ARUN PALAWAT,JAIPUR vs. PRINCIPAL COMMISSIONER OF INCOME TAX, (CENTRAL),, JAIPUR

3. That without prejudice to the ground No. (1) and (2) above on the facts and in the circumstances of the case the ld. Pr. CIT is wrong, unjust and has erred in law in setting aside the assessment order dated 30.12.2022 passed by the ld. AO u/s 143(3) of the IT Act, 1961 by holding it to be erroneous in so far as it is prejudicial to the interest of revenue under clause (a) of expl-2 to sec. 263 allegedly on the ground that addition of Rs. 33,90,001/- made by the AO as normal income under the head income from other sources instead assessing it u/s 69A/ 69C r/w sec. 115 BBE of the IT Act, 1961.

4. The appellant craves permission to add to or amend to any of grounds of appeal or to withdraw any of them.”

(ASSESSEE) “1. That on the facts and in the circumstances of the case the ld. PCIT (Central), Jaipur is wrong, unjust and has erred in law in not accepting submission of the appellant that the notice dt 22.11.2024 issued by her to the appellant company for initiating revision proceedings u/s 263 of the IT Act, 1961 is wrong and bad in law in as much as power of the ld. Pr. CIT under this section do not extend to the assessments made in search cases by AO after obtaining mandatory approval of Addl. CIT u/s 148B of the IT Act, 1961.

2.That without prejudice to the ground No. (1) above on the facts and in the circumstances of the case the ld. Pr. CIT is wrong, unjust and has erred in law in initiating and passing impugned order u/s 263 of the IT Act, 1961 in as much as issue involved in the revision proceeding was thoroughly considered and examined by the ld. AO by application of mind and so impugned order passed by her is mere change of opinion.

3. That without prejudice to the ground No. (1) and (2) above on the facts and in the circumstances of the case the ld. Pr. CIT is wrong, unjust and has erred in law in setting aside the assessment order dated 30.12.2022 passed by the ld. AO u/s 143(3) of the IT Act, 1961 by holding it to be erroneous in so far as it is prejudicial to the interest of revenue under clause (a) of expl-2 to sec. 263 allegedly on the ground that addition of Rs. 88,24,143/- made by the AO as normal income under the head income from other sources instead assessing it u/s 69A/ 69C r/w sec. 115 BBE of the IT Act, 1961.

4. The appellant craves permission to add to or amend to any of grounds of appeal or to withdraw any of them.”

3. Since the issues involved in these appeals are exactly common on facts and on common grounds, except in figures, both these appeals have been heard together, and as such are being disposed off vide this common order, for the sake of convenience.

4. First, we take the appeal in as a lead case for discussions and disposal of appeals, as the issues involved in the lead case are common on similar facts and grounds raised by the assessee. :

5. The brief facts of the case are that the assessee company is engaged in manufacturing and trading of sarees, salwar suits and dress material etc. A search under section 132 of the Income Tax Act, 1961 was carried & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. out by the Investigation Wing of the Income-tax Department on 23.11.2021 at the business/residential premises of the appellant company. The assessee filed its return of income under section 139(1) of the IT Act, 1961 for the assessment year under consideration on 27.11.2021 declaring a total loss of (-) Rs. 3,29,36,110/-. Consequently, notice under section 143(2) was issued to the assessee on 28.06.2022 which was duly served upon the assessee. In compliance of the notice, the assessee filed its reply on ITBA portal, and printed out of the same has been placed on record. Subsequently, the AO called for the information and details pertaining to the case of the assessee relevant to assessment of its income under section 142(1) of the IT Act, 1961 on 18.08.2022 by means of a questionnaire and/or Order Sheet. In response, the ld. A/R of the assessee filed reply through ITBA portal. Thereafter, notices under section 142(1) were issued on 08.10.2022, 11.11.2022 and 22.11.2022 which were duly served on the assessee. In compliance of the notices, the ld. A/R of the assessee filed reply through ITBA portal/manual on 30.11.2022 and 16.12.2022 which were placed on record. During the assessment proceedings, the assessee has been shown all the relevant seized document which have been referred to in the order. The assessee submitted detailed and comprehensive reply explaining each and every point raised in the notice vide assessee’s letters referred above. The AO & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. after considering the reply and supporting documentary evidences, passed the assessment order after obtaining approval of the Add. Commissioner of Income Tax, Central Range, Jodhpur vide his letter No. Addl.CIT/Central Range/JU/2022-23/1006 dated 30.12.2022. The AO completed the assessment under section 143(3) read with section 148B of the IT Act, 1961 at a total loss of (-) Rs. 2,95,46,110/- after making an addition of Rs. 33,90,001/- to the declared income/loss. The details of the above said addition has been given and comprehensively explained in the assessment order. Upon examination of the assessment records, the ld. PCIT (Central), Jaipur opined that the AO passed the assessment order in a routine and casual manner without applying the applicable sections of the Act. The AO has not verified the details which were required to be verified under the scope of scrutiny. In this connection, the ld. PCIT (Central), Jaipur issued Show Cause notice under section 263 of the IT Act, 1961 dated 21.11.2024, relevant portion is reproduced as under :- “ Upon examination of the assessment record, it is revealed that in the assessment order, the addition of Rs. 33,90,001/- was made on account of cash receipt and cash payment, which were not recorded in the books of account of the assessee company. The assessing officer has taken such addition under the head income from other sources in computation of income. The receipt out of books is unexplained money and unexplained expenditure is nothing but which was unearthed owing to the search and seizure action of the department. From fact of the case, it is apparent the assessee has incurred unexplained expenditure liable to be brought to tax u/s 69C of the Income Tax Act, and is & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. also in receipt of money out of books liable to be brought to tax u/s 69A of the Income Tax Act, 1961 and the tax to be charged at special rate u/s 115BBE of the Income Tax Act. The assessment order being erroneous and has prejudicially affected the interest of revenue, therefore, the same is required to be justifiably corrected. ” In compliance to Show Cause notice under section 263 of the IT Act, the assessee filed its detailed reply vide letter dated 13.12.2024 submitting therein that the AO made detailed enquiry regarding each and every addition made in the assessment order of which detailed explanation/submission was also filed by the appellant. However, the Ld. PCIT opined that the assessment order dated 30-12-2022 for A.Y. 2021- 22 passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue and liable to revision under section 263 of the Act. The ld. PCIT, accordingly required the AO to make necessary verification in respect of the observations made in his order after allowing reasonable opportunity to the assessee.

The present appeal is against the said order of ld. Pr. CIT (Central), Jaipur passed u/s 263 in case of assessee.

& 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. “1.1 It is verifiable from the revision order that Ld. PCIT invoked the provisions of sec. 263 only on the ground that alleged escaped income was added to the assessee’s total income under normal provisions, whereas it should have been added u/s 69A/69C r.w.s 115BBE of the I T Act, 1961. In this connection it is submitted that assessment has been framed by Ld. AO after raising detailed query in the notice(s) issued u/s 142(1) and addition has been made in the order in respect of each and every item after verification of detailed submission filed by assessee. Thus, Ld. AO has duly applied his mind has made the addition under normal provisions of Income Tax Act. Thus, Ld. AO has in appreciation of material placed before him passed an appropriate order which Ld. PCIT again revised as per provisions of section 263 of the Act. It is submitted that the Ld. AO has taken a plausible view of the addition made to the total income and the said addition was not made under any of the specific provisions of the Act u/s 69A or 69C of the Act and therefore, Ld. AO cloud not be directed under the provisions of sec. 263 of the Act. (a) In this connection we rely of the judgment of Hon’ble Supreme Court in the case of PCIT-2 Vs Shree Gayatri Associates (2019) 106 Taxmann. Com 31 (SC) dated 01-03-2019 wherein Hon’ble Apex court held that “Where Commissioner passed a revisional order making addition to assessee's income under section 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was to be dismissed” In the said case the Assessee is a developer of real estate and was subjected to search operations, during which certain unaccounted income was disclosed. This disclosure was persisted in the return filed by the assessee, pursuant to such search operations. The Assessing Officer passed an order of assessment dated 26th March 2013 for AY 2010-2011, assessing assessee's total income at Rs. 1.69 Crore [rounded off] as against the returned income of Rs. 85.16 lacs [rounded off]. The Commissioner, however, was of the opinion that such order of assessment was erroneous and prejudicial to the interest of Revenue. He, therefore, exercised power of revision flowing from Section 263 of the Act. Under such revision order, he held and observed that the Assessing Officer had failed to carry out proper inquiries with respect to assessee's on-money receipts. The assessee carried the issue before the Tribunal. The Tribunal, by the impugned judgment, reversed the order of Commissioner. In such judgment, the Tribunal observed that in the order of assessment, the Assessing Officer had raised multiple queries calling upon the assessee's response. The Tribunal was of the opinion that the Assessing Officer had carried out detailed inquiries. The Commissioner was incorrect in holding that no inquiries were carried out. The revisional powers, therefore, could not have been exercised.

& 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judgment referred to the detailed correspondence between Assessing Officer and the assessee during the course of assessment proceedings to come to a conclusion that the Assessing Officer had carried out detailed inquiries which includes assessee's on-money transactions. It was on account of these findings that the Tribunal was prompted to reverse the order of revision. (b) Recently Hon’ble Coordinate ITAT, jaipur Bench, Jaipur in the case of Mukesh Kumar Saini Vs PCIT (ITAT No. 479/JP/2024) dated 01-08- 2024 having identical fats of the case held that “ In this case, the assessment was framed u/s 143(3) of the Act on 22.09.2021. It has been held to be erroneous in so far prejudicial to the interest of revenue for the reason that the income surrendered during survey operation and the addition made thereupon in the assessment order was not verified as regards the provisions of section 68, 69 & 69A r.w.s. 115BBE of the Act. The Ld. AO in the assessment framed u/s 143(3) of the Act, also examined all the aspects of the disclosure, made variations and after examination referred to provisions of section 68, 69 & 69A of the Act, but at the same time, did not levy higher tax as per provision of section 115BBE of the Act. Since a conjoint reading reveals that there was due application of mind by the AO during the assessment proceedings, the assessment cannot be held as erroneous in so far prejudicial to the interest of revenue on account of levy of higher tax as per provision of section 115BBE of the Act. From the above, it transpires that to tax any item of income/ expenditure, unaccounted investment at the specific rate r.w.s. 115BBE of the Act, it is necessary to classify the income under the relevant head provision under section 69, 68, 69B etc. as they are penal in nature. Thus, we note that the AO has taken one of the plausible view by treating the income offered during survey operation as income under the head of business and profession. The similar view has been taken by the co-ordinate bench of Delhi ITAT in the case of Hema Raman vs. PCIT in dated 12.05.2023. The observation of the bench on the issue, when reproduced, reads as : “13. On appraisal of facts, we are persuaded by the first limb of the arguments. The determination of true nature and character of income is highly contextual and law has not devised any straight jacket formula in this regard. The classification of income under a particular head of income may significantly vary having regard to the nuanced facts of each case. When seen contextually, the additional income in instant case was conceded by the assessee in the course of survey operations at her business premises. The income surrendered is sort of & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. lumpsum figures offered in the form of excess stock, unaccounted advance to staff, excess cash generated etc. from business operations. Such additional income confessed in survey at business premises gives a facial impression of business attributes. In the light of assertions made in statement in survey and post survey proceedings placed in the paper book, the assessee appears to have made out an arguable case that such income is concomitant of business activities and thus impressed with the character of business income as correctly disclosed in the ROI. The action of AO is not open to attack as erroneous where a view taken is in the realm of a possible view and not found to be wholly incongruous to facts or law. On the face of available facts, one can not say without any reservation that no plurality of opinion can exist on the point and such additional income cannot be treated as business income at all as adjudged by AO. This makes the action of the AO is the league of being plausible. The power of review cannot be exercised to collect more taxes merely owing to the reason that the law now provides for penal and steep rate of taxation by bringing such income within the ambit of S. 68/ 69 etc. 13.1 Significantly, the PCIT, while seeking to set aside the action of AO and remitting the matter back for further enquiries, did not bring any definite material to show any incorrect assumption of such facts on this score. Besides, no observations are found in the impugned revisional order suggesting a course to be adopted towards manner of determining true character of additional income or the nature of enquiries expected from AO. 13.2 In the similar factual circumstances and in the context of section 263, the Hon’ble Andhra Pradesh High Court in the case of PCIT vs. Deccan Jewellera (P) Ltd. ( 2021) 132 taxmann.com 73(AP) held the action of AO cannot be said be marred by any perversity and the revisional order was set aside. 13.2 Taking into account the entire conspectus of the matter, we thus find merit in this plea. The pre-requisites of S. 263 are clearly not found to be fulfilled. In conclusion, in the light of discussion in para 13 supra, the approach adopted by the Assessing Officer being plausible, the action of the Assessing Officer cannot be labeled as ‘erroneous’ although it may be prejudicial to the interest of the revenue. Thus, twin conditions of Section 263 are not simultaneously satisfied in the instant case. The jurisdiction usurped by the Pr.CIT under Section 263 thus fails on this parameter and hence the revisional order cannot be sustained in law. Consequently, the revisional order passed under Section 263 is quashed.

& 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. So, we are of the considered view that ld. PCIT could not substitute the view taken by ld. AO as per his understanding of facts of the case. In view of the above, and after considering the facts in totality, we hold that the order passed u/s 263 of the Act is not sustainable. Accordingly, we quash the same. Hence, the solitary ground of appeal of the assessee is hereby allowed. (c) The Hon’ble ITAT, Jaipur bench, Jaipur in the case ofShri Rajesh Chaudhary Vs ACIT, CC, Alwar (ITA No. 597/JP/2024) dated 01-01- 2025held that “ We have heard both the parties and perused the materials available on record. In this case, it is noted that the ld. PCIT observed that the AO has not done verification. It may be noted that whether Section 69 of the Act is applicable or not which depends upon the following conditions. Investment is not recorded in the books. (I) Assessee offer no explanations about the nature and sources of the (II) investment or the explanation made by him is not in the opinion of the AO, satisfactory Thus, the AO examined and verified both the two conditions. First, condition is to satisfy that investment was not recorded in the books but second condition was not satisfied as the assessee explained sources of the investment in answer to Question No. 5 of 1st statement recorded during survey on 28-8-2018. Thus the allegation of ld. PCIT about non verification of required details is completely incorrect. The AO during survey did not find any adverse material controverting the explanation of assessee about the source of investment and thus the AO was satisfied by considering the reply of the assessee. As regards the invocation of provision of Section 115BBE of the Act, it is noted that source of the investments were explained by the assessee which had been verified by the AO during the course of assessment proceedings. It is noted that the year of investment is not identified and even the quantum is also not identified and thus it is not prejudicial to the interest of revenue. We also found that the show cause notice issued and consequential revenue order passed u/s 263 of the Act passed by the ld.PCIT is based on assumption and presumption which does not indicate that the order is prejudicial to the interest of the Revenue. Hence, in view of the entirety of the facts and circumstances of the case, we do not concur with the findings of the ld.PCIT. Thus, the appeal of the assessee is allowed. 2.1 Further it is verifiable from the query letter(s) and written submissions filed by assessee (available in paper book) it is evident and verifiable that during the course of assessment proceedings the Learned AO asked, verified the required relevant details and as such the assessment order passed in neither & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. erroneous nor prejudicial to the interest of revenue and the assessee strongly objects the show cause notice issued u/s 263 of the I.T. Act, 1961. It is submitted that if an order is passed after making inquiry on an issue and after having examined the replies of the Assessee with due application of mind, it is not the case where no inquiry was made. Therefore, such a case cannot be treated as a case of “no inquiry” and thus proceedings u/s 263 of the Act cannot be initiated in such a case. Further, an assessment order should not be subject to revision u/s 263 merely because another view is possible on the issue decided by the AO Following judgments including that of the Supreme Court has decided this issue in favour of assessee:- - Hon’ble Supreme Court in the case of Greenworld Corporation – [2009] 181 Taxman 111 - Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. – [2012] 28 taxmann.com 273 (Delhi) - Delhi High Court in the case of CIT v. Anil Kumar Sharma – [2010] 194 Taxman 504 (Delhi)

Lack of enquiry/no enquiry is different from inadequate enquiry and it is only in case of no enquiry by the AO, Pr. CIT/CIT can exercise jurisdiction u/s 263 of the Act and not in case where the AO has made enquiries as seems appropriate in the facts and circumstances of the case. 2.2 It is submitted that in the order passed u/s 263 of the Act, the Ld. PCIT has quoted certain case laws. It is submitted that said laws are either having different facts of case or the issue involved in such cases where diverged opinions are available in the decisions of the Hon’ble Courts. It is submitted that it is settled position of law that if there divergent opinions on an issue, one which is favorable to the assessee shall apply, The following case laws submitted in support of above:- (i) Vegetable products 88 ITR 192 (SC) (ii) CIT Vs Straw Board Manufacturing Ltd. 177 ITR 43 (SC) 2.3 Without prejudice to the above submissions made it is evident/verifiable that Ld. A.O. made enquiries on the issue(s) and assessee complied to the enquiries and filed all the required details/submission. Thus it is not a case where that A.O. made no enquiry or verification which should have been made. It is clear & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. from reading of notice u/s 263 of the Act, 1961 that the proceedings u/s 263 has been started on the same issue which have already been considered and examined by the then A.O. Thus the proceeding u/s 263 is a step to start again a second scrutiny/investigation of facts without there being any material to hold even prima-facie that the assessment order passed by A.O. is erroneous which is not valid in the eyes of law (CIT Vs. Trustees Anupam Charitable Trust (1987) 167 ITR (129) (Rajasthan), CIT Vs. Godawari Sugar Mills Ltd. (1993) 203 ITR 108 (Bom.) and CIT Vs. Shakti Charities (2000) 160 CTR 107 (Mad.). The facts and submissions are verifiable from the assessment record. The Supreme Court in case of CIT Vs. Green World Corporation (2009) 314 ITR 81 (Supreme Court) held that ‘The jurisdiction under section 263 can be exercised only when both the following conditions are satisfied (i) the order of the assessing officer should be erroneous and (ii) it should be prejudicial to the interest of the Revenue. These conditions are conjunctive. An order of assessment passed by the Assessing officer should not be interfered with only because another view is possible. “The Rajasthan High Court in a recent judgement in case of CIT Vs. Chambal Fertilizers and Chemicals Ltd. (2013) 258 CTR (Raj.) 540 has held “The law is that the CIT cannot invoke the powers to correct each and every mistake or error committed by the A.O. Every loss to the Revenue cannot be treated as prejudicial to the interest of the Revenue and if the AO has adopted one of the course permissible under the law or where two views are possible and the AO has taken one view which the CIT does not agree, it cannot be treated as an order erroneous and prejudicial to the interest of the Revenue, the AO exercises quasi judicial power vested in him and if he exercises such powers in accordance with law, arrives at a just conclusion such conclusion cannot be termed to be erroneous only because the CIT does not feel satisfied with the conclusion. The Delhi High Court in case of CIT Vs. Kelvinator of India Ltd. (2011) 332 ITR 231 (Delhi) it has held that Assessing officer taking one of two possible views with which commissioner not agreeing the assessment order cannot be treated as an erroneous order prejudicial to the interest of revenue. The Karnataka High Court after considering various judicial pronouncement in the case of CIT Vs. Gokul Das Exports (2011) 333 ITR 214 (Kar) has held that assessing officer taking one out of two views the assessment order is not prejudicial to interest of revenue. In view of the above judicial pronouncements and various other judgements on the issue the assessment order passed by A.O. cannot be treated as an erroneous and prejudicial to the interest of revenue. In the case of CIT Vs. Vodafone Essar South Ltd. (2013) 2012 Taxman 184 Hon'ble Delhi High Court held that assessing officer before passing assessment order made an enquiry and directed his mind on all aspects. View adopted by him was clearly one among two plausible views that could have been taken. Commissioner did not specifically furnish any reasons to say why original order & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. was unsupportable in law. Commissioner could not have validity exercised his revisionary power u/s 263 in instant case. The order is not prejudicial to revenue as A.O. was correct in law and on the facts of the case. Thus the Ld. Pr. CIT is wrong in holding that A.O. did not make any enquiry or verification so as to invoke jurisdiction u/s 263. Even newly inserted Explanation 2 (a) to section 263 does not authorize or give unfettered powers to the Commissioner to revise each and every order, if in his opinion, same has been passed without making enquiries or verification which should have been made, since the Pr. CIT had not brought any material on record to substantiate his inference, and so the impugned revision order is only to carry out fishing enquiries with objective of substituting his views with that of the Assessing Officer which is not permissible in law (refer Narayan Tatu Rane Vs. I.T.O. (2016) 70 Taxman.com227 (Mumb-Trib). 2.3 Two views are possible- Revision is not valid When the Assessing Officer takes one of the two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable in law. - CIT v. Max India Limited [2007] 295 ITR 282 (SC) - Malbar Industries Co Ltd v. CIT [2000] 243 ITR 83 (SC)

In view of above therefore no case for invoking Section 263 of I. T. Act, 1961 and proceedings being wrong and bad in law the same may kindly be dropped.

Ground No. 1 relates to objecting the action of Pr. CIT- “ that on the facts and in the circumstances of the case the ld. PCIT (Central), Jaipur is wrong, unjust and has erred in law in not accepting submission the appellant that the notice on 22.11.2024 issued by him to the appellant for initiating revision proceedings u/s 263 of the IT Act, 1961 is wrong and bad in law in as much as power of the ld. Pr. CIT under this section do not extend to the assessments made in search cases by AO after obtaining mandatory approval of Addl. CIT u/s 148B of the IT Act, 1961. In this connection, it is submitted that the notice issued is wrong and bad in law on legal as well as factual basis. At the outset, the assessee submits that the powers of the learned Pr.CIT u/s 263 do not extent to the search assessment(s) made u/s 143(3) after obtaining mandatory approval u/s 148B of the IT Act, & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. 1961 of the Additional Commissioner of Income Tax. For ready reference and sake of convenience the provisions of Section 263 is reproduced here in below :- 263. (1) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer [or the Transfer Pricing Officer, as the case maybe,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, [including,— (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section.] Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before [or after the 1st day of June, 1988] by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall include— (i) an order of assessment made by the Assistant Commissioner [or Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the [Joint] Commissioner under section 144A; (ii) an order made by the [Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer [or the Transfer Pricing Officer, as the case may be,] conferred on, or assigned to, him under the orders or directions issued by the Board or by the [Principal Chief Commissioner or] Chief Commissioner or [Principal Director General or] Director General or [Principal Commissioner] or Commissioner authorised by the Board in this behalf under section 120; (iii) an order under section 92CA by the Transfer Pricing Officer;] (b) "record" [shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the [Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or] Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. [Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] 2(ii) As per above proviso the scope of Section 263 and explanation thereto from the plain reading it is clear that in addition to assessment made by AO as per explanation (a) (i) only the assessment order made by the Assistant Commissioner or Deputy Commissioner or Income-tax Officer on the basis of directions issued by the Joint Commissioner u/s 144A and as per the explanation (a)(ii) only the order made by the Joint Commissioner in exercise of the power or in performance of the functions of Assessing Officer conferred on or assigned to him under the orders or directions issued by the Board or by the Chief Commissioner or the Commissioner authorized by the Board in this behalf u/s 120 are covered under this section. 2(ii)(a) Further, a combined reading of these provisions read with explanation will indicate that this provision covers assessments made by AO u/s 143(3). In these cases, there is application of mind only by one person. Therefore in all these cases power of review been vested with the Commissioner. The assessments in search cases are made under special provisions as provided u/s 143(3) / 148 r.w.s. 148B. This means that as per provisions of section 263(1), only those cases are covered where the assessment has been made either by the Assessing Officer himself or on the basis of the directions issued by the Joint Commissioner u/s 144A or the Joint Commissioner in exercise of the power or in performance of the functions of Assessing Officer. If the intention of the legislature had been to cover the assessments made u/s 143(3) / 148 r.w.s. 148B, one more clause would have been added to explanation to section 263 providing for this. 3(i) The assessments in caseof search u/s 132 carried out after 01-04-2021 can be made only after obtaining prior approval of the next higher authority i.e. Joint Commissioner / Addl. Commissioner u/s 148B of the IT Act, 1961. This & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. sub-section as inserted by the Finance Act, 2022 w.e.f. 01.04.2022 and no corresponding amendment was made in explanation to section 263, to cover these assessments also. 3(ii) Meaning of the word approval as mentioned in Section 148B The word approval has not been defined in the Act. However, it has been defined in Black’s Law Dictionary – VIth Edition as the act of confirming, ratifying, assenting, sanctioning or consenting to some act or thing done by another. Hence, approval implies knowledge and exercise of discretion after knowledge. Hon’ble ITAT Pune, Bench “B” in case of Akil Gulamali Somji Vs. Income Tax Officer Ward4(5), Pune, has observed that the provisions laid down u/s 148B of the Act are different as here the prior approval of Joint Commissioner is not required merely for direction for payment of the due amount of tax but overall approval of the assessment framed by the I.T.O. Therefore, assessment made without obtaining prior approval as required under section 148B was declared null and void in this case. 3(iii) Further in case of assessments in cases other than cases of search and seizure, there is no provision for review in the Act other than as provided for under section 263 and explanation thereto. Therefore, all these are covered u/s 263. In case of search assessments after 01.04.2021 prior approval under section 148B has been made mandatory as an approval is made after thorough review. Therefore, these are not covered u/s 263. Had the attention of the legislature been to cover the search assessment r.w.s. 148B under section 263, suitable amendment would have been made in explanation to section 263(1) also. Clearly meaning thereby, that the assessment completed r.w.s. 148B cannot be revised u/s 263. 4(i) Procedure for assessment in Search and Seizure cases : Procedure for assessment in Search and Seizure cases is provided in the Manual of Office Procedure Vol.II (Tech.) published by DIRECTORATE OF INCOME TAX (ORGANISATION & MANAGEMENT SERVICES) CENTRAL BOARD OF DIRECT TAXES in February 2003. The relevant guidelines as provided In Chapter-3 related to Assessment Procedure (Search and Seizure) are reproduced hereunder :- 4(ii) “4. Appraisal report, panchanama and annexures : Along with the seized material the investigation wing forwards to the Assessing Officer an appraisal report, copies of warrants, and thepanchanama and its annexures. These should be handed over to the A.O. within two and a half months from the date of initiation of the search. The appraisal report comprises the investigation wing’s findings on the search and may include a note on the modus operandi of & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. tax evasion adopted by the searched parties and their associates, tentative computation of undisclosed income in the hands of various assessees, overview of seized materials and suggestions for further enquires. This report is prepared essentially for the guidance of the AO; as such, its findings are not binding on him. Wherever there is a major deviation between the income estimated in the appraisal report and the income proposed to be assessed, however, the matter should be discussed between the assessment wing and the investigation wing and the minutes of this meeting should be recorded. The AO should leave a detailed note in the order sheet of the MR in this regard. It must be noted that the appraisal report is open to scrutiny by audit along with the relevant assessment records in all search cases.” 4(iii) A review of the provision of Section 148B it clear that he assessment order in case of search carried out after 01.04.2021 are subject to approval by the Addl. Commissioner u/s 148B and discussed with the investigation wing in case of major deviation between the income estimated in the appraisal report and the income proposed to be assessed. Thus, if the orders already subject to review by two authorities, as explained above have to be reviewed again u/s 263, there would not be finality in the assessment proceedings. This will be against the observation of Hon’ble Bombay High Court in CIT vs. Gabrial India Ltd. (1993) 203 ITR (BOM), wherein the Hon’ble High Court held that such an action is against the well accepted policy of law that there must be point of finality in all legal proceedings and that stale issues should not be reactivated beyond a particular stage. 4(iii)(a) The power exercised by JCIT u/s 144A is not same as u/s 148B of the Act 4(iii)(b) That the provisions of section q144A and 148B are reproduced hereunder : [Power of [Joint commissioner] to issue direction in certain cases. 4(iii)(c) 144A. A [Joint Commissioner] may, on his own motion or on a reference being made to him by the [Assessing] Officer or on the application of an assessee, caqll for and examine the record of any proceeding in which an assessment is pending and, if he considers that, having regard to the nature of the case or the amount involved or for any other reasons, it is necessary or expedient so to do, he may issue such directions as he thinks fit for the guidance of the [Assessing] Officer to enable him to complete the assessment and such directions shall be binding on the [Assessing]Officer : 4(iv) Prior approval necessary for assessment in cases of search or requisition.

& 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. 148B – No order of assessment or reassessment or recomputation under this Act shall be passed by an Assessing Officer below the rank of Joint Commissioner, in respect of an assessment year to which clause (i) or clause (ii) or clause (iii) or clause (iv) of Explanation 2 to section 148 apply except with the prior approval of the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director] A review of the aforesaid provisions indicates that the powers of JCIT/Addl. CIT u/s 148B are much wider compared to the compared to powers u/s 144A of the Act. Under the provisions of Section 144A, the JCIT may, on his own motion or on a reference being made to him by the [Assessing] Officer or on the application of an assessee, call for and examine the record of any proceeding in which an assessment is pending and, if he considers that, having regard to the nature of the case or the amount involved or for any other reasons, it is necessary or expedient so to do, he may issue such directions as he thinks fit for the guidance of the [Assessing] Officer to enable him to complete the assessment and such directions shall be binding on the [Assessing] Officer. Whereas heading of Section 148B indicates that it is applicable only in cases of search or requisition and provides that no order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in the said section except with the prior approval of the Addl. CIT. 4(iv)(a) Thus, the provisions of Section 144a are applicable in all cases other than search and requisition whereas provisions of Section 148B are applicable only in case of search and requisition. The provisions of Section 144A empower to JCIT to issue binding directions to AO for his guidance to enable him to complete the assessment only in certain circumstances, whereas the provisions of Section 148 B require the AO to seek prior approval of Addl. CIT before passing any order of assessment or reassessment. As such no assessment can be made u/s 143(3) r.w. section 148B by AO until and unless, the entire record of assessment and the issues arising during assessment are reviewed by Addl. CIT and proposed assessment order is approved by him. Hence approval u/s 148B from Addl. CIT, tantamount to review by the next higher authority. Thus, orders already reviewed cannot be reviewed again. Whereas, there is no such provision for assessment under section 143(3) of the Income Tax Act, 1961, which is taken care of u/s 263 of the Income tax Ac t, 1961. 4(iv)(b) Further, even in cases where the AO obtained prior approval of JCIT u/s 144A in support of any view taken by him during the course of assessment proceedings, the Hon’ble Allahabad High Court in the following cases has held that CIT would not be justified in interfering in the approval accorded by the Addl. CIT for framing assessment order.

& 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. CIT vs Dr. Ashok Kumar in Appeal No. 192 of 2000 CIT vs. Dr. Ashok Kumar in Appeal No. 163 of 2008 CIT vs. Dr. Ashok Kumar in Appeal No. 413 of 2012 CIT vs. Dr. Ashok Kumar in Appeal No. 414 of 2012 4(iv)(c) In all the aforesaid cases the Hon’ble Court at para 5.2 of the order observed as under: “In the last is is also relevant fact that the AO was fully alive about the facts of the case and that is why he got necessary approval of Addl. Commissioner before completing the assessment orders for all the assessment years and once that is not disputed by the revenue than the CIT would not be justified in interfering in the approval accorded by the Addl. CIT for framing assessment order and thus there was no case for setting aside the assessment orders for the assessment years in question. On the basis of facts and circumstances of the case I am of the opinion that the impugned order is liable to be quashed accordingly.” In view of the foregoing, it is clear that powers of the CIT do not extend to assessments made u/s 143(3) after obtaining approval u/s 148B.”

S.No. PARTICULARS OF DOCUMENTS PAGE NO.

1. Copy of show cause notice dated 22-11-2024 issued u/s 263 of the 1-2 I.T. Act, 1961 by Pr. CIT(Central), Jaipur.

(4) The Ground No. 4 is a general ground.

A search under section 132 of the Income Tax Act, 1961 was carried out by the Investigation Wing of the Income-tax Department on 23.11.2021 at the business/residential premises of the appellant company.

& 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. The assessee filed its return of income for the assessment year under consideration on 27.11.2021 declaring a total loss of (-) Rs. 3,29,36,110/-. Consequently, notice under section 143(2) was issued to the assessee on 28.06.2022 and thereafter, the AO called for the information and details pertaining to the case of the assessee relevant to assessment of its income under section 142(1) of the IT Act, 1961 on 18.08.2022 by means of a questionnaire and/or Order Sheet. In response, the ld. A/R of the assessee filed reply. During the assessment proceedings, the assessee has been shown all the relevant seized document which have been referred to in the order. The assessee submitted detailed and comprehensive reply explaining each and every point raised in the notices vide assessee’s letters dated 30.11.2022 and 16.12.2022. The AO considering the reply and supporting documentary evidences, passed the assessment order after obtaining approval of the Add. Commissioner of Income Tax, Central Range, Jodhpur vide his letter No. Addl.CIT/Central Range/JU/2022- 23/1006 dated 30.12.2022. The AO completed the assessment under section 143(3) read with section 148B of the IT Act, 1961 at a total loss of (-) Rs. 2,95,46,110/- after making an addition of Rs. 33,90,001/- to the declared income/loss. The details of the above said addition has been given and comprehensively explained in the assessment order.

& 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. Upon examination of the assessment records, the ld. PCIT (Central), Jaipur opined that the AO passed the assessment order in a routine and casual manner without applying the applicable sections of the Act. The AO has not verified the details which were required to be verified under the scope of scrutiny. In this connection, the ld. PCIT (Central), Jaipur issued Show Cause notice under section 263 of the IT Act, 1961 dated 21.11.2024, relevant portion is reproduced as under :- “ Upon examination of the assessment record, it is revealed that in the assessment order, the addition of Rs. 33,90,001/- was made on account of cash receipt and cash payment, which were not recorded in the books of account of the assessee company. The assessing officer has taken such addition under the head income from other sources in computation of income. The receipt out of books is unexplained money and unexplained expenditure is nothing but which was unearthed owing to the search and seizure action of the department. From fact of the case, it is apparent the assessee has incurred unexplained expenditure liable to be brought to tax u/s 69C of the Income Tax Act, and is also in receipt of money out of books liable to be brought to tax u/s 69A of the Income Tax Act, 1961 and the tax to be charged at special rate u/s 115BBE of the Income Tax Act. The assessment order being erroneous and has prejudicially affected the interest of revenue, therefore, the same is required to be justifiably corrected. ” Thus the ld. PCIT invoked the provisions of section 263 on the ground that alleged escaped income was added to the assessee’s total income under normal provisions, whereas it should have been added under section 69A/69C read with section 115BBE of the IT Act, 1961.

In compliance to Show Cause notice under section 263 of the IT Act, the assessee filed its detailed reply vide letter dated 13.12.2024 & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. submitting therein that assessment has been framed by the AO after raising multiple queries in the notices issued under section 142(1) and after making detailed enquiry/verification regarding each and every addition made in the assessment order of which detailed explanation/submission was also filed by the appellant.

The controversy arises whether there was any enquiry conducted by the AO during the assessment proceedings in respect of the documents seized during search. On this aspect, from perusal of the assessment order, we find that the AO not only made a detailed enquiry/verification in respect of the seized papers found during searchbut also went on examining the correctness of the disclosure. The AOhas discussed each and every addition made by him in para 9(i) to 9(xx) pages 14 to 35 of the assessment order and then accordingly assessed the total income of the assessee at Rs. 2,95,46,110/- by making an addition of Rs. 33,90,001/-.From the assessment order, it is noted that the AO has taken all possible measures to examine/verify the details which were required to be verified under the scope of scrutiny. Thus it is not proper to say that the AO has not applied his mind. The ld. PCIT was incorrect in holding that no enquiries were carried out. The AO on the basis of verification of the seized material and considering the explanation of the assessee, has taken a plausible view while making the addition under normal & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. provisions of the Act, instead of any of the specific provisions of the Act under section 69A or 69C of the Act. Therefore, the AO has in appreciation of requisite material placed before him passed an appropriate order. The AO passed the assessment order after due application of mind, therefore, assessment cannot be held as erroneous in so far prejudicial to the interest of revenue on account of non levy of higher tax as per provision of section 115BBE of the IT Act.

In the order, ld. PCIT has referred to clause (a) of Explanation 2 to section 263 of the Act, in holding that necessary inquiries were not carried out by the AO during the assessment proceedings.

We, however, find that the ld. PCIT in the notice issued under section 263 of the Act (page 1-2 of paper book) did not make any reference to the Explanation 2 to section 263 of the Act. Therefore, we hold that the ld. PCIT erred in holding assessment order as erroneous and prejudicial to the interest of Revenue after referring to Explanation 2 of section 263 of the Act.

The Hon’ble Supreme Court in the case of PCIT-2 vs. Shree Gayatri Associates (2019) 106 Taxmann.com 31 (SC) dated 01.03.2019 held that “Where Commissioner passed a revisional order making addition to assessee's income under section 69A in respect of on- & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was to be dismissed”.

The ld. AR of the assessee placing reliance on the decision of Coordinate Bench of the Tribunal at Jaipur in the case of Mukesh Kumar Saini vs. PCIT in dated 01.08.2024 submitted that to tax any item of income/ expenditure, unaccounted investment at the specific rate r.w.s. 115BBE of the Act, it is necessary to classify the income under the relevant head provision under section 69, 68, 69B etc. as they are penal in nature. Thus, we note that the AO has taken one of the plausible view by treating the income offered during survey operation as income under the head of business and profession. The similar view has been taken by the co-ordinate bench of Delhi ITAT in the case of Hema Raman vs. PCIT in dated 12.05.2023. The observation of the Bench on the issue, when reproduced, reads as:

13. On appraisal of facts, we are persuaded by the first limb of the arguments. The determination of true nature and character of income is highly contextual and law has not devised any straight jacket formula in this regard. The classification of income under a particular head of income may significantly vary having regard to the nuanced facts of each case. When seen contextually, the additional income in instant case & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. was conceded by the assessee in the course of survey operations at her business premises. The income surrendered is sort of lumpsum figures offered in the form of excess stock, unaccounted advance to staff, excess cash generated etc. from business operations. Such additional income confessed in survey at business premises gives a facial impression of business attributes. In the light of assertions made in statement in survey and post survey proceedings placed in the paper book, the assessee appears to have made out an arguable case that such income is concomitant of business activities and thus impressed with the character of business income as correctly disclosed in the ROI. The action of AO is not open to attack as erroneous where a view taken is in the realm of a possible view and not found to be wholly incongruous to facts or law. On the face of available facts, one can not say without any reservation that no plurality of opinion can exist on the point and such additional income cannot be treated as business income at all as adjudged by AO. This makes the action of the AO is the league of being plausible. The power of review cannot be exercised to collect more taxes merely owing to the reason that the law now provides for penal and steep rate of taxation by bringing such income within the ambit of S. 68/ 69 etc. 13.1 Significantly, the PCIT, while seeking to set aside the action of AO and remitting the matter back for further enquiries, did not bring any definite material to show any incorrect assumption of such facts on this score. Besides, no observations are found in the impugned revisional order suggesting a course to be adopted towards manner of determining true character of additional income or the nature of enquiries expected from AO. 13.2 In the similar factual circumstances and in the context of section 263, the Hon’ble Andhra Pradesh High Court in the case of PCIT vs. Deccan Jewellera (P) Ltd. ( 2021) 132 taxmann.com 73(AP) held the action of AO cannot be said be marred by any perversity and the revisional order was set aside. 13.2 Taking into account the entire conspectus of the matter, we thus find merit in this plea. The pre-requisites of S. 263 are clearly not found to be fulfilled. In conclusion, in the light of discussion in para 13 supra, the approach adopted by the Assessing Officer being plausible, the action of the Assessing Officer cannot be labeled as ‘erroneous’ although it may be prejudicial to the interest of the revenue. Thus, twin conditions of Section 263 are not simultaneously satisfied in the instant case. The jurisdiction usurped by the Pr.CIT under Section 263 thus fails on this & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. parameter and hence the revisional order cannot be sustained in law. Consequently, the revisional order passed under Section 263 is quashed.

Thus, the Coordinate Bench of the Tribunal, Jaipur allowed the appeal of the assessee by observing in para 18 of its order as under :-

18. So, we are of the considered view ld. PCIT could not substitute the view taken by ld. AO as per his understanding of facts of the case. In view of the above, and after considering the facts in totality, we hold that the order passed u/s 263 of the Act is not sustainable. Accordingly, we quash the same. Hence, the solitary ground of appeal of the assessee is hereby allowed.

The Coordinate Bench of the Tribunal, Jaipur in the case ofShri Rajesh Chaudhary Vs ACIT, CC, Alwar (ITA No. 597/JP/2024) dated 01-01-2025held that - “ 9. We have heard both the parties and perused the materials available on record. In this case, it is noted that the ld. PCIT observed that the AO has not done verification. It may be noted that whether Section 69 of the Act is applicable or not which depends upon the following conditions. (i) Investment is not recorded in the books. (ii) Assessee offer no explanations about the nature and sources of the investment or the explanation made by him is not in the opinion of the AO, satisfactory Thus, the AO examined and verified both the two conditions. First, condition is to satisfy that investment was not recorded in the books but second condition was not satisfied as the assessee explained sources of the investment in answer to Question No. 5 of 1st statement recorded during survey on 28-8-2018. Thus the allegation of ld. PCIT about non verification of required details is completely incorrect. The AO during survey did not find any adverse material & 599/JPR/2025 M/s Zari Silk (India) Pvt. Ltd. & Arun Palawat, Jaipur. controverting the explanation of assessee about the source of investment and thus the AO was satisfied by considering the reply of the assessee. xxxxxx xxxxxx 9.3 As regards the invocation of provision of Section 115BBE of the Act, it is noted that source of the investments were explained by the assessee which had been verified by the AO during the course of assessment proceedings. It is noted that the year of investment is not identified and even the quantum is also not identified and thus it is not prejudicial to the interest of revenue. We also found that the show cause notice issued and consequential revenue order passed u/s 263 of the Act passed by the ld.PCIT is based on assumption and presumption which does not indicate that the order is prejudicial to the interest of the Revenue. Hence, in view of the entirety of the facts and circumstances of the case, we do not concur with the findings of the ld.PCIT. Thus, the appeal of the assessee is allowed.”