2023 (10) TMI 1008 - AT - Income Tax

PCIT revision order upheld for inadequate inquiry into large cash deposits during demonetization under section 263

ITAT Jaipur upheld PCIT's revision order u/s 263 regarding cash deposits of old currency notes during demonetization. The assessee deposited large amounts ... Revision u/s 263 - Cash deposits in the form of old currency notes in bank account on a single day during demonetization period - PCIT observed that due to lack of enquiries and also due to incorrect and incomplete appreciation of facts and law, the assessment order u/s 143(3) has been rendered erroneous in so far it is prejudicial to the interest of Revenue - HELD THAT:- It is noteworthy to mention from the order of ld. PCIT, Udaipur that various additional documentary evidences which have been furnished in compliance to notice u/s 263 of the I.T. Act were not produced before the AO. This becomes all the more important in view of the fact that one of the key reason of scrutiny is ‘’Large squared up loan during the year’’. Since the AO has not examined the documentary evidences in respect of this issue and has not conducted the requisite verification due to which the assessment order u/s 143(3) of the I.T. Act is found to be erroneous in so far it is prejudicial to the interest of revenue. Hence, taking into consideration the above facts and circumstances, we find that the ld. PCIT is justified in holding that that the assessment order u/s 143(3) made by the AO had been rendered erroneous and prejudicial to the interest of the revenue and we concur with the findings of the ld. PCIT taking into consideration the written submissions of the assessee. Thus the appeal of the assessee is dismissed. Issues Involved:1. Invocation of provisions of Section 263 of the Income Tax Act.2. Assumption of jurisdiction under Section 263.3. Setting aside the assessment order despite alleged application of mind by the Assessing Officer (AO).4. Condonation of delay in filing the appeal due to COVID-19 lockdown.Summary:Condonation of Delay:The Tribunal condoned the delay of 462 days in filing the appeal, citing the complete lockdown due to COVID-19 and the Supreme Court's orders extending limitation periods. The Tribunal found merit in the assessee's reasons for the delay, including the lockdown and an employee's medical leave, which led to the misplacement of appeal papers.Invocation of Section 263:The Principal Commissioner of Income Tax (PCIT) invoked Section 263, arguing that the AO's order was erroneous and prejudicial to the interest of the revenue. The PCIT noted that the AO failed to properly verify the cash deposits made during the demonetization period and the squared-up loans, which were key reasons for the scrutiny selection.Assumption of Jurisdiction under Section 263:The Tribunal upheld the PCIT's assumption of jurisdiction under Section 263, agreeing that the AO did not conduct the requisite verification of documentary evidence related to large squared-up loans and cash deposits during demonetization. The Tribunal concurred with the PCIT's findings that the AO's order lacked proper inquiries and verification.Setting Aside the Assessment Order:The Tribunal found that the AO's assessment order was indeed erroneous and prejudicial to the revenue's interest. The AO had disallowed certain unverifiable expenses but failed to make proper inquiries into significant issues like large squared-up loans and cash deposits during demonetization. The Tribunal supported the PCIT's direction to the AO to conduct necessary examinations and verifications.Conclusion:The Tribunal dismissed the assessee's appeal, upholding the PCIT's order under Section 263. The Tribunal agreed that the AO's order was erroneous and prejudicial to the revenue's interest due to inadequate verification and inquiries into key issues. The appeal was dismissed based on the comprehensive review of facts and legal principles.