Simple Disagreement With Plausible Views Of AO Is No Basis For CIT To Assume Jurisdiction U/s 263: Kolkata ITAT

The Bench of the ITAT comprising of Sanjay Garg (Judicial Member) and Rajesh Kumar (Accountant Member) observed that “it can be said to be plausible and possible view on the basis of evidences before the AO and the PCIT cannot invoke the jurisdiction u/s 263 of the Act on the ground that he does not agree with the view taken by the AO and direct the AO to add the entire cash deposits in the hands of the assessee. In our opinion, the jurisdiction u/s 263 of the Act can be invoked if twin conditions are satisfied i.e. order is erroneous and is prejudicial to the interest of the revenue.” (Para 7)

As per the brief facts of the case, the Assessee's case was reopened based on information from DDIT (Investigation) in respect of the high value of cash deposits into the bank of the Assessee. During re-assessment proceedings, it was revealed that the high value of cash deposited had been credited to the bank account of the assessee. The assessment was completed u/s 143(3)/147. The PCIT observed from the perusal of the assessment records that the assessee has transferred the said amount through cheques/ RTGS to other entities. The PCIT observed that while framing the assessment, the AO applied 8% on cash deposits to determine the total business income of the assessee and on the same lines, the AO adopted the same percentage on the total deposits to determine the income instead of treating the same as unexplained investment/cash.

According to PCIT, in terms of Section 69, where in the financial year immediately preceding the assessment year, the assessee has made investments that are not recorded in the books of accounts, if any, maintained by him for any source of income and the assessee did not explain the nature or source of investments or explanation offered by him is not satisfactory, then the value of investments may be deemed to be the income of the assessee in the impugned financial year. The PCIT observed that for this reason, the assessment framed by the AO is erroneous insofar as it is prejudicial to the interest of the revenue. Accordingly, a show cause notice was issued to u/s 263 which was replied by the assessee. The PCIT, after taking into account the contentions of the assessee, passed the revisionary order u/s 263 setting aside the assessment order passed by them earlier by directing the AO to frame the assessment afresh after affording a reasonable opportunity to the assessee.

The Bench noted that the AO after carrying out investigation and after recording a statement of a person who owned up the money deposited in the assessee's bank accounts though the bank accounts were opened under his signature by obtaining KYC documents from the assessee fraudulently.

The Bench observed that the income from the deposits has also been assessed in the assessment framed in the case of the said person u/s 143(3)/147 by adding only 0.10% of total cash deposit on the ground that the assessee is providing accommodation entries on commission basis through jamakharchi companies/concerns.

The Bench accepted the contention of assessee by considering the decision of Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT reported in [2000] 243 ITR 83 (SC) that in order to invoke u/s 263 the twin conditions have to be satisfied but in the present case since the conditions as envisaged u/s 263 were not satisfied, therefore the assumption of jurisdiction is invalid and so is the revisionary order passed u/s 263.

Therefore, on finding the order of reassessment issued by PCIT is erroneous, ITAT allowed the assessee's appeal.

Counsel for Appellant/Taxpayer: Somnath Ghosh

Counsel for Respondent/Department: S.Datta

Case Title: Satbir Mahato verses PCIT

Case Number: I.T.A. No. 71/Kol/2021

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