TaxTMI 
TaxTMI 
2020 (3) TMI 625
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....No. 103/Rjt/2017 - AY- 2010-11 4. As per the grounds of appeal, the assessee has challenged the revisional jurisdiction usurped by the Principal Commissioner of Income Tax, Rajkot (Pr.CIT) under s.263 of the Act. 5. In the instant appeal, the relevant facts are noted as follows: 5.1 The assessee, an individual, derived income from sources such as 'salary', 'business income' and 'interest income'. The assessee however did not file return of income. Thereafter, based on certain information available with the department that the assessee has made huge transactions in stock market and commodities and made cash deposits in bank, a notice under s.148 of the Act was issued to the assessee on 02.12.2013. Pursuant to the statutory notices thereafter, the assessee filed a return of income for the impugned AY 2010-11 declaring business loss of Rs. 6,68,451/- and 'income from other sources' and 'salary income' aggregating to Rs. 76,220/-. The assessment was carried out under s.143(3) r.w.s. 147 of the Act whereby the income was assessed at Rs. 76,220/- as offered. However, the claim of carry forward loss of Rs. 6,68,451/- was disallowed. 5.2 Subsequent to the assessment, on verification o....
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....ents of Rs. 26,86,510/- to M/s. Labdhi Finance Corporation. Thus the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue. 5. The above facts show that the assessment order passed by the Assessing Officer in respect of AY 2010-11 appears to be erroneous and prejudicial to the interest of the revenue. Therefore, I intend to initiate proceedings u/s 263 of the I.T. Act and pass a suitable order. Before passing such order, you are hereby given an opportunity of being heard in the matter. Please state as to why the order passed by the Assessing Officer in your case should not be revised after making necessary inquiry. In this connection you are requested to submit the written submission, if any, and attend this office on 28/01/2016 at 12.15 p.m. A soft copy of the written submission should also be produced." 5.4 The assessee filed a written submission contesting the show cause notice which is reproduced in para 4 of the revisional order appealed against. The Pr.CIT however did not concur with the justifications advanced by the assessee to drop the proceedings initiated under s.263 of the Act. 5.5 As regards first issue, as noted by the Pr.CI....
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.....1 Adverting to the first limb of allegation, the learned AR for the assessee at the outset submitted before the Tribunal that the ingredients of Section 263 of the Act is not available at all and therefore Pr.CIT has wrongly invoked the jurisdiction under s.263 of the Act. The learned AR submitted that the assessment order which was the subject matter of revision by the Pr.CIT is neither erroneous nor prejudicial to the interest of the Revenue. The learned AR adverted our attention to the assessment order passed by the AO and submitted that the notice under s.148 of the Act was issued to the assessee for filing the return on the ground that the assessee had made huge transactions in share market and commodities and made cash deposits in the bank. In response to such notice, a return was filed showing losses to the tune of Rs. 6.68 Lakhs incurred by the assessee. The return so filed was subjected to scrutiny assessment. The source of cash deposits of Rs. 20,87,000/- was specifically raised by the AO and in response thereto, the books of accounts were produced by the assessee which were suitably verified at the end of AO. In the circumstances, lack of proper enquiry on the issue can....
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.... of the Act. The learned AR accordingly urged that the revisional order of the Pr.CIT under s.263 of the Act is not sustainable for the reasons cited above and accordingly requires to be quashed. 7. The learned DR, on the other hand, strongly defended the action of the Pr.CIT and submitted that plea raised on behalf of the assessee is without any traction as noted in the revisional order. The learned DR pointed out that on the face of a very meager or negative income, a substantial amount of cash conveniently shown to be an opening balance for the year under consideration was naturally required to be verified. The source of cash generated during the year alleged to have been received from unknown clients is unworthy of any reliance as neither the broker nor the assessee could have entered into share transactions in cash. The AO has totally failed to obtain the details of so called individual clients from whom the cash was claimed to be received and in turn, deposited in the bank and with the broker via demand draft/cheque. The narrative of the assessee towards source of cash thus clearly remains unverified even at this stage. The learned DR thus submitted that the whole basis of e....
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....wo views are possible and one view, as legally plausible, has been adopted by the AO then existence of other possible view alone would not be sufficient to exercise powers under s.263 of the Act by the Pr.CIT / CIT concerned. Hence, there can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO. It is only when an order is erroneous and causing prejudice, that the Section will be attracted. An incorrect assumption of facts or incorrect application of law will satisfy the requirements of the order being erroneous. 8.2 In the instant case, the allegation of the Revisional CIT are two fold; firstly, the source of cash deposit to the tune of Rs. 20.87 Lakhs during the year [and similar deposits of Rs. 36.45 Lakhs in FY 2010-11 (AY 2011-12) and Rs. 62.20 Lakhs in FY 2011-12 (AY 2012-13)] has not been examined at all and secondly, deposits of Rs. 26.85 Lakhs shown to have been received by the corresponding broker was not probed by the AO. On the other hand, it is the case of the assessee that the cash book was produced before the AO in the course of re-assessment proceedings which reflects the source of cash deposits an....
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....d. Similarly, no concrete evidence is available for conversion of cash into demand drafts, which has, in turn, been paid to the broker. The elementary details called for by the AO could not persuade any reasonable person to form an opinion in favour of the assessee as regards source of cash. No trail of cash deposits was placed on record. Mere passing of entries towards receipt of cash from unknown persons, in the cash book, in the strange circumstances bypassing the stock market regulations, could not have discharged the AO of its quasi-judicial responsibilities. The assessment order passed by the AO clearly suffers from the vice of lack of requisite enquiries or verification expected from him which has rendered the order passed by the AO to be erroneous in so far as it is prejudicial to the interests of the Revenue as rightly held by the Revisional Commissioner. Armed with fairly extensive powers, the Pr.CIT, in our view, has taken action compatible with circumstances. Therefore, the cause of action did exist in relation to all the three assessment years in question. Hence, the Pr.CIT was fully justified in invoking its power under s.263 of the Act to set aside the assessment fra....