The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that the assessment order passed without proper examination of evidence shall be erroneous and prejudicial to the interest of the revenue.
The assessee’s case was selected for complete scrutiny under Computer-Assisted Scrutiny Selection (CASS) since there was an abnormal increase in cash deposits during the demonetization period as compared to the average rate of cash deposits during the pre-demonetization period.
The assessee clarified that the assessee had a cash balance of Rs.95.06 Lacs. During demonetization, the assessee deposited Rs.93 Lacs in denominations of Rs.500/- and Rs.1000/- and he did not collect any SBN currency post-demonetization. The cash was stated to be sourced out of earlier cash withdrawals and the amounts introduced by the partners of the assessee firm. Having satisfied with the assessee’s reply, the Assessing Officer accepted the returned income filed by the assessee.
The Commissioner of Income Tax (CIT) sought revision of the order and alleged that submissions of the assessee were accepted without any verification and without calling for any further details.
The Authorized Representative submitted that necessary enquiries were made by the Assessing Officer while framing the assessment and therefore, the assessment order could not be termed as erroneous and prejudicial to the interest of the Revenue. And all the details were provided during the course of assessment proceedings to the satisfaction of the Assessing Officer and therefore, it was a case wherein necessary enquiries were made which could not be subjected to revision under Section 263 of the Income Tax Act, 1961.
The Departmental Representative submitted that though the Assessing Officer called for certain details, however, he failed to verify the source of cash deposits made by the assessee during the demonetization period. It was submitted that there was no application of mind on the part of the Assessing Officer.
The Principal Commissioner of Income Tax (PCIT) maintained that the Assessing Officer accepted the submissions regarding the source of cash deposits without any verification and called for further details. The findings of the Assessing Officer were without any basis and there exists no material evidence to explain the cash deposits. The cash withdrawal by partners ought to have been examined by the Assessing Officer.
Finally, relying on the decision of the Supreme Court in the case of Malabar Industrial Company Ltd. (243 ITR 83), it was held that the order was passed without application of mind and without making due enquiries. The assessment order was held to be erroneous and prejudicial to the interest of the revenue since the same was passed without proper examination of materials and records.
The Two-member bench comprising of Manoj Kumar Aggarwal (Accountant member) and Manomohan Das (Judicial member) held that no fault could be found in the observation that the assessment was framed without making due enquiries. In such a case, the revision would be justified in terms of the decision of the Supreme Court in the case of Malabar Industrial Company Ltd. (243 ITR 83). Thus, the appeal was dismissed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
