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2023 (11) TMI 706 - HC - Income TaxValidity of Revision u/s 263 - PCIT was of the view that the cash withdrawn was utilised to purchase inventory and was thus, “directly hit by the provisions of Section 40A(3)" - As per the PCIT, there was non-application of mind by the AO since he had not noticed the provisions of Section 40A(3) - ITAT set aside revision orders - HELD THAT:- It is this order of the PCIT which has been reversed by the Tribunal. What is not in dispute is that the respondent/assessee had not claimed any expenditure with regard to the cash that was withdrawn. The reason for this was that the said money was utilised for the purchase of a parcel of land, which in the books of accounts of the respondent/assessee was shown as stock-in-trade, which in essence got neutralised being reflected in the closing stock. Therefore, clearly the provisions of Section 40A(3) of the Act were not applicable. Thus, the order passed under Section 263 of the Act wrongly took recourse to Section 40A(3) of the Act and therefore, in our view, correctly set aside by the Tribunal. Also Tribunal appears to have adverted to is that if no addition was made viz-a-viz the deposit of Rs.16.80 crores, which was the subject matter of the reassessment proceedings, then it was not open to the AO to make an addition qua any other amount. In other words, if the AO did not bring to tax the amount which was adverted to in the “reason to believe” framed in the first instance, then the PCIT could not have triggered proceedings for cash withdrawals amounting to Rs. 35.70 crores under Section 263 of the Act. We agree with the view taken by the Tribunal on this score as well. This view is covered by the various judgments including the judgment rendered in Martech Peripherals Pvt. Ltd [2017 (4) TMI 727 - MADRAS HIGH COURT] Decided in favour of assessee.
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