HETALKUMAR PRAVINCHANDRA RAJYAGURU,RAJKOT vs. PR. CIT, RAJKOT-1, RAJKOT, RAJKOT

6.In response to the above notice, the assessee, vide its letter dated 14.02.2024, has filed its reply before the learned PCIT, which is reproduced by learned PCIT in its revision order, under section 263 of the Act. The assessee submitted before the learned PCIT that said disclosure has been made by the partner after examining the noting made in a note book and loose papers found and seized from the office premises of the assessee, during the survey proceedings and as per explanation given by the assessee, the noting in the note book contained details of transactions of purchase and sales made by him during the year under consideration. The assessee has also agreed to pay the income tax on the disclosure amount during survey, and in fact, assessee has paid the taxes on the disclosed amount during the survey. Since the purchase and sale relates to assessee`s business. Therefore, it is income of the assessee, from the assessee`s business and should be assessed under the head income from business. Therefore, it should not be taxable under section 115BBE of the Act. In respect of fall in the gross profit ratio, the assessee submitted that it is very small andnegligible fall in the gross profit, which is because of more expenses incurred during the year, for the purpose of business.

10.Learned Counsel for the assessee submitted that during the assessment proceedings, the assessee furnished documents and evidences, before the Assessing officer, in aspect of excess stock, which were examined by the assessing officer, as it is evident that during the assessment proceedings, the assessing officer issued notice under section 142(1) of the Act, asking the questions in respect of excess stock/ shortage of stock.Therefore, having examined the details and documents submitted by the assessee, the assessment order was framed by the assessing officer, after applying his mind. Hence, such assessment order should not be erroneous as well as prejudicial to the interest of revenue.

13.About gross profit ratio, the Learned DR for the Revenue, submitted that no any question was raised, by the assessing officer during the assessment proceedings, by the Assessing Officer. Therefore, so far, the gross profit ratio is concerned,there was no enquiry made by the assessing officer, hence, order passed by the assessing officer is erroneous.

14.In re-joinder, the Ld. Counsel for the assessee submitted that the assessee submitted all documents and evidence, before the assessing officer, such as balance sheet, profit and loss account and cash flow statement, during the assessment proceedings,and assessing officer had worked out the gross profit ratio, based on these financial statements of the assessee. , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 15.We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record.Since in the present case, the Ld.PCIT has exercised his jurisdiction u/s.263 of the Act, in case of all assessees, on the ground that the assessing officer while completing the assessment proceeding did not make enquiries which he ought to have made. Therefore, it is necessary to look into what enquiries the assessing officer made on the issues raised in the order u/s.263 of the Act, in respect of all assessees` appeals, which are as follows, appeal- wise; in the case of Shamji Nathu Vaishya:

The ld. PCIT noticed in respect of disclosure on account of commission income of Rs.1,54,00,000/- that the income of Rs. 1,54,00,000/-, disclosed during the survey and admitted by the assessee, as its income earned during that year ought to have treated as income from unexplained sources in view of the provisions of section 69A of the Act, 1961 and taxed u/s 115BBE of the Act. However, the assessing officer failed to do the same. Therefore, Ld. PCIT noticed that the order passed u/s 143(3) of the Income tax Act, 1961, on 08/04/2021, by the assessing officer is erroneous since the assessing officer had accepted the assessee's claim of commission income of Rs. 1,54,00,000/-, even when the assessee failed to submit relevant and necessary documents during the course of assessment proceedings. Therefore, learned PCIT held that the assessment order passed by the assessing officer, was passed without proper examination, and enquiry. , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer, issued notice under section 142(1) of the Act, dated 06.02.2024, vide para 2 of page no. 4 of the notice, the assessing officer has asked the assessee to submit the relevant documents and evidences, in respect of commission. In response to this notice of the assessing officer, the assessee submitted its reply before the assessing officer, on three occasions, on 12.02.2021, 18.02.2021, and 04.03.2021( vide paper book page No.24 to 31). Therefore, learnedCounsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed enquiry. Hence, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of the revenue. However, learned DR for the revenue, relied on the stand taken by the learned PCIT.

The ld. PCIT noticed in respect ofdisclosure of income on account of inflated expenses in the profit and loss account and noticed that the bogus expenses to the tune of Rs.90,00,000/-, ought to have taxed, as deemed income u/s 69C of the Act, and taxed u/s 115BBE of the Income Tax Act. However, the assessing officer failed to do the same. Therefore, learned PCIT noticed that order passed by the assessing officer is without proper inquiry and investigation, which is erroneous and prejudicial to the interest of revenue. Therefore, learned PCIT held that assessment order, passed by assessing officer, was without proper examination, and enquiry.

Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer, issued notice under section 142(1) of the Act, dated27.01.2021, vide para no. 2 of page no. 3 of the notice, wherein the assessing officer has raised this issue and asked the questions of the assessee, vide paper book page No.22. In response to this notice, the 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 assessee, submitted its reply, before the assessing officer, on 09.03.2021 (The assessee`s reply is placed on paper book page Nos. 28 to 33.). Therefore, learned Counsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed enquiry. Hence, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of the revenue. However, learned DR for the revenue, relied on the stand taken by the learned PCIT.

(iii). In respect of ITANo. 371/Rjt/2024,in the case of Soham Paper Pvt. Ltd. The ld. PCIT noticed in respect ofshortage of stock of Raw material of Rs.2,33,05,730/- andexcess stock of finished goods of Rs.7,02,780/-, that during the course of survey proceedings, carried out on 12.02.2019, in case of the assessee, shortage of stock of Raw Material of Rs. 2,33,05,730/-, and excess stock of finished goods of Rs.7,02,780/-, was found. The assessee has not furnished any concrete and satisfactory explanation regarding the shortage/ excess as noted above. The response of director of the company Shri Divyesh Marvaniya, at the time of survey is very vague. He blames that the quantification of stock made by Registered Valuer, was done by unscientific method and estimated basis. At this stage it should not be lost sight of the fact that the valuation was done by a Registered Surveyor and Loss Assessor. As a professional, such a person are competent in their work and are trained for stock measurement etc, in a scientific manner. The assessee has also made vague and indeterminate reply stating that the imported wastepaper, there is existence of moisture which results in 5% to 7% shortage in the volume. From this it was clear that the assessee impliedly accepted the shortage of stock but tried to justify the same on the ground of moisture.It was noticed by the ld PCIT that the assessee has neither during survey nor during the post survey proceedings, furnished satisfactory , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 reconciliation or explanation with regards to shortage/ excess of stock found at the time of survey. The primary onus isto reconcile the shortage of stock with corroborative documentary evidences, was on the assessee and, then, to confirm the veracity of the explanation/claims of the assessee, based on the supporting documents submitted was duty of the Assessing Officer. However, no such explanation is found from the assessment records.Therefore, learned PCIT noticed thatneither the assessee has given any explanation nor has the assessing officer made any proper enquiry in this regard.

Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer, issued notice under section 142(1) of the Act,dated 06.02.2024, vide para 2 & 3 of the notice, wherein the assessing officer has raised this issue and asked the questions from the assessee, vide paper book page No.22.The assessing officer has further issued show -cause notice to the assessee, wherein the assessing officer asked the questions relating to shortage of stock of raw material and stock of finished goods, vide paper book page No.27. In response to this notice, the assessee, submitted its reply, before the assessing officer, on 15.09.2021, 20.09.2021 and 06.03.2019 (The assessee`s replies are placed on paper book page Nos. 25 to 26, page No.28 to 32 and page No.13 to 18). Therefore, learned Counsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed enquiry. Hence, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of the revenue. However, learned DR for the revenue, relied on the stand taken by the learned PCIT. in the case of Dhruv Print Pack Industires.

ITA No. 312, 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 The ld. PCIT noticed in respect ofshortage of stock of raw material of Rs.16,31,394/- and excess stock of finished goods of Rs.14,04,558/-, (net discrepancy Rs. 2,26,836/-)that in the assessee`s case, no elaborate explanation along with documentary evidence was given with regards to shortage of stock found during the course of survey proceedings. Neither explanation, along with documentary evidence has ever come from the assessee nor has the assessing officer insisted the assessee or conducted independent inquiry to ascertain the real reasons for shortage of stock found during the survey proceedings. The ld PCIT noticed that it is a case of accepting the claim of the assessee, on its face value, without going into the details. While conducting scrutiny assessment, the assessing officer is duty bound to appreciate each and every fact presented before him with corroborative evidences rather than accepting the claim on its face value. Otherwise, there is no point in conducting scrutiny assessment at all. Assessment carried out in such mechanical manner cannot be said to have been made after due application of mind and no proper enquiry was made by the assessing officer. Therefore, learned PCIT, noticed that shortage of stock of Rs.2,26,836/-, found during the survey and admitted by the assessee is to be added to the total income of the assessee. Therefore, learned PCIT held that the value of shortage of stock of Rs.2,26,836/-, ought to have been treated as undisclosed income of the assessee u/s 69A and taxed u/s 115BBA of the Income Tax Act. Apart from this, the learned PCIT noticed that in assessee`s case, there islate payment of employee's contribution to PF of Rs. 1,41,718/-. The ld. PCIT noticed that there wasdelay in deposit of Employee's contribution to Provident Fund of Rs. 1,41,718/-, which required to be disallowed u/s 43B of the I.T, Act,however, the assessing officer had not disallowed the same while passing the assessment order u/s 143(3) of the Income tax Act, 1961.Therefore, learned PCIT held that the order passed u/s 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 143(3) of the Income-tax Act, 1961, on 24/09/2021 by the assessing officer is erroneous.

Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer, issued notice under section 142(1) of the Act,dated 06.02.2021, vide para 2 & 3 of the notice,( paper book page No.13) wherein the assessing officer has raised the same issue, as raised by ld PCIT in a revision proceedings. The assessing officer asked the assessee to submit the relevant documents and details. In response to the notice ofthe assessing officer, the assessee submitted its reply before the assessing officer on 24.09.2021, (vide paper book page No. 24 to 27).Therefore, learned Counsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed enquiry. Hence, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of the revenue except Late Payment of employeescontribution to P.F. Rs.1,41,718/- . However, learned DR for the revenue, relied on the stand taken by the learned PCIT. the case of Bharat Kalyanji Bhindi The ld. PCIT noticed in respect ofexcess stock of Rs.4,51,99,231/-, that the assessee's claim of reduction of amount of excess stock declared during the survey proceedings to Rs.4,51,99,231/-, ought to have been rejected by the assessing officer on the following reasons:

(i) In reply to question No.3 of the statement of the assessee, recorded during the course of survey proceedings, the assessee specifically stated that his books of account are being maintained in computer and the accounts of his , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 business are written till 18.02.2019. Therefore, the assessee's claim that 1011.51 grams of 22 ctGold ornaments purchased were remained to be entered in the books is not tenable and acceptable.

(ii) As per submission filed by the assessee during the course of assessment proceedings, the assessee claimed to have purchased 34.490 gram ornaments for Rs.3,78,359/- from Junagadh Jewellery Pvt Ltd, on 24.11.2018 and also claimed that he has paid Rs.3,78,359/-, on 24.11.2018 to Junagadh Jewellery Pvt Ltd but due to reason that purchase bill dated 24.11.2018 was misplaced and hence entries could not be passed in the account. The contentions of the assesseeis apparently not found to be tenable because if the bill was misplaced, the assessee can obtained duplicate bill from the seller and make entry in his books of account within reasonable time. However, in the instant case, though the purchase claimed to have made on 24.11.2018, no entry of such purchase made till date of survey i.e. 20.02.2019. Therefore, the claim of the assessee, ought to have verified deeply,however, the assessing officer failed to do the same. (iii) Further, neither the assessee has furnished evidence of transportation of goods, mode of transportation, delivery challans etc, in respect of alleged purchases of 1011.500 gram gold as discussed above nor the assessing officer has called for and verified the same. The assessing officer ought to have also verified above transactions by way of issuing notice u/s 133(6) of the I.T. Act. The assessment carried out in such mechanical manner cannot be said to have been made after due application of mind.Therefore, ld. PCIT held that assessing officer did not make any efforts to verify the assessee's claim which clearly proves that assessing officer has passed the assessment order hurriedly, and without proper enquiry which makes such order as erroneous and prejudicial to interest of revenue. , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer, issued notices under section 142(1) of the Act,dated 06.02.2021, vide para 2 & 3 of the notice and assessing officer also issued show cause notice 08.09.2021( vide paper book page No. 26 and 59), wherein the assessing officer had asked the questions from the assessee, and asked the assessee to submit relevant documents and evidences. In response to these notices ofthe assessing officer, the assessee submittedits fourreplies, along with documentary evidences, before the assessing officer, on four occasions, that is, on 19.02.2021, 01.03.2021, 09.09.2019 and 28.05.2019, respectively ( vide paper book page Nos. 34, 35 to40, 59 to 64 and 16 to 17). Therefore, learned Counsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed enquiry. Hence, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of the revenue. However, learned DR for the revenue, relied on the stand taken by the learned PCIT.

(vi). In respect ofITA No. 324/Rjt/2024,in the case of Deepmala Marine Export The ld. PCIT noticed in respect ofexcess stock of Rs.81,32,250/-, that disclosure has been made by the partner after examining the noting made in a note book and loose papers found and seized from the office premises of the assessee, during the survey proceedings and as per explanation given by the year under his statement, the noting in the note book contained details of transactions of unaccounted purchase and sales made by him during the year under consideration. Therefore, ld PCIT noticed that such explanation of the assessee,which is not backed by any corroborative evidence, is not acceptable, merely saying that the noting in the note book were unaccounted purchase and sales made by him during the year under consideration is not 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 sufficient to claim these unaccounted receipts as business receipts. To claim the receipts as business receipts, the assessee should have explained the entries appearing in the note book before the assessing officer with corroborative documentary evidences, like purchase bills, sale bills, name of purchaser, name of seller etc, during the assessment proceedings. The primary onus to explain the receipts with corroborative documentary evidences was on the assessee and, then, to confirm the veracity of the explanation/claims of the assessee based on the supporting documents submitted. However, no such explanation is found from the assessment records. Therefore, ld. PCIT noticed that neither the assessee has given any explanation nor has the assessing officer made any proper enquiry in this regard. The ld. PCIT noticed in respect ofdownfall in gross profit(GP) that there is a fall in gross profitby 00.49%.The ld PCIT noticed that explanation of issue of decrease in gross profit ratio, submitted by the assessee, should not be accepted because during the year under consideration, the assessee- firm has total turnover of Rs.77,42,35,548/- and had earned a gross profit of Rs.5,69,44,263/- (Excluding discloser) @ 7.35%. As against this, the assessee- firm had a turnover of Rs.77,92,16,706/- and had earned gross profit of Rs. 6,11,25,995/-, @ 7.84% in the immediately preceding year. Thus, there is a downfall in gross profit by 00.49%. The learned PCIT noticed thatno apparent reason was found in respect of fall in Gross Profit, neither the assessee has submitted any explanation for fall in gross profit ratio nor has the assessing officer verified the issue. The assessing officer ought to have verified the issue while passing the assessment order u/s 143(3) of the Income tax Act, 1961,however, the assessing officer failed to do the same, therefore, order passed by the assessing officer is erroneous. , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer, issued notices under section 142(1) of the Act,dated 06.02.2021, 21.09.2021, and 06.02.2021, vide paper book page Nos. 21 and 22, wherein the assessing officer had asked the relevantquestions from the assessee, and asked the assessee to submit relevant documents and evidences. In response to these notices ofthe assessing officer, the assessee submitteditsthreereplies, along with documentary evidences, before the assessing officer, on three occasions, that is, on 12.02.2021, 23.09.2021, and12.02.2021, respectively ( vide paper book page Nos. 28 and 26). Therefore, learned Counsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed enquiry.In respect ofdownfall in gross profit(GP) ratio, the learned Counsel for the assessee submitted that it is a very small downfall in gross profit(GP) ratio, due to increase of some expenses for business purpose.Therefore, learned Counsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed enquiry. Hence, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of the revenue. However, learned DR for the revenue, relied on the stand taken by the learned PCIT.

(vii). In respect ofITA No. 335/Rjt/2024,in the case of Dhruv Craft Mill Pvt. Ltd The ld. PCIT noticedthe contention of the assessee, in respect ofexcess stock of Rs.33,75,886/-, that the quantification of stock made by the Registered Surveyor on volume density basis, which is on estimate basis and cannot give exact quantification of stock and hence, the same was strongly objected by the assessee,however, in order to avoid long drawn litigation, to buy peace of mind and to save cost & time, assessee has voluntarily offered the 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 additional income to the extent of Rs.33.76 lakhs. The ld. PCIT did not accept the above contention of the assessee. The income which was ultimately brought to tax, pursuant to the disclosure made, which was voluntary on the part of the assessee. The ld. PCIT noticed that in the instant case, the assessee has disclosed additional income to the extent of Rs.33.76 lakhs,however, it did not specify how it fell in. Unless such facts are mentioned with specificity, it cannot be said the income disclosed by the assessee, representing unexplained business assets and it is taxable u/s 28, as part of business income. The primary onus to explain the source of income with corroborative documentary evidences was on the assessee and, then, to confirm the veracity of the explanation/claims of the assessee based on the supporting documents submitted, then it is the duty of the Assessing Officer.However, no such explanation is found from the assessment records.Therefore, ld. PCIT noticed that neither the assessee has given any explanation nor has the assessing officer made any proper enquiry in this regard.

Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer, issued notices under section 142(1) of the Act, dated 06.02.2021, vide para 2 of the notice and assessing officer alsoissued show cause notice dated 08.09.2021, wherein the assessing officer had asked questions from the assessee in respect of source of the excess stock. In response to the notice of the assessing officer, the assessee submitted its reply before the assessing officer, on two occasions, on 22.02.2021 and 15.09.2021( vide paper book page Nos.26 to 27 and page no.30 to 36). Therefore, learned Counsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed enquiry.Therefore, learned Counsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed enquiry. Hence, , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of the revenue. However, learned DR for the revenue, relied on the stand taken by the learned PCIT.

(viii). In respect ofITA No. 326/Rjt/2024,in the case ofKishor VeljibhaiFofandi The ld. PCIT noticed in respect ofexcess stock of Rs.41,30,340/- that the said disclosure has been made by the assessee, after examining the noting made in a note book and loose papers found and seized from the office premises of the assessee, during the survey proceedings and as per explanation given by the assesse in his statement, the noting in the note book contained details of transactions of unaccounted purchase and sales made by him during the year under consideration. Such explanation of the assessee, which is not backed by any corroborative evidence, is not acceptable, merely saying that the noting in the note book were unaccounted purchase and sales made by him during the year under consideration is not sufficient to claim these unaccounted receipts, as business receipts. To claim the receipts as business receipts, the assessee should have explained the entries appearing in the note book before the assessing officer with corroborative documentary evidences, like purchase bills, sale bills, name of purchaser, name of seller etc, during the assessment proceedings. The primary onus to explain the receipts with corroborative documentary evidences was on the assessee and, then, to confirm the veracity of the explanation/claims of the assessee based on the supporting documents submitted, was duty of the Assessing Officer. However, no such explanation is found from the assessment records. The ld PCIT noticed that neither the assessee has given any explanation nor has the assessing officer made any enquiry in this regard. The ld. PCIT noticed that 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 it is a case of accepting the claim of the assessee, on its face value, without going into the details. While conducting scrutiny assessment the assessing officer is duty bound to appreciate each and every fact presented before him with corroborative evidences rather than accepting the claim on its face value,otherwise there is no point in conducting scrutiny assessment at all. The ld. PCIT noticed that there is a downfall in gross profit ratio, also.The assessment carried out in such mechanical manner cannot be said to have been made after due application of mind and after making proper enquiry.

Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer, issued notice under section 142(1) of the Act,dated06.02.2021, vide paper book page No.

in the case of Sun Export The ld. PCIT noticed in respect ofexcess stock of Rs.1,75,04,460/-, that the disclosure has been made by the assessee, after examining the noting made in a note book and loose papers found and seized from the office premises of the assessee, during the survey proceedings and as per explanation given by 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 the assessee in his statement, the noting in the note book contained details of transactions of unaccounted purchase and sales made by him during the year under consideration. Such explanation of the assessee, which is not backed by any corroborative evidence, is not acceptable andmerely saying that the noting in the note book were unaccounted purchase and sales made by him during the year under consideration is not sufficient to claim these unaccounted receipts as business receipts. To claim the receipts as business receipts the assessee should have explained the entries appearing in the note book before the assessing officer with corroborative documentary evidences like purchase bills, sale bills, name of purchaser, name of seller etc. during the assessment proceedings. The primary onus to explain the receipts with corroborative documentary evidences was on the assessee and, then, to confirm the veracity of the explanation/claims of the assessee based on the supporting documents submitted, was duty of the Assessing Officer. However, no such explanation is found from the assessment records. The ld PCIT noticed thatneither the assessee has given any explanation nor has the assessing officer made any enquiry in this regard.Neither explanation along with documentary evidence has ever come from the assessee nor has the assessing officer insisted the assessee or conducted independent inquiry to ascertain the real character of the amounts found noted in the note book during the survey proceedings. It is a case of accepting the claim of the assessee on its face value without going into the details. Therefore, learned PCIT noticed thatassessment carried out in mechanical manner and assessing officer has not conducted proper enquiry. About downfall in gross profit (GP) ratio of 00.31%, the learned PCIT noticed that during the year under consideration, the assessee- firm has not explained the downfall. No apparent reason is found in respect of huge down fall in Gross Profit ratio. , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer, issued notice under section 142(1) of the Act, dated06.02.2021, vide paper book page No.20. The assessing officer alsoissued show cause notice dated 08.09.2021,wherein the assessing officer had asked questions from the assessee, in respect of source of the excess stock. In response to the notice of the assessing officer, the assessee submitted its reply before the assessing officer,on27.09.2021. About downfall in the gross profit ratio, the learned Counsel submitted that this is because of more expenses incurred during the year for the purpose of business. Therefore, learned Counsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed enquiry.During the course of assessment proceedings, the assessee in reply to notice u/s 142(1) 06.02.2021, vide his submission dated 12.02.2021 has submitted details of GP/NP of four years for comparison, to justify gross profit ratio. Hence, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of the revenue. However, learned DR for the revenue, relied on the stand taken by the learned PCIT. in the case ofChunilal G. Vanik The ld. PCIT noticed in respect ofexcess stock of Rs.1,35,50,792/-, that the said disclosure has been made by the assessee after examining the loose paper file found during the survey which was inventoried as annexure BF- 1/6 found from the office premises of the assessee during the survey proceedings. As per the explanation given by the assessee in his statement, the noting in the loose paper contained details of transactions of unaccounted purchase and sales made by the assessee during the year under consideration. Such explanation of the assessee, which is not backed by any corroborative evidence, is not acceptable,merely saying that the noting in the Page | 24 , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 loose paper were unaccounted purchase and sales made by the assessee during the year under consideration is not sufficient to claim these unaccounted receipts as business receipts. To claim the receipts as business receipts the assessee should have explained entries appearing in the loose paper before the assessing officer with corroborative documentary evidences like purchase bills, sale bills, name of purchaser, name of seller etc, during the assessment proceedings. The assessee in the submission has mentioned that the excess stock found during the survey was part of the total stock. In this regard, merely saying that the excess stock found during the survey was part of the total stock is not sufficient to claim this unaccounted stock as part of business. To claim the stock as part of the business, the assessee ought to have explained the sources from which such stock was purchased before the assessing officer with corroborative documentary evidences during the assessment proceedings. The primary onus to explain the unaccounted stock with corroborative documentary evidences was on the assessee and, then, to confirm the veracity of the explanation/claims of the assessee based on the supporting documents submitted, was duty of the Assessing Officer.However, no such explanation is found from the assessment records, therefore, the assessing officer did not conduct proper enquiry.

Learned Counsel for the assessee submitted that during the assessment proceedings, the assessing officer, issued notice under section 142(1) of the Act, dated06.02.2021, vide paper book page No.20. The assessing officer alsoissued show cause notice dated 08.09.2021, ( paper book page no.20 and 22) wherein the assessing officer had asked questions from the assessee, in respect of source of the excess stock. In response to the notice of the assessing officer, the assessee submitted its reply before the assessing officer,on25.09.2021.Therefore, learned Counsel for the assessee, submitted that assessing officer, during the assessment proceedings made detailed , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 enquiry.Hence, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of the revenue. However, learned DR for the revenue, relied on the stand taken by the learned PCIT.

“The phrase “prejudicial to the interests of the Revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law”.

8……However, what is opinion formed as a result of these enquiries is something which is inexclusive domain of the Assessing Officer, and even if Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceedings. The conclusions arrived at as a result of enquiries cannot be tinkered with in the revision proceedings. The conclusions being drawn up as a result of enquiry is a highly subjective exercise and as to what is appropriate conclusion is something on which perceptions vary from person to persons. These variations in the perceptions of the Assessing Officer vis-a-vis that of the Commissioner, cannot render an order erroneous and prejudicial to the interest of the revenue.

19.The aforesaid position gets further strength from the decision of Hon’ble High Court of Calcutta in the case of CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (Cal), the relevant finding of which is applicable to the facts of the present assessee is quoted below :

“85. Whether the assessment order dated March 28, 2008, was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order-sheets go to show thatheard from time to time. In deciding the question the court has to bear in mind the presumption in law laid down in Section 114 clause (e) of the Evidence Act: “that judicial and official acts have been regularly performed.

It is a settled position in law that provisions of section 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the Ld. Pr. C.I.T. cannot be sustained on the principle of ‘erroneous’ nature , 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 of the order of the A.O., as it is not erroneous. Further, in the instant case, to reiterate, there was no allegation by the Ld. DR for the revenue, that the evidences produced by these assessees before assessing officer were fictitious or invented, thus accepted the authenticity of the same. Such an order cannot be called erroneous and prejudicial to interests of revenue only because the A.O. made the assessment without discussing such details therein, as held by the Coordinate Bench of ITAT Kolkata in the case of Chroma Business Ltd. vs. DCIT (2004) 82 TTJ 540 (Cal).Further support in this connection is taken from the decision of Hon’ble Delhi High Court in the case of CIT vs. Vikas Polymers (2012) 341 ITR 537 (Del). Relevant part of the observation in this regard reads as under :

This is for the reason that if a query is raised during the course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer was reflected in the assessment order, that would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision.

ITA No. 312, 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld Pr. CIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquiries or verification that would have been carried out by a prudent officer. Hence, the said explanation, which was inserted by Finance Act 2015 w.e.f. 1.4.2015, would not be applicable to the year under consideration. For that we rely on the judgment of the Co-ordinate Bench of Mumbai in the case of Shri Narayan Tatu Rane vs. ITO in & 2691/Mum/2016 for A.Y. 20108-09 dated 06.05.2016.We note that section 263 of the Act enables supervisory jurisdiction to the PCIT over the assessing officer (AO). The PCIT is empowered to act u/s. 263 of the Act when he considers that AO’s order is erroneous in so far as it is prejudicial to the interest of Revenue. It is a settled position of law that the aforesaid twin condition i.e. AO’s order is erroneous and prejudicial to the interest of revenue is sine qua non for assumption of revisionary jurisdiction by PCIT. As per the scheme of the Act, AO has a dual role to discharge while assessing the income of an assessee. He is both an investigator as well as an adjudicator. If the AO fails in discharging any of the two said duties, that is, as an investigator or that of an independent/impartial adjudicator, the CIT’s supervisory jurisdiction is attracted because the order of the AO would be erroneous for lack of inquiry, that is if he does not investigate or it would be erroneous for failure of AO to adjudicate as an independent/impartial adjudicator which means that if the AO passes assessment order in violation of natural justice, or there is bias or arbitrariness etc. then also the order of AO would be erroneous. When we say that lack of inquiry makes an AO’s order erroneous, one has to keep in 322 to 329/Rjt/2024 & 335 & 371/Rjt/2024 mind the difference between lack of inquiry and inadequate inquiry. The Lack of inquiry makes the AO’s order erroneous, but inadequate inquiry does not make the order of AO erroneous. If the AO’s view is a plausible view on the facts and circumstances of the case, then PCIT cannot exercise the 263 jurisdiction to impose his own view which may be a view possible to be taken in the very same facts of the case.Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is ‘’null’’ in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Principal CIT. Therefore, we quash all these orders of the Principal CIT, being ab initio void, except issue in in case of Dhruv Print Pack Industries, in respect of late payment of employee`s contribution to PF of Rs.1,41,718/-. in case of Dhruv Print Pack Industries, there is late payment of employee`s contribution to PF of Rs.1,41,718/-, which is covered against the assessee, by the judgment of the Hon'ble jurisdictional Gujarat High Court in the case of State Road Transport Corporation (GSRTC) 41 taxmann.com 100 (Guj). It is also covered against the assessee by the judgement of the Hon`ble Supreme Court, in the case of Checkmate Services Private Limited, in civil appeal No.2833/2016, dated 12.10.2022. Therefore, in the case of ITA No.331/RJT/2024, in case of Dhruv Print Pack Industries(supra) the order passed by the learned PCIT, is upheld to the extent of contribution of PF of Rs.1,41,718/-, hence assessee`s appeal in ITA No.331/RJT/2024, in case of Dhruv Print Pack Industries, is partly allowed, therefore, assessing officer is directed to make addition in the hands of the assessee of Rs. 1,41,718/-.

Order pronounced in the open court on 30-06-2025