INCME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and preudicial order - AO framed assessment order with incorrect assumption of facts and without application of mind -

Pr. CIT assumed jurisdiction under section 263 on the ground that AO in the reassessment order discussed the issue of cash deposit to the tune of Rs. 11,65,300. Assessee explained that said cash of Rs. 11,65,300 were receipt from business carried out under section 44AE and the same had been reflected in the return of income to the tune of Rs. 84,000. In fact, said bank account was never disclosed by assessee in the return of income and never reflected in return of income. However, AO held that cash deposit of Rs. 11,65,300 had been reflected in return of income, and hence, order passed by AO was erroneous and prejudicial to the interest of revenue. Held: Assessee himself stated that deposits in the bank account were out of undisclosed source of income. Moreover, assessee had not retracted his statement later on, and in fact he agreed to pay due taxes on said undisclosed income. No doubt, AO raised this issue during reassessment proceedings, however, he reached on a wrong conclusion and made addition of Rs. 18,989, being opening balance in bank account instead of making addition to the tune of Rs. 11,65,300 being cash deposited by assessee during the assessment year under consideration, thus, AO framed assessment order with incorrect assumption of facts and without application of mind, therefore, order passed by AO was erroneous and prejudicial to the interest of revenue.

Relied:Malabar Industrial Company Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxPub(DT) 1227 (SC) and CIT v. Emery Stone Manufacturing Co. (1995) 213 ITR 843 (Raj-HC) : 1995 TaxPub(DT) 457 (Raj-HC).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2007-08

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