ITAT quashes CIT revision order under section 263 for best judgment assessment during demonetization cash deposits case

ITAT Chennai ruled in favor of the assessee, quashing the CIT's revision order u/s 263. The case involved unexplained cash deposits during demonetization where AO made best judgment assessment u/s 144 after assessee provided only partial details. AO added Rs. 240.85 lacs for trading discrepancies but made no addition for cash deposits. ITAT held that CIT cannot substitute AO's judgment in best judgment assessments, and revision jurisdiction u/s 263 was barred since reassessment proceedings were pending before CIT(A).

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Issues Involved:
The judgment involves the invocation of revisionary jurisdiction under section 263 by the Principal Commissioner of Income Tax, the validity of the notice issued under section 148 of the Act, and the overlapping of jurisdiction between revisionary authority and appellate authority.

Assessment Proceedings:
The assessee filed a return of income declaring Rs. 1.05 Lacs and deposited cash during demonetization, leading to the reopening of the case. The Assessing Officer found discrepancies in the trading results, leading to an addition of Rs. 240.85 Lacs to the income. The AO did not make any addition on the issue of cash deposits. The assessment was framed on a best judgment basis due to the incomplete details provided by the assessee.

Revisionary Proceedings:
The Principal CIT held the assessment order as erroneous and prejudicial to the assessee's interest due to the non-verification of cash deposits during demonetization. The CIT set aside the assessment, directing the AO to examine the cash deposits. The assessee challenged this decision, citing various case laws, but the CIT upheld the revision, stating that the issue of cash deposits was not properly examined by the AO.

Findings and Adjudication:
The Tribunal noted that the assessment was made on a best judgment basis, and the CIT could not substitute the AO's judgment. The assessee had an appeal pending before the first appellate authority during the revision, invoking the principle that the CIT cannot exercise jurisdiction when a larger issue is pending before the appellate authority. Citing judicial precedents, the Tribunal held that the revision under section 263 was without jurisdiction and quashed the same, allowing the appeal.

Conclusion:
The Tribunal found the revision under section 263 to be bad-in-law and quashed it, following the principle that the revisionary authority cannot exercise jurisdiction when a larger issue is pending before the appellate authority. The appeal was allowed accordingly.

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