Gora Bai Sahu Vs ITO (ITAT Agra)
AO’s Lapse on Source Verification Proves Costly: Section 263 Sustained- ITAT Agra Says AO’s Blind Acceptance of Past Savings Not a Possible View
Facts
AIR information revealed purchase of immovable property worth ₹60 lakh jointly by 3 persons; & Assessee’s share was ₹20 lakh. AO reopened the case u/s 147 & completed assessment u/s 143(3) r.w.s.147 on 29.11.2019 at returned income of ₹2,10,500. AO accepted Assessee’s explanation that the ₹20 lakh investment was from “past savings”, based on bank statement & registry.
Pr. CIT noted that ₹20 lakh was credited into the bank account on 13.02.2012, just before issue of cheque dated 18.02.2012, but source of such credit was never verified. Further, Assessee’s 1/3rd share in stamp duty expenses of ₹2,25,040/- was also not enquired into. PCIT held that the AO failed to make proper verification of the immediate source of funds as well as expenses. By virtue of Explanation 2 to s.263 (inserted by Finance Act, 2015), lack of enquiry by AO makes the order “erroneous & prejudicial to the interests of Revenue.” Accordingly, the order u/s 143(3)/147 was set aside for fresh assessment.
Assessee’s Arguments
- AO had issued notice u/s 142(1) & verified bank statement & registry before accepting the explanation.
- Revision u/s 263 amounts to a mere change of opinion, which is not permissible.
- Relied on case laws including M.L. Chains (Allahabad HC), Shreeji Prints (SC), Meerut Roller Flour Mills (Allahabad HC) & ITAT rulings.
- Also initially challenged absence of DIN in the PCIT’s order, but later did not press this ground.
ITAT’s Findings
- AO only recorded Assessee’s statement of “past savings” without verifying the ₹20 lakh credit entry dated 13.02.2012.
- Notice u/s 133(6) was issued to the bank but remained unanswered; AO still accepted the claim.
- Such acceptance cannot be treated as a “possible view” but was an “incorrect view” due to non-verification.
- AO’s omission fell squarely under Explanation 2(a) & (b) to s.263, hence revision valid.
- Case laws cited by Assessee were distinguishable.
Decision
- Appeal dismissed.
- ITAT held that AO’s order was erroneous & prejudicial for failure to examine source of ₹20 lakh & related expenses.
- Revision u/s 263 by PCIT sustained.
Mere acceptance of Assessee’s claim of “past savings” without verifying the immediate source of a large credit entry renders the assessment order erroneous & prejudicial, empowering PCIT to act u/s 263.
