The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that Principal Commissioner of Income Tax (PCIT) was not validly empowered to invoke revisionary provision of Section 263 of the Income Tax Act, 1961.
Hence the revisionary order for AY(Assessment Year) 2016-17 was set aside.
The assessee in the present case is Navneet Bhardwaj . The PCIT has issued notice to the assessee exercising its revisionary power under Section 263 of Income Tax Act on the issue which was already decided by the AO (Assessing Officer). Aggrieved by the order of PCIT the assessee filed an appeal before the Tribunal.
The Authorised Representative of the assessee submitted that the case was selected for limited scrutiny for the sole reason of large cash deposit in the saving bank account as per Annual Information Return (AIR), total turnover and other income in part a of income tax return of assessee for which the Assessing Officer issue notices under Section 142(1) of the Income Tax Act along with questionnaire.
The assessee was required to explain source of cash of Rs. 66, 87,000/- along with documentary evidences, in response to such notice the assesee stated that he was carrying on a school during the year under consideration under the name Mount Litera School, Muzzafarnagar and the assessee was settler/president of the Shri Ram Educational Trust, under which said school was running.
Further the AR contended that the AO has made sufficient and adequate enquiry in accepting the explanation of assessee regarding source of cash deposit in the assessment order, which cannot be alleged as erroneous and prejudicial interest of revenue.
The Departmental Representative (DR) supported the revisionary order under Section 263 of the Income Tax Act and submitted that as per explanation 2 to Section 263 of the Income Tax Act in a case of insufficient enquiry the assessment order has to be held as erroneous and prejudicial to the interest of revenue and the same can be revised under Section 263 of the Income Tax Act.
The Bench comprising of Chandra Mohan Garg, Judicial Member and M.Balaganesh, Accountant Member observed that during limited scrutiny proceedings on the sole issue of source of cash deposit to the bank account of assessee, the Assessing Officer issued to notices along with questionnaire which were duly replied by the assessee along with relevant documentary evidences.
Thereafter the AO considered and adjudicated the issue in the assessment order and concluded and allowed the claim of assessee regarding source of cash deposit that the deposits were made out of receipt of fees from students in cash as the bank account of trust was opened letter and in the mean time for running the trust existing saving bank account in the name of assessee was opened and the cash fees was deposited to the bank account.
Thus the Tribunal held that the PCIT was not validly empowered to invoke revisionary provision of Section 263 of the Income Tax Act. Hence revisionary order under Section 263 of the Income Tax Act for AY 2016-17 was set aside and assessment order was restored.
Hence the appeal of the assessee was allowed.
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