Revision u/s 263 was justified due to contradictory stand of assessee on credit card cash payments was left out of examination – ITAT
ABCAUS Case Law Citation:
ABCAUS 3802 (2023) (09) ITAT
Important Case Laws relied upon by parties:
CIT, Shimla Versus Greenworld Corporation 2009 181 Taxman 111 (SC)
Mr. Jitendra Singh Chadha vs. PCIT
In the instant case, the assessee had challenged the order passed by the Pr. CIT in passing revisionary order u/s 263 of of the Income Tax Act, 1961 (the Act).
The return filed by the appellant assessee was selected for complete scrutiny through CASS/CPC. The assessment order was passed u/s 143(3) accepting the returned income.
Later, PRCIT observed from the assessment records that the case was selected for scrutiny to examine the large cash payments made towards credit card bills. As per the data available at Insight Portal, the assessee had made cash payments to Bank for settling this credit card bill.
It was further observed that in the proceedings u/s 143(3), the Assessing Officer (AO) had raised a query in this regard, but when Assessee did not reply, the AO did not confront the assessee with the information on hand. The AO sought a confirmation from bank calling for account statement pertaining to the credit card.
Pending any reply from the ICICI Bank the assessing officer failed to make any meaningful enquiry nor reach a logical conclusion on this issue. Instead, he accepted the returned income. After the completion of assessment, reply was received from ICICI Bank wherein they provided the account statement containing complete details of the cash payments.
In the revisional proceedings, after considering the response of the assessee the PCIT observed that cash was paid against the credit card dues. Further it was also noticed that bills were also settled by payment through cheques issued by third parties.
When confronted, the assessee explained to have accumulated cash balance available with her out of cash withdrawals made by her from time to time, as also gifts received by her from family members and relatives.
However, having regard to the standard of living maintained by the assessee, the drawings made by her were considered to be on lower side. Accordingly, this explanation of the assessee that the source for the cash utilized for payment of credit card bills out of the cash drawings made month to month, was rejected.
PCIT concluded that the order passed by assessing officer u/s 143(3) is both erroneous and prejudicial to the interest to the Revenue. The assessing officer failed to undertake the minimum enquiry that was warranted in this case merely on the basis of material available on the record before him. An order passed without making enquiries or verification which should have been made in this case is an order deemed to be erroneous in so far as it is prejudicial to the interest of revenue.
PCIT concluded that the cash payments and payments through two third party cheques represented the assessee’s undisclosed income as the Assessee was unable to submit any explanation for the source of cash and the third-party cheque payments made in her favour.
Thus, PCIT treated the payments against credit card as income from unexplained sources under section 68 read with section 115BBE of the Act and enhanced the assessment and directed the AO to recompute total income and issue notice of demand.
The Tribunal noted that responding to the query in the notice u/s 142(1) the assessee had responded that he does not have any credit card. Further in another reply the assessee had stated that all credit card payments were made only through banking channels. Also, the assessee had submitted that she had not made any payment of credit card using cash during the relevant year.
The Tribunal opined that the assessment order need not be elaborative and need not give reasons for accepting every submission made on behalf of assessee but it should at least reflect application of a judicious mind.
The Tribunal opined that when apparently there were contradictory stands of assessee with regard to holding of the credit cards and payments made to it. The AO had not reflected in order as to how he has drawn inferences on the basis of responses of assessee qua the queries raised. The Revisional authority was justified to assume that the issue was not examined in a judicious manner so as to ensure there is no prejudice to the interest and loss to the Revenue and in such circumstances, order has to be construed to be erroneous and prejudicial to the interest of Revenue.
The Tribunal observed that the contention that issue was examined thoroughly by the AO has no substance. It is not a case of AO holding one of the views, but a case where false and contradictory stand of the assessee was left out of examination.
With respct to the additional ground that Section 263 does not give powers to the PrCIT to enhance the assessment and to pass an order of assessment itself. In this regard as the ITAT concurred with the Revenue that if the provisions of Section 263 of the Act are considered same provide that PCIT can pass an order enhancing or modifying the assessment or cancelling the assessment and directing of fresh assessment. In the case in hand although the queries were raised by AO and which were responded by the assessee, the assessment order though does not show any reason for not making the addition but PrCIT has duly examined both the issues to establish, that additions should have been made. Thus, PCIT was in its right to modify the conclusion of the AO qua not making the additions in the assessment by making the additions. The power of ‘modifying the assessment’ has in its ambit making or correcting any additions, left out or not made by the AO, though ought to be made in the assessment proceedings. The same may or may not be by way of enhancement.
Accordingly, the ITAT dismissed the ground of appeal of the assessee.
Download Full Judgment Click Here >>
- Jewellery purportedly received from grandparent under Will added as unexplained credits
- SC lays down tests to determine if a debt is financial debt or operational under IBC
- Commonality of directors of companies does not mean deposits received was bogus
- Application though named as rectification but if tax is not legitimate, it also touches merit: HC
- Cost of acquisition as on 01.04.1981 taken as per valuer report by reverse indexing of FMV
