PAWAN CHOPRA,HARYANA V. PR, CIT, ROHTAK

ITA 777/DEL/2022

AI Insights

The case involves Pawan Chopra, the appellant, contesting the revision of his assessment order for the Assessment Year 2017-18 by the PCIT, Rohtak. The primary contention was the validity of the PCIT's jurisdiction under section 263 of the Income-tax Act, 1961, and the subsequent addition made on account of a negative cash balance reported in the assessee's records. The Tribunal found that the PCIT had correctly assumed jurisdiction as he independently applied his mind to the facts and records, despite the initial proposal from the Assessing Officer (AO). However, the Tribunal also found that the negative cash balance, which was a result of unrecorded agricultural income, did not warrant any addition, as this income had been accepted by the revenue but was not considered in the context of the negative cash balance.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33974 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: LALIT MOHAN
• Keywords: Audit objection; Borrowed satisfaction
• Section: 143(3); 154; 263

Judgement Text

"INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No. 777/Del/2022 (Assessment Year: 2017-18) Pawan Chopra, S/o. Shri Khan Chand, H. NO. 234, Ward-10, Model Town, Ratia Fatehabad, Haryana, India 125 051 Vs. Pr. CIT, Rohtak, Haryana (Appellant) (Respondent) PAN:AMYPC9948F Assessee by : Shri Lalit Mohan, CA Revenue by: Ms. Suman Malik, CIT DR Date of Hearing 14/01/2025 Date of pronouncement 29/01/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.777/Del/2022 for AY 2017-18, arises out of the ld PCIT, Rohtak [hereinafter referred to as ‘ld. PCIT’, in short] dated 01.03.2022 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 20.12.2019 by the Assessing Officer, ITO, Ward-2, Fatehabad (hereinafter referred to as ‘ld. AO’). 2. Though the assessee has raised several grounds before us, the preliminary ground raised is challenging the validity of assumption of jurisdiction under section 263 of the Act by the Learned PCIT. 3. We have heard the rival submissions and perused the materials available on record. The Learned AR vehemently pleaded before us that the assumption of ITA No. 777/Del/2022 Pawan Chopra Page | 2 jurisdiction by the Learned PCIT under section 263 of the Act got triggered based on the proposal sent by the Learned AO to Learned PCIT to initiate revision proceedings under section 263 of the Act, comma, thereby constituting borrowed satisfaction by the Learned PCIT and accordingly, the Learned PCIT’s revision order under section 263 of the Act deserve to be quashed on that limited count itself. On perusal of the records, we find that assessment order was framed in the instant case on 20-12-2019. Later, an audit objection was raised indicating the negative cash balance which the assessee had on 04-05-2016 to the extent of Rs 11,74,368/-.This audit objection is enclosed in pages 34 to 35 of the paper book. Accordingly, the Learned assessing officer issued notice under section 154 of the Act on 08-01-2021 seeking to rectify the assessment order passed on 20-12-2019. The assessee gave a reply to the said section 154 notice which is enclosed in page 38 of the paper book. Considering the reply, the Learned AO dropped the section 154 proceedings which is enclosed in page 39 of the paper book. Thereafter, the Learned AO sent a proposal to Learned PCIT for initiating section 263 proceedings which is enclosed in page 46 of the paper book. In fact, the proposal of the Learned AO starts from the audit objection. All these facts are staring on us. However, what is to be seen is the copy of relevant audit objection; copy of notice issued under section 154 of the Act by the Learned AO; the copy of reply filed by the assessee in response to section 154 notice ; copy of order dropping the section 154 proceedings by the Learned AO and the copy of proposal mooted by the Learned AO before the Learned PCIT for initiating section 263 proceedings were available inside the record or inside the folder when the case records were perused by the Learned PCIT. Hence, the Learned PCIT on perusal of the file had independently applied his mind and assumed his revision jurisdiction under section 263 of the Act. On perusal of the entire revision order passed by the Learned PCIT, nowhere it is mentioned that the initiation of revision proceedings under section 263 of the Act got triggered only based on the proposal mooted by the Learned AO. Hence it cannot be a case of borrowed satisfaction. Instead, when the Learned PCIT while perusal of the file found these papers which were already there on record and accordingly the Learned PCIT on his ITA No. 777/Del/2022 Pawan Chopra Page | 3 independent application of mind assumed jurisdiction to revise the assessment order framed on 20-12-2019 on which we do not find any fault. More importantly, the case of the assessee was selected for limited scrutiny only to examine the cash deposits. But on 4-5-2016 itself, the assessee had negative cash balance of Rs 11,74,368/-. This clearly goes to prove that the Learned AO had not examined it in the right perspective with regard to the issue that ought to have been examined even in the limited scrutiny. Hence, we hold that the assumption of jurisdiction by the Learned PCIT is correct in the facts and circumstances of the instant case. Hence the grounds raised challenging the assumption of jurisdiction under section 263 of the Act by the Learned PCIT are dismissed. 4. Now, let us see whether an addition per se could be made on account of negative cash balance. We find that assessee had filed his return of income declaring taxable income of Rs. 2,77,400/- and agricultural income of Rs. 22,50,000/-. The learned AO and the learned PCIT had accepted the receipt of agricultural income of Rs. 22,50,000/- by the assessee. Further, in the capital account filed by the assessee, we find that only a sum of Rs. 8,28,800/- has been reflected as agricultural income by the assessee as against the total receipt of Rs. 22,50,000/-. Hence, the remaining sum of Rs. 14,21,200/- (22,50,000 – 8,28,800) is very much available as a cash source with the assessee and which has been accepted by the revenue in the instant case. If the said cash is brought in the cash book, then there would be no negative cash balance at all in the hands of the assessee warranting any addition. This fact was not considered by the learned PCIT while setting aside the order of the learned AO. Hence, we hold that on merits, there is absolutely no case for making any addition towards the negative cash balance. Hence, the learned PCIT though was correct in assuming revision jurisdiction under section 263 of the Act on legality, but on merits of the issue, he erred in not looking into the agricultural income disclosed by the assessee, which fact has not been sought to be disturbed even by the learned PCIT in his order. Accordingly, there ITA No. 777/Del/2022 Pawan Chopra Page | 4 is no case for making any addition on account of negative cash balance in the instant case. Accordingly, the grounds raised by the assessee are partly allowed. 5. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 29/01/2025. -Sd/- -Sd/- (VIKAS AWASTHY) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:29/01/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "