Facts
A survey operation unearthed that the assessee's gross receipts were higher than reported. The AO reopened assessments and added the profit element of the differential receipts. The Ld. Pr.CIT initiated revision proceedings u/s 263, arguing the entire suppressed receipts should be taxed, not just the profit element.
Held
The Tribunal held that the Ld. Pr.CIT's revisionary order was unsustainable. The AO's action of taxing only the profit element was a permissible view, and the revision was barred by Explanation 1(c) to Section 263 as the issue was already pending in appeal before the CIT(A).
Key Issues
Whether the revisionary order passed u/s 263 of the Act is sustainable when the issue was already pending before the CIT(A)? Whether taxing only the profit element of suppressed receipts is a valid course of action by the AO?
Sections Cited
133A, 148, 147, 263, 142(1), 143(3), 65A, 65B
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 ABY T. VARKEY, JM: These are appeals preferred by the assessee against the orders of the Learned Principal Commissioner of Income Tax, (hereinafter in short "the Ld. Pr.CIT”) (Central), Chennai-1, both dated 22.03.2024 for the Assessment Years (hereinafter in short "AY”) 2017-18 & 2018-19 passed u/s.263 of the Income Tax Act, 1961 (hereinafter in short "the Act”).
Brief facts as noted are that, the assessee is a partnership firm engaged in the business of real estate. A survey operation u/s.133A of & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate :: 2 ::
the Act was conducted i the Act was conducted in the case of the assessee on 07.08.2019, in the n the case of the assessee on 07.08.2019, in the course of which a laptop was impounded. Upon analysis of the same, it course of which a laptop was impounded. Upon analysis of the same, it course of which a laptop was impounded. Upon analysis of the same, it was gathered that the gross receipts of the assessee from the real estate was gathered that the gross receipts of the assessee from the real estate was gathered that the gross receipts of the assessee from the real estate business was substantially higher than the gross receipts repor business was substantially higher than the gross receipts repor business was substantially higher than the gross receipts reported in the regular books of accounts. The survey team is noted to have quantified regular books of accounts. The survey team is noted to have quantified regular books of accounts. The survey team is noted to have quantified the potential escapement of income at 11.59% of the differential receipts. the potential escapement of income at 11.59% of the differential receipts. the potential escapement of income at 11.59% of the differential receipts.
On the basis of the survey findings, the AO is noted to have reopened the On the basis of the survey findings, the AO is noted to have reopened the On the basis of the survey findings, the AO is noted to have reopened the assessments for AYs 2017 assessments for AYs 2017-18 & 2018-19 u/s 148 of the Act. In the 19 u/s 148 of the Act. In the reasons recorded for reopening these assessments, the AO had formed a reasons recorded for reopening these assessments, the AO had formed a reasons recorded for reopening these assessments, the AO had formed a belief that, the income element of 11.59% and 12.56% of the differential belief that, the income element of 11.59% and 12.56% of the differential belief that, the income element of 11.59% and 12.56% of the differential receipts receipts had had escaped escaped assessment assessment for for AYs AYs 2017 2017-18 18 & & 2018 2018-19 respectively. Thereafter, in the reassessment proceedings, the assessee is hereafter, in the reassessment proceedings, the assessee is hereafter, in the reassessment proceedings, the assessee is noted to have disputed the AO’s reliance on the contents of the noted to have disputed the AO’s reliance on the contents of the noted to have disputed the AO’s reliance on the contents of the impounded laptop. After considering the submissions and objections of impounded laptop. After considering the submissions and objections of impounded laptop. After considering the submissions and objections of the assessee, the AO is noted to have computed the difference the assessee, the AO is noted to have computed the difference the assessee, the AO is noted to have computed the difference between gross receipts as per books of accounts and the gross receipts as per gross receipts as per books of accounts and the gross receipts as per gross receipts as per books of accounts and the gross receipts as per laptop and treated the same as undisclosed turnover of the assessee. The laptop and treated the same as undisclosed turnover of the assessee. The laptop and treated the same as undisclosed turnover of the assessee. The AO is noted to have estimated the profit element embedded therein at the AO is noted to have estimated the profit element embedded therein at the AO is noted to have estimated the profit element embedded therein at the rate of 11.59% and 12.56% and ac rate of 11.59% and 12.56% and accordingly framed the assessments for cordingly framed the assessments for AYs 2017-18 & 2018-19 respectively, u/s 147 of the Act both dated 19 respectively, u/s 147 of the Act both dated 19 respectively, u/s 147 of the Act both dated 31.03.2022. The details thereof, as noted from the assessment order is as 31.03.2022. The details thereof, as noted from the assessment order is as 31.03.2022. The details thereof, as noted from the assessment order is as follows:-
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Sl. No. Particulars Particulars AY 2017-18 AY 2018-19
1. Gross Gross Receipts Receipts as as per per Rs.11,96,19,541 Rs.57,56,06,658 Rs.57,56,06,658 impounded laptop impounded laptop
2. Gross Receipts as per books of Gross Receipts as per books of Rs.3,22,02,272 Rs.5,13,18,170 accounts (according to the AO) accounts (according to the AO)
3. Differential Receipts Differential Receipts Rs.8,74,13,269 Rs.52,42,88,488 Rs.52,42,88,488
4. Profit Profit element element embedded embedded Rs.1.01 crores Rs.6.58 crores therein therein added added to to the the total total (8,74,13,269 x (52,42,88,488 x (52,42,88,488 x income by AO 11.59%) 12.56%)
3. Aggrieved by the action of the AO, the assessee is noted to have Aggrieved by the action of the AO, the assessee is noted to have Aggrieved by the action of the AO, the assessee is noted to have preferred appeals before the Ld. CIT(A) in both the years. During the preferred appeals before the Ld. CIT(A) in both the years. During the preferred appeals before the Ld. CIT(A) in both the years. During the pendency of the appeal, th pendency of the appeal, the Ld. Pr.CIT is noted to have issued notices u/s e Ld. Pr.CIT is noted to have issued notices u/s 263 of the Act, both dated 15.02.2024, proposing to revise the income 263 of the Act, both dated 15.02.2024, proposing to revise the income 263 of the Act, both dated 15.02.2024, proposing to revise the income tax assessments completed u/s 147 of the Act for both the AYs 2017 tax assessments completed u/s 147 of the Act for both the AYs 2017 tax assessments completed u/s 147 of the Act for both the AYs 2017-18 & 2018-19. In the notice, the Ld. Pr.CIT is noted to have observed 19. In the notice, the Ld. Pr.CIT is noted to have observed 19. In the notice, the Ld. Pr.CIT is noted to have observed that the AO’s action of adding only the profit element qua the differential receipts AO’s action of adding only the profit element qua the differential receipts AO’s action of adding only the profit element qua the differential receipts was erroneous. According to the Ld. Pr.CIT, the assessee had already was erroneous. According to the Ld. Pr.CIT, the assessee had already was erroneous. According to the Ld. Pr.CIT, the assessee had already claimed all the expenditure in the Profit & Loss Account and no evidence claimed all the expenditure in the Profit & Loss Account and no evidence claimed all the expenditure in the Profit & Loss Account and no evidence was adduced for any additiona was adduced for any additional expenditure and therefore, according to l expenditure and therefore, according to him, the entire suppressed receipts ought to have been brought to tax. It him, the entire suppressed receipts ought to have been brought to tax. It him, the entire suppressed receipts ought to have been brought to tax. It is noted that while quantifying the value of suppressed receipts, the Ld. is noted that while quantifying the value of suppressed receipts, the Ld. is noted that while quantifying the value of suppressed receipts, the Ld. Pr.CIT had computed the differential receipts at Rs.5,80,42,094/ Pr.CIT had computed the differential receipts at Rs.5,80,42,094/ Pr.CIT had computed the differential receipts at Rs.5,80,42,094/- and Rs.45,43,54,220/- as opposed to the figures of Rs. as opposed to the figures of Rs.8,74,13,269 8,74,13,269/- & & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate :: 4 ::
Rs.52,42,88,488/- adopted by the AO, for AYs 2017 adopted by the AO, for AYs 2017-18 & 2018 18 & 2018-19 respectively.
4. The assessee is noted to have furnished their replies to the show The assessee is noted to have furnished their replies to the show The assessee is noted to have furnished their replies to the show cause notices issued u/s 263 of the Act cause notices issued u/s 263 of the Act for both the AYs on the same for both the AYs on the same lines. The copies of these replies are found to be placed at Pages 78 lines. The copies of these replies are found to be placed at Pages 78 lines. The copies of these replies are found to be placed at Pages 78-83 and 163-168 of the Paper 168 of the Paper-book. The Ld. Pr.CIT however did not agree book. The Ld. Pr.CIT however did not agree with the explanations put forth by the assessee and passed the with the explanations put forth by the assessee and passed the with the explanations put forth by the assessee and passed the impugned revisionary orders u/s 263 of the Act for both the AYs 2017 rders u/s 263 of the Act for both the AYs 2017 rders u/s 263 of the Act for both the AYs 2017-18 & 2018-19 dated 22.03.2024, directing the AO to bring to tax the entire differential dated 22.03.2024, directing the AO to bring to tax the entire differential dated 22.03.2024, directing the AO to bring to tax the entire differential receipts between the total receipts from business as per the impounded receipts between the total receipts from business as per the impounded receipts between the total receipts from business as per the impounded laptop and the declared receipts. Aggrieved by the laptop and the declared receipts. Aggrieved by the orders of the Ld. orders of the Ld. Pr.CIT, the assessee is now in appeal before us. Pr.CIT, the assessee is now in appeal before us.
5. Having regard to the facts taken note of above, both sides agreed Having regard to the facts taken note of above, both sides agreed Having regard to the facts taken note of above, both sides agreed that the appeals for both the years are similar and therefore, ITA that the appeals for both the years are similar and therefore, ITA that the appeals for both the years are similar and therefore, AY 2017 No.925/Chny/2024 for AY 2017-18 is taken as the lead case, decision of d case, decision of which will be followed in the appeal for AY 2018 which will be followed in the appeal for AY 2018-19.
Assailing the action of the Ld. Pr.CIT, the Ld. AR for the assessee Assailing the action of the Ld. Pr.CIT, the Ld. AR for the assessee Assailing the action of the Ld. Pr.CIT, the Ld. AR for the assessee submitted that, the impugned reassessment order and the addition made submitted that, the impugned reassessment order and the addition made submitted that, the impugned reassessment order and the addition made therein, which was sought to be set aside therein, which was sought to be set aside by the Ld. Pr.CIT was already in by the Ld. Pr.CIT was already in challenge before the Ld. CIT(A) and pending for adjudication on the date challenge before the Ld. CIT(A) and pending for adjudication on the date challenge before the Ld. CIT(A) and pending for adjudication on the date of invocation of the revisionary jurisdiction. The Ld. AR brought to our of invocation of the revisionary jurisdiction. The Ld. AR brought to our of invocation of the revisionary jurisdiction. The Ld. AR brought to our & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate notice that the assessee had disputed the reliance placed by the AO on notice that the assessee had disputed the reliance placed by the AO on notice that the assessee had disputed the reliance placed by the AO on the disputed seized material i.e. the laptop as well as the contents thereof sputed seized material i.e. the laptop as well as the contents thereof sputed seized material i.e. the laptop as well as the contents thereof and therefore, since the matter was already and therefore, since the matter was already challenged before the Ld. ed before the Ld. CIT(A), who has co-terminus powers of the AO, the Ld. Pr.CIT was terminus powers of the AO, the Ld. Pr.CIT was terminus powers of the AO, the Ld. Pr.CIT was unjustified in simultaneously invoking revisionary unjustified in simultaneously invoking revisionary powers u/s 263 of the powers u/s 263 of the Act on the very same issue and that such action was in violation of the Act on the very same issue and that such action was in violation of the Act on the very same issue and that such action was in violation of the fetter/bar set out in Explanation 1 to Section 263 of the Act. For this, the set out in Explanation 1 to Section 263 of the Act. For this, the set out in Explanation 1 to Section 263 of the Act. For this, the Ld. AR placed reliance on the decision of the Hon’ble jurisdictional Madras Ld. AR placed reliance on the decision of the Hon’ble jurisdictional Madras Ld. AR placed reliance on the decision of the Hon’ble jurisdictional Madras High Court in the case of rt in the case of Smt. Renuka Philip vs ITO (409 ITR 567) (409 ITR 567).
The Ld. AR further argued on merits that the impugned issue had The Ld. AR further argued on merits that the impugned issue had The Ld. AR further argued on merits that the impugned issue had already been critically analyzed in detail by the survey team as well as the already been critically analyzed in detail by the survey team as well as the already been critically analyzed in detail by the survey team as well as the AO. Taking us through the reasons recorded for reopen AO. Taking us through the reasons recorded for reopening, notices issued ing, notices issued u/s 142(1) of the Act as well as the findings recorded in the assessment u/s 142(1) of the Act as well as the findings recorded in the assessment u/s 142(1) of the Act as well as the findings recorded in the assessment orders passed u/s 147 of the Act, the Ld. AR contended that there was no orders passed u/s 147 of the Act, the Ld. AR contended that there was no orders passed u/s 147 of the Act, the Ld. AR contended that there was no lack of enquiry on this issue and therefore, the Ld. Pr.CIT could not lack of enquiry on this issue and therefore, the Ld. Pr.CIT could not lack of enquiry on this issue and therefore, the Ld. Pr.CIT could not interfere with these completed assessments u/s 263 of the Act. The Ld. completed assessments u/s 263 of the Act. The Ld. completed assessments u/s 263 of the Act. The Ld.
AR further brought to our notice a plethora of judgments wherein it has AR further brought to our notice a plethora of judgments wherein it has AR further brought to our notice a plethora of judgments wherein it has been held that, where details of any undisclosed receipts/sales been held that, where details of any undisclosed receipts/sales been held that, where details of any undisclosed receipts/sales are unearthed in the course of any search/survey, then the whole amou unearthed in the course of any search/survey, then the whole amou unearthed in the course of any search/survey, then the whole amount cannot be brought to tax but it is only the profit element embedded cannot be brought to tax but it is only the profit element embedded cannot be brought to tax but it is only the profit element embedded therein which can be assessed to tax. He accordingly submitted that the therein which can be assessed to tax. He accordingly submitted that the therein which can be assessed to tax. He accordingly submitted that the view adopted by the AO bringing to tax the profit element of the view adopted by the AO bringing to tax the profit element of the view adopted by the AO bringing to tax the profit element of the & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate differential receipts was a permissible view in differential receipts was a permissible view in law and therefore, relying law and therefore, relying upon the decision of the upon the decision of the Hon’ble Supreme Court in the case of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT Industrial Co. Ltd. v. CIT (243 ITR 83),he urged that the impugned he urged that the impugned order passed u/s 263 of the Act was bad in law and therefore ought to be order passed u/s 263 of the Act was bad in law and therefore ought to be order passed u/s 263 of the Act was bad in law and therefore ought to be cancelled.
Per contra, the Ld. CIT, DR appearing for the Revenue vehemently Per contra, the Ld. CIT, DR appearing for the Revenue vehemently Per contra, the Ld. CIT, DR appearing for the Revenue vehemently supported the order of the Ld. Pr.CIT. Reiterating the observations of the supported the order of the Ld. Pr.CIT. Reiterating the observations of the supported the order of the Ld. Pr.CIT. Reiterating the observations of the Ld. Pr.CIT, he argued that since the Ld. CIT(A) had not yet passed the d. Pr.CIT, he argued that since the Ld. CIT(A) had not yet passed the d. Pr.CIT, he argued that since the Ld. CIT(A) had not yet passed the appellate order on the issue impugned in the order u/s 263 of the Act, the appellate order on the issue impugned in the order u/s 263 of the Act, the appellate order on the issue impugned in the order u/s 263 of the Act, the bar set out in Explanation 1 to Section 263 of the Act cannot be applied. bar set out in Explanation 1 to Section 263 of the Act cannot be applied. bar set out in Explanation 1 to Section 263 of the Act cannot be applied.
He further submitted that the assessm He further submitted that the assessment order lacked any detailed ent order lacked any detailed discussion on the impugned issue and that the AO did not record any discussion on the impugned issue and that the AO did not record any discussion on the impugned issue and that the AO did not record any basis as to how he arrived at a conclusion to assess only the profit basis as to how he arrived at a conclusion to assess only the profit basis as to how he arrived at a conclusion to assess only the profit element instead of the gross receipts and therefore, this showed that the element instead of the gross receipts and therefore, this showed that the element instead of the gross receipts and therefore, this showed that the reassessment order was passed without application of mind. The Ld. CIT, der was passed without application of mind. The Ld. CIT, der was passed without application of mind. The Ld. CIT, DR therefore urged us not to interfere with the order of the Ld. Pr.CIT. DR therefore urged us not to interfere with the order of the Ld. Pr.CIT. DR therefore urged us not to interfere with the order of the Ld. Pr.CIT.
We have heard both the parties and perused the material placed on We have heard both the parties and perused the material placed on We have heard both the parties and perused the material placed on record before us. It is noted that, record before us. It is noted that, in the case in hand, n the case in hand, the Ld. Pr.CIT invoked jurisdiction u/s 263 u/s 263 of the Act principally on the broad allegation of the Act principally on the broad allegation that there was failure to conduct that there was failure to conduct proper enquiries which the facts of the enquiries which the facts of the case required the AO to make. According to Ld. Pr. O to make. According to Ld. Pr.CIT, the assessment CIT, the assessment & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate order suffered from lack of enquiry as also ack of enquiry as also non-application of application of mind to the facts of the case resulting in a patently erroneous addition. facts of the case resulting in a patently erroneous addition. facts of the case resulting in a patently erroneous addition. As a result, in the opinion of Ld. Pr. CIT, the AO's order was erroneous and the opinion of Ld. Pr. CIT, the AO's order was erroneous and the opinion of Ld. Pr. CIT, the AO's order was erroneous and prejudicial to the interests of the Revenue and the interests of the Revenue and therefore liable for revision e for revision u/s 263 of the Act. Before us, the assessee has seriou he assessee has seriously contested the impugned sly contested the impugned order both on legality as well as on its merits. order both on legality as well as on its merits.
10. We first take up the legal challenge of the assessee which is that We first take up the legal challenge of the assessee which is that We first take up the legal challenge of the assessee which is that the Ld. Pr.CIT was prohibited in terms the Ld. Pr.CIT was prohibited in terms of Explanation 1(c) to Section 263 of Explanation 1(c) to Section 263 of the Act, in directing revision of the impugned issued viz., addition of of the Act, in directing revision of the impugned issued viz., addition of of the Act, in directing revision of the impugned issued viz., addition of entire supressed receipts as opposed to the profit element embedded entire supressed receipts as opposed to the profit element embedded entire supressed receipts as opposed to the profit element embedded therein. It is noted that Explanation (1) to Section 263 of the Act lays therein. It is noted that Explanation (1) to Section 263 of the Act lays therein. It is noted that Explanation (1) to Section 263 of the Act lays down certain circumstances in which t certain circumstances in which the power under Section 263 of the he power under Section 263 of the Act is not exercisable by the Ld. Pr.CIT.The relevant E by the Ld. Pr.CIT.The relevant Explanation 1(c) xplanation 1(c) to Section 263, which is in dispute in the present case, which is in dispute in the present case, reads as follows: reads as follows:
"Revision of orders prejudicial to revenue Revision of orders prejudicial to revenue
263(1)...
(a) to (b)** ** **
(c) Where any order referred to in this sub (c) Where any order referred to in this sub-section and passed by the section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or Assessing Officer had been the subject matter of any appeal [filed on or Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the before or after the 1st day of June, 1988], the powers of the before or after the 1st day of June, 1988], the powers of the Commissioner under th Commissioner under this Sub-section shall extend and shall be deemed section shall extend and shall be deemed always to have extended to such matters as had not been considered always to have extended to such matters as had not been considered always to have extended to such matters as had not been considered and decided in such appeal." and decided in such appeal."
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11. It was brought to our notice that the Hon’ble jurisdictional Madras It was brought to our notice that the Hon’ble jurisdictional Madras It was brought to our notice that the Hon’ble jurisdictional Madras High Court in the case of Renuka Philip High Court in the case of Renuka Philip (supra) has held that the above (supra) has held that the above language used in Explanation 1(c) provides that, language used in Explanation 1(c) provides that, when the appeal is when the appeal is pending before the Commissioner pending before the Commissioner (Appeals), then jurisdiction under jurisdiction under Section 263 of the Act Section 263 of the Act cannot be exercised. In the decided case, the In the decided case, the assessee had originally filed the return of income disclosing long term lly filed the return of income disclosing long term lly filed the return of income disclosing long term capital gain and had claimed the entire sum as exempt u/s 54 of the Act. capital gain and had claimed the entire sum as exempt u/s 54 of the Act. capital gain and had claimed the entire sum as exempt u/s 54 of the Act.
The case of the assessee was reopened u/s 147 of the Act and the AO The case of the assessee was reopened u/s 147 of the Act and the AO The case of the assessee was reopened u/s 147 of the Act and the AO found that the assessee was not eligible for exemption u/s 54 o found that the assessee was not eligible for exemption u/s 54 o found that the assessee was not eligible for exemption u/s 54 of the Act and therefore denied the same, however, at the same time, the AO found and therefore denied the same, however, at the same time, the AO found and therefore denied the same, however, at the same time, the AO found the assessee to be eligible for exemption u/s 54F of the Act and thus the assessee to be eligible for exemption u/s 54F of the Act and thus the assessee to be eligible for exemption u/s 54F of the Act and thus allowed proportionate claim. Aggrieved by this action of the AO, the allowed proportionate claim. Aggrieved by this action of the AO, the allowed proportionate claim. Aggrieved by this action of the AO, the assessee had carried the matter in a assessee had carried the matter in appeal before the CIT(A). In the ppeal before the CIT(A). In the meanwhile, and during the pendency of the appeal, the Ld. CIT had and during the pendency of the appeal, the Ld. CIT had and during the pendency of the appeal, the Ld. CIT had invoked revisionary jurisdiction u/s 263 of the Act wherein he held that, invoked revisionary jurisdiction u/s 263 of the Act wherein he held that, invoked revisionary jurisdiction u/s 263 of the Act wherein he held that, the deduction allowed by the AO u/s 54F of the Act was also erroneous the deduction allowed by the AO u/s 54F of the Act was also erroneous the deduction allowed by the AO u/s 54F of the Act was also erroneous and therefore directed the AO to disallow the same. On appeal, the directed the AO to disallow the same. On appeal, the directed the AO to disallow the same. On appeal, the Hon’ble Madras High Court found that the larger issue which was the Hon’ble Madras High Court found that the larger issue which was the Hon’ble Madras High Court found that the larger issue which was the allowability of exemption u/s 54 of the Act as opposed to Section 54F was allowability of exemption u/s 54 of the Act as opposed to Section 54F was allowability of exemption u/s 54 of the Act as opposed to Section 54F was pending before the CIT(A) and therefore the CIT could not hav pending before the CIT(A) and therefore the CIT could not hav pending before the CIT(A) and therefore the CIT could not have exercised the power u/s 263 of the Act for denying the deduction u/s 54F of the Act, the power u/s 263 of the Act for denying the deduction u/s 54F of the Act, the power u/s 263 of the Act for denying the deduction u/s 54F of the Act, & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate which was already in dispute before the CIT(A). The relevant findings of which was already in dispute before the CIT(A). The relevant findings of which was already in dispute before the CIT(A). The relevant findings of the Hon’ble High Court taken note of by us, is as follows: the Hon’ble High Court taken note of by us, is as follows:-
“22. The above explanation makes it “22. The above explanation makes it clear that when the appeal is clear that when the appeal is pending before the Commissioner, the exercise of jurisdiction under pending before the Commissioner, the exercise of jurisdiction under pending before the Commissioner, the exercise of jurisdiction under Section 263 of the Act is barred. The Commissioner in the order dated Section 263 of the Act is barred. The Commissioner in the order dated Section 263 of the Act is barred. The Commissioner in the order dated 14.03.2012 states that the appeal pertains to the claim made by the 14.03.2012 states that the appeal pertains to the claim made by the 14.03.2012 states that the appeal pertains to the claim made by the assessee under Secti assessee under Section 54 of the Act and it has got nothing to do with on 54 of the Act and it has got nothing to do with the order passed by the Assessing Officer under Section 54F of the Act. the order passed by the Assessing Officer under Section 54F of the Act. the order passed by the Assessing Officer under Section 54F of the Act. The said finding rendered by the Commissioner is wholly unsustainable, The said finding rendered by the Commissioner is wholly unsustainable, The said finding rendered by the Commissioner is wholly unsustainable, since the assessee went on appeal against the re since the assessee went on appeal against the re-assessment or assessment order dated 31.12.2009 stating that his claim for deduction under Section 54 dated 31.12.2009 stating that his claim for deduction under Section 54 dated 31.12.2009 stating that his claim for deduction under Section 54 of the Act should be accepted. of the Act should be accepted.
23. Therefore, in the process of considering as to what relief the 23. Therefore, in the process of considering as to what relief the 23. Therefore, in the process of considering as to what relief the assessee is entitled to, the Assessing Officer held that the assessee is assessee is entitled to, the Assessing Officer held that the assessee is assessee is entitled to, the Assessing Officer held that the assessee is entitled to claim deduction under Section 54F of the Act and assigned o claim deduction under Section 54F of the Act and assigned o claim deduction under Section 54F of the Act and assigned certain reasons for that. Therefore, the larger issue was pending before certain reasons for that. Therefore, the larger issue was pending before certain reasons for that. Therefore, the larger issue was pending before the Commissioner of Appeals, and in such circumstances, the the Commissioner of Appeals, and in such circumstances, the the Commissioner of Appeals, and in such circumstances, the Commissioner could not exercise power under Section 263 of the Commissioner could not exercise power under Section 263 of the Commissioner could not exercise power under Section 263 of the Act on account of the statutory bar. Therefore, on this ground also, the account of the statutory bar. Therefore, on this ground also, the account of the statutory bar. Therefore, on this ground also, the assumption of jurisdiction under Section 263 of the Act was wholly assumption of jurisdiction under Section 263 of the Act was wholly assumption of jurisdiction under Section 263 of the Act was wholly erroneous.”
In light of the above binding legal position, we now revert back to In light of the above binding legal position, we now revert back to In light of the above binding legal position, we now revert back to the facts of the present case. As noted in the preceding paragraphs, the the facts of the present case. As noted in the preceding paragraphs, the the facts of the present case. As noted in the preceding paragraphs, the survey action conducted upon the assessee resulted in impounding of a survey action conducted upon the assessee resulted in impounding of a survey action conducted upon the assessee resulted in impounding of a laptop, which contained purported details of laptop, which contained purported details of the receipts of the assessee the receipts of the assessee from its real estate business, which was found to be substantially higher from its real estate business, which was found to be substantially higher from its real estate business, which was found to be substantially higher than what was reported in the books of accounts. Upon analysis of the than what was reported in the books of accounts. Upon analysis of the than what was reported in the books of accounts. Upon analysis of the same, the AO had recorded specific reasons computing the value of same, the AO had recorded specific reasons computing the value of same, the AO had recorded specific reasons computing the value of suppressed receipts and also working out the undisclosed profit ts and also working out the undisclosed profit ts and also working out the undisclosed profit percentage qua such supressed receipts which had escaped tax. percentage qua such supressed receipts which had escaped tax. percentage qua such supressed receipts which had escaped tax.
Thereafter, after making enquiries in the reassessment, the AO had Thereafter, after making enquiries in the reassessment, the AO had Thereafter, after making enquiries in the reassessment, the AO had & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate framed the assessment order wherein he had brought to tax undisclosed framed the assessment order wherein he had brought to tax undisclosed framed the assessment order wherein he had brought to tax undisclosed profit embedded in the supressed receipts. It was brought to our notice edded in the supressed receipts. It was brought to our notice edded in the supressed receipts. It was brought to our notice that, the assessee had disputed the reliability of the material found from that, the assessee had disputed the reliability of the material found from that, the assessee had disputed the reliability of the material found from the laptop itself, on the ground that the data therein was not put to the the laptop itself, on the ground that the data therein was not put to the the laptop itself, on the ground that the data therein was not put to the test of the provisions of Section 65A and Sec test of the provisions of Section 65A and Section 65B of the Indian tion 65B of the Indian Evidence Act. The assessee had therefore claimed that no addition could Evidence Act. The assessee had therefore claimed that no addition could Evidence Act. The assessee had therefore claimed that no addition could have been made on the basis of such unreliable material. Accordingly, the have been made on the basis of such unreliable material. Accordingly, the have been made on the basis of such unreliable material. Accordingly, the assessee is noted to have disputed the addition of the undisclosed profit assessee is noted to have disputed the addition of the undisclosed profit assessee is noted to have disputed the addition of the undisclosed profit in relation to the suppressed receipts, before the Ld. CIT(A). In the o the suppressed receipts, before the Ld. CIT(A). In the o the suppressed receipts, before the Ld. CIT(A). In the meantime, it is observed that the Ld. Pr.CIT had exercised power u/s 263 meantime, it is observed that the Ld. Pr.CIT had exercised power u/s 263 meantime, it is observed that the Ld. Pr.CIT had exercised power u/s 263 of the Act and passed the impugned order holding that the addition of of the Act and passed the impugned order holding that the addition of of the Act and passed the impugned order holding that the addition of undisclosed profit was unjustified and that the entire r undisclosed profit was unjustified and that the entire receipts ought to eceipts ought to have been added to the total income. Applying the ratio decidendi have been added to the total income. Applying the ratio decidendi have been added to the total income. Applying the ratio decidendi emerging from the above decision (supra), we find that the larger issue emerging from the above decision (supra), we find that the larger issue emerging from the above decision (supra), we find that the larger issue which was the reliability of the impounded material itself, was in dispute which was the reliability of the impounded material itself, was in dispute which was the reliability of the impounded material itself, was in dispute and pending before the Ld. and pending before the Ld. CIT(A), who having the co-terminus powers of terminus powers of the AO was required to look into the entire gamut of the issue before the AO was required to look into the entire gamut of the issue before the AO was required to look into the entire gamut of the issue before passing the appellate order. Accordingly, we find merit in the plea of the passing the appellate order. Accordingly, we find merit in the plea of the passing the appellate order. Accordingly, we find merit in the plea of the assessee that, in terms of bar set out in Explanation 1(c) to Sec assessee that, in terms of bar set out in Explanation 1(c) to Sec assessee that, in terms of bar set out in Explanation 1(c) to Section 263 of the Act and in light of the above binding decision of the Hon’ble Madras of the Act and in light of the above binding decision of the Hon’ble Madras of the Act and in light of the above binding decision of the Hon’ble Madras High Court (supra), the Ld. Pr.CIT was unjustified in exercising revisional High Court (supra), the Ld. Pr.CIT was unjustified in exercising revisional High Court (supra), the Ld. Pr.CIT was unjustified in exercising revisional jurisdiction u/s 263 of the Act on the impugned issue, which was already jurisdiction u/s 263 of the Act on the impugned issue, which was already jurisdiction u/s 263 of the Act on the impugned issue, which was already & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate pending in appeal, and therefore the impugned order being bad in law is therefore the impugned order being bad in law is directed to be cancelled. directed to be cancelled.
For completeness, we For completeness, we also take up the other argument raised by the also take up the other argument raised by the assessee objecting the merits of the impugned order passed u/s 263 of assessee objecting the merits of the impugned order passed u/s 263 of assessee objecting the merits of the impugned order passed u/s 263 of the Act and that the Ld. Pr.CIT had ex the Act and that the Ld. Pr.CIT had exceeded the scope of revisionary ceeded the scope of revisionary jurisdiction vested in himu/s 263 of the Act.For this, jurisdiction vested in himu/s 263 of the Act.For this, we have to first we have to first examine the scope of revisionary jurisdiction u/s 263 examine the scope of revisionary jurisdiction u/s 263 of the Act. For that, of the Act. For that, let us take the guidance let us take the guidance of judicial precedence laid down by laid down by the Hon'ble Apex Court in Malabar Industrial Co. Ltd. v. CIT Malabar Industrial Co. Ltd. v. CIT (243 ITR 83) (243 ITR 83) wherein their Lordships have held that wherein their Lordships have held that twin conditions should be satisfied twin conditions should be satisfied before jurisdiction u/s 263 u/s 263 of the Act is exercised by the Ld. CIT. The twin of the Act is exercised by the Ld. CIT. The twin conditions, which need to be satisfied, are that (i) the order of the conditions, which need to be satisfied, are that (i) the order of the conditions, which need to be satisfied, are that (i) the order of the Assessing Officer must be erroneous and (ii) as a consequence of passing t be erroneous and (ii) as a consequence of passing t be erroneous and (ii) as a consequence of passing an erroneous order, prejudice is caused to the interests of the an erroneous order, prejudice is caused to the interests of the an erroneous order, prejudice is caused to the interests of the Revenue. In the following circumstances, the order of the AO can be held In the following circumstances, the order of the AO can be held In the following circumstances, the order of the AO can be held to be erroneous, i.e. (i) if the Assessing Officer's order was pass to be erroneous, i.e. (i) if the Assessing Officer's order was pass to be erroneous, i.e. (i) if the Assessing Officer's order was passed on assumption of incorrect facts; or assumption of incorrect law; assumption of incorrect facts; or assumption of incorrect law; assumption of incorrect facts; or assumption of incorrect law; or (ii)
Assessing Officer's order is in violation of the principles of natural justice; Assessing Officer's order is in violation of the principles of natural justice; Assessing Officer's order is in violation of the principles of natural justice; or (iii) if the AO's order is passed without application of mind; or (iv) if (iii) if the AO's order is passed without application of mind; or (iv) if (iii) if the AO's order is passed without application of mind; or (iv) if the AO has not investigated the issue before him. It is only under these gated the issue before him. It is only under these gated the issue before him. It is only under these circumstances enumerated in the foregoing, that an order passed by the circumstances enumerated in the foregoing, that an order passed by the circumstances enumerated in the foregoing, that an order passed by the Assessing Officer can be termed as erroneous for the purpose of Assessing Officer can be termed as erroneous for the purpose of Assessing Officer can be termed as erroneous for the purpose of Section & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate :: 12 ::
263 of the Act. Coming to the second limb, the AO's erroneous order can Act. Coming to the second limb, the AO's erroneous order can Act. Coming to the second limb, the AO's erroneous order can be revised by the Ld. CIT only when it is shown that the said order is be revised by the Ld. CIT only when it is shown that the said order is be revised by the Ld. CIT only when it is shown that the said order is prejudicial to the interests of Revenue. When this aspect is examined, one prejudicial to the interests of Revenue. When this aspect is examined, one prejudicial to the interests of Revenue. When this aspect is examined, one has to understand what is prejudicial to the int has to understand what is prejudicial to the interest of the Revenue. The erest of the Revenue. The Hon'ble Supreme Court in the case of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd Malabar Industrial Co. Ltd (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to held that this phrase i.e. "prejudicial to the interest of the revenue'' has to held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction wit be read in conjunction with an "erroneous" order passed by the Assessing h an "erroneous" order passed by the Assessing Officer. The Hon'ble Supreme Court, held that for invoking powers Officer. The Hon'ble Supreme Court, held that for invoking powers Officer. The Hon'ble Supreme Court, held that for invoking powers conferred by Section 263 Section 263; the CIT should not only show that the AO's ; the CIT should not only show that the AO's order is erroneous as a result of any of the situations enumerated above a result of any of the situations enumerated above a result of any of the situations enumerated above but the CIT must also further show that as a result of an erroneous order, but the CIT must also further show that as a result of an erroneous order, but the CIT must also further show that as a result of an erroneous order, some loss is caused to the interests of the Revenue. Their Lordships in some loss is caused to the interests of the Revenue. Their Lordships in some loss is caused to the interests of the Revenue. Their Lordships in the said judgment held that, every loss of revenue as a consequence of an at, every loss of revenue as a consequence of an at, every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests order of Assessing Officer cannot be treated as prejudicial to the interests order of Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. It was further observed that, when the Assessing Officer of the Revenue. It was further observed that, when the Assessing Officer of the Revenue. It was further observed that, when the Assessing Officer adopts one of the course permissible i adopts one of the course permissible in law and it has resulted in loss to n law and it has resulted in loss to the Revenue, or where two views are possible and the Assessing Officer the Revenue, or where two views are possible and the Assessing Officer the Revenue, or where two views are possible and the Assessing Officer has taken one view with which the Ld. CIT does not agree, it cannot be has taken one view with which the Ld. CIT does not agree, it cannot be has taken one view with which the Ld. CIT does not agree, it cannot be treated as an order prejudicial to the interests of the Revenue unless the treated as an order prejudicial to the interests of the Revenue unless the treated as an order prejudicial to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. ew taken by the Assessing Officer is unsustainable in law. ew taken by the Assessing Officer is unsustainable in law.
We note that both in the We note that both in the Show Cause Notice [SCN] as well as in the as well as in the impugned order, it is not the case of it is not the case of the Ld. Pr.CIT that, the AO had not the AO had not & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate made enquiry into the issue. Instead, the case of Ld. Pr.CIT is that, the made enquiry into the issue. Instead, the case of Ld. Pr.CIT is that, the made enquiry into the issue. Instead, the case of Ld. Pr.CIT is that, the AO had not applied his mind at all to the facts gathered in the course of AO had not applied his mind at all to the facts gathered in the course of AO had not applied his mind at all to the facts gathered in the course of assessment. According to the Ld. Pr.CIT, there was no information in the assessment. According to the Ld. Pr.CIT, there was no information in the assessment. According to the Ld. Pr.CIT, there was no information in the assessment order or the file to ind assessment order or the file to indicate that the assessee had furnished icate that the assessee had furnished any details and that the AO had applied his mind to the same before any details and that the AO had applied his mind to the same before any details and that the AO had applied his mind to the same before estimating the profits on the undisclosed receipts, instead of bringing to estimating the profits on the undisclosed receipts, instead of bringing to estimating the profits on the undisclosed receipts, instead of bringing to tax the entire receipts. In the opinion of the Ld. Pr.CIT, the assessee had tax the entire receipts. In the opinion of the Ld. Pr.CIT, the assessee had tax the entire receipts. In the opinion of the Ld. Pr.CIT, the assessee had already claimed the entire expenditure in the Profit & Loss Account and already claimed the entire expenditure in the Profit & Loss Account and already claimed the entire expenditure in the Profit & Loss Account and therefore there was no question of taxing only the profit in the receipts therefore there was no question of taxing only the profit in the receipts therefore there was no question of taxing only the profit in the receipts but the entire receipts ought to have been brought to tax. This inaction of but the entire receipts ought to have been brought to tax. This inaction of but the entire receipts ought to have been brought to tax. This inaction of the AO, according to the Ld. Pr.C the AO, according to the Ld. Pr.CIT, rendered the assessment order to be IT, rendered the assessment order to be erroneous and prejudicial to the interests of the Revenue. erroneous and prejudicial to the interests of the Revenue.
From the material placed on record before us, we find that the AO, From the material placed on record before us, we find that the AO, From the material placed on record before us, we find that the AO, in his recorded reasons, had explicitly set out his mind after examining in his recorded reasons, had explicitly set out his mind after examining in his recorded reasons, had explicitly set out his mind after examining the seized material and the survey team’s analysis that it was the profit aterial and the survey team’s analysis that it was the profit aterial and the survey team’s analysis that it was the profit embedded in the suppressed receipts found from the laptop, which in his embedded in the suppressed receipts found from the laptop, which in his embedded in the suppressed receipts found from the laptop, which in his belief, had escaped assessment. The relevant reasons recorded for belief, had escaped assessment. The relevant reasons recorded for belief, had escaped assessment. The relevant reasons recorded for reopening the assessment for AY 2017 reopening the assessment for AY 2017-18 (lead case) is n 18 (lead case) is noted to be as under:
Survey u/s 133A of the Income Survey u/s 133A of the Income-tax Act, 1961 has been conducted in the case of tax Act, 1961 has been conducted in the case of the assessee on 07.08.2019. For the FY 2016 the assessee on 07.08.2019. For the FY 2016-17 (AY 2017-18), the assessee 18), the assessee firm has disclosed receipts of Rs.3.22 Crores but as per the impounded laptop, firm has disclosed receipts of Rs.3.22 Crores but as per the impounded laptop, firm has disclosed receipts of Rs.3.22 Crores but as per the impounded laptop, the gross receipt is Rs.11.96 Crores. gross receipt is Rs.11.96 Crores.
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No entries found regarding expenditures were found in registers / computer / No entries found regarding expenditures were found in registers / computer / No entries found regarding expenditures were found in registers / computer / laptop. The apparent difference in the receipts worked out to Rs.8.74 Crores and laptop. The apparent difference in the receipts worked out to Rs.8.74 Crores and laptop. The apparent difference in the receipts worked out to Rs.8.74 Crores and adopting the net profit @ 11.59% (after deducting the partner's adopting the net profit @ 11.59% (after deducting the partner's salary from the salary from the receipts), the difference in net profit arrived at 1.01 Crore. On perusal of the receipts), the difference in net profit arrived at 1.01 Crore. On perusal of the receipts), the difference in net profit arrived at 1.01 Crore. On perusal of the ITR, it is clear that the assessee has not disclosed the same. ITR, it is clear that the assessee has not disclosed the same.
Thereafter, it is noted that the AO in his notice u/s 142(1) of the Act dated Thereafter, it is noted that the AO in his notice u/s 142(1) of the Act dated Thereafter, it is noted that the AO in his notice u/s 142(1) of the Act dated 22.03.2022 had set out a detailed questionnaire regarding the suppressed set out a detailed questionnaire regarding the suppressed set out a detailed questionnaire regarding the suppressed receipts found in the impounded laptop. The AO is noted to have also inter alia receipts found in the impounded laptop. The AO is noted to have also receipts found in the impounded laptop. The AO is noted to have also questioned the absence of entries regarding expenditure in the laptop. The questioned the absence of entries regarding expenditure in the laptop. The questioned the absence of entries regarding expenditure in the laptop. The relevant requisition of the AO is noted to relevant requisition of the AO is noted to be as under:
“1. Please furnish statement of computation of your income from all sources “1. Please furnish statement of computation of your income from all sources “1. Please furnish statement of computation of your income from all sources during the year.
2. Please furnish a copy of audit report, Profit and Loss account along with 2. Please furnish a copy of audit report, Profit and Loss account along with 2. Please furnish a copy of audit report, Profit and Loss account along with schedules/notes to accounts, Balance Sheet. schedules/notes to accounts, Balance Sheet.
Please furnish a copy of 3. Please furnish a copy of the partnership deed.
Please reconcile the income declared in the Income tax return filed by you 4. Please reconcile the income declared in the Income tax return filed by you 4. Please reconcile the income declared in the Income tax return filed by you and the tax credit claimed in the return of income for A.Y. 2017 and the tax credit claimed in the return of income for A.Y. 2017 and the tax credit claimed in the return of income for A.Y. 2017-18 with Form 26AS.
Survey u/s 133A of the Income 5. Survey u/s 133A of the Income-tax Act, 1961 has been conducted in the tax Act, 1961 has been conducted in the case of the assessee on C7.08.2019. For the FY 2016 of the assessee on C7.08.2019. For the FY 2016-17 (AY 2017-18), the assessee 18), the assessee firm has disclosed receipts of Rs.3.22 Crores but as per the impounded laptop, firm has disclosed receipts of Rs.3.22 Crores but as per the impounded laptop, firm has disclosed receipts of Rs.3.22 Crores but as per the impounded laptop, the gross receipt is Rs. 11.96 Crores. the gross receipt is Rs. 11.96 Crores.
No entries found regarding expenditures were found in r No entries found regarding expenditures were found in registers / computer / egisters / computer / laptop. The apparent difference in the receipts worked out to Rs.8.74 Crores and laptop. The apparent difference in the receipts worked out to Rs.8.74 Crores and laptop. The apparent difference in the receipts worked out to Rs.8.74 Crores and adopting the net profit ® 11.59% (after deducting the partner's salary from the adopting the net profit ® 11.59% (after deducting the partner's salary from the adopting the net profit ® 11.59% (after deducting the partner's salary from the receipts), the difference in net profit arrived at 1.01 Crore. On perusal receipts), the difference in net profit arrived at 1.01 Crore. On perusal receipts), the difference in net profit arrived at 1.01 Crore. On perusal of the ITR, it is clear that the assessee has not disclosed the same. ITR, it is clear that the assessee has not disclosed the same.
As against the income, it is seen that the assessee has admitted only Rs. As against the income, it is seen that the assessee has admitted only Rs. As against the income, it is seen that the assessee has admitted only Rs. 37,33,880/- as income under the head 'profit and gains from the Business' and as income under the head 'profit and gains from the Business' and as income under the head 'profit and gains from the Business' and not the additional receipts amoun not the additional receipts amounting to net profit of Rs. 1.01 Crore which is ting to net profit of Rs. 1.01 Crore which is ascertained based on the average profit percentage. ascertained based on the average profit percentage.
The assessee has not disclosed the additional receipts admitted during the The assessee has not disclosed the additional receipts admitted during the The assessee has not disclosed the additional receipts admitted during the statement recorded u/s 133A. It is also evident from the survey findings that the statement recorded u/s 133A. It is also evident from the survey findings that the statement recorded u/s 133A. It is also evident from the survey findings that the assessee is not maintaining proper books of accounts. Further, the ascertained ssessee is not maintaining proper books of accounts. Further, the ascertained ssessee is not maintaining proper books of accounts. Further, the ascertained net profit to the tune of Rs.1.01 Crores. Therefore, the income chargeable to tax net profit to the tune of Rs.1.01 Crores. Therefore, the income chargeable to tax net profit to the tune of Rs.1.01 Crores. Therefore, the income chargeable to tax & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate of Rs. 1.01 Crores has escaped assessment as the assessee has not disclosed of Rs. 1.01 Crores has escaped assessment as the assessee has not disclosed of Rs. 1.01 Crores has escaped assessment as the assessee has not disclosed the same.”
It is noted that the assessee had furnished a detailed reply to the noted that the assessee had furnished a detailed reply to the noted that the assessee had furnished a detailed reply to the above notice u/s 142(1) of the Act, copy of which has been placed at Page above notice u/s 142(1) of the Act, copy of which has been placed at Page above notice u/s 142(1) of the Act, copy of which has been placed at Page 23-26 of the Paper-book. The AO thereafter, is noted to have again issued book. The AO thereafter, is noted to have again issued book. The AO thereafter, is noted to have again issued another notice u/s 142(1) of the act dated another notice u/s 142(1) of the act dated 28.03.2022 wherein he is 28.03.2022 wherein he is noted to have called for the complete details of the expenses claimed in noted to have called for the complete details of the expenses claimed in noted to have called for the complete details of the expenses claimed in the Profit & Loss Account. After these enquiries, the AO is noted to have the Profit & Loss Account. After these enquiries, the AO is noted to have the Profit & Loss Account. After these enquiries, the AO is noted to have framed the reassessment order u/s 147 of the Act. On perusal of the framed the reassessment order u/s 147 of the Act. On perusal of the framed the reassessment order u/s 147 of the Act. On perusal of the reassessment order, it is noted that the AO had set out his detailed er, it is noted that the AO had set out his detailed er, it is noted that the AO had set out his detailed findings for bringing to tax the profit element embedded in the findings for bringing to tax the profit element embedded in the findings for bringing to tax the profit element embedded in the undisclosed receipts. The relevant discussion in the assessment order is undisclosed receipts. The relevant discussion in the assessment order is undisclosed receipts. The relevant discussion in the assessment order is noted to be as follows:- -
9. The assessee's arguments are duly cons 9. The assessee's arguments are duly considered and found not to be acceptable idered and found not to be acceptable for the following reasons: for the following reasons:
The impounded materials necessary for arriving at the income has already The impounded materials necessary for arriving at the income has already The impounded materials necessary for arriving at the income has already been handed over to the assessee firm on 23.08.2019. The quantification been handed over to the assessee firm on 23.08.2019. The quantification been handed over to the assessee firm on 23.08.2019. The quantification has been based on the books and documents, ele has been based on the books and documents, electronic devices impounded ctronic devices impounded during the course of survey proceedings. during the course of survey proceedings.
The assessee has not reconciled the apparent difference in receipts which The assessee has not reconciled the apparent difference in receipts which The assessee has not reconciled the apparent difference in receipts which was worked out to Rs. 8.74 crores and net profit of Rs. 1.01 crore has been was worked out to Rs. 8.74 crores and net profit of Rs. 1.01 crore has been was worked out to Rs. 8.74 crores and net profit of Rs. 1.01 crore has been arrived at after adopting the net profi arrived at after adopting the net profit 11.59%, till date, despite the time t 11.59%, till date, despite the time available with the assessee from 23.08.2019 and despite the opportunities available with the assessee from 23.08.2019 and despite the opportunities available with the assessee from 23.08.2019 and despite the opportunities provided during the post survey/ assessment proceedings. Presently, the provided during the post survey/ assessment proceedings. Presently, the provided during the post survey/ assessment proceedings. Presently, the assessee is taking an unfounded prayer that the assessment is based on assessee is taking an unfounded prayer that the assessment is based on assessee is taking an unfounded prayer that the assessment is based on statements, loose sheets/excel sheets/pen drives, etc. tatements, loose sheets/excel sheets/pen drives, etc.
There is no evidence whatsoever that the assessee was under duress during There is no evidence whatsoever that the assessee was under duress during There is no evidence whatsoever that the assessee was under duress during the course of survey proceedings and it has taken more than 4 years for the the course of survey proceedings and it has taken more than 4 years for the the course of survey proceedings and it has taken more than 4 years for the assessee to retract from the findings admitted by t assessee to retract from the findings admitted by the assessee, Shri. he assessee, Shri. C.Balakrishnan (one of the partners of the firm) in statement u/s.133A of C.Balakrishnan (one of the partners of the firm) in statement u/s.133A of C.Balakrishnan (one of the partners of the firm) in statement u/s.133A of the Income-tax Act, 1961. Therefore, the plea of the assessee that Shri tax Act, 1961. Therefore, the plea of the assessee that Shri tax Act, 1961. Therefore, the plea of the assessee that Shri C.Balakrishnan (one of the partners of the firm) was under duress cannot C.Balakrishnan (one of the partners of the firm) was under duress cannot C.Balakrishnan (one of the partners of the firm) was under duress cannot be accepted. In fa be accepted. In fact, the findings are based on impounded materials and ct, the findings are based on impounded materials and not just on mere statements recorded. not just on mere statements recorded.
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The assessee firm was also requested to produce documentary evidences 10. The assessee firm was also requested to produce documentary evidences 10. The assessee firm was also requested to produce documentary evidences regarding land owners payments, details of the land owners. No such details regarding land owners payments, details of the land owners. No such details regarding land owners payments, details of the land owners. No such details have been produced by the assessee till date. The assessee vide letter dated uced by the assessee till date. The assessee vide letter dated uced by the assessee till date. The assessee vide letter dated 26.03.2022 has stated that the Gross Receipts declared by the assessee was 26.03.2022 has stated that the Gross Receipts declared by the assessee was 26.03.2022 has stated that the Gross Receipts declared by the assessee was Rs.6.15 Crores and not Rs. 3.22 Crores. The assessee has stated that the Rs.6.15 Crores and not Rs. 3.22 Crores. The assessee has stated that the Rs.6.15 Crores and not Rs. 3.22 Crores. The assessee has stated that the amount of Rs.3.22 Crores represents the net s amount of Rs.3.22 Crores represents the net surplus transferred to the profit urplus transferred to the profit and loss account after deducting Land owner payment of Rs.2.93 Crores against and loss account after deducting Land owner payment of Rs.2.93 Crores against and loss account after deducting Land owner payment of Rs.2.93 Crores against the Land owner receipts of Rs.6.15 Crores. However, in the absence of details the Land owner receipts of Rs.6.15 Crores. However, in the absence of details the Land owner receipts of Rs.6.15 Crores. However, in the absence of details regarding land owner payments, the argument cannot be accepted. regarding land owner payments, the argument cannot be accepted. regarding land owner payments, the argument cannot be accepted.
With the materials available on record, the difference in net profit was With the materials available on record, the difference in net profit was With the materials available on record, the difference in net profit was arrived at 1.01 Crore. The assessee has not controverted the finding with arrived at 1.01 Crore. The assessee has not controverted the finding with arrived at 1.01 Crore. The assessee has not controverted the finding with material evidences/reconciliation. Therefore, an amount of Rs.1.01 crore has material evidences/reconciliation. Therefore, an amount of Rs.1.01 crore has material evidences/reconciliation. Therefore, an amount of Rs.1.01 crore has been added to the total income been added to the total income of the assessee.
In light of the above narrated facts, it is noted that, the AO had In light of the above narrated facts, it is noted that, the AO had In light of the above narrated facts, it is noted that, the AO had examined the survey material, applied his mind, recorded his reasons for examined the survey material, applied his mind, recorded his reasons for examined the survey material, applied his mind, recorded his reasons for reopening the assessment, and thereafter, he made specific enquiries reopening the assessment, and thereafter, he made specific enquiries reopening the assessment, and thereafter, he made specific enquiries from the assessee and then from the assessee and then, recorded his findings for bringing to tax the , recorded his findings for bringing to tax the undisclosed profit qua the suppressed receipts found in the impounded undisclosed profit qua the suppressed receipts found in the impounded undisclosed profit qua the suppressed receipts found in the impounded material. Having taken note of these facts, we are therefore unable to material. Having taken note of these facts, we are therefore unable to material. Having taken note of these facts, we are therefore unable to subscribe to the Ld. Pr.CIT’s finding that the AO had framed the im subscribe to the Ld. Pr.CIT’s finding that the AO had framed the im subscribe to the Ld. Pr.CIT’s finding that the AO had framed the impugned assessment without applying his mind to the facts of the present case. assessment without applying his mind to the facts of the present case. assessment without applying his mind to the facts of the present case.
Rather, we find that, the AO had made specific enquiries and also Rather, we find that, the AO had made specific enquiries and also Rather, we find that, the AO had made specific enquiries and also recorded his findings for assessing the undisclosed profit. recorded his findings for assessing the undisclosed profit.
Before us the Ld. CIT, DR however had argued th Before us the Ld. CIT, DR however had argued th Before us the Ld. CIT, DR however had argued that the figures adopted by the AO for working out the suppressed profits was incorrect, adopted by the AO for working out the suppressed profits was incorrect, adopted by the AO for working out the suppressed profits was incorrect, which showed that he had not applied his mind to the facts of the case. In which showed that he had not applied his mind to the facts of the case. In which showed that he had not applied his mind to the facts of the case. In this regard, it is noted that the quantification of gross receipts as per the this regard, it is noted that the quantification of gross receipts as per the this regard, it is noted that the quantification of gross receipts as per the laptop made by the AO has not been disputed by the Ld. Pr.CIT. It is he AO has not been disputed by the Ld. Pr.CIT. It is he AO has not been disputed by the Ld. Pr.CIT. It is noted that, the dispute relates the computation of gross receipts as per noted that, the dispute relates the computation of gross receipts as per noted that, the dispute relates the computation of gross receipts as per & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate :: 17 ::
books of accounts. According to Ld. Pr.CIT, had the AO applied his mind, books of accounts. According to Ld. Pr.CIT, had the AO applied his mind, books of accounts. According to Ld. Pr.CIT, had the AO applied his mind, then he would have noted that the gross receipts as per b then he would have noted that the gross receipts as per b then he would have noted that the gross receipts as per books of accounts at Rs.6,15,77, ,447/- and not Rs.3,22,02,272/-, as stated in the , as stated in the assessment order. It was brought to our notice that, this particular aspect assessment order. It was brought to our notice that, this particular aspect assessment order. It was brought to our notice that, this particular aspect had been pointed out by the assessee itself in their reply to notice u/s had been pointed out by the assessee itself in their reply to notice u/s had been pointed out by the assessee itself in their reply to notice u/s 142(1) of the Act, wherein 142(1) of the Act, wherein it was submitted before the AO that, it was submitted before the AO that, the gross receipts as per books of accounts was Rs.6 receipts as per books of accounts was Rs.6,15,77,447/ 447/- and not Rs.3,22,02,272/-. The AO is noted to have specifically taken note of this . The AO is noted to have specifically taken note of this . The AO is noted to have specifically taken note of this contention but rejected the same, which have already taken note of contention but rejected the same, which have already taken note of contention but rejected the same, which have already taken note of above. However, for the sake of convenience, the relevant observations . However, for the sake of convenience, the relevant observations . However, for the sake of convenience, the relevant observations made by the AO, in this regard, are being again reproduced made by the AO, in this regard, are being again reproduced made by the AO, in this regard, are being again reproduced hereunder: -
“.. The assessee vide letter dated 26.03.2022 has stated that the Gross .. The assessee vide letter dated 26.03.2022 has stated that the Gross .. The assessee vide letter dated 26.03.2022 has stated that the Gross Receipts declared by the assessee was Rs.6.15 Receipts declared by the assessee was Rs.6.15 Crores and not Rs. 3.22 Crores and not Rs. 3.22 Crores. The assessee has stated that the amount of Rs.3.22 Crores Crores. The assessee has stated that the amount of Rs.3.22 Crores Crores. The assessee has stated that the amount of Rs.3.22 Crores represents the net surplus transferred to the profit and loss account represents the net surplus transferred to the profit and loss account represents the net surplus transferred to the profit and loss account after deducting Land owner payment of Rs.2.93 Crores against the Land after deducting Land owner payment of Rs.2.93 Crores against the Land after deducting Land owner payment of Rs.2.93 Crores against the Land owner receipts of Rs.6.15 owner receipts of Rs.6.15 Crores. However, in the absence of details Crores. However, in the absence of details regarding land owner payments, the argument cannot be accepted.” regarding land owner payments, the argument cannot be accepted.” regarding land owner payments, the argument cannot be accepted.”
In light of the above, we are therefore unable to countenance this In light of the above, we are therefore unable to countenance this In light of the above, we are therefore unable to countenance this line of argument by the Revenue that the AO had not applied his mind to line of argument by the Revenue that the AO had not applied his mind to line of argument by the Revenue that the AO had not applied his mind to acts of the case and had ex-facie adopted incorrect figure while the facts of the case and had adopted incorrect figure while computing the addition. Instead, it is observed that the AO had computing the addition. Instead, it is observed that the AO had computing the addition. Instead, it is observed that the AO had specifically considered this aspect and rejected the same and hence it specifically considered this aspect and rejected the same and hence it specifically considered this aspect and rejected the same and hence it cannot be said to be a case of non cannot be said to be a case of non-application of mind. application of mind. Moreover, as rightly pointed out by the Ld. AR of the assessee that, the action of the rightly pointed out by the Ld. AR of the assessee that, the action of the rightly pointed out by the Ld. AR of the assessee that, the action of the & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate :: 18 ::
AO did not cause any prejudice to the interests of the Revenue, because AO did not cause any prejudice to the interests of the Revenue, because AO did not cause any prejudice to the interests of the Revenue, because he had resultantly computed a higher value of suppressed receipts in the he had resultantly computed a higher value of suppressed receipts in the he had resultantly computed a higher value of suppressed receipts in the relevant AY 2017-18. If 18. If this action of the AO is interfered with, then it this action of the AO is interfered with, then it would result in reduction in the value of suppressed receipts, which would result in reduction in the value of suppressed receipts, which would result in reduction in the value of suppressed receipts, which cannot be done u/s 263 of the Act. For these reasons, we reject this cannot be done u/s 263 of the Act. For these reasons, we reject this cannot be done u/s 263 of the Act. For these reasons, we reject this particular line of contention of the Revenue. particular line of contention of the Revenue.
We further note that the Ld. Pr.CIT had laid much emphasis on the We further note that the Ld. Pr.CIT had laid much emphasis on the We further note that the Ld. Pr.CIT had laid much emphasis on the aspect that, as the assessee was unable to bring on record evidences aspect that, as the assessee was unable to bring on record evidences aspect that, as the assessee was unable to bring on record evidences regarding incurrence of expenses outside the books, the AO should not regarding incurrence of expenses outside the books, the AO should not regarding incurrence of expenses outside the books, the AO should not have taxed the profit element but the entire value have taxed the profit element but the entire value of receipts, and such of receipts, and such action of the AO showed his non action of the AO showed his non-application of mind. The Ld. Pr. CIT is application of mind. The Ld. Pr. CIT is noted to have proceeded on the assumption that, the entire expenses had noted to have proceeded on the assumption that, the entire expenses had noted to have proceeded on the assumption that, the entire expenses had already been recorded in the P&L A/c and that there already been recorded in the P&L A/c and that there were were no expenses incurred outside the books and therefore the entire receipt ought to be books and therefore the entire receipt ought to be books and therefore the entire receipt ought to be brought to tax. The Ld. AR has rightly pointed out that, these brought to tax. The Ld. AR has rightly pointed out that, these brought to tax. The Ld. AR has rightly pointed out that, these observations of the Ld. Pr.CIT is based on his own subjective notion and is observations of the Ld. Pr.CIT is based on his own subjective notion and is observations of the Ld. Pr.CIT is based on his own subjective notion and is not backed by any cogent material or evidence. We are in agreement not backed by any cogent material or evidence. We are in agreement not backed by any cogent material or evidence. We are in agreement with the Ld. AR that, the Ld. Pr.CIT has essentially sought to substitute his the Ld. AR that, the Ld. Pr.CIT has essentially sought to substitute his the Ld. AR that, the Ld. Pr.CIT has essentially sought to substitute his own view with the view adopted by the AO. However, for doing so, as own view with the view adopted by the AO. However, for doing so, as own view with the view adopted by the AO. However, for doing so, as noted in the preceding paragraphs, the Ld. Pr.CIT is required to noted in the preceding paragraphs, the Ld. Pr.CIT is required to noted in the preceding paragraphs, the Ld. Pr.CIT is required to demonstrate that the view adopted by the AO demonstrate that the view adopted by the AO was a patently was a patently unsustainable view in law. But, if there are two views possible on this unsustainable view in law. But, if there are two views possible on this unsustainable view in law. But, if there are two views possible on this & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate :: 19 ::
aspect, and the AO had adopted the view which favoured the assessee, aspect, and the AO had adopted the view which favoured the assessee, aspect, and the AO had adopted the view which favoured the assessee, then such action of the AO cannot be termed as ‘erroneous’ in terms of then such action of the AO cannot be termed as ‘erroneous’ in terms of then such action of the AO cannot be termed as ‘erroneous’ in terms of Section 263 of the Act. This Section 263 of the Act. This proposition is supported by the decision of proposition is supported by the decision of Hon’ble Supreme Court in the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. Malabar Industrial Co. Ltd. v.
CIT (supra).
It was brought to our notice that, the view entertained by the AO It was brought to our notice that, the view entertained by the AO It was brought to our notice that, the view entertained by the AO bringing to tax the profit element qua the undisclosed receipts bringing to tax the profit element qua the undisclosed receipts bringing to tax the profit element qua the undisclosed receipts was based on the proposition that it cannot be a matter of argument that, on the proposition that it cannot be a matter of argument that, on the proposition that it cannot be a matter of argument that, the amount of receipts/ sales by itself would represent the income of the amount of receipts/ sales by itself would represent the income of the amount of receipts/ sales by itself would represent the income of the assessee. For this, our attention was invite our attention was invited to the following findings following findings rendered by the Hon’ble Gujarat High Court in the case of ble Gujarat High Court in the case of ble Gujarat High Court in the case of CIT Vs President Industries (258 ITR 654) President Industries (258 ITR 654).
"3. Having perused the assessment order made by the Assessing Officer, "3. Having perused the assessment order made by the Assessing Officer, "3. Having perused the assessment order made by the Assessing Officer, the order made by the Commissioner (Appeals) and the Tri the order made by the Commissioner (Appeals) and the Tribunal, we are bunal, we are satisfied that the Tribunal was justified in rejecting the application under satisfied that the Tribunal was justified in rejecting the application under satisfied that the Tribunal was justified in rejecting the application under section 256(1). It cannot be a matter of an argument that the amount of section 256(1). It cannot be a matter of an argument that the amount of section 256(1). It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not sales by itself cannot represent the income of the assessee who has not sales by itself cannot represent the income of the assessee who has not disclosed the sales. disclosed the sales. The sales only represent the price received by the The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred seller of the goods for the acquisition of which it has already incurred seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only the cost. It is the realisation of excess over the cost incurred that only the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of forms part of the profit included in the consideration of sales. Therefore, sales. Therefore, unless there is a finding to the effect that investment by way of unless there is a finding to the effect that investment by way of unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold has been made incurring cost in acquiring goods which have been sold has been made incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question, by the assessee and that has also not been disclosed, the question, by the assessee and that has also not been disclosed, the question, whether entire sum of undisclosed whether entire sum of undisclosed sale proceeds can be treated as sale proceeds can be treated as income of the relevant assessment year answers by itself in the income of the relevant assessment year answers by itself in the income of the relevant assessment year answers by itself in the negative. The record goes to show that there is no finding nor any negative. The record goes to show that there is no finding nor any negative. The record goes to show that there is no finding nor any material has been referred to about the suppression of investment in material has been referred to about the suppression of investment in material has been referred to about the suppression of investment in acquiring the goods whic acquiring the goods which have been found subject of undisclosed h have been found subject of undisclosed sales."
& 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate :: 20 ::
It was also brought to our attention that, on similar It was also brought to our attention that, on similar set of facts, this set of facts, this Tribunal at Mumbai in the case of in the case of M/s Prime Developers Vs ACIT ( M/s Prime Developers Vs ACIT (ITA No. 175-178/M/2010 178/M/2010) had rejected the Revenue’s plea that the p had rejected the Revenue’s plea that the profit should not be estimated on the undisclosed sales unless the assessee was should not be estimated on the undisclosed sales unless the assessee was should not be estimated on the undisclosed sales unless the assessee was able to substantiate the incurrence of expenses with evidences. This able to substantiate the incurrence of expenses with evidences. This able to substantiate the incurrence of expenses with evidences. This Tribunal is noted to have upheld the assessee’ ted to have upheld the assessee’s plea for estimation of s plea for estimation of profit element embedded in profit element embedded in suppressed receipts in real estate business, receipts in real estate business, by observing as under:- -
"42. Scope of Reasonable Expenditure: Assessee needs to expend in "42. Scope of Reasonable Expenditure: Assessee needs to expend in "42. Scope of Reasonable Expenditure: Assessee needs to expend in order to earn income/profit and it is basic and universal principle in any order to earn income/profit and it is basic and universal principle in any order to earn income/profit and it is basic and universal principle in any business. This principle applies to both accounted and u business. This principle applies to both accounted and u business. This principle applies to both accounted and unaccounted profits. In a case of unaccounted profits, due to its very nature of profits. In a case of unaccounted profits, due to its very nature of profits. In a case of unaccounted profits, due to its very nature of unaccounting, normally, the parties do not maintain evidences and unaccounting, normally, the parties do not maintain evidences and unaccounting, normally, the parties do not maintain evidences and therefore, evidencing such unaccounted evidences is impossibility. therefore, evidencing such unaccounted evidences is impossibility. therefore, evidencing such unaccounted evidences is impossibility. Probably, for this reason, the courts have Probably, for this reason, the courts have taken conscious view that it is taken conscious view that it is for the assessing authority to quantify reasonable expenditure for the assessing authority to quantify reasonable expenditure for the assessing authority to quantify reasonable expenditure considering the facts of the case and industry. Legally speaking, the considering the facts of the case and industry. Legally speaking, the considering the facts of the case and industry. Legally speaking, the judgments are uniform in asserting that entire sale proceeds should not judgments are uniform in asserting that entire sale proceeds should not judgments are uniform in asserting that entire sale proceeds should not be added as income. be added as income. Honble High court of Ahmadabad ruled in the case Honble High court of Ahmadabad ruled in the case of Panna Corporation that the " assessee ought to have spent of Panna Corporation that the " assessee ought to have spent of Panna Corporation that the " assessee ought to have spent reasonable amount for the purpose of receiving such gross profit' (para reasonable amount for the purpose of receiving such gross profit' (para reasonable amount for the purpose of receiving such gross profit' (para 14 of Tax Appeal No 325 of 2000 dt. 16.6.2012). Further, Hon'ble High 14 of Tax Appeal No 325 of 2000 dt. 16.6.2012). Further, Hon'ble High 14 of Tax Appeal No 325 of 2000 dt. 16.6.2012). Further, Hon'ble High Court Of Madhya Pradesh held in the case of President Industries 258 ya Pradesh held in the case of President Industries 258 ya Pradesh held in the case of President Industries 258 ITR 654 that ' entire sale proceeds of the assessee should not be added ITR 654 that ' entire sale proceeds of the assessee should not be added ITR 654 that ' entire sale proceeds of the assessee should not be added in his income'. Further, from the judgment in case of Panna Corporation in his income'. Further, from the judgment in case of Panna Corporation in his income'. Further, from the judgment in case of Panna Corporation (supra), it is settled proposition that there (supra), it is settled proposition that there is no need for the assessee to is no need for the assessee to demonstrate the genuineness of the claim of unaccounted expenditure demonstrate the genuineness of the claim of unaccounted expenditure demonstrate the genuineness of the claim of unaccounted expenditure in the cases of this kind. The underlined logic is that the unaccounted in the cases of this kind. The underlined logic is that the unaccounted in the cases of this kind. The underlined logic is that the unaccounted expenditure is always unevidenced and never maintained. Therefore, expenditure is always unevidenced and never maintained. Therefore, expenditure is always unevidenced and never maintained. Therefore, transferring onus transferring onus on to the assessee in matters of this kind is not on to the assessee in matters of this kind is not approved. Ex consequenti, it is for the AO allow necessarily reasonable approved. Ex consequenti, it is for the AO allow necessarily reasonable approved. Ex consequenti, it is for the AO allow necessarily reasonable deduction towards such unaccounted expenditure without demanding deduction towards such unaccounted expenditure without demanding deduction towards such unaccounted expenditure without demanding evidences, considering the nature of industry and also evidences rela evidences, considering the nature of industry and also evidences rela evidences, considering the nature of industry and also evidences relating to extents of net profits earned by the assessee. Considering the above to extents of net profits earned by the assessee. Considering the above to extents of net profits earned by the assessee. Considering the above legal position on the matter, we are of the clear legal position on the matter, we are of the clear-cut opinion, the AO's cut opinion, the AO's conclusions on this issue are certainly erroneous. In principle, we uphold conclusions on this issue are certainly erroneous. In principle, we uphold conclusions on this issue are certainly erroneous. In principle, we uphold & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate the views of the CIT(A) in this the views of the CIT(A) in this regard. Therefore, relevant grounds regard. Therefore, relevant grounds raised in the revenue's appeals are dismissed." raised in the revenue's appeals are dismissed."
It was brought to our notice that the above findings of this Tribuna It was brought to our notice that the above findings of this Tribuna It was brought to our notice that the above findings of this Tribunal have been affirmed by the Hon’ have been affirmed by the Hon’ble Bombay High Court in their decision ble Bombay High Court in their decision of 2 rendered in of 2013. Likewise, it is noted that in the case of , it is noted that in the case of ITO Vs. Anand Builders(ITA No.52 of 2002) ITO Vs. Anand Builders(ITA No.52 of 2002), this Tribunal in similar , this Tribunal in similar circumstances had held that, 8% of the unaccounted on circumstances had held that, 8% of the unaccounted on-money could be money could be taxed in place of the entire unaccounted on taxed in place of the entire unaccounted on-money receipts since there is money receipts since there is always the unaccounted payments. The above decision of this Tribunal is always the unaccounted payments. The above decision of this Tribunal is always the unaccounted payments. The above decision of this Tribunal is noted to have been upheld by been upheld by the Hon’ble Gujarat High Court and the SLP ble Gujarat High Court and the SLP filed against the judgment before the Supreme Court filed against the judgment before the Supreme Court [SLP(C) no 14166 0f [SLP(C) no 14166 0f 2003] was also dismissed and reported in 265 ITR 3 was also dismissed and reported in 265 ITR 37 as under; as under;-
"Dismissed the special leave petition filed by the Department "Dismissed the special leave petition filed by the Department "Dismissed the special leave petition filed by the Department against the judgment dated January 21, 2002 of the Gujarat High Court in dated January 21, 2002 of the Gujarat High Court in dated January 21, 2002 of the Gujarat High Court in ITA No. 52 of 2002 whereby the High Court dismissed the Department's appeal 52 of 2002 whereby the High Court dismissed the Department's appeal 52 of 2002 whereby the High Court dismissed the Department's appeal on the ground that no substantial question of law arose. The question of on the ground that no substantial question of law arose. The question of on the ground that no substantial question of law arose. The question of law raised in the appeal before th law raised in the appeal before the High Court was whether the e High Court was whether the Appellate Tribunal's finding while directing the Assessing Officer to tax Appellate Tribunal's finding while directing the Assessing Officer to tax Appellate Tribunal's finding while directing the Assessing Officer to tax only 8 per cent of the unaccounted on money receipt instead of fully only 8 per cent of the unaccounted on money receipt instead of fully only 8 per cent of the unaccounted on money receipt instead of fully taxing it, in the absence of any evidence of expenditure, could not be taxing it, in the absence of any evidence of expenditure, could not be taxing it, in the absence of any evidence of expenditure, could not be stated to be perverse." perverse."
The Ld. AR also brought to our notice another decision of Hon’ble The Ld. AR also brought to our notice another decision of Hon’ble The Ld. AR also brought to our notice another decision of Hon’ble Gujarat High Court in the case of in the case of PCIT, Surat Vs. Anupam Organiser PCIT, Surat Vs. Anupam Organiser [(2020) (9) TMI 973 (2020) (9) TMI 973] wherein it was held that, the Tribunal was the Tribunal was justified in considering that the assessee o justified in considering that the assessee ought to have spent reasonable ught to have spent reasonable amount for the purpose of receiving the amount of on amount for the purpose of receiving the amount of on-monies and thus, monies and thus, & 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate what could be brought to tax was the profit embedded in such receipts what could be brought to tax was the profit embedded in such receipts what could be brought to tax was the profit embedded in such receipts and not the entire receipts. and not the entire receipts.
In light of the above decisions (supra), above decisions (supra), we find that the view adopted by the AO of not taxing adopted by the AO of not taxing the entire value of suppressed suppressed receipts but only the profit element embedded therein but only the profit element embedded therein, was indeed a permissible , was indeed a permissible view in law, in the facts and circumstances of this case. in the facts and circumstances of this case.
For the reasons set out above, we there For the reasons set out above, we therefore are of the considered are of the considered view that the order dated the order dated 31.03.2022 passed by the AO passed by the AO bringing to tax the profit element of the undisclosed / suppressed receipts instead of the profit element of the undisclosed / suppressed receipts instead of the profit element of the undisclosed / suppressed receipts instead of taxing the entire value, cannot also be said to be unsustainable in law. As , cannot also be said to be unsustainable in law. As , cannot also be said to be unsustainable in law. As noted above, the course adopted by the AO while passing the order u/s the course adopted by the AO while passing the order u/s the course adopted by the AO while passing the order u/s 143(3)/147 of the Act was one of the permissible views in law. of the Act was one of the permissible views in law. of the Act was one of the permissible views in law. We are of therefore of considered view that the assessment order dated therefore of considered view that the assessment order dated therefore of considered view that the assessment order dated 31.03.2022 passed u/s 147 cannot be said to have been passed u/s 147 cannot be said to have been passed without application of hout application of mind or on incorrect assumption of facts. As noted above, the AO while mind or on incorrect assumption of facts. As noted above, the AO while mind or on incorrect assumption of facts. As noted above, the AO while passing the assessment order had discharged the dual role and has taken passing the assessment order had discharged the dual role and has taken passing the assessment order had discharged the dual role and has taken a plausible view in law, which cannot be said to be unsustainable in law. a plausible view in law, which cannot be said to be unsustainable in law. a plausible view in law, which cannot be said to be unsustainable in law.
In the aforesaid facts and circumstances therefore, the impugned order cts and circumstances therefore, the impugned order cts and circumstances therefore, the impugned order u/s 263 of the Act dated u/s 263 of the Act dated 22.03.2024 is held to be unsustainable. Hence, is held to be unsustainable. Hence, we cancel the same by allowing the appeal of the assessee. we cancel the same by allowing the appeal of the assessee. we cancel the same by allowing the appeal of the assessee.
& 926/Chny/2024 925 & 926/Chny/2024 (AYs 20 2017-18 & 2018-19) Vanavil Estate :: 23 ::
Since the facts and circumstances in the lead cas Since the facts and circumstances in the lead cas Since the facts and circumstances in the lead case under consideration, being AY 2017 consideration, being AY 2017-18 are identical to the facts & circumstances 18 are identical to the facts & circumstances 19, our above decision shall apply mutatis mutandis mutatis mutandis involved in AY 2018-19, to the assessee’s appeal in the assessee’s appeal in as well 926/Chny/2024 as well. Hence, we accordingly cancel the accordingly cancel the impugned order u/s 263 of the Act dated order u/s 263 of the Act dated 22.03.0204 for AY 2018 22.03.0204 for AY 2018-19 as well.
In the result, the appeal for both AYs 2017 In the result, the appeal for both AYs 2017-18 & 2018 18 & 2018-19 stands allowed.
Order pronounced on the 12th day of February, 2025, in Chennai. Order pronounced on the , in Chennai.