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Facts
The assessee, Singh Golden Transport Co., engaged in transportation and logistic services, filed its return for AY 2019-20, which was accepted by the AO under Section 143(3). Subsequently, the PCIT initiated revision proceedings under Section 263, alleging that the AO's order was erroneous and prejudicial to the revenue because the AO failed to adequately inquire into depreciation claims, fall in Gross Profit rate, and expenses, especially concerning income surrendered during a survey under Section 133A.
Held
The Tribunal found that the AO had, in fact, raised specific queries on all the issues identified by the PCIT and the assessee had provided detailed replies with documentary evidence, which the AO duly considered before passing the assessment order. The PCIT was therefore incorrect in alleging insufficient inquiries. The Tribunal quashed the PCIT's revision order and restored the original assessment order.
Key Issues
Whether the PCIT's revision order under Section 263 was valid when the AO had made due inquiries and the assessee had provided necessary explanations and documents during the original assessment proceedings.
Sections Cited
263, 143(3), 133A, 142(1), 115BBE, 44AB, 3CD, 68, 69, 69A, 69B, 69C, 69D, 144, 32(1)(ii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI DINESH MOHAN SINHA
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by revision-order dated 21.03.2024 passed by learned Pr. Commissioner of Income-Tax (Central), Bhopal [“PCIT”] u/s 263 of Income- tax Act, 1961 [“the Act”] which in turn arises out of assessment-order dated 16.09.2021 passed by learned ACIT, Central Circle-3, Indore [“AO”] u/s 143(3) of the act for Assessment-Year [“AY”] 2019-20, the assessee has filed this appeal on the grounds raised in Appeal-Memo (Form No. 36).
Page 1 of 11
The background facts leading to present appeal are such that the assessee-firm is engaged in the business of transportation and logistic services. For AY 2019-20, the assessee filed return of income declaring a total income of Rs. 86,11,350/- which was subjected to scrutiny-assessment and the AO completed assessment u/s 143(3) vide order dated 16.09.2021 accepting the returned income. Subsequently, Ld. PCIT examined the record of assessment-proceeding and viewed that the assessment-order passed by AO is erroneous in so far it is prejudicial to the interest of revenue which attracts revisionary-jurisdiction u/s 263. Accordingly, the PCIT issued show-cause notice dated 24.02.2024 and finally passed revision-order dated 21.03.2024 u/s 263. Aggrieved by such revision-order, the assessee has come in this appeal before us.
Ld. AR for assessee carried us to revision-order and demonstrated the issues noted by PCIT for undertaking revision. The PCIT has noted that a survey u/s 133A was conducted upon assessee on 22.02.2019 falling within previous year 2018-19 relevant to AY 2019-20 under consideration. During survey, certain documents inventorised as LPS-02 (Page No. 01 to 54) were impounded and confronted to one of the partners of assessee-firm Shri Amarjeet Singh Bagga. The partner Shri Bagga surrendered income of Rs.
1,05,08,150/- consisting of (i) Income of Rs. 99,18,920/- from unaccounted freight obtained from trucks and (ii) Income of Rs. 5,89,230/- on account of excess cash found during survey. The assessee has credited surrendered income of Rs. 1,05,08,150/- to P&L A/c but declared net profit of Rs.
Page 2 of 11 85,89,650/- only, therefore if the surrendered income is excluded, the P&L A/c would result in a loss. Despite this, the AO has simply relied on the explanation of assessee regarding increase in depreciation claimed on newly purchased assets (10 trucks) in the month of January to March. But the AO has failed to:
(i) inquire into the date of registration and date of put to use those trucks and to properly verify the claim of depreciation in all respects; (ii) inquire into and verify the fall in G.P. @ 8.36% in current year as compared to 10.79% in preceding year; and (iii) inquire into and verify the expenses claimed in trading account compared to preceding year leading to a fall in G.P. rate.
Based on these observations, the PCIT has treated the assessment-order passed by AO as erroneous-cum-prejudicial to the interest of revenue. The PCIT has set aside assessment-order and directed AO to reframe assessment for the issues identified by him.
Having explained the issues for which Ld. PCIT has undertaken revision, Ld. AR made a very forceful submission that the PCIT is grossly wrong in observing that the AO has not made enquiries or sufficient enquiries qua the issues identified by him. Ld. AR carried us to various papers filed in Paper-Book as well as further papers filed during hearing and also filed through a letter dated 09.01.2025 after conclusion of hearing as
per liberty given during hearing (copy directly provided by Ld. AR to the respondent’s office). Referring to same, Ld. AR attempted to demonstrate
Page 3 of 11 that during assessment proceedings the AO has vehemently scrutinized all three issues noted by Ld. PCIT:
(i) Notice dated 20.02.2021 issued by AO u/s 142(1) [Paper-Book Pages 54 to 58]: The AO raising following queries:
“A-8. Please furnish the following details regarding business activities of the firm: 1. XXX (not relevant) 2. Comparative chart for the relevant and three preceding years of gross receipts/gross profit/net profit and explain the variation in net profit/gross profit. A-9. Please furnish details alongwith evidence of addition in ‘fixed assets’ and substantiate the date of putting them to use.” B-3. In the statement recorded in the course of survey proceedings, the partner Shri Amarjeet Singh Bagga accepted to disclose Rs. 5,89,230/- on the basis of difference in cash found and as per cash book and Rs. 99,18,920/- on the basis of discrepancies found in page no. 1 to 54 of LPI-2. Please show as to how the same is treated in your ITR and Final A/cs. B-4. If the aforesaid disclosed income of Rs. 1,05,08,150/- is excluded from your P&L A/c, your P&L A/c will result in a loss. Please explain and justify the same with documentary evidence.” (ii) Show-cause notice dated 22.02.2021 issued by AO:
“SHOW CAUSE NOTICE Please show cause as to why incomes detected/disclosed by you under various heads in pursuance to the survey proceedings should not be considered as incomes u/ss 68, 69, 69A, 698, 69C and/or 69D, as the case may be, read with section 115BBE. Your reply on this issue alongwith on the uncomplied issues of the questionnaires earlier issued in your case should reach this office within three days of receipt of this communication. Any letter furnished by you seeking for adjournment may please be treated as disposed off. Please note that in case of failure in doing so, it will be presumed that you have nothing to say/explain/furnish; and action in accordance with the Income Tax Act, 1961 may be taken, including but not limited to the action in accordance with the provisions u/s 144 according to my best judgment on the basis of material available on record.”
Page 4 of 11 1st Reply filed by assessee to AO on 02.03.2021 [Copy filed to (iii) ITAT on 09.01.2025 as per liberty given during hearing]: The assessee filed following reply:
“8. Comparative GP/NP Chart for the relevant financial year and preceding three years as desired is attached herewith. [An attachment to reply is filed giving a comparative chart of Gross-Receipts, G.P., N.P., G.P. Ratio and N.P. Ratio for current year and preceding years in a tabular format]. 9. Evidences regarding addition made to fixed assets during the relevant financial year as desired are attached herewith.” 2nd Reply filed by assessee to AO on 09.03.2021: (iv)
The assessee’s reply is re-produced by AO on Page 3 to 15 of assessment-order. For the sake of brevity, this reply is not re-produced here.
3rd Reply filed by assessee to AO on 14.07.2021 [Paper-Book Pages (v) 59-66]: The assessee filed following reply:
“3. Yes, voluntary disclosure of income amounting to Rs.1,05,08,150/- was made during the course of survey. Details of the disclosure made are as under:- a) Income on a/c of transportation/freight receipts = Rs. 99,18,920/- b) Excess cash = Rs.5,89,230/- Total = Rs.1,05,08,150/- The surrendered income has been offered in the Audited P&L A/c and thus computation of income for the Assessment Year 2019-20. Copy of Audited Profit & Loss a/c of the assessee for the FY 2018-19 reflecting offering of surrendered income is attached herewith.
Page 5 of 11
XXX (Scanned P&L A/c, hence not reproduced) 4. With reference to your query that ‘if the disclosed income’ is excluded from the P&L a/c, then the P&L a/c will result in a loss’, it is submitted as under:- a) 10 trucks for Rs. 2,75,07,000/- were purchased during the relevant financial year. b) Total depreciation of Rs. 2,33,82,395/- charged in the books of accounts of the assessee firm for the relevant financial year. c) The same is a notional expense and is a non-cash expenditure. If the same is not charged in books of accounts, the income of the d) assessee firm for the relevant financial year will amount to Rs.3,19,72,045/- which is much more than the income surrendered during the course of survey. 4th Reply filed by assessee to AO on 22.07.2021 [Paper-Book Page (vi)
67]:
The assessee filed following reply:
“1. Evidences regarding trucks (fixed assets) purchased during the relevant financial year are attached herewith. 2. XXX (not relevant) 3. Trading and P&L A/c as per the final and audited books of accounts for the pre-survey period and post-survey period of the survey year are attached herewith.” 5th submission – Tax Audit Report filed by assessee to AO [Paper- (vii)
Book Page 32 & 42]:
The assessee’s accounts are audited u/s 44AB and the assessee has filed Tax Audit Report in Form No. 3CD. In Clause No. 18 of Form No.
3CD, there is a requirement to file complete details of depreciation. In response to this requirement, the auditors have verified assessee’s
Page 6 of 11 documents and made reporting in Annexure-II to Form No. 3CD as under:
Page 7 of 11 Ld. AR explained that the details of 10 trucks purchased for Rs.
2,75,07,000/- with ‘date of purchase’ and ‘date put to use’ are clearly reported in “Plant & Machinery – 30% - Sec 32(1)(ii) block”.
Thus, Ld. AR submitted that during assessment proceedings, the AO has raised specific queries and the assessee has filed vehement details/ documents qua all three issues raised by Ld. PCIT:
Ld. AR next carried us to Para 3 to 8 / Page 2 to 8 of assessment-order to demonstrate that the AO was satisfied with the replies submitted by assessee and therefore accepted the income declared by assessee in return of income. However, the AO was not satisfied with one aspect i.e. the tax rate applied by assessee to the income of Rs. 5,89,230/- representing excess cash found during survey which according to AO was taxable at higher rate u/s 115BBE as against normal rate applied by assessee. Therefore, the AO made a limited variation of charging higher tax @ higher rate u/s 115BBE to the portion of surrendered income relating to excess-cash.
Clearly therefore, Ld. AR contended, the assessee had filed all details/ documents before AO during the course of assessment. Therefore, this is not a case of no enquiry or insufficient enquiry as alleged by Ld. PCIT. Still the Ld. PCIT has tried to brand the assessment-order as erroneous-cum- prejudicial which is wrong. Ld. AR submitted that the order passed by PCIT is not in accordance with the law of section 263 and must be quashed.
Page 8 of 11
Per contra, Ld. DR supported the revision-order. He referred Q.No. 17 raised by survey authorities in the statements recorded during survey and reply thereto given by assessee’s partner and submitted that the assessee offered unaccounted freight receipts of Rs. 99,18,920/- and admitted that the expenses were already recorded in books. Therefore, the freight receipts of Rs. 99,18,920/- offered by assessee is net income. So far as the claim of depreciation on newly purchased trucks is concerned, Ld. DR submitted that the assessee has purchased trucks in last 3 months of the year i.e.
January to March, therefore it becomes extremely necessary to examine the date of putting to use. He submitted that in Point No. 4 of letter dated 14.07.2021 and Point No. 1 of letter dated 22.07.2021, the assessee has merely given the details/evidences of trucks purchased during the year but the date of putting to use is not intimated. Therefore, the PCIT’s revision- order is correct. Ld. DR prayed to uphold the revision-order.
We have considered rival contentions of both sides and perused the impugned order as well as the material held on record to which our attention has been drawn. On a careful consideration of various documents placed in the Paper-Book, as discussed at length in the foregoing paras, we find that during the course of assessment-proceeding, there were specific queries raised by AO with regard to the issues contemplated by Ld. PCIT and the assessee filed vehement replies with documents. The AO has raised a specific query No. B-4 in notice dated 20.02.2021 that if the disclosed income of Rs. 1,05,08,150/- (i.e. surrendered income) is excluded from P&L
Page 9 of 11 A/c, it will result in a loss. The assessee has filed explanation to this query in Point No. 4 of reply dated 14.07.2021. Similarly, the AO has asked assessee to give details of additions to fixed assets made during the year vide query No. A-9 of notice dated 20.02.2021 and the assessee has filed details/evidences of addition to fixed assets vide Point No. 9 of reply dated 02.03.3021, Point No. 4 of reply dated 14.07.2021 and Point No. 1 of reply dated 22.07.2021. In so far as the date of putting to use the newly purchased trucks is concerned, the same is duly reported in Annexure-II to Form No. 3CD of Tax Audit scanned and reproduced above. Similarly, the AO has asked assessee to furnish comparative chart of GP and NP vide query No. A-8 of notice dated 20.02.2021 and the assessee has submitted requisite details vide Point No. 8 of reply dated 02.03.2021. The AO has also issued a show-cause notice dated 22.02.2021 and the assessee has filed reply dated 09.03.2021 which is re-produced in AO’s order itself. Thus, it is clearly discernible that the AO has made specific queries to all the issues raised by PCIT and the assessee has filed replies with evidences which the AO has considered. Only thereafter, the AO has passed assessment-order accepting assessee’s returned income with a variation of charging higher rate of tax to excess cash found during survey. When it is so, the Ld. PCIT is wrong in alleging that the AO has not made enquiries and thereby terming the assessment-order as erroneous or prejudicial to the interest of revenue and passing a revision-order. Hence, we quash the impugned revision-order
Page 10 of 11 passed by Ld. PCIT and restore the original assessment-order passed by AO.
The assessee succeeds in this appeal.
Resultantly, this appeal is allowed.
Order pronounced by putting on notice board as per Rule 34 of ITAT Rules, 1963 on 24/02/2025
Sd/- Sd/- (DINESH MOHAN SINHA) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 24/02/2025 Dev/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore
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