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 in bank account on single day and had squared up loans during the year. AO failed to examine additional documentary evidence and conduct requisite verification of these transactions. PCIT correctly found the assessment order u/s 143(3) erroneous and prejudicial to revenue interest due to inadequate inquiry and incomplete appreciation of facts. Appeal dismissed.

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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.

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