QADER ABDUL RAZZAQUE ABDUL,AURANGABAD vs. PRINCIPAL COMMISSIONER OF INCOME TAX , NASHIK

With reference to declaration in Stock- That the Hon'ble PCIT has erred in setting aside the Assessment order without following decision given by the Hon'ble Juri ictional ITAT given in another case.

With reference to Scrutiny Selection and Assessment in Survey cases- Despite the above facts the initial selection of Case for Scrutiny Assessment and thereafter setting aside the same though the Returned Income was accepted in true spirits as per the CBDT instructions. That, the CBDT has clearly specified that the case cannot be selected for Scrutiny if the Assessee has not retracted from 2

With reference to declaration in- That the Hon'ble PCIT has erred in Setting aside the Assessment without verifying the submission made, though the declaration taken by the Authority was for Business related Stock arise on account of Various years variation and not on actual differences which clearly indicated about the source and nature of Income which is also duly accepted by the confirming order of the Learned Assessing Officer (Lrd. AO) without applying Section 69.That setting aside the order is not proper and as per legal interpretation when there are no other documents on record NIL to established other source of Income except the Business Income since inception by the Assessee.

With reference to Setting aside the Assessment order – The Hon'ble PCIT has erred in Setting aside the order of the Learned Assessing Officer (Lrd. AO) holding the order passed by the AO as erroneous and prejudicial to the interest of the revenue.

The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.”

Briefly stated the facts are that the assessee, a proprietor of M/s Captain Colour Home, Aurangabad is engaged in the business of wholesale and retail of paints. For AY 2019-20, the assessee filed his return of income on 24.10.2019 declaring total income of Rs.71,12,860/-. The assessee made a declaration of Rs.38,01,000/- on account of excess stock during the course of survey action u/s 133A of the Income Tax Act, 1961 (the “Act”) conducted on 25.02.2019 and offered same for taxation while filing the return of income for the AY 2019-20. Thereafter, the case was selected for compulsory scrutiny under CASS for the reason “case is pertaining to survey u/s 133A of the Act”. Notice u/s 143(2) of the Act was issued in response to which the assessee submitted that the amount declared during the survey proceedings was offered in his Income Tax return filed on 24.10.2019 in addition to his normal income. During the course of assessment proceeding, the Ld. Assessing Officer (“AO”) verified the same and finalized the assessment by accepting the returned income of the assessee.

While carrying out review of scrutiny assessment in the case of the assessee, the Ld. PCIT noticed that during the survey action, the assessee was unable to answer regarding the difference in stock at Rs.38,01,000/- and could not submit any plausible evidence. During the assessment proceedings in response to notice u/s 143(2) the assessee has filed his

The assessee responded and submitted the detailed explanation regarding the non-applicability of section 69 read with 115BBE on amount of Rs. 38,01,000/- declared by the assessee on account of unexplained investment during the survey proceedings, which is incorporated in paragraph 5 of the Ld. PCIT‟s order. The crux of the assessee‟s submission was that the income is offered to tax under the head “Income from Business, the Ld. AO also assessed the same under the head „Income from Business‟. The additional income is derived from business and hence it cannot be said that the source for the additional income remained unexplained for applying the provisions of section 69B read with 115BBE of the Act. The excess stock and cash found was of business income and same has been duly offered for taxation and has been verified during the assessment proceedings and the returned income was accepted as well. The assessee has no income other than business income and stock difference was due to non completion/ finalization of books at the relevant point of time. Further, no instances of unaccounted purchases were found by the survey team and therefore, the excess stock and cash found represent business income only.

The submissions of the assessee were not acceptable to the Ld. PCIT. The Ld. PCIT was of the opinion that the proceedings initiated by him under section 263 of the Act are in accordance with law and therefore directed the Ld. AO to frame the assessment afresh by observing as under:

It is against the direction of the Ld. PCIT to the Ld. AO to revise the impugned assessment order in the light of aforesaid discussion that the assessee is in appeal before the Tribunal and all the grounds of appeal relate thereto.

The ld. AR reiterated the submission made before the Ld. PCIT. He submitted that the assessment order passed by the Ld. AO is correct and it is neither erroneous nor prejudicial to the interest of Revenue because the assessment has been made after complete enquiries and verification and considering all the facts and submissions made by the assessee. The Ld. AR relied on the following judicial precedents in support of the assessee‟s claim against invocation of section 263 by the Ld. PCIT: i. Mohammad Osman Mohammad Haroon Motiwala v. PCIT - [ITA No. 1133/Pun/ 2024, Order dated 05.02.2025 (Pune - Trib.)]. ii. Gandhi Ram v. PCIT – [(2022) 145 taxmann.com 109 (Chandigarh - Trib.) Order dated 04.08.2022]. iii. Hema Raman v. PCIT - [ITA No. 1012/Del/2022, Order dated 12.05.2023 (Delhi - Trib.)]. iv. DCIT v. Vaishali Agro Soya Products - [ITA No. 634/Pun/2024, Order dated 11.09.2024 (Pune - Trib.)]. v. DCIT v. Tulshiram Vithalrao Koyale [ITA No. 624 / Pun/2024, Order dated 31.07.2024 (Pune - Trib.)]. vi. Late Harilal Mavjibhai Patel v. ACIT - [ITA No. 2698 / Pun/2024, Order dated 25.04.2025 (Pune - Trib.)]. 9. The Ld. DR took us through the assessment order and pointed out that it has been passed without carrying out any enquiry/verification in relation to the issue for which the case of the assessee was selected for complete scrutiny through CASS. Therefore, the Ld. PCIT was justified in exercising power vested in him to invoke the provisions of section 263 of the Act and direct the Ld. AO to revise the assessment order in the light of his observations and findings.

We have given our careful thought to the submissions of the Ld. AR and Ld. DR and perused the records and various judicial precedents cited by the Ld. AR as well. From the perusal of the impugned assessment order

We find that no notice under section 142(1) along with the detailed questionnaire was issued by the Ld. AO. The Ld. AO has accepted the explanation of the assessee by passing a very brief order reproduced below: “The The assessee has e-filed his return of income on 24.10.2019 vide E-filing Acknowledgement No. 217055901241019 declaring total income of Rs. 71,12,860/-, The case was selected under scrutiny for the reasons "Case is pertaining to survey u/s 133A of the Income-tax Act, 1961". Statutory notice u/s 143(2) of the Income-tax Act, 1961 was issued in this case on 28.09.2020 electronically & sent to the assessee's e-mail. The reply of the 143(2) notice was submitted by the assessee on 16.10.2020, wherein assessee submitted that the Income-tax Return filed was properly filed by disclosing Survey income in complete, in addition to normal income the total profit disclosed is of Rs. 71,12,863/- which includes survey income of Rs. 38,01,000/-.

It is therefore revealed from the above discussion that during the course of assessment proceedings, the Ld. AO communicated the reasons for selection of case and issued notice under section 143(2) of the Act to which the assessee submitted his response reproduced in the preceding paragraph (Pages 25-29 of the Paper Book refers). The Ld. AO in his impugned assessment order has mentioned that details of documents/ information related to the survey were also called for from the Juri ictional Assessing Officer (“JAO”) and in consideration of the same along with the submissions filed by the assessee, he accepted the explanation of the assessee on the impugned issue under dispute. However, there is no inkling in the assessment order as to details/ information was furnished by the JAO and what explanation was given by the assessee. The assessment order only mentions that the assessee filed submissions. However, the details/documents examined by the Ld. AO are 7

Now coming to the provisions of section 263 of the Act, it is a well settled proposition that both the conditions i.e. erroneous as also prejudicial to the interest of Revenue must pre-exist to enable the Ld. PCIT to exercise the power under section 263 of the Act. In the present factual matrix of the case as well as the settled legal position, we are of the view that the Ld. PCIT was justified in resorting to the provisions of section 263 of the Act. We find that the order of the Ld. AO is cryptic one. He has not given relevant facts and reasons for coming to the conclusion based on these facts and law. Moreover, the documentary evidence available in the records which the Ld. AO admits to have verified the veracity thereof fails to demonstrate that he made the requisite enquiry. If that be so, it can be easily inferred that the Ld. AO did not apply his mind nor he had not made inquiry on the issue. In such a scenario wherein the assessment is completed without any enquiry/verification of the issues involved, the Hon‟ble Delhi High Court held in Gee Vee Enterprises vs. Addl. CIT 99 ITR 375 (Delhi) that the assessment order is erroneous as also prejudicial to the interests of Revenue as it caused prejudice to revenue administration as emphasised by Hon‟ble Madras High Court in Venkatakrishna Rice Co. vs. CIT 163 ITR 129 (Mad). The case laws relied upon by the Ld. Counsel for the assessees are rendered in a different factual scenario which is not applicable to the present facts of the assessee‟s case.

It has been held by various Courts that lack of enquiry on the germane issue renders the assessment order being erroneous and prejudicial to the interest of Revenue. The Hon‟ble Supreme Court in Rampyari Devi Saraogi vs. CIT (67 ITR 84) while taking note of the fact that the AO had concluded the assessment in "undue hurry" by passing a short, stereotyped assessment order, without making any inquiries, upheld the revision done by the CIT.

In the case of Deniel Merchants Pvt. Ltd. vs. ITO dated 29.11.2017, the Hon'ble Supreme Court upheld the law as laid down by the High Courts in Subhlakshmi Vanijya Pvt. Ltd vs. CIT [155 ITD 171 (Kol)], Rajmandir ITA Nos.1007 & 1008/PUN/2024 Estates [386 ITR 162 (Cal)] etc. and held that the CIT is entitled to revise the assessment order u/s 263 on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned.

We also find that the Hon‟ble Bombay High Court in the case of Vedanta Ltd. vs. CIT (2021) 124 taxmann.com 435 (Bom) has held that where the assessment was completed without proper inquiries, the Commissioner was competent to invoke provisional juri iction and direct the Assessing Officer for fresh assessment.

We are, therefore of the view that on the facts and in the circumstances of the assessee‟s case and the legal position set out above, assumption of juri iction under section 263 of the Act by the Ld. PCIT was justified. Accordingly, we uphold the order of the Ld. PCIT. The grounds raised by the assessee are accordingly dismissed.

In the result, the appeal of the assessee is dismissed.

अपील र्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT concerned. 4. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, “बी” बेंच, पुणे / DR, ITAT, “B” Bench, Pune. 5. ग र्ड फ़ इल / Guard File. //सत्य दपि प्रदि//// आिेश नुस र / BY ORDER,