2024 (5) TMI 1526 - AT - Income Tax

PCIT's revision under Section 263 unjustified when AO conducted proper enquiry on cash deposits

ITAT Chandigarh allowed the assessee's appeal against PCIT's revision order u/s 263. The case involved reopening u/s 147 to verify cash deposits of Rs ... Revision u/s 263 - unexplained cash deposits not verified - HELD THAT:- Case of the assessee was reopened u/s 147 to verify the cash deposit in the bank account maintained by the assessee. In the proceedings so followed, the AO has enquired about the cash so found deposited in the bank account and the assessee in turn has filed his explanation and necessary documentation in support thereof. Thereafter, the AO in the reassessment order so passed u/s 147 r/w 143(3) has recorded a clear finding of having verified the explanation so submitted by the assessee and the fact that the necessary documentation have been submitted and duly verified by him and consequentially, the explanation of the assessee regarding the nature and source of cash so deposited was found in order and no adverse finding has been recorded by the AO. PCIT basis the same documentation and material available on record has however pointed out that the AO has not applied his mind and the order so passed has been held to be erroneous in so far as prejudicial to the interest of the Revenue for the reason that out of Rs 10.50 lacs, an amount of Rs 1 lacs has remained unexplained and unverified. In our view, once the AO has carried out the necessary enquiry and recorded a specific finding that the source of cash so deposited of Rs 10.50 lacs has been found to be in order, it is clearly a case where the AO has applied his mind and has arrived at a reasonable finding which cannot be disturbed by invocation of jurisdiction u/s 263 - Appeal of the assessee is allowed. The appeal was filed by the Assessee against the order of the Ld. PCIT, Chandigarh -1 dated 27/03/2021 concerning the Assessment Year 2011-12. The core issues raised by the Assessee in the appeal were related to the validity of the order passed under section 263 of the Income Tax Act without proper inquiry during the revisionary proceedings and the alleged errors in the assessment order. The Assessee contended that the assessment was completed after due inquiry and consideration of relevant material, and the actions taken by the Ld. PCIT were unwarranted.During the hearing, the Assessee's representative highlighted that the case was reopened to verify a cash deposit of Rs. 10.50 lakhs in the Assessee's bank account, which was explained as being received from the Assessee's mother through a land sale transaction. The Assessee argued that the AO had thoroughly examined and accepted the explanation and documentation provided regarding the cash deposit. The Assessee relied on a decision of the Hon'ble Telangana and Andhra Pradesh High Court in a similar case to support their position.On the other hand, the Ld. CIT/DR supported the Ld. PCIT's order, emphasizing discrepancies in the explanation provided by the Assessee regarding the source of the cash deposit.The Court analyzed the facts and found that the AO had conducted a proper inquiry into the cash deposit during the reassessment proceedings, accepted the Assessee's explanation, and verified the relevant documentation. The Court noted that the Ld. PCIT's assertion that the AO had not applied his mind was unfounded, as the AO had arrived at a reasonable finding based on the evidence presented. Citing the decision of the Hon'ble Telangana and Andhra Pradesh High Court, the Court concluded that when the AO had already examined the relevant facts, the jurisdiction under section 263 of the Act should not be invoked to reevaluate the same. Therefore, the Court set aside the Ld. PCIT's order and upheld the AO's assessment order.In conclusion, the Court allowed the Assessee's appeal, ruling in favor of the Assessee based on the proper inquiry conducted by the AO and rejecting the Ld. PCIT's assertion that the assessment order was erroneous and prejudicial to the interest of revenue.