2023 (11) TMI 446 - HC - Income Tax

Tribunal Upholds Appeal: Assessment Order Found Valid, Section 263 Powers Unjustified, No Costs Imposed.

PRINCIPAL COMMISSIONER OF INCOME TAX 1 Versus PRAFUL GAUTAMLAL KOTHARI

The Tribunal's decision to allow the assessee's appeal against the order under Section 263 of the Income Tax Act was upheld. The Tribunal determined that ... Revision u/s 263 - Validity of reassessment proceedings - cash deposit - HELD THAT:- The notice u/s 263 was issued based on the assessment order passed on the ground that the assessment was to be treated as erroneous and prejudicial to the interest of revenue. After hearing the parties, in exercise of powers u/s 263 the revision was allowed which was a subject matter of challenge. Even the perusal of the order of the Tribunal which was challenged at the hands of the assessee indicates that, on facts the Tribunal found that during the course of assessment proceedings the inquires were made and it was found that the cash deposit was deposited by the assessee in his Savings Bank Account wherein the assessee was a joint holder with a son-Saral Kothari. When an explanation was rendered by the assessee as a set out in the order of the Tribunal, it cannot be said that the authorities could have exercised powers u/s 263 as the assessment order cannot be said to be erroneous or prejudicial to the interest of revenue. Tribunal has arrived at finding of fact that the assessing officer accepted genuineness of the claim of the assessee after inquiries and consideration of material placed on record. As clarified that we have not gone into the question of the issue of the Explanation 2 to the Section 263 of the Act. No substantial question of law arises. Issues involved:The judgment involves the following Issues:1. Whether the Tribunal was justified in allowing the appeal of the assessee against the order u/s. 263 of the Income Tax Act contrary to Explanation 2 of Section 263 of the ActRs.2. Whether the Tribunal was justified in allowing the appeal of the assessee against the order u/s. 263 of the Income Tax ActRs.3. Whether the Tribunal was justified in allowing the appeal of the assessee against the order u/s. 263 of the Income Tax Act of Ld. PCIT when there was gross inadequacy in inquiry conducted as per the order of the Supreme CourtRs.Comprehensive Judgment Details:Issue 1:The appeal was filed under Section 260-A of the Income Tax Act challenging the order passed by the Income Tax Appellate Tribunal, Rajkot. The case involved a substantial cash deposit in the assessee's bank account, leading to a re-opening of the case under Section 147 of the Act. The Tribunal found that the assessing officer conducted inquiries and accepted the genuineness of the cash deposit after considering the evidence provided by the assessee. Therefore, the Tribunal concluded that the assessment order was not erroneous or prejudicial to the interest of revenue, and the powers under Section 263 of the Act were not justified to be exercised.Issue 2:The Tribunal did not delve into the question of the issue of Explanation 2 to Section 263 of the Act. It was emphasized that the authorities had accepted the genuineness of the cash deposit after conducting inquiries and reviewing the material on record. The Tribunal found that no substantial question of law arose from the impugned order and dismissed the appeal, stating that no costs were applicable in this case.Issue 3:The judgment highlighted that the Tribunal's decision was based on the factual findings that the assessing officer had properly conducted inquiries and accepted the explanation provided by the assessee regarding the cash deposit. The Tribunal's order was upheld, emphasizing that the assessment order was not erroneous, and hence, the exercise of powers under Section 263 of the Act was not warranted. The appeal was dismissed based on these grounds, with no costs imposed.This comprehensive summary provides a detailed overview of the judgment, outlining the issues involved and the specific details of the court's decision for each issue.