Ankush Garg Vs CIT (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT), Delhi, dismissed two appeals filed by Ankush Garg against orders passed by the Commissioner of Income Tax (CIT), Rohtak, for the assessment years 2010-11 and 2011-12. The central issue in both appeals revolved around the CIT’s invocation of Section 263 of the Income Tax Act, which allows for the revision of an Assessing Officer’s (AO) order if it is deemed erroneous and prejudicial to the interests of revenue. The CIT had set aside the original assessment order under Section 143(3) and directed the AO to conduct a fresh assessment.
The case originated from scrutiny of Garg’s income tax returns, where a significant cash deposit of ₹26,72,650/- was noted in an ICICI Bank account that was initially not disclosed. Garg explained that this account was used for collecting commission payments on behalf of other parties, with subsequent withdrawals made to pay these parties. However, he failed to provide a list of these parties for verification, stating he did not maintain books of account. To resolve the matter, Garg surrendered the cash deposit as his turnover and offered 8% of it (₹2,09,732/-) as income, in addition to the ₹1,28,700/- already declared from cash collection activities. The AO accepted this explanation.
Subsequently, the CIT, exercising revisional jurisdiction under Section 263, issued a show cause notice, finding the AO’s order erroneous and prejudicial to revenue due to a lack of adequate inquiry. The CIT highlighted several discrepancies and inconsistencies in Garg’s explanations, such as the initial non-disclosure of the bank account, the inability to provide details of the parties involved in the cash deposits, and the implausibility of conducting commission-based work without a personal phone. The CIT directed the AO to conduct a thorough re-assessment, including inquiries into the undisclosed bank account, investment activities, vehicle ownership, telephone expenses, credit card usage, and the nexus between the claimed commission activity and the cash deposits.
The ITAT upheld the CIT’s order, concurring that the AO had failed to conduct necessary inquiries and had merely accepted Garg’s submissions without proper verification. The Tribunal relied on several judicial precedents, including CIT vs. Nagesh Knitwears Private Limited and Malabar Industrial Company Limited vs. CIT, which establish that an order can be considered erroneous if the AO fails to make inquiries that should have been made, and prejudicial to revenue if lawful tax has not been realized due to such errors. The ITAT emphasized that the AO acts not only as an adjudicator but also as an investigator, with a duty to ascertain the truth behind the facts presented in the return, especially when circumstances warrant further investigation. The Tribunal found that Garg’s shifting explanations and the lack of supporting evidence necessitated a more thorough inquiry, which the AO had failed to undertake. Consequently, the ITAT found no reason to interfere with the CIT’s order directing a fresh assessment.
FULL TEXT OF THE ORDER OF ITAT DELHI
