Akula Laxmi Padmavathi, Rajahmundry V. The ACIT, Circle-2, Rajahmundry

ITA 103/VIZ/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0869 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-09-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 12-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MS. ASN INFRACON
• Keywords: Gift
• Section: 263; 143(3); 142(1); 143(2)

Judgement Text

आयकरअपीलȣयअͬधकरण, ͪवशाखापटणमपीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įीदुåवूǽआरएलरेɬडी, ÛयाǓयकसदèयएवंĮीएसबालाकृçणन, लेखासदèयकेसम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./ I.T.A. No.103/Viz/2022 (Ǔनधा[रणवष[/ Assessment Year :2017-18) Akula Laxmi Padmavathi, Rajahmundry. PAN: ACFPA 6952 Q Vs. Assistant Commissioner of Income Tax, Circle-2, Rajahmundry. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸकȧओरसे/ Appellant by : Sri GVN Hari, Advocate Ĥ×याथȸकȧओरसे/ Respondent by : Sri MN Murthy Naik, CIT-DR सुनवाईकȧतारȣख/ Date of Hearing : 22/09/2022 घोषणाकȧतारȣख/Date of Pronouncement : 13/10/2022 O R D E R PERS. BALAKRISHNAN, Accountant Member : This appeal filed by the assessee against the order of the Ld. Principal Commissioner of Income Tax-1, Visakhapatnam [Ld. Pr. CIT] passed U/s. 263 of the Income Tax Act, 1961 [the Act] vide DIN & Order No. ITBA/REV/F/REV5/2021-22/1041956038(1), dated 29/03/2022 for the AY 2017-18. 2 2. Brief facts of the case are that the assessee is an individual carrying on real estate business and also a partner in a partnership firm viz., “Sri Sairam Real Estates” filed her return of income for the AY 2017-18 on 6/3/2018 admitting a total income of Rs. 17,77,650/-. The case was selected for limited scrutiny under CASS for verifying the “cash deposits made during the year”. Subsequently, notice U/s. 143(2) and 142(1) of the Act were issued and served on the assessee. In response to the notices, the Assessee’s Representative filed various information called for both on-line and physical. The Ld. AO on verification of the submissions made by the Assessee’s Representative completed the assessment by accepting the income returned by the assessee. The Ld. Pr. CIT invoking the powers vested u/s 263 of the Act, considered the order of the Ld. AO as erroneous and prejudicial to the interests of the Revenue on the reasons that the Ld. AO has failed to verify the creditworthiness of the donors, absence of proof towards cultivation and receipt of agricultural proceeds and also creditworthiness of M/s. ASN Infracon Pvt Ltd., while refunding the share application money. The Ld. Pr. CIT has also observed that the Ld. AO failed to observe the details of plots sold by General Power of Attorney holder and consequently, the cash deposits made in the joint 3 account of the assessee with the Axis Bank. On this ground, the Ld. Pr. CIT considered the Ld. AO has not enquired into the details of transactions and accordingly considered the order of the Ld. AO as erroneous and prejudicial to the interests of the Revenue. The Ld. Pr. CIT therefore directed the Ld. AO to gather necessary evidences and conduct such enquiry and pass a consequential order as deemed fit. Aggrieved by the order of the Ld. Pr. CIT, the assessee carried the matter in appeal before the Tribunal. 3. The assessee has raised the following grounds of appeal: 1. The order of the Ld. Pr. CIT is contrary to the f acts an d al so the l aw appl icabl e to the facts of the case. 2. The Ld. Pr. CIT is not justified in assuming jurisdiction U/s. 263 of the Act inasmuch as the assessment order U/s. 143(3) dated 28/11/2019 for the AY 2017-18 is neither erroneous nor prejudicial to the interes ts of Revenue. 3. Without prejudice to the above, the Ld. Pr. CIT is not justified in directing the assessing officer to reexamine the sources for cash deposits of Rs. 1,70,00,000 in the bank account during the previous year rel evant to the impugned assessment ye ar. 4. The Ld. Pr. CIT ought to have appreci ate d th at the assessing officer had al re ady made enquiries in respect of the above issues and as such it is not a case of lack of inquiry to enabl e the Ld. Pr CIT to invoke the provisions of section 263 of the Act. 5. Any other ground or grounds that may be urged at the time of hearing of the appeal .” 4 4. Grounds No. 1 & 5 are general in nature and they need not be adjudicated. 5. Grounds No. 2, 3 & 4 relate to the assuming of jurisdiction U/s. 263 of the Act by the Ld. Pr. CIT considering the order of the Ld. AO as erroneous and prejudicial to the interests of the Revenue. The Ld. AR submitted that the assessee has furnished the details required by the Ld. AO with respect to cash deposits in response to the notice u/s. 142(1) of the Act. The Ld. AR further submitted that the assessee has made an application towards subscription of shares in M/s. ASN Infracon Pvt Ltd by cash and cancelled the subscription and requested for return of money which was refunded to the assessee by M/s. ASN Infracon Pvt Ltd., by cash, which was deposited into the account of the assessee. The Ld. AR further submitted that the assessee has given a General Power of Attorney (GPA) to Mr. M. Govind and Mr. B. Govind for sale of their plots. Accordingly, funds were received from Mr. M. Govind and B. Govind which was used for subscription towards shares in M/s. ASN Infracon Pvt Ltd., by way of cash after withdrawing from the Axis Bank account jointly maintained with the assessee’s husband. The Ld. AR further submitted that these cash deposits are before the demonetization period. 5 Per contra, the Ld. DR supported the order of the Ld. Pr. CIT and submitted that the Ld. AO has not conducted a detailed enquiry while framing the assessment. The Ld. DR relied on the decision of the Hon’ble Supreme Court in the case of Deniel Merchants (P.) Ltd vs. Income Tax Officer reported in [2018] 95 taxmann.com 366 (SC). 6. We have heard both the parties and perused the materials available on record and the orders of the Ld. Revenue Authorities. We find from the paper book submitted by the Ld. AR the Ld. AO has issued notice U/s. 142(1) of the Act in notice No.ITBA/AST/F/142(1)/2019-20/1017861760(1),dated 09/09/2019 with a detailed questionnaire as annexure. We extract below in verbatim the questionnaire issued by the Ld. AO. “Please furnish the following details for the AYs 2017-18. 1. Please give brief no te about the business activities carried out and me thod of accounting followed during the relevant previous year. Please mention if there is any deviation in me thod of accounting. 2. Computation of to tal inco me. Profit and loss account & Balance shee t. 3. List of all bank accounts held by you in the following format along with a copy of bank account state ments for the financial year 2016-17. Sl Name of the Account Type of Address of 6 no bank Number account the bank 4. Please provide details of cash deposits made in your bank account during the Financial Year 01/04/2016 to 31/3/2017 in the following format. Sl no Date of transaction Amount deposited Name of the Bank Account number 5. Please explain sources of deposits made in the bank accounts stated above with documentary evidence. 6. Please furnish books of account along with cash book for the year under consideration. 7. Any o ther information you may like to furnish in support of your claims made. M.V. Rao, Circle 2(1), Rajahmundry.” 7. In response to the above notice, the Ld. AR has submitted all the required details along with supporting evidence of bank statements, Pattadar Pass Book for the agricultural income earned by the donors and given as gift to the assessee. The Ld. AR also submitted confirmation letters from the assessee’s Mother-in law and from her mother’s sister who has gifted aggregating Rs.15.25 lakhs to the assessee out of their income earned from the agricultural activities and savings. Further, it is seen from the paper book the assessee’s husband Mr. Akula Satyanarayana has also gifted Rs. 16 lakhs which is also substantiated from the sources available from his personal return 7 of income and savings. The Ld. AO after considering all these evidences has passed the assessment order accepting the income returned by the assessee. We find that there was a specific question raised in Notice u/s 142(1) of the Act, and detailed reply submitted by the assessee during the assessment proceedings. However, the Ld. Pr. CIT has subjected the assessment order to revision proceedings on the ground that the Ld. AO has passed the assessment order without making any further enquiry and concluded that in the absence of any specific enquiry made by the Assessing Officer / recording reasons for accepting the assessee’s submissions without any appropriate evidence shall be considered as erroneous or prejudicial to the interests of the Revenue. Further, it is a settled principle that when the assessee has produced appropriate evidence before the Ld. AO and where the Ld. AO has not recorded the reasons for accepting the explanation of the assessee cannot render the order of the Ld. AO prejudicial to the interests of the Revenue. 8. Further, from the submissions made by the Ld. AR, we find that the assessee has made submissions towards share application money in M/s. ASN Infracon Pvt Ltd., where the assessee’s husband is a Director. From the bank statement 8 submitted by the Ld. AR we find that the cash has been withdrawn from the Axis Bank for subscribing towards share application in M/s. ASN Infracon Pvt Ltd by the assessee. Subsequent to the cancellation of the share application, the company ie., M/s. ASN Infracon Pvt Ltd., returned back the money to the assessee by way of cash during the month of July and August, 2016. The conclusion of the Ld. Pr. CIT that the Ld. AO should have verified the creditworthiness of M/s. ASN Infracon Pvt Ltd., for return of such huge amount cannot be accepted due to the fact that the amount paid by the assessee by way of cash has been returned subsequent to non-allotment of shares and hence the question of creditworthiness does not arise. In the case of JRD Tata Trust vs. DCIT reported in [2020] 122 taxmann.com 275 (Mum. – Trib.) in the context of exercising the powers U/s. 263 of the Act observed as follows: “...........Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedings. When the facts as emerging out of the scrutiny are apparently in order, and no further inquiry is warranted in his bonafide opinion, he need not conduct further inquiries just because it is lawful to make further inquiries in the matter. A degree of reasonable faith in the assessee and not doubting everything coming to the Assessing Officer's notice in the assessment proceedings cannot be said to be lacking 9 bonafide, and as long as the path adopted by the Assessing Officer is taken bonafide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the powers under section 263. In the case strial Co Ltd v. CIT [(2000) 243 ITR 83 (SC)], Hon'ble Supreme Court has held that "Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law." The test for what is the least expected of a prudent, judicious and responsible Assessing Officer in the normal course of his assessment work, or what constitutes a permissible course of action for the Assessing Officer, is not what he should have done in the ideal circumstances, but what an Assessing Officer, in the course of his performance of his duties as an Assessing Officer should, as a prudent, judicious or reasonable public servant, reasonably do bonafide in a real-life situation. It is also important to bear in mind the fact that lack of bonafides or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances.” 9. We therefore are of the considered view that the Ld. AO accepting the explanation of the assessee cannot be faulted merely because it could have been lawful to make more detailed inquiries or because he did not write specific reasons of accepting the explanation cannot be a reason to invoke the powers U/s. 263 of the Act. In view of the above discussions, we hereby vacate the impugned revision order and restore the order of the Ld. AO. It is ordered accordingly. 10 10. In the result, appeal of the assessee is allowed. Pronounced in the open Court on the 13 th October , 2022. Sd/- Sd/- (दुåवूǽआर.एलरेɬडी) (एसबालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखासदèय/ACCOUNTANT MEMBER Dated : 13.10.2022 OKK - SPS आदेशकȧĤǓतͧलͪपअĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee– Akula Laxmi Padmavathi, D.No.82-18-2/3, Sarada Nagar, Rajahmundry. 2. राजèव/The Revenue – Assistant Commissioner of Income Tax, Circle-2, Aayakar Bhavan, Veerabhadrapuram, Rajahmundry. 3. The Principal Commissioner of Income Tax-1, Visakhapatnam. 4. आयकरआयुÈत (अपील)/ The Commissioner of Income Tax 5. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयअͬधकरण, ͪवशाखापटणम/ DR,ITAT, Visakhapatnam 6. गाड[फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam