal papers, which were later found and signed by the assessee. The Tribunal, after considering the facts and the small delay, decided to condone the delay and admit the appeal.Revision of Assessment by PCIT:The PCIT revised the assessment made by the Assessing Officer (AO) for the assessment year 2017-18 under section 263 of the Income Tax Act. The PCIT found the AO's estimation of profit rate on the differential cash deposit to be erroneous and prejudicial to the interest of Revenue. The AO had estimated the profit rate at 8% on the differential cash deposit of Rs. 12,16,374. However, the PCIT determined that the differential cash deposit should be assessed as deemed income under section 68 of the Act as unexplained cash credit, rather than using the net profit estimation.The assessee, engaged in trading cellular E-recharge services, explained that the difference between cash sales and cash deposits was due to various factors such as collections from debtors, MPesa collections, and certain withdrawals not utilized for the intended purpose. The PCIT observed that no additional expenditure was incurred by the assessee, leading to the assessment order being deemed erroneous. The PCIT directed the AO to reexamine the expenditure incurred by the assessee.During the appeal, the assessee reiterated their arguments made before the PCIT, emphasizing that the difference in cash deposits was not indicative of additional income. The CIT-DR supported the PCIT's revision order, stating that the assessee's audited accounts did not show additional expenditure justifying the differential cash deposit.Upon review, the Tribunal found that the AO's assessment was based on a possible view, considering the explanations provided by the assessee regarding the differential cash deposits. The Tribunal concluded that the AO's order was reasonable, and hence, set aside the PCIT's order, restoring the AO's assessment.In conclusion, the appeal filed by the assessee was allowed, and the order was pronounced in the open court on 14th July 2023 at Chennai.