Zakaria Bajpe Vs CIT (International Taxation) (ITAT Bangalore)
ITAT Bangalore: Revision u/s 263 Upheld – AO’s Silent Acceptance of Cash Deposits & Property Source is Erroneous
Background
Assessee, an NRI during AY 2015-16, filed return declaring income of ₹50.72 lakh. Case was selected for limited scrutiny to verify (i) large cash deposits in bank accounts & (ii) source for purchase of property (land at Udyavara, Udupi for ₹81 lakh, paid in FY 2013-14). Assessee explained that deposits (₹37.6 lakh) came from earlier cash withdrawals & rent receipts, & property payments were sourced from withdrawals in FY 2013-14. AO accepted the explanations & passed order u/s 143(3) dated 04.08.2017 without recording reasons, simply stating “after verification & discussion, assessment is completed”.
CIT’s Revision u/s 263
CIT (Intl. Tax) held AO’s order erroneous & prejudicial because:
- AO accepted submissions without detailed inquiry or reasoning.
- Bearer cheques issued in third parties’ names (Karanth family) were treated as “cash withdrawals” by assessee, but AO did not verify circumstances.
- Sources for property purchase not cross-checked with statement of affairs & bank statements of earlier years.
- Relying on Infosys Technologies Ltd. (Karnataka HC), CIT held that even acceptance orders must record reasons; otherwise, they are erroneous. AO was directed to redo assessment after proper inquiry.
Tribunal’s Findings
- AO’s order was silent on key issues flagged in scrutiny (cash deposits & property source).
- Following Infosys Technologies (Kar HC), every conclusion, even one accepting assessee’s claim, must be supported by reasoning, however brief.
- Failure to record basis of acceptance amounts to lack of inquiry/application of mind, making the order erroneous & prejudicial to Revenue.
- Assessee can still substantiate explanations before AO in fresh proceedings.
Key Takeaways
- Orders without reasoning are vulnerable to revision u/s 263, even if they accept assessee’s claims.
- Limited scrutiny issues must be specifically examined & addressed in assessment order.
- Infosys Technologies (Kar HC) binding: AO’s conclusions must have recorded reasoning; silence ≠ due inquiry.
- Assessees must maintain clear evidence trail for cash deposits & property investments to withstand revision
FULL TEXT OF THE ORDER OF ITAT BANGALORE
