ITAT upholds AO's acceptance of demonetization cash deposits explanation, quashes CIT's Section 263 revision order

The ITAT Ranchi quashed a revision order under Section 263 where the CIT challenged the AO's acceptance of the assessee's explanation for abnormal cash deposits during demonetization. The assessee, a proprietor of two pan masala trading concerns operating as a Consignee Sales Agent for DS Group Delhi, had deposited large amounts of demonetized currency between November-December 2016. The AO had initially scrutinized the case due to unusual cash deposit patterns but accepted the assessee's explanation after detailed verification of bank books, cash books, and supporting documents. The ITAT held that the twin conditions under Section 263 - assessment being erroneous and prejudicial to revenue - were not satisfied, as the AO had conducted proper enquiry and taken a plausible view based on evidence.

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Issues:
The judgment involves the issue of jurisdiction under section 263 of the Income Tax Act, 1961 and the validity of the revisionary order passed by the Principal Commissioner of Income Tax- Ranchi.

Details of the Judgment:

Issue 1: Invalid Jurisdiction u/s 263 of the Act
The appeal was filed by the assessee against the order of the Principal Commissioner of Income Tax- Ranchi passed under section 263 of the Act for the assessment year 2017-18. The Principal Commissioner observed abnormal increase in cash deposits during demonetization period and raised concerns about lack of verification by the Assessing Officer (AO). The assessee explained the increase in sales during the relevant period due to festive season and prohibition on certain items. The Assessing Officer had conducted necessary verification and accepted the explanations provided by the assessee. The Tribunal noted that the conditions for invoking jurisdiction under section 263 were not fulfilled as the assessment order was not erroneous or prejudicial to the interest of revenue. The Tribunal quashed the revisionary order, citing the decision of the Hon'ble Supreme Court and Delhi High Court.

Conclusion:
The Tribunal allowed the appeal of the assessee, emphasizing that the revisionary order passed under section 263 of the Act was quashed.

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