SARITA GUPTA,ALWAR vs. PCIT(CENTRAL), JAIPUR, JAIPUR

3. The appellant craves to alter, amend and modify any ground of appeal

4. Necessary cost be awarded to the assessee.”

3. The present appeal challenged the order of ld. PCIT passed u/s 263 of the Act. The brief fact as culled out from the records is that in this case a Survey action u/s 133A of the I.T. Act, 1961 (hereinafter to be referred as 'the Act') was carried out on 11-10- Paints, Prop. Smt. Sarita Gupta situated near Gol Market, Rajgarh, Alwar.

3.1 The assessee e-filed her return of income u/s 139 on 12/09/2018 vide acknowledgement no. 290819050120918 declaring income of Rs. 15,95,820/-. The case was selected for compulsory scrutiny, being a survey case, as per CBDT guidelines for selection of cases under compulsory scrutiny. The proceedings of assessment of income were initiated by issuing of notice u/s 143(2) of the Act on 20-09-2019 through computer systems which was served electronically on the Email of the assessee firm. The assessee is engaged in the business of retail trading of Paints, Distemper, Primer etc during the year under consideration.

3.2 During survey proceedings cash of Rs. 5,66,343/- was found, whereas as per books the cash in hand on the date of survey was Rs. 2,34,608/-.

He was asked vide question no. 21 of his statements to give justification of the difference of Rs. 3,31,735/- found in cash.

He in response to the question stated that the difference amount was income of M/s Sahil Paints earned from undisclosed sources during the year under consideration.

During the course of assessment proceedings, the assessee vide notice u/s 142(1) was asked to show how the income surrendered in return of income is disclosed. In response to that the A/R of the assessee stated that the cash difference of Rs.

3,31,735/- has already been declared by the assessee in the ITR and paid due taxes thereon.

On perusal of the reply along with ITR and computation of income furnished by the assessee, it is noticed that the assessee has declared the amount of Rs. 3,31,735/- surrendered during the survey. But the assessee has paid the tax thereon at normal rates.

Since, during the survey proceedings Shri Harsh Gupta admitted that the amount was income of M/s Sahil paints earned from undisclosed sources and since, he failed to explanation about the source of excess cash found during the survey proceedings, thus, the assessee in terms of provisions of section 69A of the Act. In view of the fact, tax on the income of Rs. 3,31,735/- shall be charged as per the provisions of section 115BBE of the Act.

3.3 During survey proceedings, stock of Rs. 52,76,668/- was found on physical verification, whereas as per books the stock position on the date of survey was Rs. 38,58,444/-. In this way excess stock of Rs. 14,18,225/- was found. On this aspect statement of Shri Harsh Gupta was recorded. He was asked vide question no. 20 to give justification of excess stock found. In response to the question, he stated that he was unable to give justification on the excess stock found and surrendered the amount of Rs. 14,18,225/- as income of M/s Sahil Paints for the year under consideration. During the course of assessment proceedings, the assessee vide notice u/s 142(1) was asked to give justification in this regard and to show how the undisclosed income is shown in the ITR. The reply of the assessee has been considered carefully by the ld. AO. It is noticed that on the same date a survey was also conducted on M/s Mahawar Electric Store related to the family Gupta (husband of the assessee Smt. Sarita Gupta) was recorded on 11.10.2017. He in response to question no. 8 of his statements stated that at the godown situated at Vikas Colony, Rajgarh the stock of M/s Sahil Paints and M/s Mahawar Electric Store was lying. However, quantum was not differentiated then. Now, the A/R of the assessee submitted that the stock of Rs. 52,76,668/- found during the physical verification includes the stock of Rs. 12,34,965/- related to M/s Mahawar Electric Store. In support of this submission he furnished copy of bills & vouchers of the items of the stock that is related to M/s Sahil Paints i.e. Rs. 38,35,321/- (5276668 - 1234965)/- and supporting bills & vouchers of items mentioned in stock inventory that related to M/s Mahawar Electric Store for Rs. 12,34,965/-. To that extent the submission of the assessee is found acceptable. It is further stated that also the purchase bills of Rs. 2,59,282/- was not entered on the date of survey and the reply to the effect was given vide letter dated 13.10.2017. The assessee in support of it, has not filed supporting bills and the copy of the said letter. Also, the letter is also not found available on record. Thus, the submission of the assessee for the acceptable by the ld. AO. Therefore, the excess stock of Rs. 1,83,259/- is found from the business premises of the assessee for which the assessee fails to offer any proper justification. Since the assessee has already disclosed the amount of Rs. 12,924/- on account of short stock income in the ITR, therefore, the amount of Rs. 1,70,335/- (Rs. 1,83,259 - Rs.12,924) is held as income of the assessee for the year under consideration on account of unaccounted purchase and added in the total income of the assessee.

4. On culmination of the assessment proceedings, the ld. PCIT called for examination the assessment records. Upon examination of the assessment record, the ld. PCIT noted that during the survey proceedings, excess cash of Rs. 3,31,735/- was found, and the then AO has mentioned in the assessment order that the excess cash of Rs. 3,31,735/- relates to section 69A whereon tax was to be charged under the provisions of section 115BBE whereas a perusal of Computation Sheet revealed that the tax was charged at normal rates. Further, during the survey proceedings, surrendered the same for taxation. During the assessment proceedings, the assessee explained the stock of Rs. 12,34,965/-, out of the excess stock of Rs. 14,8,225/- & thus the excess stock was remained at Rs. 1,83,259/-. Out of excess stock of Rs. 1,83,259/-, the assessee has disclosed Rs. 12,924/- in his return of income and an addition of Rs. 1,70,335/- was made by the then AO. Purchase of excess stock related to unexplained investment.

Therefore, the income of Rs. 1,83,259/- relates to unexplained investment, u/s 69 whereon tax was to be charged under the provisions of section 115BBE whereas a perusal of Computation Sheet revealed that the tax was charged at normal rates.

5. Based on this set of facts, the ld. PCIT noted that in this case, the ld. AO has not applied proper provisions of the Act on the income declared and offered in the return of income so filed.

Therefore, ld. PCIT noted that the order is erroneous and prejudicial to the interest of revenue and the action was initiated by invoking of section 263 of the Act by issuing a show cause notice as per provisions of 263 of the Act. Against that show cause notice on record. The ld. PCIT considered all the facts and circumstances as detailed in the reply filed by the assessee but not found the convincing and ld. PCIT thus held as under:-

“10. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 13.04.2021 for Α.Υ. 2018-19 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO 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. The order of the AO is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Act. The assessment order is set aside to be made afresh in the light of the observation made in this order. The AO is required to make necessary verification in respect of the observations made in this order after allowing reasonable opportunity to the assessee. I wish to make it clear that I am not disturbing the assessment that has already been made. I am only passing an order whereas applicability of the provisions of section 69A and 69 are considered. The order of the AO is, therefore, liable to revision under the explanation (2) clause (a) of section 263 of the Act. The assessment order is set aside and restored to the file of Assessing Officer to verifying applicability of provisions of section 69A and 69 of the Income Tax Act.”

6. Feeling aggrieved from the above order of the PCIT passed u/s. 263 of the Act, the present appeal is filed by the assessee challenging the finding recorded thereon. Apropos to the ground so raised the ld. AR appearing on behalf of the assessee has placed their written submission on record which is reproduced herein below; Sarita Gupta vs. PCIT 1. The assessee is proprietor of M/s Sahil Paints engaged in the business of trading of color, paint, etc. A survey was carried out at the business premises of assessee on 11.10.2017. In course of survey Sh. Harsh Gupta, brother of the husband of assessee in his statement dt. 11.10.2017 which continued on 12.10.2017, in reply to Q. No.20 to 23 (PB 33-35) offered for tax current year income of Rs.17,49,960/- represented in form of excess cash of Rs.3,31,735/- and excess stock of Rs.14,18,225/-. This statement is also confirmed by assessee on 12.10.2017 (PB 35-36).

2. The assessee filed the return on 12.09.2018 declaring total income of Rs.15,95,820/- (PB 10-13). The assessee declared business income of Rs.11,68,858/- u/s 44AD of the Act by declaring n.p. rate of 10.33% on the turnover of Rs.1,13,05,227/- and other income of Rs.4,38,610/- (cash Rs.3,31,735/- + renovation of shop Rs.1,00,000/- - short stock Rs.76,022/- + profit on short stock Rs.12,924/- + capital introduced Rs.70,000/-).

3. During the course of assessment proceedings assessee explained that physical stock found in survey of Rs.52,76,668/- includes stock of Mahaveer Electrical Store Rs.12,34,965/- and after recording the purchases of Rs.2,59,282/-, the book stock is Rs.41,17,726/- and thus the stock found short is Rs.76,023/-. The AO, however, did not allow the claim of purchases of Rs.2,59,282/- and thus worked out the excess stock at Rs.1,83,259/- but considering that on the short stock of Rs.76,023/- the assessee has declared profit of Rs.12,924/-, made addition of Rs.1,70,335/-.

4. In the assessment order with reference to the cash of Rs.3,31,735/-, AO invoked provision of section 115BBE but in the computation of total income it was charged to tax at normal slab rate and with reference to the stock of Rs.1,70,335/- tax was charged at normal rate. Against the assessment order assessee filed appeal before Ld. CIT(A) (PB 16-17).

5. After passing of assessment order AO issued notice u/s 154 dt. 16.02.2024 (PB 14-15) stating that the tax on excess cash at Rs.3,31,735/- was to be charged u/s 115BBE but it was charged at normal rate and thus there is a mistake apparent on record.

6. After issuance of notice u/s 154 dt. 16.02.2024, the Ld. PCIT(Central), Jaipur issued show cause notice u/s 263 dt. 07.03.2024 stating that cash of Rs.3,31,735/- and excess stock of Rs.1,83,259/- relates to unexplained investment u/s 69 chargeable to tax u/s 115BBE of the Act but AO has charged the tax at normal rate and thus the order passed by AO is erroneous in so far as it is prejudicial to the interest of revenue.

8. The Ld. PCIT(Central) by invoking clause (a) & clause (b) of Explanation 2 to section 263 set aside the assessment order to the file of AO to verify the applicability of provisions of section 69 & 69A of the Act. Submission:-

Smt. Rekha Shekhawat Vs. PCIT (2022) 218 DTR 161 (Jaipur) (Trib.) In view of the fact that the unrecorded trade advances and cash in hand admitted during the course of survey u/s 133A emanated from and related to the real estate business carried on by the assessee and the same were later incorporated in the regular books of accounts, the additional income was in the nature of business income and did not fall u/s 68 and/or sec. 69 and therefore, Principal CIT was not justified in invoking the provisions of sec. 263 by holding that the assessment order was passed without considering that such additional income fell under the purview of ss. 68 and 69 and that tax was chargeable u/s 115BBE as against normal rates.

Surya Hatchery Vs. PCIT (2023) 222 DTR 57 (Chd.) (Trib.) AO having accepted the additional income surrendered by the assessee at the time of survey u/s 133A as normal business income after making enquiries into the nature of assessee's income and considering the assessee's replies and the relevant facts on record, it cannot be held that the assessment order has been passed without a proper enquiry and therefore, the Principal CIT was not justified in passing the impugned revisional order u/s 263 on the basis that the surrendered income is assessable as per the provisions of sec. 115BBE.

CIT Vs. Embassy Brindavan Developers (2023) 294 Taxman 437 (SC) Notice issued in SLP against High Court’s order that where assessee purchased property for development of a Tech Park, however, same was sold for want of funds without any development whatsoever and AO had taken a view that assessee was liable to pay capital gain tax on profit from said transaction, merely because out of two plausible views available, AO had taken one view, jurisdiction u/s 263 could not be exercised.

Bhikhabhai Rajabjai Dhameliya Vs. PCIT (2023) 201 ITD 424 (Surat) (Trib.) Where any inquiry, even inadequate was made by AO, that would not give occasion to invoke jurisdiction u/s 263 merely because Commissioner had different opinion unless view taken by AO is unsustainable in law.

Dhanraj Chhipa Vs. PCIT (2023) 225 DTR 315 (Jodhpur) (Trib.) If there was any enquiry and a possible view was taken by the AO, it would not give occasion to the CIT to pass orders u/s 263 merely because he has a different opinion in the matter. Since the AO has examined the assessee's case and made complete enquiry regarding

Satya Narayan Dhoot Vs. PCIT (2023) 222 DTR 177 (Jodhpur) (Trib.) AO having issued notice u/s 142(1) wherein he called for details of exempt income and also justification for various exemptions and deductions claimed in the return of income including the profit on sale of investments and the assessee having filed the break-up details of exempt income including exemption of long-term capital gain claimed u/s 10(38) in reply thereto, the Principal CIT was not justified in initiating revision proceedings on the basis that the AO has allowed the exemption without examining the claim.

CIT Vs. E.I.D. Parry Ltd. (1995) 216 ITR 489 (Mad.) (HC) Reassessment under s. 147(b)—Vis-a-vis rectification under s. 154— The two jurisdictions are different as the existence of the information for the belief that income chargeable to tax has escaped assessment is the sine qua non for reopening the assessment under s. 147(b) and discovery of an error apparent on the record is the sine qua non for rectification under s. 154 and the ITO must have recourse to the appropriate provision having regard to the facts and circumstances of the case—However, in case where the jurisdiction under s. 147(b) and s. 154 seem to overlap, the ITO may choose one in preference to the other and once he has done so, he should not give it up at a later stage and have recourse to the other.

Berger Paints India Ltd. Vs. ACIT & Ors. (2010) 322 ITR 369 (Cal.) (HC) Petitioner received a notice under sec. 154 dt. 24th Dec., 2002 whereby the AO proposed to rectify mistakes which had allegedly occurred in an intimation issued under sec. 143(1). AO after considering the submissions of the petitioner, in the reply to the show cause, was of the view that rectification of the assessment order was not called for. Notice under sec. 148 however issued by AO on the same grounds on which rectification was proposed. Reasons quoted Sarita Gupta vs. PCIT for reopening assessment were practically the same as the reasons for the notice under sec. 154 for rectification of the alleged mistakes. Rectification notice had been dropped by the same AO. He cannot again start reassessment proceedings on the basis of the same reasons. Condition precedent for initiation of reassessment proceedings is in any case, the formation of the belief, based on new materials that any income had escaped assessment. A notice under sec. 148 may not be issued merely on change of opinion. Where the condition precedent for issuance of a notice is absent, the notice might be challenged by filing a writ petition under Art.

Sarita Gupta vs. PCIT AO having initiated proceedings under s. 154 proposing to tax a particular income and pending said proceedings, initiating proceedings under s. 147 for taxing the same income, proceedings under s. 147 suffered from change of opinion, hence bad in law and so also assessment in pursuance thereof. Sushil Kumar Jain Vs. ACIT (2016) ITL 3825 (Del.) (Trib.) The rectification proceedings u/s 154 were initiated in the year 2011, however, AO without dropping the proceedings or without passing any order u/s 154, initiated the reassessment proceedings on the same issue in the year 2013 and thereafter, completed the assessment by means of order u/s 143(3) read with section 147. On these facts it was held that during the continuation of the proceedings u/s 154, AO embarked upon the same issue by means of a separate re-assessment proceedings without concluding the earlier proceedings initiated u/s 154. It goes without saying that initiation of two parallel proceedings on a similar subject matter cannot sustain. If first proceedings have been validly initiated, then such proceedings must come to an end for making a way for the initiation of another proceeding on the same subject matter. Unless the earlier proceedings are buried, either by way of an order on merits or by dropping the same, no fresh subsequent proceedings on the same subject matter can be initiated. This manifests that the proceedings u/s 147 cannot stand during the continuation of proceedings u/s 154. Hence, the initiation of re- assessment by means of notice u/s 148 and the proceedings flowing therefrom are hereby set aside. Mahinder Freight Carriers Vs. DCIT (2011) 56 DTR 247 (Mum.) (Trib.) AO reopened the assessment for the reason that the rental income has been wrongly treated as business income and the assessee has claimed wrong deduction in respect of the remuneration paid to the partners under sec. 40(b)(v). Earlier, AO initiated proceeding under sec. 154 for the same reason which has not been given finality either by dropping the same or passing any order in the said proceeding. Besides, except the return and its enclosures, no other material or information was in the possession of the AO. Admittedly, the mandate of sec. 147 is not fulfilled for the reason that the AO himself was not sure whether the issue in controversy could be subject-matter of proceedings under sec. 154 or the same can be subject matter of proceedings under sec.

Though the cases referred above are with reference to proceedings u/s 154 and proceedings u/s 148 on the same issue, the principal laid down in these cases equally apply to proceedings u/s 263 and

4. It is submitted that against the addition made by the AO which are also subject matter of 263 proceedings, appeal filed by the assessee is pending before Ld. CIT(A) (PB 16-17). Clause (c) of Explanation 1 to section 263 provides that where the assessment order is subject matter of any appeal, the powers of PCIT shall extend only to such matters as had not been considered and decided in such appeal. Since the issue of addition of Rs.1,70,335/- is subject matter of appeal, the order passed by PCIT on this issue is illegal & bad in law as held by Hon’ble Allahabad High Court in case of CIT Vs. Vam Resorts & Hotels (P) Ltd. (2020) 186 DTR 205 where it is held that assessment having been passed by AO u/s 143(3) after enquiry and on the date of exercise of revisional jurisdiction by CIT, said assessment being subject matter of appeal before CIT(A), exercise of revisional jurisdiction by CIT was invalid.

“2.10. We have heard the rival contentions and perused the material available on record. During the course of survey, the assessee has surrendered an amount of Rs.70,04,814/- towards investment in stock of rice which had not been recorded in the books of accounts. Subsequently, in the books of accounts, the assessee has incorporated this transaction by debiting the purchase account and crediting the income from undisclosed sources. In the annual accounts, the purchases of Rs.70,04,814/- were finally reflected as part of total purchases amounting to Rs.33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amounting to Rs.1,94,42,569/- in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of Rs.70,04,814/- also found credited in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/loss account and offer the same to tax. Accordingly, we do not see any infirmity in assessee’s bringing such transaction in its books of accounts and the accounting treatment thereof so as to regularise its books of accounts. In fact, the same provides a credible base for Revenue to bring to tax subsequent profit/loss on sale of such stock of rice in future. 2.11. Having said that, the next issue that arises for consideration is whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head “business income” or “income from other sources”. In the present case, the assessee is dealing in sale of food grains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. Therefore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head “business income” and not under the head income from other sources”. In the result, ground No. 1 of the assessee is allowed.” Similar view has been taken by Hon’ble ITAT, Jaipur Bench in case of DCIT Vs. Sh. Ram Narayan Birla order dt. 30.09.2016 and Sanjay Gupta Vs. ACIT order dt. 17.07.2023 (copy enclosed). Thus when there are favorable decisions

In view of above, order passed u/s 263 be quashed.”

7. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions:

Sr. No. Particulars Pg. No. 1 Copy of reply dt. 11.03.2024 filed to DCIT (Central) with reference to 1-9 notice u/s 154 & notice u/s 263 2 Copy of acknowledgement of return along with computation of total 10-13 income 3 Copy of notice u/s 154 dt. 16.02.2024 & copy of Form No. 35 filed 14-18 before CIT(A) 4 Copy of reply dt. 10.03.2021 filed to the AO explaining the stock 19-26 difference 5 Copy of statement dt. 11.10.2017 of Sh. Harsh Gupta & Smt. Sarita 27-41 Gupta recorded during course of survey along with stock inventory 6 Copy of order u/s 263 dt. 20.03.2024 in case of Hari Om Gupta & 42-49 15.03.2024 in case of Smt. Jyoti

Case laws relied upon:

S. No. Particulars Pg No.

1. Copy of decision of Hon’ble ITAT, Jaipur Bench in case of Smt. Rekha 1-24 Shekhawat Vs. PCIT (2022) 99 ITR (Trib.) 69

2. Copy of decision of Hon’ble ITAT, Chandigarh Bench in case of Surya 25-53 Hatchery Vs. PCIT (2023) 222 DTR 57

3. Copy of decision of Hon’ble Rajasthan High Court in case of PCIT Vs. 54-58 Bajargan Traders DBITA No.258/2017 order dt. 12.09.2017

5. Copy of decision of Hon’ble ITAT, Jaipur Bench in case of Sanjay Gupta 72-78

After issuance of notice u/s 154 dt. 16.02.2024, the Ld.

PCIT(Central), Jaipur issued show cause notice u/s 263 dt.

07.03.2024 stating that cash of Rs.3,31,735/- and excess stock of Rs.1,83,259/- relates to unexplained investment u/s 69 chargeable to tax u/s 115BBE of the Act but ld. AO has charged the tax at normal rate. Thus, the order passed by ld. AO is erroneous in so far as it is prejudicial to the interest of revenue.

The ld. AR as regards disclosure of stock stated that the assessee has already offered the income to the extent of Rs.

12,924/- and for the balance amount added, explanation furnished by the assessee for the purchase amount of being for an amount of Rs. 2,59,282/- not considered has not been appreciated and assessee in this case also offered the income considering the credit of that purchase bill. Ld. AO did not the view of the assessee on this aspect but accepted the view of the assessee and considered the income as business income of the assessee and ld. AO has already applied mind and applied section 115BBE for cash amount. Thus, so far as the excess cash found in the hands of the assessee based on this set of facts merely invoking the provisions of section 115BBE of the Act is not permissible as the order itself is not erroneous or prejudicial to the interest of the revenue.

The bench noted that in this case during survey proceedings cash hand on the date of survey was Rs. 2,34,608/-. In this regard, statement of Shri Harsh Gupta was recorded in that survey. He was asked vide question no. 21 of his statements to give justification of the difference of Rs. 3,31,735/- found in cash. He in response to the question stated that the difference amount was income of M/s Sahil Paints earned from undisclosed sources during the year under consideration. The ld. AO has ordered the said income liable to taxed under as per provision of section 115BBE of the Act but did not compute the tax in accordance with that provision of the Act. Therefore, on this aspect of the matter we consider the order of the ld. AO prejudicial to the interest of the revenue. Even the ld. AO issued 154 notice on 16.02.2024 but since the proceeding u/s. 263 started it has not been clarified by the either party that order was passed by the ld. AO as per provision of section 154 of the Act or not. Since that aspect has not been disputed we considered the order of the ld. AO prejudicial to the interest of the revenue to that extent as the ld AO while passing the order already ordered to charge that income as per provision of section 115BBE of the Act but the same was not charged. bench noted that on this aspect statement of Shri Harsh Gupta was recorded. He was asked vide question no. 20 to give justification of excess stock found. In response to the question, he stated that he was unable to give justification on the excess stock found and surrendered the amount of Rs. 14,18,225/- as income of M/s Sahil Paints for the year under consideration. In the assessment proceedings, the assessee vide notice u/s 142(1) was asked to give justification as to how the undisclosed income is shown in the ITR filed. The reply of the assessee has been considered carefully by the ld. AO. Ld. AO noticed that on the same date a survey was also conducted on M/s Mahawar Electric Store related to the family member of the assessee wherein statement of Shri Vinod Kumar Gupta (husband of the assessee Smt. Sarita Gupta) was recorded on 11.10.2017. He in response to question no. 8 of his statements stated that at the godown situated at Vikas Colony, Rajgarh the stock of M/s Sahil Paints and M/s Mahawar Electric Store was lying. However, quantum was not differentiated then. Now, the A/R of the assessee submitted that the stock of Rs. 52,76,668/- found during the physical verification includes the stock of Rs. 12,34,965/- submission he furnished copy of bills & vouchers of the items of the stock that is related to M/s Sahil Paints i.e. Rs. 38,35,321/- (5276668 - 1234965)/- and supporting bills & vouchers of items mentioned in stock inventory that related to M/s Mahawar Electric Store for Rs. 12,34,965/-. To that extent the submission of the assessee is found acceptable by the ld. AO.

It is further stated that also the purchase bills of Rs.

2,59,282/- was not entered on the date of survey and the reply to the effect was given vide letter dated 13.10.2017. The assessee in support of it, has not filed supporting bills and the copy of the said letter. Also, the letter is also not found available on record. Thus, the submission of the assessee for the bills of Rs. 2,59,282/- said to be not entered in the books was not acceptable by the ld. AO.

Therefore, the excess stock of Rs. 1,83,259/- is found from the business premises of the assessee for which the assessee fails to offer any proper justification. Since the assessee has already disclosed the amount of Rs. 12,924/- on account of short stock income in the ITR, therefore, the amount of Rs. 1,70,335/- (Rs.

1,83,259 - Rs.12,924) is held as income of the assessee for the added in the total income of the assessee. Since on that aspect of the matter ld. AO consciously not considered to charge that income as per provision of section 115BBE of the Act. Thus, we are of the view that on this aspect of the matter the ld. AO has already applied his mind to considered that income emerges out of the business of the assessee and therefore, on this aspect of the matter we do not consider that the provision of section 263 of the Act shall apply, as the ld. AO has already taken a plausible view on the matter.

Thus, ground no. 2 raised by the assessee stands partly allowed. Ground no. 1 & 3 being general in nature the same is not required to be adjudicated. Ground no. 4 raised by the assessee awarding the cost we considered the decision of the PCIT while discharging the official function and therefore, there is no merits and even the assessee remained silent and not submitted any arguments we dismiss that ground.

In terms of these observations, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 29/08/2024.