Loading judgment…
Facts
An assessee filed an appeal against an order passed by the PCIT under Section 263 of the Income Tax Act. A survey was conducted where the assessee declared additional income, which was also offered in the return of income. The AO accepted the return, but the PCIT initiated revision proceedings.
Held
The Tribunal held that for the PCIT to assume jurisdiction under Section 263, two conditions must be met: the AO's order must be erroneous and prejudicial to the revenue. In this case, the AO had already made a finding that the income was included, thus the twin conditions were not satisfied.
Key Issues
Whether the PCIT was justified in invoking Section 263 when the AO had already made a finding regarding the inclusion of income declared during a survey?
Sections Cited
263, 143(3), 133A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : This appeal filed by the assessee is directed against the order of the Principal Commissioner of Income Tax (Central)-1, Chennai dated 24.03.2024 relevant to the assessment year 2020-21 passed u/s. 263 of the Income-tax Act, 1961 (hereinafter “the Act”).
There is a delay of 36 days in filing the appeal by the assessee. The assessee has filed condonation petition/affidavit stating the reasons for delay in filing the appeal. We have considered the petition/affidavit of delay in filing the appeal and satisfied that there was sufficient cause for not filing the appeal within the prescribed time limit. Hence, the delay is hereby condoned.
The effective ground of appeal in this appeal of assessee is against order passed by Ld. PCIT u/s 263 of the Act holding the assessment order passed by the A.O u/s. 143(3) of the Act as erroneous and prejudicial to the interest of revenue.
The assessee is a proprietor of M/s. Jayalakshmi Silk & Sarees.
A survey u/s. 133A of the Act was conducted at the premises of the assessee on 25.02.2020 and the assessee offered additional income of Rs.8,31,975/- during the survey operation. Subsequently, the assessee filed return of income on 31.12.2020 declaring total income of Rs.14,04,930/-. The A.O in the assessment order passed u/s. 143(3) of the Act has noted that the assessee has furnished details regarding additional income offered and as per the details furnished by the assessee, the additional income admitted during the survey has been offered in the return of income filed for the A.Y 2020-21. The A.O accordingly accepted the return at Rs.14,04,930/- in the order passed u/s 143(3) of the Act. The Ld. PCIT after examining the record noted that the A.O without making any independent verification by calling for specific details like stock as on the date of survey, purchases and sales made from the date of survey till the end of Financial Year and closing stock as at the end of the year has simply given finding in the assessment order that stock admitted in the case of the survey has been included as business income in the return of income. The Ld. PCIT therefore invoking clause (a) of Explanation (2) to Section 263 of the Act held the order erroneous and prejudicial to the interest of revenue and directed to make necessary inquiries/verification to find out whether the excess stock estimated during the survey is included in the total return.
The Ld. Authorized Representative (A.R) of the assessee before us has submitted that survey was conducted on 25.02.2020 before the end of financial year and the assessee in the return of income filled has shown total income of Rs. 14,04,930/-, which included the income disclosed during the survey of Rs. 8,31,975/-. The Ld. AR submitted that the A.O has clearly noted that the additional income admitted during the survey was duly offered in the return of income filed for the A.Y 2020-21 and therefore, initiating revision proceedings on the same issue which has been examined by the A.O is unsustainable and bad in law.
The Ld. Departmental Representative (DR), on the other hand, has relied on the orders of lower authorities.
We have heard the rival submissions, and perused the materials available on record. A survey u/s. 133A was conducted on 25.02.2020 in the case of the assessee and the assessee has offered a sum of Rs. 8,31,975/- as additional income. Subsequently, the assessee filed return of income on 31.12.2020 admitting total income of Rs. 14,04,930/-. In the assessment order, the A.O noted that the additional income admitted during the survey has been offered in the return of income. However, the Ld. PCIT has observed that the A.O had not verified whether the stock admitted during the course of survey was actually included in the return of income and held the assessment order passed by the A.O u/s 143(3) of the Act as erroneous and prejudicial to the interest of revenue and directed the A.O to conduct the necessary inquiry and verification to determine whether the stock valued at Rs. 8,31,975/- admitted during the course of survey is included in the total income. It is settled position of law that in order to assume jurisdiction under section 263 of the Act, the PCIT has to be satisfied with twin conditions, namely (i) the order of the A.O sought to be revised is erroneous and (ii) it is prejudicial to the interest of revenue . The A.O in present case has given clear finding that the income admitted during survey has been included in the return of income. The Ld PCIT without any basis held that assessee has not offered any additional income towards excess stock of Rs 8,31,975 found during survey and then directed A.O to make necessary enquiries and verification to find out whether excess stock valued at Rs 8,31,975 is included in the total income. We are of the opinion that the twin condition of erroneous and prejudicial to the interest of revenue has not been satisfied in this case and therefore set aside the order of Ld. PCIT.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on 02nd April, 2025.