AO Fails to Properly Examine Rs. 1.27 Cr Co-operative Society Deposits: ITAT upholds PCIT's Revision Order [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) upheld the revisionary order passed by the Principal Commissioner of Income Tax (PCIT) due to the lack of enquiry by the Assessing Officer (AO) in Rs. 1.27 Cr deposits by Co-operative Society.

Pavan Prabhudyal Bhadada (assessee), in search and seizure action on Shri Renuka Mata Multi State Urban Co-operative Society revealed that the assessee had deposited Rs. 1,27,75,311 in an account maintained with the society.

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The AO had accepted the assessee’s claim that he had no knowledge of the transactions and passed the reassessment order u/s. 147 without making any addition. The PCIT invoked section 263 and observed that the AO accepted the explanation without carrying out proper inquiry and failed to verify the source of cash deposits.

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The PCIT observed that such unexplained deposits should have been added as unaccounted investments. The PCIT held that the non-examination of this aspect resulted in an erroneous order causing prejudice to the Revenue.

Aggrieved by the PCIT’s order, the assessee filed an appeal before the ITAT. The assessee’s counsel contended that the reassessment was completed after considering replies including Form 26AS and AIR data.

The counsel submitted that the bank account was operated by the assessee’s father without his knowledge and to support this claim affidavits from both father and the assessee were submitted before the tribunal.

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The two-member bench comprising Dr. BRR Kumar (Vice President) and Siddhartha Nautiyal (Judicial Member) observed that the argument regarding the bank account being operated by the father was raised for the first time during appellate proceedings.

The tribunal observed that no such submissions were made during assessment or section 263 proceedings. The tribunal further observed that no enquiry was conducted on this aspect by the AO.

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The tribunal held that there was evident lack of inquiry by the AO and that the PCIT rightly invoked section 263. The tribunal observed that there was no infirmity in the order passed by the PCIT by invoking section 263 of the Income Tax Act.  The appeal of the assessee was dismissed.

To Read the full text of the Order CLICK HERE

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