Pr. CIT's S.263 Revision Over Unexplained Cash Deposits: ITAT Quashes Order [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the Principal Commissioner of Income Tax ( Pr. CIT )’s order under section 263 of the Income Tax Act,1961, which had directed a fresh assessment for verifying unexplained cash deposits of Rs. 44,72,000 for Assessment Year (AY) 2011-12.

Ashok Kumar, appellant-assessee, challenged the order dated 17.03.2021 for the AY 2011-12 passed by the Pr.CIT. The assessee's main ground was that the Pr. CIT erred in invoking section 263 of the Income Tax Act, declaring the Income Tax Officer ( ITO )'s order as erroneous and prejudicial to the revenue, and directing a fresh assessment.

The case was selected under section 147 due to a cash deposit of Rs. 44,72,000, and a notice under section 148 was issued. The assessee filed a return under section 44AD, claiming to be a petty contractor.

However, the cash deposits, made in large amounts, contradicted this claim. No details or evidence of the business or source of the deposits were provided, and no inquiry was conducted. As a result, the cash deposits were treated as unexplained and taxed under section 68 of the Act.

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The Pr. CIT found that the assessee did not respond to the notice. The cash deposit of Rs. 44,72,000 contradicted the claim of being a petty contractor, with no supporting business details or evidence of the deposit's source. The Pr. CIT set aside the assessment order and directed a fresh assessment to verify the source of the deposits, with the assessee given a chance to explain.

Aggrieved by the decision the assessee appealed before the tribunal.

The assessee’s counsel argued that section 68 was inapplicable since the return was filed under section 44AD, which does not require books of accounts. It was also pointed out that submissions were provided, contrary to the Pr. CIT’s claim. The counsel stated that the Assessing Officer had already examined the issue, and no errors were found. The appeal was requested to be allowed, as the Pr. CIT’s revision was unjustified.

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The two member bench comprising Vimal Kumar (Judicial Member) and Shamim Yahya(Accountant Member) after hearing both sides and reviewing the records, agreed with the assessee’s arguments. It noted that filing under section 44AD does not require maintaining books of accounts, and the cash deposit restrictions in section 44AD did not apply to the relevant year. It found that the Pr. CIT had wrongly assumed jurisdiction and, therefore, set aside and quashed the order under section 263 of the Act.

In short,the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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