Assessment was completed u/s. 153A read with section 143(3) making an addition of Rs. 59,16,628 on account of unexplained cash credit found in the books of account. During the pendency of the assessee’s appeal before the Commissioner (Appeals), the assessee opted for Direct Tax Vivad se Vishwas Scheme, the appeal was withdrawn and form 5 was issued by the competent authority upon payment of taxes determined under the Scheme. Principal Commissioner set aside the assessment order with the direction to the Assessing Officer to decide the issue afresh after giving sufficient opportunity of being heard to the assessee.

Held, that the order of the Assessing Officer could not be held erroneous and prejudicial to the interests of the Revenue because:

(a) It was not a case where there were just two entries or for that matter, the account was dormant. The credits in the bank account of Loan Creditor had arisen on account of receipt of compensation from the Railways on acquisition of his land. The bank statement of the creditor was submitted by the assessee during the course of assessment proceedings as well as revision proceedings and necessary explanation regarding credit of Rs. 2 crores in the bank account was also submitted. Failure by the creditor to file the return could not be held against the assessee. In any case, once the permanent account number of IS had been submitted by the assessee, the Revenue had all the resources available at its disposal to enquire further regarding the tax return and filing status.

(b) the assessee had submitted the copy of cash book as well as the cash flow statement during the course of assessment proceedings with necessary explanation in terms of opening cash in hand. Therefore, the findings of the Principal Commissioner that cash payment of Rs. 25 lakhs was not accounted for in books of account was incorrect. Further, the assessee would still be eligible to claim availability of funds to the extent of intangible additions of Rs. 59,16,628 which had suffered taxation and also attained finality given that the assessee’s application under the Vivad se Vishwas Scheme had been accepted by the competent authority on payment of due taxes. Therefore, the findings of the Principal Commissioner were to be set aside.

(c) the matter had been duly enquired into by the Assessing Officer and the explanation of the assessee had been accepted by the Assessing Officer and in view thereof, the findings of the Principal Commissioner that proper and complete enquiry had not been conducted by the Assessing Officer is incorrect. (AY. 2013-14)