SHIVAM RESIDENTIAL CONSTRUCTION (INDIA) PVT. LTD.,VALSAD vs. PRINCIPAL COMMISSIONER OF INCOME TAX, VALSAD

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.396/SRT/2018 (�नधा�रणवष� / Assessment Year: (2013-14) (Virtual Court Hearing) Shivam Residential Construction Principal Commissioner of (India) Pvt. Ltd., New Civil Income-tax-Valsad, Palak Vs. Hospital Road, Nanakwada, Valsad Arcade, Pali Hill, Santinagar, Tithal Road, Valsad-396001 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAPCS 3137 G (Appellant) (Respondent) िनधा�रती की ओर से /Assessee by : Shri Milin Mehta, C.A राज�व क� ओर से /Respondent by: Shri Ashish Pophare, CIT-D.R

सुनवाई की तारीख/ Date of Hearing : 30/01/2023 घोषणा की तारीख/ Date of Pronouncement : 10/02/2023 आदेश / ORDER PER DR. A. L. SAINI, AM: By way of this appeal, the assessee has challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax-Valsad (in short “ld. PCIT”] dated 28.03.2018, under section 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for assessment year 2013-14. 2. Grounds of appeal raised by the assessee are as follows: “All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. 1. The learned Principal Commissioner of Income Tax-Valsad (‘the PCIT” erred in fact and in law in passing the order u/s 263 of the Income Tax Act, 1961(“the Act”) without giving proper opportunity of being heard. Invalid exercise of provision u/s 263 2. The learned CIT erred in fact and in law in revising the assessment by invoking powers u/s 263 Act despite the fact that the conditions stipulated for invoking such extra-ordinary jurisdiction were not satisfied.

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. 3. The learned CIT erred in fact and in law in setting aside the assessment u/s 143(3) of the Act and directing a fresh assessment on the issues already consider and decided during the proceedings u/s 143(3) of the Act. 4. The learned CIT erred in law and in fact in not dropping the proceedings u/s263 and observing that the order passed u/s 143(3) was made without proper examination and inquiry despite the fact that the Assistant Commissioner of Income Tax, Valsad Circle, Valsad (“the AO") has examined the matter and the order u/s 143(3) was passed after application of mind by the AO. 5. The learned CIT erred in fact and in law in not dropping the proceedings u/s 263 despite the fact that the original order was not erroneous and not prejudicial to the interest of the Revenue. 6. The learned CIT erred in fact and in law in holding the order framed u/s 143(3) of the Act as erroneous and prejudice to the interests of revenue without conducting necessary enquiries and verification and without forming an opinion that the order of AO is prejudicial to the interest of revenue. Additional income: 7. The learned CIT erred in fact and in law in directing the AO to frame a fresh assessment order despite the fact that the AO had thoroughly examined the additional income disclosed by the appellant in the return of income. 8.The learned CIT erred in fact and in law in directing the AO to tax the amount of Rs.3.15 crores instead of the amount of Rs.2.25 crores as offered by the appellant in the return filed. 9. The learned CIT erred in fact and in law in not allowing the expenditure incurred by the appellant from the additional income disclosed despite the fact that the additional income offered by the appellant was in the nature of business income. Invoking provisions of Section 68 on advance received for land 10. The learned CIT erred in fact and in law in directing the AO to frame a fresh assessment order despite the fact that the AO had thoroughly examined the advances received by the appellant. 11. The learned CIT erred in fact and in law in directing the AO to frame a fresh assessment order merely on the basis of assumptions, surmises and conjectures. Construction expenses of Rs.2,00,00,000/- 12. The learned CIT erred in fact and in law in directing the AO to frame a fresh assessment order despite the fact that AO had thoroughly examined the construction expenditure incurred by the appellant. 13. The learned CIT erred in fact and in law in directing the AO to frame fresh assessment order in respect of construction expenses of Rs.2,00,00,000/- despite the fact that the same has been disallowed by the appellant in the return of income.

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. Unsecured loans 14. The learned CIT erred in fact and in law in directing the AO to frame a fresh assessment order despite the fact that the AO had thoroughly examined the unsecured loans received by the appellant. 15. The learned CIT erred in fact and in law in directing the AO to frame a fresh assessment order merely on the basis of assumptions, surmises and conjectures. Other grounds 16. Your appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal.” 2. In this appeal, the assessee has raised a multiple grounds of appeal which are in real sense arguments only. However, at the time of hearing, we have noted that solitary grievance of the assessee is that learned Principal Commissioner of Income Tax-Valsad (‘the PCIT”) erred in fact and in law in passing the order u/s 263 of the Income Tax Act.

After going through the assessment records of the AO, it was noticed by ld PCIT that assessment framed by the assessing officer suffers from certain errors/mistakes which make it not only erroneous but also prejudicial to the

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. interest of revenue. The errors are enumerated/mentioned in the notice u/s 263 of the Act which is reproduced by ld PCIT in his order at page no.2 and 3. The important contents of the notice are as follows: (i)On perusal of the case records, it is seen that the Assessing Officer has not called for categorical details of stock held by the assessee such as stock of land fully developed, land under development, construction work in progress, completed units etc. what has been called for is merely the method of valuation adopted for closing stock and not the category-wise quotative details of closing stock. (ii)It is seen that the bank account statement of the assessee as also of the depositors have not been called for by the Assessing Officer independently from the bank and merely the photocopies of the bank statements supplied by the assessee has been accepted. (iii).It is seen from assessee’s submission dated 12.02.2016 (Point No.28) that the assessee has submitted details of advances received against booking from various customers. It is, however, seen that the Assessing Officer has not made any independent verification/inquiry by way of letters u/s 133(6) or otherwise. It is also seen from the perusal of assessee’s submission that the assessee has not submitted PAN details of such customers.in light of these facts, the Assessing Officer has failed to carry out necessary examination of assessee’s claim of advances received. 3.It is seen that Smt. Geeta P Vashi, Shri Shallesh P Vashi, Shri Puranjay P Vashi and Smt. Miraj P.Vashi and Mr. Abdul Razak hold not less than 10% shares in assessee company. It is seen that their ledger accounts with the assessee company have not been called for examining the applicability of the provision of Section 2(22)(e) of the Act and consequent incidence of Dividend Distribution Tax. 4.The assessee company has borrowed considerable funds on interest as can be seen from Annexure-19 of assessee’s submission dated 12.02.2016. The Assessing Officer has not examined the utilization of these funds from the angle of diversion of interest bearing fund towards non-business purpose. 5.On perusal of construction expenses of rs.6,74,74,275/- debited to P & L A/c, it is seen that the above expenses includes Rs.2,00,00,000/- towards provision for various future expenses of Sharvaanee site. Since, the above expense was made towards the provision future expenses & thus, not allowable us/ 37 of the I T Act. However, A.O had allowed the same. 6.Apart from the above, it is also seen that in this case, survey action u/s 133A of the I.T Act was conducted on 01.11.2012 and impounded certain materials as per inventory. On perusal of the impounded material, it was found that assessee had taken on money payment on the booking of flats from the customers at its project “Sharvaanee”. Therefore, statement of Shri Miraj Prakash Vashi was recorded u/s 131of the I.T Act during the course of survey; Shrri Miraj Prakash

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. Vashi in his answer to question no. 21 has stated that the company has received Rs.10,50,000/- on money for the sale of each of the 30 flats which have been sold. He further stated that out of on money of Rs.10,50,000/-, expenses of rs.3,00,000/-(approx.) have been incurred. Accordingly, he offered Rs.2,25,00,000/- (Rs.10,50,000/- - Rs.3,00,000/- = Rs.7,50,00/- x30) for taxation as the additional income in addition to regular income of the company for the financial year 2012-13. 7.On perusal of the return of income filed subsequent to the survey action u/s133A, it is seen that the assessee has shown revenue from operation of Rs.10,80,91,928/- in P & L Account and after claiming various expenses, shown net profit at Rs.4,59,023/-.Further, vide note No. 24to notes to financial statements submitted that the sale of units for the yar ended March 31,3013 includes receipts from flat owners in cash disclosed during survey by Income-tax Department. However, neither the ae has given breakup of the above receipt nor the AO had obtained the same during the course of assessment proceedings. 8.Further, on perusal of the records and even office note, it is seen that during the course of assessment did not pursue the impounded material and also statements recorded. Furthermore, the allowability of claim of expenses off Rs.3,00,000/-made against receipt of on money of each flat which comes to Rs.90,00,000/- was not verified. 9. Therefore, in view of the observations in para-4 to 10, the order of the AO is erroneous as well as prejudicial to the interest of revenue due to almost complete absence of any inquiry on the above mentioned issues necessitating the revision of the order of the AO by invoking the provisions of section 263 of the I.T. Act.You are, therefore, required to show-cause as to why the aid assessment order be not revised by invoking the provision \s of 263 of I.T. Act, 1961. The hearing in your case is being fixed on 26.03.2018 at10.00 A.M. Please note that the required details should be submitted after numbering the documents enclosed and indexing the same in the forwarding/covering letter.” 5. In response to the above notice, assessee appeared before ld PCIT and filed a letter dated 26.03.2018 requesting for 15 days’ time/adjournment. Later on, assessee submitted its reply on dated 27.03.2018.

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. 7. The issues which remain the subject-matter of current proceedings are (i) non-consideration of the documents impounded during the course of survey while finalizing the assessment (para-8 & 10 of the notice u/s 263 dated 22.03.2018 pertain to this issue and both are interconnected) (ii) no inquiry about the sources of advances received and (iii) provision of Rs.2 crores made in the original return of income by debiting the P & L account but adding back the same amount in the revised return of income filed on 19.02.2014 on the ground that tax at source had not been deducted i.e. invoking the provisions of section 40(a)(ia). These were discussed by the ld PCIT one by one, as follows: (a) During the course of survey on 01.11.2012, the following documents/material was found and impounded: Sl.No. Annexure Description Written pages 1 BF-1 Loose paperfile 1 to 50 2 BF-2 Pocket diary (ultratech cement) 1 to 8 3 BF-5 Back-up of HP laptop (one sealed CD+one “ working CD) 4 BF-6 Back-up of computer (one sealed CD+one “ working CD) 5 BF-7 Back-up of computer printer system (one “ sealed CD+one working) 6 BF-8 Back-up of computer (Tally)/one sealed “ CD+one working CD 7 BF-9 Back-up of computer(accounts)/one sealed “ CD+one working CD) 8 BF-10 -do- “ 9 BF-11 -do- “

(i) As mentioned in the show cause notice u/s 263 dated 22.03.2018, the AO has raised no query whatsoever about any of these documents/data back-ups while framing the assessment. This fact is not disputed by the assessee’s ARs. They have in their letter 27.03.2018 have only made a general comment that the AO has seen/examined the issues raised in the notice u/s 263 dated 22.03.2018 without specifying how and as what basis why this comment/assertion is being made. Examination of the assessment records of the AO shows that the AO has not made any inquiry whatsoever about any of the documents/data back-up impounded during the course of survey.

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. (ii) Although, it is not desirable to discuss each and every entry in the documents/data back-up impounded during the course of survey and listed hereinabove, a mention about the figures written in Annexure-BF-2 which is a small pocket diary having the notings of total selling price of Rs.64.50 and having the break-up in the form of Ch-54.00 and Ca-10.50 is felt necessary. When these jottings/figures are compared with the statement dated 01.11.2012 of Shri Miraj Vashi, director of the assessee company go to show that out of the cash of Rs.10.50 lacs per flat taken by the assessee company in respect of flats sold, the assessee has claimed an amount of Rs.3,00,000/- as expenses to be deductible out of this unaccounted-for cash/on money. The declaration made on the date of survey of Rs.2.25 crores has been arrived at after adopting the figure of unaccounted-for/on money of Rs.7.50 lacs per flat and not Rs.10.50 lakhs as written in the note-book. (iii) Now, what the survey team should have questioned but did not is another issue, it was the duty of the AO to go through the impounded documents and the statement recorded during the course of survey, obtain the response/reply of the assessee before finalizing the assessment. Not such thing was done. In fact, he has accepted whatever income was disclosed/offered by the assessee under the head business. What is more surprising and shocking is that this figure of Rs.2.25 crores which should have been at lest Rs.3.15 crores (by taking the figure of Rs.10.50 lacs per flat and not Rs.7.50 lacs) has been accepted without any break-up of the business income. It is settled in law and accounting practice that whatever unaccounted-for income is discovered, it is to be taken a net and all expenses etc. which might have gone into earning of such income are supposed to have been allowed/deducted. Therefore, no further deduction of any kind is allowable out of such unaccounted-for income discovered.

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. (iv) In other words, there is no way to know whether the unaccounted- for income admitted/disclosed during the course of survey has been accounted-for or not. Further, it is common sense that the unaccounted-for income has to be offered/shown as a separate/extraordinary item in the P &L account and this enters the books of account only after the tax thereon is paid. Hence, there is no way this extraordinary item can be taken as a part of the regular business income. (v) Additionally, another dimention to the wrong claim made by the assessee and allowed by the AO without any examination whatsoever is that the unaccounted-for income has been accepted as business income. It is again a matter of common sense that the unaccounted-for income will enter one of the heads of income enumerated in the I.T Act only after meeting the requirements of accountancy/law i.e. the manner of earning the unaccounted-for income and the parties from whom such unaccounted-for cash has been received. None of these things has been examined neither by the survey team nor by the AO at the assessment stage. This is a case of gross negligence and callous attitude of the survey team as well as the AO. This is only regarding one particular item of the annexure of documents impounded during the course of survey but not examined/considered while framing the assessment. The contents of other documents and the data back-up are not being dealt with in detail as the same requires a detailed study of the documents/data back-up and comparison of the same with the regular books of account/audited accounts etc. (vi) In any case, in view of the above facts, it becomes clear that the AO has not carried out any inquiry whatsoever about the documents/data back-up impounded during the course of survey. In fact, he has not even bothered to raise a single querry about any of the documents/data back-up and there is not even a whisper in the

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. assessment records. Therefore, in view of the complete absence of any inquiry whatsoever about this very significant and material issue having a bearing on the computation of taxable income the assessment order of the AO dated 31.03.20016 is found to be erroneous as well as prejudicial to the interest of revenue. (b) As can be seen from the notice u/s 263 dated 22.03.2018, the AO has not examined the issue of advances received. The assessee has provided the list of advances but no verification whatsoever has been carried out by the AO. Even the confirmations in respect of any of these advances have been obtained, leave alone further verification about the sources of funds i.e. creditworthiness of the parties claimed to have given these advances. The assessee in its reply dated 27.03.2018 submitted during current proceedings has only mentioned that the documents asked for by the AO for these advances have been submitted. The fact that no inquiry/investigation was made is not disputed. The fact that even the confirmations were not obtained also remains undisputed. (i) The absence of even the confirmations violates the requirements of Section 68, the fact that some or most of these parties must have entered into transactions of purchases of flats from the assessee company does not take away the fact that the requirements of Section 68 were required to be met as these amounts entered the books of account of the assessee company in the form of advances and not as sale proceeds. Therefore, in view of the above, it becomes settled that the Assessing Officer's failure to make requisite inquiries about the advances received makes the assessment order erroneous as well as prejudicial to the interest of revenue. (c) The third issue which is the subject-matter of present revisionary proceedings is regarding the claim of Rs.2.00 croers as a “provision” in the P & L account filed with the original return of income on 04.10.2013 but disallowed and added back in the computation of income filed with the

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. revised income field on 19.02.2014 on the ground that no TDS has been deducted on this amount. This basically means that the claim of Rs.2.00 crores as provision stands but the deduction gets shifted to the subsequent years in which the TDS could be made are paid to the Govt. account. In fact, the claim of provision itself in the original return of income is wrong but the AO has not bothered to examine the issue leaving the serious error which would get carried forward to the next year. The assessee in its reply has submitted that the provision of Rs.2.00 crores is in respect of the expenses actually incurred but the bills not received during the financial year concerned. This fact needs verification/investigation. Since, the AO has not carried out any inquiry whatsoever about this issue the assessment order dated 31.03.2016 is found to be erroneous as well as prejudicial to the interest of revenue. (d) The fourth and the last issue as a subject matter of the current proceedings u/s 263 is the non-examination of the substantial amounts borrowed by the assessee and interest paid thereon. The AO has not examined the issue. The unsecured loans brought forward as on 01.04.2012 was Rs.1.07 core and the closing balance as on 31.03.2013 is Rs.28.74 lacs. The AO has asked for the details about unsecured loans vide item no. 15 of notice u/s 142(1) dated 25.01.2016 mentioning the requirements of section 68 including the loan confirmation and copy of bank statement of the lenders. However, the perusal of the assessee’s reply filed vide letter dated 12.02.2016 shows that the assessee has filed invalid loan confirmations as the same do not contain the bank account number of the lenders. The AO has not bothered to examine the validity of loan confirmations, the issue of further verification about the sources of funds by making requisite investigation is something which has not crossed the mind of the AO. (e) Therefore, the absence of requisite inquiries about the unsecured loans and the fact that the secured and unsecured loans ostensibly taken for the purpose of business, whether actually utilized for the purpose of business only or diverted for some non-business purpose has not been examined,

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. makes the assessment order dated 31.03.2016 erroneous as well as prejudicial to the interest of revenue. It is worthwhile to mention that there are several transactions of advances for land paid to related and other parties. Whether these are actually advances for purchase of land or only the terminology of advance for land has been utilised has not been examined. (f) The fact whether these advances have been given after entering into required agreements and the life of the pendency of these advances, should have been examined to see whether the funds have been retained in business or have gone out for non-business purposes. The absence of any inquiry about this issue makes the order erroneous as well as prejudicial to the interest of revenue. Therefore, the assessment order dated 31.03.2016 is hereby set-aside and made to be afresh after giving due opportunity to the assessee. 8. Therefore, in view of the above factual matrix and legal propositions, ld PCIT held that assessment order dated 31.03.2016 u/s 143(3) has been passed by the AO without making any inquiries whatsoever in respect of the issues as mentioned hereinabove. Therefore, the assessment order of the AO dated 31.03.2016 was set-aside by ld PCIT on the issues as mentioned hereinabove.

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. money to the assessee are not met. The assessee should be asked to identify and produce the persons from whom it has claimed to have received unaccounted- for/on money of Rs.10.50 lacs so that such persons/parties can also be taxed in respect of this unaccounted-for cash/on money.

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. survey proceedings the assessee has never discussed in his assessment order. The Ld. DR took us through paper book page-18 and stated that in the profit and loss account, the previous year sale is at Rs.9,87,39,322/-, however during the current year, the sale is at Rs.10,80,91,928/-and previous year profit before tax is at Rs.1,27,55,512/- whereas current year profit on account of increased sale is only Rs.4,29,023/- therefore it not getting reflected in these financial statements that assessee has offered even Rs. 7.50 Lakh per flat.

In which figure, in the financial statements, the assessee has disclosed the amount admitted in survey proceedings, is not clear, and therefore it is loss of Revenue. The Ld. DR for the Revenue also stated that in the statement of assessee taken during the survey vide page-8 of diary, no expenses was quantified by assessee in his statement per flat, and assessee has declared the on-money received by him and assessee did not say anything that the expenses are yet to be deducted from the amount admitted during the survey proceedings. Therefore it is complete lack of inquiry and it is a case of ‘no enquiry’. The Assessing Officer has never discussed in his assessment order and Assessing Officer neve asked the query by issuing show cause notice u/s 142(1) in respect of the four issues raised by ld PCIT. Moreover the assessee never replied these specific issues raised by Ld. PCIT, during the assessment stage, therefore the order passed by Ld.PCIT should be upheld.

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd.

CIVIL HOSPITAL ROAD NANAKWADA, VALSAD GUJARAT 396001 Madam/Sir, Sub: Calling for information u/s 142(1)-reg. Ref: This office notice u/s 143(2) dated 05./09/2014 In connection with the assessment for the assessment year 2013-14 you are required to furnish: 1. Hard copy of I.T. Return filed for A.Y. 2013-14 with computation statement. 2. Tax Audit Report, if applicable 3. Profit & Loss A/c, Balance sheet and other schedules 4. Evidence of prepaid taxes and chapter VI-A deductions 5. Details of all Bank accounts The above information may please be filed within 15 days of receipt of this letter or latest by 10.10.2014 at my office at Room No.208, 2ndFlor,Palak Arcade, Shanti Nagar Tithal Road,Valsad. Yours sincerely, Sd/- T. Satyanandam Dy. Commissioner of Income tax, Valsad Circle, Valsad

To The Deputy Commissioner of Income-Tax, Valsad Circle, Valsad, Room No.208, Palak Arcade,Shanti Nagar, Tithal Road, Valsad Reg: Shivam Residential Construction (India) Pvt. Ltd. Shree Thakorji Nagar, New Civil Hospital Road, Nanakwada, Valsad P.A.No.AAPCS 3137G Sub: Your Notice U/s 141(1) of the Income-Tax Act, For assessment year 2013-14 Respected Sir, Our abovenamed client is in receipt of your leter No.DCIT/VLS/Cir./142(1)/2014-15/757 dated 18.09.12213 calling upon our client to furnish information in connection with the assessment proceedings for assessment year 2013-14. As required by you we beg to submit hereunder: 1. Copy of computation of income together with acknowledgement of original return filed for the year under consideration. 2. Copy of computation of income together with acknowledgement of revised return filed for the year under consideration. 3. Audit report in Form No.3CA,3CD and 3CEB. 4. Copy of balance sheet, profit & loss A/.c and other schedules. 5. Evidence of prepaid taxes and proof of deductions claimed under Chapter VI-A 6. Details of all bank accounts held. We request you Sir, to issue a questionnaire to enable us to make detail submissions at the time of scrutiny proceedings. Thanking you, Yours faithfully, (Bhadreshh Gandhi) 16. From the above notice u/s 142(1) and the reply of assessee against the notice u/s 142(1) of the Act, it is vivid that Assessing Officer has never asked the question/issues raised by ld PCIT. We note that ld PCIT has raised four issues in his revision order under section 263 of the Act, as noted by us above, however, none of the issue has been examined by the assessing officer. It is a case of “no

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. inquiry”. Therefore, order passed by the assessing officer is erroneous as well as prejudicial to the interest of revenue.

“Basic information The assessee is engaged in the activity of land development and residential./commercial construction. Assessee has filed its original return of income for AY 2013-14 pertaining to FY 2012-13 declaring a total income of Rs.25,74,560/- on 04.10.2013. Thereafter, assessee has filed it revised return of income on 19.02.2014 declaring the total income of Rs.2,25,74,560/-. The said return of income was filed after voluntarily disallowance u/s 40(a)(ia) for non- deduction of TDS on payment made to contractor and sub-contractor. Brief facts of the case 2. Subsequently, the case was selected for scrutiny and order u/s 143(3) by the Computer Aided Scrutiny Selection (CASS) process. Notice u/s 143(2) of the Income-tax Act, 1961, dated 05-09-2014 was issued and duly served upon the assessee. A letter dteed18.09.2014 was issued requesting the assessee to furnish a paper book, containing financial statements and details of bank accounts.In response to this, the paper book containing financial statements and bank statements was submitted on 07.10.2014. Due to change in incumbent a notice u/s 129 was issued on 10.08.2015, which was duly served. A notice u/s 142(1) of the Act along with questionnaire calling for details and explanations was issued on 25.01.2016, requesting the assessee to produce various details to substantiate the details made available in the return of income filed by the assessee. 3. In response to the notices issued by this office, Shri Bhadresh Gandhi, Advocate and Shruti Desai ITP, duly authorized by the assessee has attended the proceedings as the authorized representative of the assessee and furnished the details/explanations called for from time to time and furnished the details called for, which are examined and placed on record after perusal & verification. 4. The assessee has recognized revenue based on sold areas as per percentage completion method. The stage of completion is determined as per the proportion of the cost of construction and development actually incurred till end of the year and total estimated cost of construction and development of the project. The total estimated cost of project was estimate based on the technical and other estimates of the saleable areas, cost etc. a detail working for last three year is submitted by assessee and kept on record. 5. Subject to the preceding remarks and on the basis of data available for the cognizance of the undersigned, the total income of the assessee is computed as under: 6. Assessed u/s 143(3) of the Income Tax Act, 1961. Credit to be given for prepaid taxes, if any, after due verification. Applicable interest u/s

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. 234/234B/234C of the Act to be charged. Demand notice & challan to be issued accordingly. Sd/- [Shaurya S. Shukla] Deputy Commissioner of Income Tax, Valsad Circle, Valsad. 18. From the above assessment order, it is quite clear that it is silent about four issues raised by the Ld. PCIT. The impounded documents in survey proceedings have not been examined by AO. Therefore, it is abundantly clear that Assessing Officer never examined the issue relating to survey proceedings and he has never ascertained the amount whether the amount admitted in the survey proceedings has been fully disclosed by the assessee in the income tax return and paid tax thereon. Therefore, it is a loss of revenue and order of assessing officer is also erroneous. 19. However, we note that Ld. Counsel for the assessee submitted before us the judgment of Hon'ble jurisdictional High Court in the case of Commissioner of Income-tax-II vs. Shilpa Dyeing & Printing Mills (P.) Ltd. [2013] 39 taxmann.com 3 (Guj)/[2013] 219 Taxman 279 (Guj) [04-04-2013], wherein it was held that since income declared in survey to be taxed, it has to fall under one of heads of income u/s 14 and can not be taxed separately. However, we note that the judgment of Hon'ble jurisdictional High Court cited by Ld. Counsel does not help the assessee under consideration since the amount declared in the survey proceedings have not been examined by the Assessing Officer at all, whether it falls u/s 14 of the Act, is a separate question altogether which cannot be linked here where there is no inquiry made by AO. 20. We also find merit in the submission of ld DR for the Revenue to the effect that no doubt the sales have marginally increased from Rs.9.87 crores to Rs.10.80 crores and in such increased amount whether the amount admitted during the survey proceedings have been included or not, is doubtful and the same fact has not been examined by the Assessing Officer.

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. 21. The ld Counsel stated that ld PCIT cannot give specific direction to the assessing officer and can not pointed out specific error in the assessment order, as he has done in last para of his order. We do not agree with ld Counsel`s arguments. We note that ld PCIT in the assessee`s case under consideration, has examined the issue himself and found that assessing officer has committed exact error, therefore, ld PCIT let it know to the assessing officer, and directed the assessing officer to correct the specific mistake. We note that it is necessary for the ld PCIT to point out the exact error in the assessment order, which he proposes to revise, so that assessee would have an adequate opportunity of meeting that error before the final order is made. CIT Vs. G. K. Kabra (1995) 211 ITR 336 (AP). 22. It is important to remember that the AO is not only an adjudicator but also an investigator. He cannot "remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word 'erroneous' in section 263 emerges out of this context. It is because it is incumbent on the AO to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word 'erroneous' in the section 263 includes the failure to make such an inquiry becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.

ITA No.396/SRT/2018 A.Y.13-14 Shivam Residential Construction (India) Pvt. Ltd. Industrial Company Ltd vs. CIT 243 ITR 83 (SC). The relevant portion of this judgment is reproduced as under: "An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind." 23. Therefore, considering the facts and circumstances, as narrated above, we note that four issues identified by Ld. PCIT have neither been examined by Assessing Officer nor assessee submitted any details/explanation before the Assessing Officer, hence we uphold the revision order passed by Ld. PCIT under section 263 of the Act, and dismiss the appeal of the assessee.

Order is pronounced on 10/02/2023 by placing record on notice board.

Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat �दनांक/ Date: 10/02/2023 Dkp Outsourcing Sr.P.S/**SS Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat