2023 (5) TMI 731 - AT - Income Tax

Revision u/s 263 by CIT - As per PCIT AO fails to examine the issue on increase in share premium in light of provisions of section 56(2)(vii), although, the assessee has made huge cash deposits during demonetization period, the AO has not verified the issue in light of SOP issued by CBDT for verification and as the assessee has claimed deduction for provision for bad and doubtful debts, the Assessing Officer has not applied his mind to relevant provisions of Act, before allowing the claim - HELD THAT:- Although the assessee has received huge share premium, but the Assessing Officer has not verified the issue in light of provisions of section 56(2)(vii) of the Act, by calling for specific details with regard to price charged by the assessee and valuation of shares, but simply accepted the explanation of the assessee without any verification with regard to price determined for allotment of shares.

As regards huge cash deposits during demonetization period, although the assessee has deposited a sum of Rs. 19.53 crores into various bank accounts, but the Assessing Officer has not made any attempts to verify huge cash deposits in light of SOP issued by CBDT for verification of cash deposits during demonetization period. Similarly, the claim of provision for bad and doubtful debts written of was also not verified with reference to provisions of section 36(1)(vii) r.w.s. 36(2) of the Act.

From observations of AO, it is very clear that although the assessee did not furnished relevant details called for by the Assessing Officer with reference to increase in share premium, cash deposit during demonetization period and provision for bad and doubtful debts, but the Assessing Officer has completed the assessment on the basis of available information on record and accepted income declared by the assessee for the relevant assessment year.

Even though the assessee has not furnished any details with regard to three issues taken up by the PCIT for revision proceedings, AO has completed the assessment and accepted the income declared for relevant assessment years.

Thus AO has failed to verify the issues in light of relevant provisions of the Act and he ought to have verified in light of provisions of section 263 of the Act and Explanation (2) to section 263 which rendered the assessment order to be erroneous in so far as it is prejudicial to the interests of the revenue and thus, the PCIT has rightly invoked their jurisdiction u/s. 263 - PCIT, after considering relevant facts has rightly set aside the assessment order passed by the Assessing Officer u/s. 143(3) - Decided against assessee.