Manuj Jain HUF Vs PCIT (ITAT Chandigarh)
In the case of Manuj Jain HUF Vs PCIT (ITAT Chandigarh), the Income Tax Appellate Tribunal (ITAT) Chandigarh deliberated on the dispute arising from the assessment order for the Assessment Year 2017-18. The case involves the dispute between the assessee, Manuj Jain HUF, and the Principal Commissioner of Income Tax (PCIT), Ludhiana-1. The central legal issue revolved around the jurisdiction of PCIT to initiate proceedings under Section 263 of the Income Tax Act, 1961.
Background: The relevant facts indicate that the assessee filed its income tax return, which was selected for scrutiny. Subsequently, the Principal Commissioner of Income Tax (PCIT) examined the assessment records and deemed the order passed by the Assessing Officer (AO) as erroneous and prejudicial to the interests of the revenue. The PCIT issued a show-cause notice under Section 263(1) and directed the AO to pass a fresh order after providing the assessee with a sufficient opportunity of hearing.
Contention of the Assessee: The assessee contested the jurisdiction of the PCIT, arguing that the AO conducted adequate inquiries during the assessment proceedings. The assessee highlighted that the AO examined the source of cash deposits during the demonetization period and accepted the explanation provided. Moreover, the assessee emphasized the absence of any substantial irregularities or lack of inquiry by the AO.
Contention of Revenue: The Revenue, represented by the Principal Commissioner of Income Tax, asserted that the AO failed to conduct necessary inquiries and verifications regarding the cash deposits made during demonetization. It argued that the AO did not adequately examine the source of cash deposits and overlooked critical factors, such as the nature of business activities and the credibility of transactions.
Decision by ITAT: After considering the arguments from both parties, the ITAT Chandigarh pronounced its decision. The tribunal analyzed the assessment order, concluding that the AO had diligently examined the source of cash deposits and conducted necessary inquiries. It noted that the PCIT’s observations were based on conjectures rather than concrete findings. Consequently, the ITAT upheld the assessment order, ruling in favor of the assessee and reviving the original order.
Conclusion: The case of Manuj Jain HUF Vs PCIT highlights the significance of diligent assessment procedures and the necessity for substantive evidence in tax disputes. The ITAT’s decision underscores the importance of due process and the limitations on revising assessment orders under Section 263 of the Income Tax Act. This ruling sets a precedent for future cases involving similar issues, emphasizing the need for comprehensive inquiries before challenging assessment orders.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
This is an appeal filed by the Assessee against the order of Ld. Pr. CIT, Ludhiana-1 dt. 31/03/2022 pertaining to Assessment Year 2017-18.
2. In the present appeal, the assessee has taken the following grounds of appeal:
1. “On the facts and circumstances of the case and in law, the PCIT-1 Ludhiana has erred in initiating proceedings u/s 263 of the Income Tax Act, 1961 by wrongly assuming jurisdiction u/s 263 hence the order passed by PCIT u/s 263 of the Income Tax Act, 1961 is bad in law and void-ab-initio.
2. Without prejudice to ground no. 1 above, on the facts and circumstances of the case and in Law, the Ld. PCIT has erred in assuming jurisdiction and passing the revisionary order u/s 263 of the Income Tax Act, 1961 in spite of the fact that the Ld. AO has made adequate inquiries and verification of documents were sought from the assessee during the course of assessment proceedings and AO has taken a permissible view. The order passes by the AO is neither erroneous nor prejudicial to the interest of revenue, hence the order of PCIT should be set aside.
3. The Ld. PCIT has revised the order of the A.O. u/s 263 only on the basis of the Audit objection hence passing the revisionary order u/s 263 on the basis of Audit objection is illegal and bad in the eyes of law.
4. The Ld. PCIT has not considered or has not uttered a single word on the Audit objection which violates the Principles of Natural justice, hence the order passed by PCIT u/s 263 of the Income Tax Act, 1961 should be set aside.
5. That in the show cause notice the words erroneous and prejudice to the interest of revenue has not been mentioned and are missing hence initiating proceedings u/s 263 of the Income Tax Act, 1961 is illegal and uncalled for.
6. The assessee craves to leave, amend, alter or take additional grounds of appeal before or at the time of hearing.”
3. Briefly the facts of the case are that the assessee filed its return of income declaring total income of Rs. 3,44,820/- on 30/12/2017 which was selected for complete scrutiny and notice under section 143(2) and 142(1) alongwith questionnaire were issued. Thereafter taking into consideration the submission filed by the assessee, the return of income was accepted.
4. The assessment records were thereafter examined by the Ld. Pr. CIT and he was of the prima facie view that the order so passed by the AO was erroneous in so far as prejudicial to the interest of the Revenue and a show cause under section 263(1) was issued on 24/03/2022 and thereafter taking into consideration the submission filed by the assessee but not founding the same acceptable, the order so passed by the AO was set aside for passing a fresh order in accordance with law after providing sufficient opportunity of hearing to the assessee.
5. Against the said findings and the direction of the Ld. Pr. CIT, the assessee is in appeal before us.
6. During the course of hearing, the Ld. AR submitted that the Ld. Pr. CIT has set aside the assessment order for the reason that cash deposited by the assessee amounting to Rs 38,37,000/- during the demonetization period has not been properly examined by the AO. In this regard, it was submitted that the issue raised by the Ld. Pr. CIT was duly examined by the AO during the course of assessment proceedings and in this regard, our reference was drawn to the contents of the assessment order which read as under:
“3. The assessee is engaged in the business of “Trading of Cloth.” Assessee has shown income under the head “Income from Business and Profession” and “Income from Other Sources” during the year under consideration.
4. During the course of assessment proceedings various documents and details were called for and examined. From the perusal of reply filed by the assessee, it is noticed that the assessee had made purchases from M/s Vinay Knitwears Pvt. Ltd. Ludhiana.
5. The assessee has explained that the source of cash deposit in the bank a/c is cash sales made by the assessee during the year.
6. The copy of account alongwith conformation from the parties was called for from the assessee. The same have been verified with the information submitted by the assessee through E-filing Portal and found that the payments made to the parties from whom goods were purchased were through cheques on various dates.
7. Further, from the reply filed by the assessee, it is noticed that assessee is doing business of Trading of Cloth on seasonal basis every year. To verify the same the copy of purchase bills was sought from the assessee through E-filing Portal. The same has been verified.
8. The reply filed by the assessee on various dates through E-filing Portal have been perused and after perusal no adverse inference has been drawn. Therefore, the returned income at Rs. 3,44,820/- is accepted.”
5. It was further submitted that during the course of assessment proceedings, the AO issued necessary queries and which were duly responded to by the assessee and the same are summarized as under:
