Shankarlal Thakordas Narsingani Vs PCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that Pr.CIT’s view that entire cash deposits during demonetization is to be treated as unexplained, is contrary to the facts on record, as assessee has demonstrated the factum of huge turnover prior to and post demonetization. Accordingly, Pr.CIT’s finding of error in AO’s order is based on incorrect appreciation of facts and accordingly revisionary jurisdiction u/s 263 unsustainable.
Facts- The present appeal has been filed by the assessee against order passed by the ld. Pr. Commissioner of Income Tax contenting that PCIT has erred in invoking provisions of section 263. Further, it is also contested that PCIT has erred in holding that Assessing Officer in making disallowance @ 20% of cash deposits of Rs. 3,85,80,075/- made in the bank accounts is erroneous in so far as it is prejudicial to the interests of revenue within the meaning of section 263 of the I.T. Act and need to be adjudicated afresh.
Conclusion- The ld.Pr.CIT’s view that entire cash deposits during this period is to be treated as unexplained, is contrary to the facts on record, wherein the assessee has demonstrated the factum of huge turnover prior to and post demonetization in the preceding year, and even in the succeeding year, and also factum of majority of the sales being in cash. Therefore, there was no occasion at all for the AO to treat the entire cash deposited during the demonetization period, as unexplained credits. The facts on record could not have led to the inference that entire sales made by the assessee during the demonetization period were bogus. In fact, the inference drawn by the AO, that only a portion of it could be treated as bogus/unexplained, was not incorrect. Therefore, we hold that the ld.Pr.CIT’s finding of error is based on incorrect appreciation of the facts before it, and his finding that the assessee had not been able to substantiate its explanation for cash sales completely is also not correct. In fact, as rightly found by the AO, to a great extent his explanation was substantiated that the majority of sales made by the assessee was in cash, but it was only vis-à-vis abnormal incremental sales made during the demonetization period, the AO refused to agree with the assessee.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Present appeal has been filed by the assessee against order passed by the ld. Pr.Commissioner of Income Tax-1, Vadodara [hereinafter referred to as “Ld.Pr.CIT”] dated 30.3.2022 pertaining to the Asst.Year 2017-18 by invoking revisionary power under section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act’ for short).
2. The grounds raised in the appeals read as under:
1. The Ld. PCIT erred on facts and in law in invoking provisions of section 263 of the Act even though the asstt order passed u/s 143(3) by the Assessing Officer is neither erroneous nor prejudicial to the interests of
2. The Ld. PCIT erred on facts and in law in holding that of Assessing Officer in making disallowance @ 20% of cash deposits of Rs. 3,85,80,075/- made in the bank accounts is erroneous in so far as it is prejudicial to the interests of revenue within the meaning of section 263 of the I.T. Act and need to be adjudicated afresh.
3. As transpires from orders of the authority below, the revisionary jurisdiction was exercised by the ld.Pr.CIT on the order passed by the AO in the present case under section 143(3) of the Act, noting that the despite the assessee not substantiating with evidences, the source of cash deposited during demonetisation period of Rs.3,85,80,075/- and the AO not being satisfied with the reply of the assessee, he had still gone to make an addition of only 20% of the cash so deposited, when he should have added back the entire amount of cash deposited during this period. The show cause notice issued in this regard by the ld.Pr.CIT for initiating proceedings under section 263 of the Act placedbefore us at PB page no.103 to 105, bringing out the above facts as under:
