The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) recently quashed the Principal Commissioner of Income Tax ( PCIT ) revision order under Section 263 of the Income Tax Act, 1961. The revision order had alleged that the assessee, made a cash payment for an immovable property, but no conclusive evidence was provided to support this claim.
Nirav Chandrakantbhai Bhalani filed his income tax return for the assessment year 2016-17, declaring an income of Rs. 3, 49, 430. Proceedings under Section 148 of the income Tax Act, 1961 were initiated based on information from the Insight Portal, which suggested that Bhalani had purchased an immovable property on January 6, 2016, for Rs. 1,92,400 and allegedly made an unaccounted cash payment of Rs. 22,13,735 beyond the documented value.
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The Assessing Officer (AO) issued notices under Sections 143(2) and 143(1) of the Income Tax statute, seeking details and documentation regarding the source of the cash payment. A search conducted at the residence of the Accountant for the group Maheshbhai Dilubhai Parmar led to the seizure of a dairy related to the sale of an industrial plot.
The AO repeatedly requested documentary evidence from assesse and issued notices highlighting non-compliance. On February 10, 2022, the AO issued a show cause notice, proposing to add Rs. 22,13,735 under Section 68 of the Income Tax law due to the alleged unaccounted cash payment.
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The assessee provided bank statements, cash books, purchase deeds, and balance sheets, asserting that the AO had not provided any documentary evidence for cross-verification. Subsequently, the AO accepted assessee’s return as filed and issued an order under Section 147 read with Section 144, accepting the declared income.
The PCIT invoked Section 263, arguing that the AO’s order was erroneous and prejudicial to the revenue because it failed to account for the alleged cash payment. The PCIT’s order was based on the assumption that assesse had made an additional cash payment beyond the documented value of the property. The PCIT set aside the AO’s order, directing a fresh assessment.
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The assesse appealed the PCIT’s order before the ITAT, Ahmedabad. The appellant’s counsel, Mehul K. Patel, argued that the AO had no documentary evidence to substantiate the alleged cash payment and that the PCIT’s reliance on impounded documents was misplaced as they did not mention the plot number or Bhalani’s name.
The PCIT’s counsel, Kamlesh Makwana, defended the PCIT’s order, asserting that it was correctly based on the impounded documents.
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The two-member bench, comprising Nautiyal (Judicial Member) and Makarand V. Mahadeokar (Accountant Member), reviewed the case. The tribunal found that the impounded documents did not mention Bhalani’s name and that the PCIT failed to prove that the alleged cash payment was made by Bhalani.
The tribunal stated that for invoking Section 263, it must be demonstrated that the AO’s order was both erroneous and prejudicial to the interests of the revenue. Due to the lack of conclusive evidence, the ITAT set aside the PCIT’s revision order, allowing assessee’s appeal.
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