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2023 (11) TMI 430 - AT - Income TaxRevision u/s 263 by CIT - source of cash deposits in the bank account, and opening balances of partner’s capital account, unsecured loans and stock at the beginning of the year as well as remuneration paid to the partners of the firm, the order so passed by the AO has been held by the ld PCIT to be erroneous as well as prejudicial to the interest of the Revenue - HELD THAT:- Examination of source of cash deposits in the bank account - As we find that the case of the assessee was reopened precisely for the reason that the assessee has not filed any original return of income and there were cash deposits in the bank account maintained by the assessee - notices were issued during the course of assessment proceedings wherein the AO has specifically enquired about the source of said cash deposits in the bank account maintained with SBI along with documentary evidence. In response to the notices, the assessee has submitted that cash deposit relates to cash sales arising out of its poultry farming business which has been deposited from time to time in the bank account maintained with SBI and in support, has submitted its stock statement detailing the opening stock, purchases during the year, sales during the year and closing stock, list of purchasers and sellers exceeding Rs 5 lacs as called for by the AO AO thereafter has examined and has recorded a specific finding in the assessment order that the assessee’s source of income is from poultry farming business and audited financial statements, books of accounts, bank statement and explanation called for from the assessee regarding source of cash deposit has been duly examined and thereafter, no adverse finding has been recorded. Thus the matter relating to source of cash deposits has been duly examined during the course of assessment proceedings and it is clearly not a case of lack of enquiry as so held by the ld PCIT. Balances of partner’s capital account, unsecured loans and stock at the beginning of the year not verified due to non-filing/invalid treatment of original return of income - As far as non-filing of the original return of income, we find that the present proceedings were initiated precisely for the reason that the original return of income was not filed and therefore, what is relevant to examine is the return of income filed pursuant to notice u/s 148 and subsequent assessment proceedings so conducted by the AO and the order passed u/s 147 r/w 143(3) which has been made subject matter of the revisionary proceedings. Once the original return of income has been treated as invalid return of income, what has been reflected or not reflected in the said return of income has no bearing on the proceedings initiated u/s 147 and consequent proceedings u/s 263 of the Act. There is no dispute that where the assessee has filed its return of income for the earlier assessment year 2013-14, the opening balances which are carried forward from the said assessment year to the year under consideration are easily verifiable. At the same time, in the instant case, we find that the AO has called for and examined the audited financial statements for the previous financial year relevant to earlier assessment year 2013-14 and thus, where the audited financial statements for the previous financial year are on record and the same has been examined by the AO, the findings of the ld PCIT holding the order so passed by the AO erroneous in nature due to non-examination of the opening balances is clearly not borne out of records. Opening stock - AO has examined the same and accepted the turnover and closing stock as well as trading results and gross profit declared by the assessee. Thus, where stock statement has been verified and book results have been accepted and no adverse finding has been recorded by the AO as well as by ld PCIT, the order so passed by the AO cannot be held as erroneous in nature as well as prejudicial to the interest of the Revenue. Non-verification of partner’s capital account and unsecured loans - We find that these are again opening balances which are carried forward from the earlier assessment year as apparent from the audited financial statements for the earlier assessment year which is available on record and duly examined by the AO. Further, during the course of assessment proceedings, the AO has called for and examined the partnership deed and it has also been submitted by the assessee that there is no addition to the capital account during the year. We thus, find that where the balances are carried forward from the earlier assessment year and there are no movements in these accounts during the year, it is a revenue neutral exercise and thus, there is no prejudice which is caused to the Revenue and in any case, the matter has been examined by the AO and no further enquiries have been conducted by the ld PCIT. Thus, the findings of the ld PCIT in this regard that the order so passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue are again not borne out of records and thus deserve to be set-aside. The matter has been duly examined by the AO and nothing has been brought on record in terms of any further enquiries conducted by the ld PCIT so as to reach a prima facie finding that the order so passed is erroneous in so far as prejudicial to the interest of the Revenue - no basis for setting aside the assessment order and that too, a speaking order, thus, the order so passed by the ld PCIT u/s 263 is hereby set- aside and that of the AO is sustained. Decided in favour of assessee.
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