Ganga Electricals Vs PCIT (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT) Pune has addressed the matter of Ganga Electricals vs. PCIT, ruling on the legality of a revision order issued under Section 263 of the Income Tax Act, 1961. The core issue was whether the Assessing Officer (AO) had conducted sufficient inquiries during the original assessment, particularly regarding a large sum of cash deposited by the firm during the demonetization period. The ITAT ultimately quashed the revision order, holding that the AO’s initial assessment was not “erroneous and prejudicial to the interest of the revenue.”
Factual Background
Ganga Electricals, a firm trading in electrical goods, filed its income tax return for the Assessment Year 2017-18, declaring an income of Rs. 1.6 crore. The case was selected for scrutiny, and the AO completed the assessment by accepting the declared income.
However, the Principal Commissioner of Income Tax (Pr.CIT) subsequently reviewed the records and observed a significant cash deposit of Rs. 19.11 crore during the demonetization period, including Rs. 18.84 crore in Specified Bank Notes (SBNs). The Pr.CIT noted that the cash deposit was disproportionately high compared to the previous year’s deposits, concluding that the AO had failed to conduct proper verification of the source of these funds. Therefore, the Pr.CIT initiated proceedings under Section 263, deeming the assessment order to be erroneous and prejudicial to the revenue.
