Pr. CIT's invocation of s.263 found unjustified; AO's view treating cash bank deposits as business receipts plausible, s.69A addition dropped

ITAT held that the Pr. CIT's invocation of s. 263 was unjustified and allowed the appeal. The AO's treatment of cash bank deposits for AY 2018-19 as business receipts and estimation of profit (consistent with AY 2017-18) was a plausible view, not erroneous or prejudicial to revenue, despite the assessee's non-response to notices under s. 147. Consequently, the addition of entire cash deposits as unexplained income under s. 69A was not sustained.

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Issues: Whether the Pr. CIT was justified in invoking section 263 of the Income-tax Act, 1961 to set aside the reassessment order passed under section 147 r.w.s. 144 r.w.s. 144B for AY 2018-19 on the ground that the Assessing Officer ought to have treated entire cash deposits as unexplained income u/s. 69A and that the assessment order is erroneous and prejudicial to the interest of revenue.

Analysis: The assessment proceeded on reopening under section 147 and the Assessing Officer treated large bank cash deposits as business receipts and estimated income at 8% under section 144, arriving at assessed income. The assessee did not participate in assessment proceedings, but facts show the assessee was engaged in the same business (recharge business) as in the earlier year where identical treatment of bank receipts was made. The Pr. CIT issued a revision notice under section 263 contending the entire cash deposits should have been treated as unexplained income under section 69A and taxed potentially under higher provisions including section 115BBE. The Tribunal analysed whether the Assessing Officer's view was a plausible one and whether the order was prima facie erroneous and prejudicial to the revenue. Given continuity in business structure and identical treatment in an earlier year, the Assessing Officer's view to treat deposits as business receipts and estimate profit at 8% constituted a reasonable and tenable view. Invocation of section 263 requires the order to be prima facie erroneous and prejudicial to revenue; where the Assessing Officer has taken a plausible view based on available material, setting aside the assessment by revision is not justified.

Conclusion: The invocation of section 263 is not justified and the Pr. CIT's order setting aside the assessment is reversed; the assessee's appeal is allowed.

Ratio Decidendi: Where an Assessing Officer, on available material and continuity of business from an earlier year, adopts a plausible method of classifying receipts as business income and estimates profit under section 144, such a view is not prima facie erroneous or prejudicial to revenue and does not justify exercise of revisional powers under section 263.

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