The Income Tax Appellate Tribunal (ITAT), Bangalore upheld the revision order by Principal Commissioner of Income Tax (PCIT) as there was acceptance of information by assessee on source of cash deposits by Assessing Officer (AO) without enquiry.
The assessee, Asha Devi is the proprietor of M/s. M.D. Jewellers and filed return of income declaring an income of Rs.9,35,850. The case was selected for limited scrutiny under CASS for verification of cash deposits during the year. Assessment was completed u/s. 143(3) of the Income Tax Act, 1961 accepting the income shown in the return.
The PCIT noticed that the assessee has made cash deposit of Rs.88,16,000 in her bank account the source of which was submitted before the AO by the assessee as from opening cash in hand, cash sales, amount received from Debtors, amount transferred from personal books and cash withdrawals. The PCIT also noticed from the cash book of the assessee that the assessee had deposited money in the form of cash of Rs.5,00,000 on 05.08.2016, Rs.10,00,000 on 29.9.2016 from an account termed as “safe custody account” and transferred the said amount to the business account of MDJ.
The PCIT was of the view that the case was selected for limited scrutiny specifically for examining the cash deposits during the year and therefore it was necessary for the AO to examine thesource of cash deposits and carry out necessary investigation. According to the PCIT, the AO failed to conduct necessary enquiries with regard to cash deposited and that the assessee has not given satisfactory explanation regarding source of cash deposits. To this extent, the PCIT considered the order of assessment to be erroneous and prejudicial to the interests of the revenue.
PCIT issued a show cause notice giving the assessee an opportunity for filing her submissions. The assessee made similar submission before the PCIT stating the deposit of cash is out of accumulated balance. The PCIT did not accept the explanation provided by the assessee and proceeded to set aside the order of the AO under Section 263 of the Income Tax Act, 1961
The Bench consisting of George George K, Judicial Member and Padmavathy S, Accountant Member observed that “In the present case, limited scrutiny was to be done for verification of cash deposits and the source of cash deposits from the safe custody account is not examined by the AO by calling for relevant details from the assessee. The AO ought to have examined the same to go into the root of these deposits whereas in the instant case, the AO has not questioned the information supplied by the assessee with regard to the source of cash deposits into the safe custody account and has simply accepted those details without further enquiry. In such circumstances, it cannot be said that the AO has made any enquiry or taken a particular view by application of mind on the issue.”
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