Case Law Details
Hardevsingh P Chudasama Vs PCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that PCIT has taken divergent view from that of AO without giving the basis for invoking of provisions of section 263 of the Income Tax Act. Accordingly, order passed by PCIT u/s. 263 not justifiable.
Facts- AO observed that the assessee deposited cash of Rs.47,69,500/- during the same period. Since the assessee has not responded to statutory notices AO proceeded on the basis section 144 of the Income tax Act. Subsequently, a show-cause notice dated 09.10.2019 was issued which was replied by the assessee dated 03.12.2019 and 24.10.2019. After taking cognizance of the same AO made addition of Rs.44,07,549/- u/s.69A of the Act being the unexplained money.
Subsequently, PCIT observed that since the assessment was made u/s.144 of the Act, total amount i.e Rs.6,78,95,152 credited by way of transfer/cash deposit in Bank account was required to be added to the total income considering it as unexplained cash added to the total income considering it as unexplained cash credit u/s.68 or u/s.69A of the Act. Thus, AO passed order which resulted in under assessment of income of Rs.6,34,87,602/- with consequent short levy of tax of Rs.7,79,80,234/- u/s.115BBE of the Act including interest u/s.234A and 234B. Therefore, PCIT issued notice u/s.263 of the Act dated 24.02.2022. PCIT set-aside the assessment order passed u/s.143(3) of the issues discussed in the order passed u/s.263 of the Act and directed the Assessing Officer to pass fresh assessment order. Being aggrieved, the present appeal is filed.
Conclusion- Held that the Ld. PCIT has taken a divergent view from that of the AO without giving the basis for invoking of provisions u/s.263 of the Act. The findings given by the Ld. PCIT that the assessee’s case should be of protective addition clearly setting out that the Ld. PCIT has expressed his second view but not pointed out any defect in the assessment order which is erroneous and prejudicial to the interest of the Revenue. Hence, the order passed by the Ld. PCIT u/s.263 of the Act is not justifiable.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeal has been filed at the instance of the assessee against the order dated 20.03.2022 passed by the Learned Principle Commissioner of Income Tax, Ahmedabad ( in short “Ld. PCIT”) arising in the matter of assessment order passed under s. 263 of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2017-18.
2. The assessee has raised the following grounds of appeal:
1. The learned PCIT has erred in law and on the facts of the case in exercising the powers u/s.263 of the Act. Under the facts the original order was neither erroneous or prejudicial to the interest of revenue and thus none of the conditions as envisaged under Section 263 are fulfilled.
2. The Learned PCIT erred in holding that the learned AO has not conducted inquiries properly and hence it is fit case under Section 263 of the Income Tax Act. 1961.
3. Your appellant craves liberty to add, alter, to modify to amend or to withdraw/delete any of the grounds of appeal at any time, on or before the hearing of appeal.
3. The notice issued u/s.142(1) of the Act dated 22.12.2017 was issued thereby calling upon the assessee to file the correct return of income during the previous year relevant to the Assessment Year 2017-18. The assessee failed to furnished the return of income either u/s.139 or in response to notice issued u/s.142(1) of the Act. On the basis of data analysis and information gathered in respect of verification, the Revenue observed that the assessee deposited substantial cash in bank account during the demonetization period but did not filed the return of income. The Assessing Officer observed that the assessee deposited cash of Rs.47,69,500/- during the same period. Since the assessee has not responded to statutory notices the Assessing Officer proceeded on the basis section 144 of the Income tax Act. Subsequently, a show-cause notice dated 09.10.2019 was issued which was replied by the assessee dated 03.12.2019 and 24.10.2019. After taking cognizance of the same the Assessing Officer made addition of Rs.44,07,549/- u/s.69A of the Act being the unexplained money. Subsequently, the Ld. PCIT observed that since the assessment was made u/s.144 of the Act, total amount i.e Rs.6,78,95,152(4,64,77,120 + 2,14,18,032) credited by way of transfer/cash deposit in Bank account was required to be added to the total income considering it as unexplained cash added to the total income considering it as unexplained cash credit u/s.68 or u/s.69A of the Act. Thus, the Assessing Officer passed order which resulted in under assessment of income of Rs.6,34,87,602/- with consequent short levy of tax of Rs.7,79,80,234/- u/s.115BBE of the Act including interest u/s.234A and 234B. Therefore, the Ld.PCIT issued notice u/s.263 of the Act dated 24.02.2022. The assessee filed the written submission on various dates which was take into account by the Ld. PCIT and thereafter set-aside the assessment order passed u/s.143(3) of the issues discussed in the order passed u/s.263 of the Act and directed the Assessing Officer to pass fresh assessment order.
4. Being aggrieved by the order passed u/s.263 of the Act, the assessee filed an appeal before the Tribunal.
5. The Ld.AR submitted that there is a delay of 360 days in filing the present appeal, as the assessee was not knowing about the technical complicated issues related to Income tax. However, after obtaining the technical legal advised which took almost 10 months the assessee could filed the present appeal. The assessee being ignorant about Income-tax statue which is the expertise subject and therefore, the assessee should not be penalized and the delay should be condoned.
6. The Ld.DR opposed the condonation of delay. The Ld.DR submitted that the assessee received the notice but has not taken cognizance of the same and therefore the delay should not be condoned.
7. We have heard the parties and perused the relevant materials available on record. It is pertinent to note that the assessee is admitting that there was a delay occurred on his part, as the assessee was not having the knowledge of income tax statue which is a expertise law and to approach the legal expert the assessee required 10 months time. The assesee’s contention appears to be genuine and therefore the delay in filing the present appeal is condoned.
8. As regards to order passed u/s.263 of the Act, the Ld.AR submitted that the cash deposits was already examined by the Assessing Officer while passing the order u/s.144 of the Act dated 24.12.2019. The cash deposits were made during the demonetization period was on account of sales of diesel were given to the Assessing Officer and in fact, the Assessing Officer made the addition of Rs.44,07,549/-. The Ld. PCIT while invoking the section 263 of the Act has taken the second view which is not permissible under the revisionary provision of Income-tax statue. The Ld.AR further submitted that the seized account of the partnership firm will not be the criteria for invoking the assessee’s case u/s.263 of the Act.
9. The Ld.DR submitted that the inquiries made by the AO were inadequate and therefore the same are not valid and Ld. PCIT has rightly invoked the provision of section 263 of the Act. The Ld.DR further submitted that the AO has not given any finding as regard to nature and source of credit/cash entries in the bank account and simply made addition by applying 8% of net profit rate by treating the total credit/cash deposits in two bank accounts of the firm instead of making addition for the entire amount treating as unexplained money. The Ld.DR also relied upon the findings of the Ld. PCIT and submitted that the AO should have made protective addition in the case of the assessee and substantive addition in the case of the partnership firm making the addition of entire amount of credit entries and cash deposited appearing in the said two bank accounts.
10. We have heard both the parties and perused the materials available on record. It is not the case of the Ld. PCIT that the cash deposits made in the bank account of the assessee was not the issue before the Assessing Officer, so question of the Assessing Officer totally ignoring the issue without applying the income tax statue does not arise. The Assessing Officer in fact inquired during the assessment proceeding and the assessee replied the same submitting that the bank account maintained with ADC Bank, Dholera Branch belongs to M/s. Bhavani Petroleum partnership firm in which assessee is also partner in the said firm. The amount of cash deposit of Rs.4,64,77,120/- and Rs.2,14,18,032/- cheque/transfer totalling Rs.6,78,95,152/- belongs to M/s.Bhawani Petroleum as per the records. In fact, the opinion and findings as well as the observation made by the Ld. PCIT in the order u/s.263 of the Act, clearly set-out that the Ld. PCIT has taken a divergent view from that of the AO without giving the basis for invoking of provisions u/s.263 of the Act. The findings given by the Ld. PCIT that the assessee’s case should be of protective addition clearly setting out that the Ld. PCIT has expressed his second view but not pointed out any defect in the assessment order which is erroneous and prejudicial to the interest of the Revenue. Hence, the order passed by the Ld. PCIT u/s.263 of the Act is not justifiable.
11. In the result, the appeal of the assessee is allowed
Order pronounced in the Open Court on 23rd September, 2024 at Ahmedabad.
Author Bio
