2024 (3) TMI 1072 - AT - Income Tax

ITAT overturns CIT revision order under section 263 for lack of proper justification regarding cash investment scrutiny

The ITAT Delhi allowed the assessee's appeal against CIT's revision order u/s 263. The CIT had held that the AO erred by accepting the source of cash ... Revision u/s 263 - CIT held AO had fallen in error by accepting the source of cash investment - limited scrutiny concluded against assessee - AR has primarily came up with the plea that the return was filed on the presumptive income and the scrutiny proceedings were for a limited purpose which was duly examined by the ld. AO - HELD THAT:- It comes up that the notice u/s 143(2) of the Act for limited scrutiny was issued on 29.09.2017 where the primary query under consideration was ‘whether the investment and income relating to security transactions are duly disclosed’. The copy of return of income shows that the assessee had filed presumptive income return. The aforesaid leaves no doubt in the mind of this Bench to conclude that the finding of the ld. PCIT that the AO had not been diligent enough and had not conducted worthwhile inquiries during the scrutiny assessment is erroneous. It appears that the ld. PCIT had questioned the prudence of the assessee for investing the sale proceeds of the business in security investment and transactions. We are of the considered view that such observations cannot be the foundation to hold that the order is erroneous so far as prejudicial to the interests of the Revenue. Rather, without pointing out anything specific during the revision proceedings, the ld.PCIT has merely substituted his own view to the matter examined by the ld. AO during assessment proceedings. Thus, the grounds raised are sustained in favour of assessee. Issues Involved:The appeal against the order of the Principal Commissioner of Income Tax, Rohtak u/s 263 of the Income Tax Act, 1961.Details of the Judgment:Issue 1: Assessment Order Review- The assessee's return of income was subjected to limited scrutiny to examine the disclosure of investment and income related to securities.- The Principal Commissioner of Income Tax, Rohtak, found the assessment order passed by the Assessing Officer to be erroneous and prejudicial to the interest of revenue.- The PCIT directed the AO to conduct detailed inquiries regarding the cash deposits and investments in securities.- The PCIT observed that the assessment order was passed without due diligence and ordered a fresh assessment.Issue 2: Assessee's Submission and PCIT's Observations- The assessee submitted that the cash deposits were from sales proceeds and provided relevant documents.- The PCIT, however, was not satisfied with the explanations provided by the assessee and found the assessment order lacking in proper investigation and enquiry.- The PCIT emphasized the need for detailed inquiries into the investments and income related to securities.Issue 3: Grounds of Appeal and Tribunal's Decision- The assessee appealed against the PCIT's order, questioning the jurisdiction and legality of the proceedings.- The Tribunal considered the composite nature of the grounds raised by the assessee.- The Tribunal found that the PCIT had substituted his own view without specific evidence, leading to the conclusion that the order was not erroneous or prejudicial to revenue.- The Tribunal allowed the appeal, setting aside the impugned order of the PCIT.This judgment highlights the importance of conducting thorough inquiries and investigations during assessment proceedings to ensure the correctness of the order passed. The Tribunal emphasized the need for specific evidence to support claims of errors prejudicial to revenue, ultimately ruling in favor of the assessee based on the lack of substantial grounds for revision.