Assessment order has to be read as it is and there is no scope for drawing any inference or reading between the lines of an assessment order – ITAT
In a recent judgment, the ITAT set aside the revisonary order u/s 263 holding that Assessment order has to be read as it is and there is no scope for drawing any inference or reading between the lines of an assessment order
ABCAUS Case Law Citation:
ABCAUS 3895 (2024) (03) ITAT
In the instant case, the assessee had challenged the order passed by the PCIT in exercise of his revisionary powers under Section 263 of the Income Tax Act, 1961 (the Act) holding that order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of revenue.
During the impugned year, the assessee had made cash deposits in the bank account both prior to demonetization of specified bank notes declared by the government and during demonetization period.
During assessment proceedings, the Assessing Officer examined the genuineness of the cash deposited to the bank account and made addition of the cash deposited during the demonetization period. No addition was made of the cash deposited during the period prior to demonetization and it was on this account that the PCIT found the assessment order erroneous.
According to the PCIT though the assessee had explained the source of cash deposits as from withdrawals made from the same bank account, considering the facts of the case this explanation of the assessee could not have been accepted by the Assessing Officer.
According to PCIT there was no whisper in the assessment order of the Assessing Officer accepting the contention of the assessee, nor any notings or Office Note to draw an inference that the addition was not made by the Assessing Officer after proper application of mind.
The PCIT held that the Assessing Officer probably missed out on taking action with regard to cash deposited during the period prior to demonetization and noting that the assessee had failed to satisfactorily explain the source of cash deposited in bank, he held that it was a case of mistake or error on the part of the Assessing Officer not to have made the said addition.
For this reason, he held the assessment order erroneous for having failed to treat the cash deposited before demonetisation period as unexplained. He accordingly restored the matter back to the Assessing Officer for making desired inquiry and verification on the said issue.
The Tribunal observed that the PCIT had also recorded the explanation furnished by the assessee regarding the source of cash deposit as being out of opening cash balance and out of cash withdrawals made in earlier months evidenced with necessary documentary evidences.
The Tribunal noted that from the order of the PCIT it was evident that he inferred that the Assessing Officer could not have been satisfied with the reply of the assessee and was not satisfied with the reply of the assessee, but by mistake had failed to make addition on account of this cash deposit.
The Tribunal observed that the basis with the PCIT for finding so was that the assessee’s explanation of deposit from cash withdrawals was not plausible because the withdrawals were made in odd figures on different dates. Also, as per PCIT, the explanation was not acceptable for the reason that there was deposits in the bank prior to withdrawal which had remained unexplained with regard to its source. According to the PCIT, the assessee’s explanation of the deposits being made out of withdrawals was not acceptable and not a plausible explanation.
The Tribunal opined that sufficiency of cash withdrawals for the deposits under question was not disputed. The judicial view in such circumstances has consistently been that where the cash deposits is explained out of cash withdrawals and there is no case of the Revenue of the cash withdrawn as having been utilized elsewhere, there was no reason for doubting the explanation of the assessee. It was not the case of the PCIT that the cash withdrawn had been utilized elsewhere. Therefore, the acceptance of the explanation offered by the assessee to the Assessing Officer cannot be faulted or for that matter doubted.
The Tribunal noted that according to the PCIT, since the assessee had not explained the source of deposits in the bank which were subsequently withdrawn in cash and redeposited, the onus of explaining the source of cash deposits was not discharged by the assessee. The Tribunal rejected the above reasoning of the PCIT and pointed out that PCIT himself noted the deposits to have been made by banking channels. Therefore, there was no question of any doubt regarding their sources which was through transparent sources only. Even otherwise, it was beyond understanding how the source of these deposits would in any way affect the genuineness of their withdrawals and subsequent re-deposits. Neither the PCIT demonstrated as to how the source of these deposits effect the genuineness of the subsequent deposits.
Once an issue shown to be examined during assessment proceedings and no addition is made, it is to be treated as accepted by AO
The other contention of the PCIT was that the Assessing Officer by mistake failed to make this addition, however there was no basis for the same. The assessment order has to be read as it is and there is no scope for drawing any inference or reading between the lines of an assessment order. Once an issue has been shown to be examined during the assessment proceedings and the assessment order does not reveal any addition made on account of the same, it is to be treated as having been accepted by the Assessing Officer. Nothing can be added or subtracted from a detailed assessment order passed. Further, if it was a mistake by the Assessing Officer and not having made addition, the Assessing Officer could very well have exercised his power of rectification of mistake under Section 154 of the Act which had not been done.
The ITAT held that the issue of impugned cash deposits had been duly examined during the assessment proceedings and the Assessing Officer arrived at a plausible view of the source of the same having been duly explained from cash withdrawals and opening cash balance duly evidenced with documents.
Accordingly, the order of the PCIT was set aside and the appeal of the assessee was allowed.
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