Navneet Bhardwaj Vs PCIT (ITAT Delhi)
In a pivotal judgment, the Income Tax Appellate Tribunal (ITAT) Delhi has set aside the revisionary order u/s 263 of the Income Tax Act, dated 27.03.2021, passed by the Principal Commissioner of Income Tax (PCIT), Dehradun. The case, Navneet Bhardwaj Vs PCIT, revolves around the assessment year 2016-17 and primarily deals with the legality of large cash deposits in a savings bank account.
The Grounds Raised by the Assessee: Navneet Bhardwaj, the assessee, raised several grounds for appeal. The primary contention was that the Assessing Officer had thoroughly scrutinized the issues raised in the notice u/s 263. Bhardwaj argued that the assessment order dated 19-12-2018 is neither erroneous nor prejudicial to the interests of the revenue.
Arguments by the Assessee’s Counsel: The counsel for the assessee claimed that sufficient and adequate inquiry was made into the source of the large cash deposit amounting to Rs. 66,87,000. The deposit was attributed to fee collection from Mount Litera School, Muzzafarnagar, run by a trust in which the assessee held the position of president.
Counter Arguments by the CIT(DR): The Commissioner of Income Tax (CIT)(DR) supported the revisionary order and argued that the assessment order could be termed as erroneous and prejudicial to the interest of revenue in the case of insufficient inquiry, as per explanation 2 to section 263 of the Act.
ITAT’s Analysis and Conclusion
ITAT noted that the Assessing Officer had indeed carried out due diligence. Trust deed documents and minutes of meetings supported the assessee’s claims. Importantly, the Assessing Officer had accepted the source of cash deposit in para 3 of the assessment order, making the revisionary order by the PCIT unwarranted.
ITAT concluded that the revisionary order u/s 263 dated 27.03.2021 for AY 2016-17 should be set aside and the original assessment order dated 19.12.2018 should be restored. The appeal by the assessee was allowed, thereby establishing that the PCIT was not empowered to invoke the provision of section 263 of the Act in this case.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal has been filed against the order of PCIT, Dehradun dated 27.03.2021 for AY 2016-17.
2. The grounds raised by the assessee are as under:-
(1) The L’d Assessing Officer has duly applied his mind to the issue raised in the notice U/S 263 and after having been satisfied on the same, took a possible view based on the facts of the case and thereby passed the impugned assessment order.
(2) That the assessment order U/S 143(3) dated 19-12-2018 as passed by the Ld Assessing Officer is neither erroneous nor prejudicial to the interests of the revenue.
(3) Observations made, inferences drawn and findings recorded by the Worthy Principal Commissioner of Income Tax in her order passed U/S 263 are incorrect, unreasonable and are untenable in law.
3. The ld. counsel of assessee submitted that The Ld Assessing Officer has duly applied his mind to the issue raised in the notice U/S 263 and after having been satisfied on the same, took a possible view based on the facts of the case and thereby passed the impugned assessment order. He further contended that the assessment order U/S 143(3) dated 19-12-2018 as passed by the Ld Assessing Officer is neither erroneous nor prejudicial to the interests of the revenue and Observations made, inferences drawn and findings recorded by the Worthy Principal Commissioner of Income Tax in her order passed U/S 263 are incorrect, unreasonable and are untenable in law.
4. Drawing our attention towards original limited scrutiny assessment order u/s. 143(3) of the Act, dated 19.12.2018 for AY 2016-17, the ld. counsel submitted that the case was selected for limited scrutiny for the sole reason of large cash deposit in the saving bank account as per AIR, total turnover and other income in part a of income tax return of assessee for which the Assessing Officer issue notices u/s. 142(1) of the Act along with questionnaire dated 10.10.2018 and 10.12.2018 through ITBA system to the assessee’s account in e-filing website. The assessee was required to explain source of cash of Rs. 66,87,000/- along with documentary evidences. He further submitted that in response to said notices assessee filed his reply along with necessary details/documents and other relevant information wherein the assessee stated that he was carrying on a school during the year under consideration and up to 27.07.2018 under the name and style Mount Litera School, Muzzafarnagar and the assessee was settler/president of the Shri Ram Educational Trust, under which said school was running the ld. counsel submitted that the Assessing Officer made sufficient and adequate enquiry in accepting the explanation of assessee regarding source of cash deposit in the assessment order para 3, which cannot be alleged as erroneous and prejudicial interest of revenue.
5. The assessee has placed reliance on various judgements to submit that the ld. PCIT was not correct in re-agitating the issue which was dealt and adjudicating by the Assessing Officer in detail by issuing notices along with questionnaire to the assessee and which were properly replied by the assessee and after taking on record reply and documentary evidences the Assessing Officer by way of detail discussion in para 3 of order allowed and accepted the claim of assessee towards source of cash deposit to his bank account. Therefore the ld. PCIT was not validly empowered to invoke provision of section 263 of the Act.
6. Replying to the above the ld. CIT(DR) supported the revisionary order u/s. 263 of the Act and submitted that as per explanation 2 to section 263 of the Act in a case of insufficient enquiry the assessment order has to be held as erroneous and prejudicial to the interest of revenue and the same can be revised u/s. 263 of the Act.
7. On careful consideration of above submission first of all, from pages 1 to 12 of assessee paper book we note that during limited scrutiny proceedings on the sole issue of source of cash deposit to the bank account of assessee, the Assessing Officer issued to notices along with questionnaire which were duly replied by the assessee along with relevant documentary evidences and thereafter the Assessing Officer considered and adjudicated the issue in para 3 of assessment order and concluded and allowed the claim of assessee regarding source of cash deposit that the deposits were made out of receipt of fees from students in cash as the bank account of trust was opened letter and in the mean time for running the trust existing saving bank account in the name of assessee was opened and the cash fees was deposited to the bank account. The ld. counsel has also submitted copies of trust deed dated 28.07.2015 and copy of the minutes of the meeting dated 29.07.2015 wherein it was resolve that the bank account in the name of assessee in ICICI Bank will remain continue and till the bank account of trust is opened the fees received will be deposited in the said personal saving account of assessee. The copy of trust deed dated 28.07.2015 revealed that the assessee was settler of trust and was having position of president therein.
8. In view of findings recorded by the Assessing Officer in para 3 of assessment order and foregoing factual matrix about the required enquiry conducted by the Assessing Officer in the limited scrutiny proceedings on the sole issue of source of cash deposit to the bank account of assessee, we are of the view that the Assessing Officer has made all necessary efforts and inquiry about the source of cash deposit to the bank account of assessee and thereafter accepted the claim of assessee explaining the source of cash deposit as fees received in cash from the students of Mount Litera School, which was run and owned by the trust in which assessee was top office bearer. The resolution dated 29.07.2015 reveals that the trustees agreed and resolved that till the bank account of trust is opened the amount of cash received as fees will be deposited to the personal saving account of the assessee. From copy of income and expenditure account for the year ended on 31.03.2016 it is clear that the trust has shown fee receipt amounting to Rs. 75,74,700/- during the year and said amount includes the cash deposit to the bank account of assessee with ICICI bank. Therefore when the impugned amount was included and shown in the income and expenditure account of trust then the factual position clearly reveals the source of cash deposited to the bank account of assessee.
9. Therefore we are unable to see any valid reason to allege the assessment order as erroneous and prejudicial to the interest of revenue and hence we are inclined to hold that the ld. PCIT was not validly empowered to invoke revisionary provision of sec 263 of the Act. Hence revisionary order u/s. 263 dated 27.03.2021 for AY 2016-17 is set aside and assessment order dated 19.12.2018 is restored.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 25.07.2023.
