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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRIB.M. BIYANI
आदेश/O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by revision-order dated 28.03.2023passed by learned PrincipalCommissioner of Income-Tax-1, Bhopal [“PCIT”] u/s 263 of Income- tax Act, 1961 [“the Act”], which in turn arises out of assessment- orderdated05.03.2021passed by learned National e-assessment Centre, Delhi[“AO”] u/s 143(3)of the act for Assessment-Year [“AY”]2018-19, the Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 assessee has filed this appeal on the grounds raised in Appeal-Memo (Form No. 36).
The background facts leading to present appeal are such that the assessee-individualis engaged in the business of selling gold and silver ornaments in a proprietorship concerned named “M/s Rikhabchand Nareshchand Kalwani” and also the business of money-lending. For the relevant AY 2018-19, the assessee filed return of income which was subjected to scrutiny-assessment and the AO completed assessment u/s 143(3) of the Act vide order dated 05.03.2021. In the return so filed, the assessee declared an additional income of Rs. 94,90,585/- on account of excess-stock of gold and silver jewellery of Rs. 69,52,314/- and Rs. 25,38,271/- respectively,surrendered by assessee during a survey u/s 133A conducted by authorities upon assessee during the relevant previous year.
The assessee declared this additional income as regular business income and paid normal tax as applicable. While completing assessment, the AO accepted assessee’s declaration without making any change. 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 20.12.2022 and finally passed revision-order dated 28.03.2023. Aggrieved by such revision- order, the assessee has come in this appeal before us.
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 3. Ld. AR for assessee carried us to Para No. 4 and 5 of revision-order and pointed out that the PCIT has precisely conducted revisionary proceeding on the footing that the additional income of Rs. 94,90,585/- on account of excess-stock attracted section 69/69A read with section 115BBE of the Act but the AO has failed to do proper enquiry on this issue during assessment-proceeding and thus the AO has not applied his mind due to which the assessment-order is erroneous-cum-prejudicial to the interest of revenue. The PCIT has also relied upon the decision of ITAT, Indore in Chandan Garments Private Limited Vs. PCIT, dated 02.12.2022 wherein PCIT’s revision-order u/s 263 passed in that case on identical issue was upheld. The PCIT has alsonoted that since the section 263 has been amended and Explanation 2(a) as reproduced belowhad been introduced therein, the assessment-order is deemed to be erroneous-cum-prejudicial to the interest of revenue if the same had been passed without inquiries or verification which should have been made:
“Explanation 2 – “For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue, if in the opinion of the Principal Commissioner or Commissioner - (a) The order is passed without making inquiries or verification which should havebeen made; (b) to (d) … ” 4. Having explained the aforesaid background, Ld. AR firstly carried us to Paper-Book-I filed by assessee. He carried us to Page No. 13-14 of Paper- Book where the AO raised specific queries to assessee vide Q.No. 8, 9, 11, 12 and 13 of the statutory-notice issued u/s 142(1) dated 30.01.2021 qua the Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 excess-stock found/additional income surrendered by assessee during survey as also the money-lending business carried on by assessee. He carried us to next Page No. 15-16of the reply-letter dated 15.02.2021 submitted by assessee in response to the aforesaid notice wherein vide Point No. 8, 9, 11, 12 and 13, the assessee submitted explanation to the queries raised by AO. Thus, Ld. AR contended, the AO has made specific queries to assessee concerning the issue raised by PCITand the assessee has also filed explanation, which is very much evident from the documents forming part of the assessment-record available with department. Therefore, this is not a case of “no enquiry” as alleged by Ld. PCIT.
Then, Ld. AR carried us to Para No. 5 to 14 of assessment-order to demonstrate that the AO has discussed at length the details of the quantities and values of excess stock; how the difference of Rs. 94,90,585/- was ascertained; how the surrender was made by assessee during survey; and how the assessee has dealt this income in accounts and declared in return of income. The AO has specifically noted that the assessee has offered income for taxation under the head “Income from business and profession” and thereafter concluded this way “Thus, assessee has disclosed the income as admitted during survey proceedings.” Ld. AR contended that the vehement analysis made by AO in assessment-order itself shows that the AO has paid due consideration to the impugned issue.
Ld. AR next submitted that the reliance of Ld. PCIT on the order of ITAT, Indore in Chandan Garments (supra) is totally mis-placed for the Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 simple reason that the facts of that case are absolutely different and having no match with the facts of assessee. To show this, Ld. AR firstly carried us to Para No. 8 and 9 of the order of ITAT in Chandan Garments (supra) which read as under:
“8. It is noteworthy that the impugned incomes have been admitted by assessee during the course of survey and also offered as such in the return of income, therefore the issue becomes simpler for us for the explicit reason that we need to focus to the statements made by assessee during survey proceeding. Ld. DR carried us to the copy of statements placed in the Paper Book and drew our attention to the following questions raised by survey-team to the assessee and the replies given:
Page No. 5 of the Statement - Page No. 19 of the Paper-Book: ��न-आज �दनांक 19/09/2016, खुशाल मो�हते कांपले�स पर अवि�थत �यवसा�यक ��त�ठान पर सव� क� काय�वाह� के दौरान, आपके �म के adjacent (बगल) वाले �म म�, िजसमे सामा�य तौर पर आपका लडका �ी संद�प जैन बैठते है, िजसका भौ�तक स�यापन �कया गया, िजसके उपरांत कुल �. 10,18,653/- क� रकम पायी गयी, िजस रकम को आपके �वारा चंदन गारम�ट �ा.�ल.से संबं�धत बतायी गयी । कृपया इस रकम का ��ोत �प�ट कर� । उ�तर- म� आपको Chandan Garment Pvt. Ltd. क� cash book �दनांक 19/09/2016 को ��तुत कर रहा हूँ िजसके अनुसार cash का balance �. 97,193/- आ रहा, अंतर क� रा�श कुल �पये 9,21,460/- (10,18,653 - 97,193) आता है । अतः इस अंतर क� रा�श को म� �प�ट करन� म� असमथ� हूँ । अतः इस अंतर क� रा�श �. 9,21,460/- अपनी कंपनी चंदन गारम�ट �ा.�ल. क� वत�मान �व�त वष�2016-17, कर �नधा�रण वष� 2017-18 के अ�त�र�त ��ोत� से अिज�त आय आय मानते हुए �नय�मत आय के अलावाआयकर कराधान हेतु �वे�छा से सम�प�त करता हूँ और उपरो�त रा�श पर देय कर �नयमानुसार भरने का वचन देता हूँ ।
Page No. 8 of the Statement - Page No. 22 of the Paper-Book:
��न- आज �दनांक को क�गई सव�ण क� काय�वाह� के दौरान Chandan Garment Pvt.Ltd. से संबं�धत stock जो�क 100-10 पोलो �ाउंड, इंदौर पर अवि�थत factory पर उपल�ध �टॉक का भौ�तक स�यापन �कया गया है । िजसक�
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 inventory आपको �दखाया जा रहा है । इस inventory के अनुसार उपल�ध stock क� कुल value �. 90,84,243/- है जब�क आपके �वारा ��तुतTrading A/c के अनुसार �टॉक क� रा�श �. 89,16,210/- आती है । कृपया अंतर क� रा�श �. 1,68,030/- को �प�ट कर�। उ�तर – इस अंतर क� रा�श कुल �पये 1,68,030/- को �प�ट करने म� असमथ� हूँ । अतः इस रा�श को म� Chandan Garment Pvt. Ltd के मद म� अपने �नय�मत आय के अलावा Undisclosed income के तौर पर घो�षत करता हूँ । इस रा�श कुल �पये 1,68,030/- को चालू �व�त वष� 2016-17 तक �नधा�रण वष�2017-18 के �लए करारोपण हेतु घो�षत करता हूँ तथा साथ ह� वचन देता हूँ के इस रा�श पर �नयमानुसार देय कर जमाकर दूंगा।
Thus, in these statements, the assessee has categorically admitted twin- aspects, viz. (i) unable to explain the excess-cash / excess-stock; and (ii) the excess-cash / excess-stock is from “additional sources” or “undisclosed income”. On a careful examination of statements, we nowhere find that the assessee has whispered any voice that the impugned incomes were earned from business. In fact, this is the precise reason that the Ld. PCIT has also made following conclusion and passed revision-order:
“4.1 Thus, it is clear from the aforesaid statement that the surrender on account of excess cash as well as excess stock has been made out of unexplained sources which was never disclosed to the department. Nowhere the assessee submitted that this suppressed income is out of business income. Not only that it has also been clearly stated in the statement that no pressure etc. was applied for recording his statement. Therefore, the submission of the assessee that excess cash and excess stock are nothing but out of business income is factually incorrect and therefore, the same cannot be accepted.”
9. Now we proceed to check whether the Statement of assessee fits in the clutches of section 69 / 69A or not.
Section 69 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.
Section 69A
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 “69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”
Thus, section 69 / 69A is applicable if three conditions are satisfied, viz. (i) the assessee has made investment / is found to be owner of any money; (ii) such investment / money is not recorded in the books of account maintained for any source of income; and (iii) the assessee offers no explanation about the nature and source of investment / money. Reverting back to the Statement of assessee, we observe that all three conditions are clearly satisfied, viz. (i) the assessee was found to have investment in excess stock of Rs. 1,68,030/- and owner of excess-cash of Rs. 9,21,460/-; (ii) the investment / cash was not recorded in the books of account of assessee; and (iii) the assessee has clearly admitted the twin-aspects as narrated earlier from which it is manifest that the assessee offered no explanation regarding nature and source thereof. Thus, it is quite clear that all ingredients of section 69 / 69A are satisfied.” Thus, Ld. AR submitted, in the case of Chandan Garments (supra), the assessee himself accepted in statements that the excess-stock was from “additional sources” or “undisclosed income”. Further, the assessee nowhere in the statements whispered any voice that the excess-stock was earned from business.
Having shown thus, the Ld. AR carried us to Page No. 4-12 of the Paper- Book where a copy of the statements of assessee recorded during survey is filed. Ld. AR drew our specific attention to Q.No. 4 raised by authorities and reply given by assessee which reads as under:
“��न 4 - आपके �वारा ��तुत �यापार खाते के अनुसार आज �दनांक को आपक� सं�थान म� सोना जेवर का �टॉक 312.477 �ाम एवं चांद� जेवर का �टॉक 46785.00 �ाम है । जब�क �वभाग �वारा �कये गये भौ�तक स�यापन के उपरांत आपक� सं�थान म� सोना जेवर �टॉक 3073.600 �ाम एवं चांद� जेवर �टॉक
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 131677.00 �ाम उपल�ध पाया गया । उपरो�तानुसार सोना जेवर के �टॉक म� पाया गया 2761.123 �ाम के अंतर एवं चांद� जेवर के �टॉक म� पाया गया 84892.000 के अंतर के बारे म� आपका �या कहना है । उ�तर- महोदय उपरो�तानुसार सोना जेवर एवं चांद� जेवर के �टॉक म� पाये गये अंतर �मशः 2761.123 �ाम एवं 84892.000 �ाम क� कुल क�मत �. 94,90,585/- क� रा�श को म� चालू �व�तीय वष� क� �नय�मत आय के अलावा मेरे �वारा अिज�त अ�त�र�त आय के �प म� �वभाग के सम� कराधान हेतु सम�प�त करता हूँ । म� उपरो�तानुसार सम�प�त क� गई आय �. 9490585/- (�. चौरा�वे लाख न�बे हजार पांच सौ �प�यासी मा�) पर �नयमानुसार देय कर का भुगतान �नि�चत समयाव�ध म� कर दूंगा । महोदय मेर� सं�थान म� �गरवी का काय� पु�तैनी है जो �क मुझे �वरासत म� 10 वष� पूव� �ा�त हुआ है । �वगत कई वष� पूव� मेरे �वारा �गरवी के �प म� रखे गये सोना-चांद� आभूषण� को �गरवी रखने वाले �यि�तय� ने आभूषण� क� क�मत से अ�धक रा�श हो जाने के कारण उठाया नह�ं था, िज�ह� मेरे �वारा �टॉक म� शा�मल कर �लया गया था ।” Analyzing above, Ld. AR submitted that when the authorities made a pointed question to assessee qua the excess-stock, the assessee replied that he carries ancestral business of money-lending wherein the gold and silver ornaments pledged by borrowers but not released by them, had been included in the inventory. Thus, the source of excess jewellery is traceable to the ornaments pledged by customers in money-lending business and forfeited by assessee. This source, as can be seen, is instantly explained by assessee in response to the question raised by survey-authorities. Ld. AR submitted that the assessee has explained the additional income as related to business and it is not a case that the assessee has failed to explain the source or the assessee has admitted that the excess-stock was earned from ‘additional sources’. Thus, there is no parity at all in the facts of Chandan Garments (supra) and assessee. Ld. AR went on submitting that the aforesaid reply given by assessee to Q.No. 4 is also supported from all
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 returns andfinancial statements of earlier years filed by assessee to Income- tax Department wherein the assessee has declared the transactions of money-lending business. Ld. AR has filed a separate Paper-Book-II containing such documents. We re-produce below the Index of Paper-Book which gives a bird’s eye view of such documents relating to AY 2013-14 to 2018-19:
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 Referring to some of the documents on test-check basis, Ld. AR demonstrated as under:
(i) Page 35, 36 of Paper-Book for AY 2013-14 - The assessee filed a separate Trading and P&L A/c of money-lending business showing
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 interest receipt of Rs. 5,34,534/-, business expenses of 3,04,110/- including a specific item of Rs. 100/- as fee for renewal of money lending license and net profit of Rs. 2,30,423/-. In Schedule “F” to Balance-Sheet, the assessee declared ‘Sundry Debtors of Girwi (i.e. money lending) Business’ at Rs. 29,35,718/-.
(ii) Page 41 of Paper-Book for AY 2014-15 – The assessee declared income from money-lending business at Rs. 1,96,302/- and ‘Sundry Debtors of Girwi (i.e. money-lending) Business’ at Rs. 37,24,318/-.
(iii) Likewise the assessee declared continuously for AY 2015-16to 2018-
19.
Thereafter, Ld. AR relied upon following decisions of ITAT, Indore and Hon’ble Rajasthan High Court wherein the excess-stock related to business carried on by assessee has been accepted as regular business income and not attracting section 69/69A read with section 115BBE:
(i) ITAT Indore in Shri Premdeep Rajput Vs. ACIT (2023) 10 ITJ Online
239, order dated 25.08.2023 (ii) ITAT Indore in ACIT Vs. Shri Anoop Neema, order dated 06.01.2022.
(iii) ITAT Indore in M/s Brijmohan Das Devi Prasad Vs. ACIT, ITA No.
428/Ind/2022 order dated 17.07.2023.
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 (iv) Hon’ble Rajasthan High Court in PCIT Vs. Bajarang Traders (2017) 86 taxmann.com 295 (Rajasthan)
Lastly, Ld. AR relied upon the decision of Hon’ble apex court in Malabar Industrial Co. Vs. CIT (2000) 243 ITR 83 (SC) where it has been held that if the AO has taken one of the two possible views, the order passed by AO cannot be said to be erroneous.
With aforesaid submissions, Ld. AR contended that in the present case of assessee, the PCIT has wrongly invoked section 263 which was not warranted at all. Therefore, the order passed by PCIT is liable to be quashed.
Ld. DR for revenue invited our attention to the very same reply given by assessee in response to Q.No. 4 of statements and submitted that the assessee has offered the surrendered income as ‘additional income’, therefore the impugned income attracts section 69/69A. He further submitted that there must be some record to show as to whom the jewellery belonged but the assessee has not produced any such record. He submitted that the case laws relied upon by Ld. AR are those wherein the section 69/69A/115BBE was invoked by AO himself in assessment and then the assessee challenged AO’s action whereas in the present case of assessee, the AO himself did not invoke section 69/69A/115BBE and that is why the PCIT had to resort to revisionary action u/s 263. Therefore, the case laws relied by Ld. AR are not applicable. Ld. DR submitted that the action of Ld. PCIT is very much in accordance with the mandate of section 263 and must be upheld.
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 11. In rejoinder, Ld. AR submitted that the reply given by assessee in response to Q.No. 4 must be read fully and carefully. The assessee has certainly made surrender and offered the same as ‘additional income’ and also declared additional income in the return filed, there is no doubt about it. But it should not be missed that the assessee also explained in his reply that the impugned excess-stock in the shape of jewellery belonged to the ancestral business of money-lending carried on by assessee. Ld. AR submitted that the assessee has categorically stated so in the last sentence of reply to Q.No.
Further, the factum of carrying money-lending business is already on record of department which is very much evident from the transactions of business declared by assessee throughout in returns and financial statements filed to department. So far as case-laws are concerned, Ld. AR submitted that it is not a point as to whether the AO invoked section 115BBE or not, the essential point is that the ITAT, Indore and Hon’ble Rajasthan have categorically held that the excess-stock explained by assessee as relatable to regular business carried on by assessee cannot attract section 69/69A/115BBE. Therefore, in the light of those decisions, the excess-stock explained and proved by assessee in present case as relatable to money-lending business, cannot attract deeming provisions of section 69/69A/115BBE and the AO has rightly not invoked those sections.
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, we firstly find that Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 during thecourse of assessment-proceeding, there were specific queries raised by AO with regard to the excess-stock/additional income identified during survey and the assessee also filed reply to AO. To this extent, there cannot be any dispute or rebuttal by revenue. Going further to the assessment-order, it is discernible that the AO has made a vehement discussion qua excess-stock in Para No. 5 to 14 of assessment-order and also taken congnizance of the fact that the assessee has offered income under the head “Income from business and profession”. On a careful consideration of Q.No. 4 put by survey-team to assessee and the reply given by assessee, we find that the assessee straightway explained the source of jewellery forming part of excess-stock, which is borrowers of money-lending business. It is further noteworthy that the assessee has been regularly declaring the financial transactions, revenue, expenses, net profit and sundry debtors of money-lending business to department year after year.
The assessee is also holding a money-lending licence and obtained renewal of license from concerned authorities. Moreover, it is also a valid contention of Ld. AR that even if there are two possible views and the AO has taken one of them, the order of AO cannot be said to be erroneous as held by Hon’ble Supreme Court in Malabar Industrial Co. (supra). We also find that in the judicial rulings of ITAT, Indore and Hon’ble Rajasthan High Court referred by Ld. AR, it has been held that the excess-stock explained by assessee as relatable to business cannot attract section 69/69A/115BBE. In the light of those rulings, the AO has rightly assessed the income at normal rates of tax, hence there is no loss of revenue to department and consequently the order
Shri Naresh Chand Kalwani, Seoni vs. PCIT-I,Bhopal AY 2018-19 passed by AO is not prejudicial to the interest of revenue. Ld. AR for assessee has also successfully explained the distinguishing factor due to which the decision in Chandan Garments (supra) relied by Ld. PCIT is not applicable to assessee’s case. After considering entire conspectus of the case, we are persuaded to hold that the facts of the present case do not warrant application of section 263. Therefore, the revision-order passed by Ld. PCIT is not a valid order. We, thus, quash the revision-order and restore the original assessment-order passed by AO. The assessee succeeds in this appeal.
Resultantly, this appeal of assessee is allowed.
Order pronounced in open court on 15.02.2024