Pavan Kandkur Vs PCIT (ITAT Bangalore)
Conclusion: In present facts of the case, the ITAT observed that proceedings under Section 263 of Income Tax Act, 1961 cannot be sustained if the tax payer had opted to settle the dispute under the Direct Tax Vivad Se Vishwas Act, 2020.
Facts: In present facts of the case, the appeal was filed by the assessee against the order of the learned CIT, Hubali passed under Section 263 of the Income Tax Act, 1961 (the Act) dated 23.03.2022 for AY 2017-18.
The brief facts of the case were that the assessee is a proprietor of the firm HVK Agencies, which is into the wholesale business of palm oil, sunflower oil and vegetable oil. The assessee filed the return of income for AY 2017-18 on 05.11.2017 declaring a total income of Rs. 1,46,760/-. The case was selected for complete scrutiny under CASS for and especially verifying the cash deposits during the demonetization period. Notice under Section 143(2) of the Act was duly served upon the assessee. The AO vide notice under Section 142(1) of the Act called for details such as computation of income, P&L Account, Balance Sheet and bank account statement. The bank account details of the assessee were obtained under Section 133(6) of the Act. The AO noticed certain discrepancies/violations on perusal of the details furnished by the assessee. There was a difference of Rs. 11,36,909/- noticed by the AO in the closing cash balance of the assessee as of 3 1.12.2016. The AO called for further details in this regard. The assessee vide letter dated 25.11.2019 explained and reconciled the discrepancy of Rs.11,36,909/- which will result in an unexplained difference of Rs.92,838/-. Accordingly the AO treated a sum of Rs.92,838/- as unaccounted cash credit under Section 68 of the Act and applied tax rate under Section 115BBE of the Act.
The PCIT initiated revision proceedings and issued show cause notice in response to which the assessee made submissions wherein it was stated that he has applied for the Direct Tax Vivad Se Viswas (DTVSV) scheme and has filed a letter before the CIT(A) for withdrawal of his appeal filed against the order passed under Section 143(3) of the Act. The assessee further submitted that the AO has already examined the details pertaining to the cash deposits during the assessment proceedings and has made the impugned addition by application of his mind. The PCIT did not accept the submissions of the assessee and set aside the order of the AO by u/s. 263 of the Act.
Before the ITAT, the assesse submitted that the issue of cash deposits made during the demonetization was opted for DTVSV and the assessee has filed Form 4 and therefore the same issue cannot be subject matter of revision proceedings under Section 263 of the Act. Reliance was placed upon the decision of the Hon’ble Madras High Court in the case Gopala Krishnan Rajkumar vs. PCT (2022) 445 ITR 557 (Mad), wherein it was observed that:
“46. Once the petitioners had opted to settle the dispute under the Direct Tax Vivad Se Vishwas Act, 2020, the proceedings initiated under section 263 have to go. If on the other hand the respective petitioners had not filed Form 1 and 2 or not accepted with the issue of Form 3, the Impugned Notice seeking to re-open the assessment under section 263 of the Income-tax Act, 1961 could be justified.
48. The taxpayers whose appeals were pending at any level were entitled to avail benefit of the scheme. Therefore, there is no justification in proceeding further with the impugned proceedings initiated by the first respondent under section 263 of the Income-tax Act, 1961.”
On basis of the above, it was observed by ITAT that the assessee has filed the necessary forms under the DTVSV scheme which have been accepted and therefore the decision of the Hon’ble Madras High Court is clearly applicable to the assessee’s case. Accordingly it was held that the PCIT was not justified in initiating the impugned proceedings under Section 263 of the Act when the assessee has opted to settle the dispute under DTVSV scheme.
Accordingly, the order of PCIT was quashed and appeal was allowed in favour of the assessee.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal filed by the assessee against the order of the learned CIT, Hubali passed under Section 263 of the Income Tax Act, 1961 (the Act) dated 23.03.2022 for AY 2017-18.
2. The assessee raised the following grounds of appeal: –
1. On the facts and in the circumstances of the case, the conditions precedent being absent the proceedings-initiated U/s.263 of the Act was opposed to law and the order passed U/s.263 is liable to be cancelled.
2. On the facts there being no error much less an error prejudicial to the interest of revenue, the learned Commissioner of Income-tax ought to have refrained from invoking the provisions of Sec.263 of the Act.
3. The learned Commissioner ought to have considered the submissions made by the appellant and ought not to have invoked the proceedings u/s.263 of the Act.
4. The learned Commissioner failed to appreciate the fact that AO has considered the issue in depth during the Original Assessment proceedings and specific queries had been raised on the transactions (which were under revision under section 263 of the Act) and in response to the same the Appellant had provided all the details as called
5. The Ld. CIT failed to consider that inadequate enquiry would not give an occasion to exercise jurisdiction under Section 263 of the Act.
6. The learned Commissioner ought to have appreciated the fact that the appellant had furnished all the details as required by the Assessing Officer in the course of assessment proceedings u/s.143(3) of the Act and thereby the AO was satisfied with the claim of the appellant and therefore the revision initiated under section 263 of the act was uncalled
7. The Ld. Commissioner erred in holding that the order now passed was made without making proper enquiries or verification which should have been made and hence the assessment order passed was not only erroneous but also prejudicial to the interest of revenue.
8. The learned Commissioner erred in setting aside the order passed U/S 143(3) of the Act dated 23.12.20 19 directing the AO to reverify the cash deposits made during the demonetization period, and the cash payments made in contravention of section 40A(3) when the same were already examined in detail during the Scrutiny Assessments.
9. The learned Commissioner failed to appreciate that the Appellant assessee had challenged the Assessment order dt. 23/12/2019 in Appeal before the CIT(A) and had also gone for the VSV scheme 2020 to settle the issues with the Income Tax Department.
10. The Ld. CIT erred in relying on section 5(3) and section 8 of the Direct Tax Vivad Se Vishwas Scheme Act 2020 in order to revise the order passed under 143(3) of the Act dated 23/12/2019.
3. The brief facts of the case are that the assessee is a proprietor of the firm HVK Agencies, which is into the wholesale business of palm oil, sunflower oil and vegetable oil. The assessee filed the return of income for AY 2017-18 on 05.11.2017 declaring a total income of Rs. 1,46,760/-. The case was selected for complete scrutiny under CASS for and especially verifying the cash deposits during the demonetization period. Notice under Section 143(2) of the Act was duly served upon the assessee. The AO vide notice under Section 142(1) of the Act called for details such as computation of income, P&L Account, Balance Sheet and bank account statement. The bank account details of the assessee were obtained under Section 133(6) of the Act. The AO noticed certain discrepancies/violations on perusal of the details furnished by the assessee. There was a difference of Rs. 11,36,909/- noticed by the AO in the closing cash balance of the assessee as of 3 1.12.2016. The AO called for further details in this regard. The assessee vide letter dated 25.11.2019 explained and reconciled the discrepancy of Rs.11,36,909/- which will result in an unexplained difference of Rs.92,838/-. Relevant statement of discrepancy and the reconciliation are reproduced below: –
