Income Tax Appellate Tribunal Decision: ITA No.904/DEL/2022

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’ DELHI, before Shri Saktijit Dey, Vice President, and Shri Pradip Kumar Kedia, Accountant Member, the appeal ITA No.904/DEL/2022 concerning the assessment year 2017-18 filed by Nanak Chand & Co., Uttar Pradesh against the revisional order of the Principal Commissioner of Income Tax, Ghaziabad, was heard and adjudicated upon.

The case involves Nanak Chand & Co., appellant, versus Principal Commissioner of Income Tax, Gzbd, respondent, centered around the assessment year 2017-18. The Tribunal delved deep into the contents and implications of the order dated 15.03.2022 by the Principal Commissioner, which revised an earlier assessment made under Section 143(3) of the Income Tax Act, 1961, on 28.06.2019. This revision claimed the original assessment to be erroneous and prejudicial to the interest of the revenue, citing issues such as unexplained cash deposits during the demonetization period, discrepancies in gross profit (GP) and net profit (NP) ratios compared to the previous years, and other financial irregularities.

The appellant argued that the revisional order under section 263 by the PCIT, Ghaziabad, was unjust, alleging it was based on inadequate and unsatisfactory examination of factual evidences and circumstances. They contested that comprehensive details and justifications provided during the original assessment proceedings covered all queries raised, including the explanation for the cash deposits and the reasons behind the GP and NP ratios fluctuations.

On examination of the appellant’s and respondent’s contentions, and after a thorough review of the submitted documents and legal precedents, the Tribunal observed that the assessee proceeded to withdraw and subsequently redeposit a substantial amount of cash in anticipation of payments to farmers for business transactions. The Assessing Officer, upon conducting a detailed inquiry, accepted the explanations regarding the cash deposits and the fluctuating GP and NP ratios, deeming them satisfactory.

The heart of the Tribunal’s decision rested on whether the Assessing Officer’s conclusions were erroneous and whether they indeed were prejudicial to the interests of the revenue. The Order highlighted the necessity of substantiating allegations with concrete evidence, especially when the original assessments were based on thorough inquiries and rational deductions.

After meticulous consideration, the Tribunal found that the Pr.CIT’s revisional order failed to establish any substantial error or neglect on part of the Assessing Officer’s comprehensive examination of the case. The allegations of unsound assessment were deemed speculative and unsubstantiated. Thus, the Tribunal favored the assessee’s argument, allowing the appeal.

Conclusively, the Tribunal’s decision underscored the principle of fairness and thoroughness in tax assessments, cementing the sanctity of reasoned inquiries over baseless allegations. The verdict allowed the appeal, setting aside the revisional order by the Principal Commissioner of Income Tax, Ghaziabad, thereby quashing the revised assessment.

Order was pronounced in the open court on 30/08/2023, marking a significant verdict in favor of the assessee, Nanak Chand & Co., and establishing a precedent for the interpretation and application of Sections 143(3) and 263 of the Income Tax Act, 1961.

Income Tax Appellate Tribunal Decision: ITA No.904/DEL/2022