TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 1313
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....2,240/- only. The case of the assessee was reopened u/s 147 of the Act on the basis of information received that he has deposited cash amounting to Rs. 21,57,400/- in his saving bank account maintained with Kotak Mahindra Bank wherein assessee is joint holder along with his son Shri Saral Kothari. Finally, The AO framed the assessment u/s 143(3) read with section 147 of the Act and admitted the return income as assessed income. 3.1 However, the ld. PCIT on examination of the case records of the assessee, found that there was cash deposit in the bank account of the assessee during the year amounting to Rs. 21,57, 400.00 only. According to the learned PCIT, the amount of cash deposit was not verified during the assessment proceedings by the AO. Accordingly, the PCIT initiated the proceedings under section 263 of the Act vide show cause notice dated 27 January 2021. 3.1 The assessee in response to such show cause notice submitted that he is the second account holder of the bank account and his son is the 1st account holder. During the year under consideration, his son has deposited cash in joint bank account. Such bank account was duly reflected in balance sheet of his Son (Saral Ko....
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....t made by the Assessing Officer is in a very casual and mechanical manner. Under these circumstances, it would be appropriate to set aside the assessment order so far as the issues of verification of source of cash deposit in savings bank account. 12. Thus, in the interest of justice and since the twin conditions namely, (i) the order of the Assessing Officer sought to be revised is erroneous: and (ii) it is prejudicial to the interests of the revenue are satisfied, the impugned assessment order is set aside for fresh assessment only to the extent of the issues discussed supra. 13. In view of the above facts, I consider that the assessment order passed by the AO u/s. 143(3} r.w.s. 147 on 23-10-2018 as erroneous in so far as it is prejudicial to the interests of revenue and therefore, by virtue of section 263 of the I. T. Act 1961, the same is hereby set-aside. The AO is directed to make a fresh assessment only to the extent of the issues discussed supra, considering the observation and findings given above, making necessary interpretations and inquires and after allowing adequate opportunity of being heard to the assessee. The AO shall verify the issues as discussed above and p....
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....ax, cannot make the order of the Assessing Officer erroneous. In our view, the order can be erroneous if the Assessing Officer fails to apply the law rightly on the facts of the case. As far as adequacy of inquiry is considered, there is no law which provides the extent of inquiries to be made by the Assessing Officer. It is Assessing Officer's prerogative to make inquiry to the extent he feels proper. The Commissioner of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding of the extent of inquiry. There were a number of judgments by various Hon'ble High Courts in this regard. 8.2 Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon'ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. The relevant observation of Hon'ble Delhi High Court reads as under: "12. ..... There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respe....
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....mposed. 15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of 'lack of inquiry'." 8.3 The Hon'ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner: "The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted ....
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....-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revised order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's on-money transactions and Tribunal, thus, set aside the revised order passed by Commissioner. The Hon'ble High Court upheld Tribunal's order. The Hon'ble Supreme Court while dismissing the SLP filed by the Department held as under:- "We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a ....
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....bmissions filed by the assessee and documents / evidence placed on record, and then framed the assessment under section 143(3)/147 of the Act accepting the return of income. This fact can be verified from the notices issued under section 142(1)/148 of the Act by the AO and reply submitted by the assessee against such notice. i. Notice u/s 148 of the Act dated 05-09-2018: On verification of information received, it is found that cash deposit amounting to Rs. 21,57,400/- was deposited by the assessee in his savings bank account with Kotak Mahindrta Bnak wherein the assessee is a join holder with his son Saral Kothari. The assessee has informed that his son has deposited cash of Rs. 21,57,400/- in kotak Mahindra Bank savings bank account wherein the assessee is joint holder. He has further submitted that the source of cash deposited in savings bank account with Kotak Mahindra Bank are cash withdrawals of Rs. 2,69,742/- and other cash receipts of Rs. 1,57,298/- The Plea of the assessee that the amount of Rs. 17,30,360/- withdrawn from Kotak Mahindra Bank of various dates, was again deposited in Kotak Mahindra Bank seems to be after cook story. The assessee has not given any valid r....
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....cepted the genuineness of the claim of the assessee. 8.10 At this juncture, it is also important to note that the learned PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. Therefore, on this reasoning the order of the AO is also erroneous insofar prejudicial to the interest of revenue. In this regard, we note that the learned PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice dated 24 February 2021 about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the course of such provisions while deciding the issue against the assessee. In this regard, we draw support and guidance from the judgment of Hon'ble Gujarat High Court in case of PCIT vs. Shreeji Prints (P.) Ltd. reported in 130 taxmann.com 293 where it was held as under: 5 The Tribunal has found that in ....