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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH, AHMEDABAD
Before: Ms. SUCHITRA KAMBLE & SHRI WASEEM AHMED
PER SUCHITRA KAMBLE, JUDICIAL MEMBER:
This appeal is filed by the assessee against order dated 07.03.2022 passed by the Principal Commissioner of Income Tax, Ahmedabad -1.
The assessee has raised the following grounds of appeal :-
“1. The learned Assessing Officer ought to have taken into consideration the facts, legal position and submission made by the appellant.
2. The learned Assessing Officer ought to have accepted the return filed by the appellant in toto and assessment made u/s.143(3) of the Act.
3. The learned Assessing Officer has erred in law by re-opening of the case u/s.263 r.w.s. 115BBE of the Act on the amount declared during the course of survey i.e. Rs.7,09,00,000/- being a cash as an un-explained valuation of stock of the appellant at the time of Survey under the provisions of the Income-tax Act, 1961 that to be Assessment Year: 2017-18 Page 2 of 7 completed by an estimated expenditure of Rs.3,93,88,000/- whereas the amount has been duly accounted, disclosed in the audited statement of account and explained as business income during the course of assessment u/s.143(3) of the Act.
4. The learned Assessing Officer has erred in law in respect of the claim of the estimated expenses of Rs.3,93,88,000/- declared by the appellant at the time of survey in order to compute the estimated net profit for the year at the time of Survey and the same has neither been accounted nor claimed in the books of accounts as an expense of Rs.3,93,88,000/- against the disclosed income of Rs.7,09,00,000/- which is subject to disallowed u/s.40A(3) of the Act.”
2.1 The assessee has also raised additional grounds which read as under :-
“1. The Id. PCIT has grossly erred in law and on facts in assuming jurisdiction u/s.263 of the Act on the erroneous ground that the impugned assessment order is erroneous insofar as it is prejudicial to the interest of the revenue.
2. Ld. PCIT grossly erred in not appreciating that in order to invoke S.263, two conditions must be fulfilled viz. the impugned assessment order must be erroneous and that error must be prejudicial to the interest of the revenue. In the present case, Id. AO has passed the reasoned assessment order after analysing all details and therefore there was no error in the impugned assessment order so as to justify action u/s.263 of the Act. Under the circumstances, the very assumption of power u/s.263 of the Act is unjustified and bad in law and therefore, order u/s.263 of the Act deserved to be quashed.
3. The subject order u/s.263 passed by Id. PCIT is illegal and bad in law in absence of any finding of Id. PCIT how the alleged error of AO has resulted in loss of revenue particularly when depreciation was justly claimed.
4. The Id. PCIT has further erred in law and on facts in not appreciating that the view taken by the AO is a possible view and hence the proceedings are illegal and bad in law.
5. The Id. PCIT has further erred in law in not coming to any concrete conclusion and without conducting any inquiry or investigating the issue, merely directed the AO to frame the assessment order afresh. Without there being any positive finding about order being erroneous and prejudicial to the interest of the revenue, the action of Id. PCIT is without jurisdiction and illegal.
6. Ld. PCIT has erred in not considering various facts, submissions, explanations and clarifications as given by the appellant and further
Assessment Year: 2017-18 Page 3 of 7 erred in not appreciating the facts and law in their proper perspective.”
The assessee firm filed its return of income on 31.10.2017 for assessment year 2017-18 declaring total income at Rs.3,14,31,850/- (deduction under Chapter VI-A of Rs.11,250/-). The order under Section 143(3) of the Income Tax Act, 1961 dated 12.12.2019 was passed after determining returned income of Rs.3,14,31,850/- as assessed income. The PCIT observed that the assessee firm had accounted for undisclosed income and Rs.7.09 Crores under the head “cash on hand” on 22.09.016 which was disclosed during the survey under Section 133A of the Act. On verification of the cash book of the firm, the PCIT observed that the said undisclosed cash has been debited in the cash book of the firm on the same day. However, on verification, of the Assessment Order dated 12.12.2018, the PCIT observed that the amount of unaccounted cash considered by the Assessing Officer is that of Rs.7,03,35,696/- and the Assessing Officer allowed the estimated expenses of Rs.3,93,88,000/- against the unaccounted cash of Rs.7,03,35,696/-. The PCIT noticed that unaccounted cash amounting to Rs.7,09,00,000/- was not routed through regular books of account. Thus, the unaccounted cash should have been taxed under Section 115BBE of the Act. The PCIT observed that the estimated expenses of Rs.3,93,88,000/- were calculated by the assessee firm against the unaccounted cash of Rs.7,09,00,000/- which are also not allowable as per the provisions of Section 115BBE(2) of the Act. The PCIT observed that the Assessing Officer allowed these estimated expenses of Rs.3,93,88,000/- without verifying the same. Accordingly, a show cause a notice under Section 263 of the Act was issued to the assessee on 07.02.2022. The assessee firm submitted its reply on 28.02.2022 and after taking cognisance of the same, the PCIT held that the undisclosed cash amounting to Rs.7,09,00,000/- accounted for income in the books of account by the assessee firm on 22.09.2016 after survey has to be taxed as per provisions of Section 115 BBE of the Act as the said income falls under Section 69A of the Act. The PCIT further observed that the assessee firm is not eligible for claiming estimated expenses of Rs.3,93,88,000/- as calculated by the assessee firm against unaccounted cash of Rs.7,09,00,000/- since the second amendment in the Section 115BBE is applicable on the assessee firm for the reasons recorded in the order. The PCIT directed the Assessing Officer to make
Assessment Year: 2017-18 Page 4 of 7 fresh assessment after giving opportunity of being heard to the assessee and frame the assessment considering the facts as also conducting investigation in respect of whether the unaccounted cash amounting to Rs.7,09,00,000/- accounted for in the books of account by the assessee firm on 22.09.2016 after survey of business income or not covered under Section 69A of the Act and also directed to verify whether the estimated expenditure amount ting to Rs.3,93,88,000/- claimed against unaccounted cash of Rs.7,09,00,000/- is regular business expenditure or not. The PCIT further directed the Assessing Officer to verify whether there is any violation of the provisions of Section 40A(3) of the Act on estimated expenditure amounting to Rs.3,93,88,000/- claimed against unaccounted cash of Rs.7,09,00,000/- or not.
Being aggrieved by the Order under Section 263 of the Act passed by the PCIT, the assessee is before us.
The Ld. AR submitted that the assessee is carrying on the construction business. Survey action was carried out under Section 133A of the Act on 22.09.2016, during the course of which, details of unaccounted cash of Rs.7,03,35,696/- were found. The Ld. AR submitted that such cash was received as a part of business activities carried on by the assessee out of which estimated expenses aggregating to Rs.3,93,88,000/- were yet to be incurred by the assessee and thus unaccounted business income of Rs.3,09,47,700/- was declared by the assessee during the survey. The assessee filed his return of income for the year under consideration on 31.10.2017 declaring total income at Rs.3,14,31,850/-. The assessee’s case was selected for scrutiny by issuance of statutory notice dated 05.09.2018 under Section 143(2) of the Act and various details were called for by the Assessing Officer from time to time which was furnished by the assessee. Eventually, the assessment was framed under Section 143(3) vide order dated 12.12.2019 without disturbing the returned income. The details of notices issued by the Assessing Officer and replies furnished by the assessee at the original assessment stage were pointed out by the ld. AR. The PCIT issued show cause notice under Section 263 of the Act and after taking cognisance of the assessee’s reply passed order under Section 263 of the Act whereby the Assessing Officer was directed to frame the assessment
Assessment Year: 2017-18 Page 5 of 7 afresh. The Ld. AR submitted that it is a settled law that in order to invoke revisionary jurisdiction, two conditions need to be fulfilled. They are, firstly Assessing Officer’s order must be erroneous and the Assessing Officer’s order must be prejudicial to the interest of the Revenue. If either of the above said conditions are not satisfied, the PCIT cannot invoke revisionary jurisdiction as laid down by the Hon’ble Apex Court in the case of Malabar Industrial Co. Limited vs. CIT (2000) 243 ITR 83 (SC). The Ld. AR submitted that the PCIT failed to appreciate that for the purpose of invoking revisionary jurisdiction, it is essential that both the conditions stated has to be satisfied. In the present case, the Assessing Officer, after taking cognisance of the assessee’s submissions and the details, has passed reasoned order and the said order is neither erroneous nor prejudicial to the interest of Revenue and hence twin conditions for invoking jurisdiction under Section 263 of the Act are not satisfied. The Ld. AR further submitted that the issue on hand were examined at the original assessment stage and it is not open to the PCIT to invoke revisionary jurisdiction. When the issue has been examined at the original assessment stage and the same does not get reflected in the final assessment order, then that by itself would not lead to a conclusion that the order of the Assessing Officer calls for interference by the PCIT under Section 263 of the Act. The Ld. AR relied upon the following decisions :-
Jai Rashmikant Patel vs. PCIT – ITA 427/Abd/2020 Veer Plastics P. Ltd. vs. PCIT – ITA 456/Ahd/2020 Harshadkumar Manilal Patel vs. PCIT – ITA 365/Ahd/2020 CIT vs. Nirma Chemicals Works (P.) Ltd. – 309 ITR 67 (Guj) Gujarat Power Corporation vs. ACIT – 350 ITR 266 (Guj) Rayon Silk Mills vs CIT – 221 ITR 155 @ 158-159 (Guj Hari Iron Trading Co. vs. CIT – [2003] 263 ITR 437 (P&H) CIT vs. Gabriel India Ltd. – [1993] 203 ITR 108 (Bom) CIT vs. Vikas Polymers – 341 ITR 537 (Del) CIT vs. Honda Siel Power Products – 333 ITR 547 @ 557-558 (Del)
5.1 The Ld. AR further summited that it is settled law that if two views are possible as regards to a particular issue and Assessing Officer adopts either of two such views, then the CIT cannot invoke jurisdiction under Section 263. The Ld. AR relied upon the following decisions:-
Assessment Year: 2017-18 Page 6 of 7 “Malabar Industrial Co. Ltd. vs. CIT – 243 ITR 83 (SC) Kwality Steel Suppliers vs. CIT – 395 ITR 1 (SC) Mehsana Dist. Co-op. Milk Producers Union – 263 ITR 645 (Guj) CIT vs. D. P. Karia – 266 ITR 113 (Guj) CIT vs. Arvind Jewellers – 259 ITR 502 (Guj) Sir Dorabji Tata Trust vs. DCII(E) – (2021) 188 ITD 38 (Mum) Torrent Pharmaceuticals vs. DCIT – (2021) 173 ITD 130 (Ahd.)”
5.2 The Ld. AR further submitted that inadequacy of inquiry by the Assessing Officer also cannot be ground for proceedings under Section 263 of the Act. The Ld. AR relied upon the following decisions:-
CIT vs. Sunbeam Auto Limited – 332 ITR 167 (Delhi) CIT vs. Anil Kumar Sharma – 335 ITR 83 (Delhi) CIT vs. Vikas Polymers – 341 ITR 537 (Delhi)
The Ld. DR submitted that the PCIT has rightly invoked the revisionary power under Section 263 of the Act as the Assessing Officer has not examined the aspect of addition under section 69A in consonance with the taxing income under Section 115BBE of the Act. Besides this, the estimated expenses also has not been verified properly by the Assessing Officer. The Ld. DR further submitted that the Assessing Officer has also not seen violation of provisions of Section 40A(3) of the Act while determining estimated expenditure. The Ld. DR relied upon the order under Section 263 of the Act.
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee while replying the show cause notice issued by the Assessing Officer during the assessment proceedings has specifically given all the details related to the survey and that of the declaration of unaccounted cash including that of expenditure which was supposed to be incurred by the assessee in his business activities. All these aspects were verified at the assessment stage and the Assessing Officer and in fact the Assessing Officer, after verifying the same, has assessed the total income of the assessee including that of estimated expenses regarding sale of shops and flats. All these aspects have been verified by the Assessing Officer at the assessment stage. Simply not specifying Section will not tantamount that the Assessing Officer has not taken cognisance of the unaccounted cash in Assessment Year: 2017-18 Page 7 of 7 consonance with the provisions of Income Tax Act. From the perusal of records, it can be seen that the Assessing Officer has categorically asked the assessee during the assessment proceedings related to the business expenditure as well as the amount which was found during the survey. The explanation offered by the assessee has been taken into account by the Assessing Officer and fully satisfied with the said explanation. After taking cognisance of all the aspects of the income Tax Statute assessed the total income of the assessee including that of the expenditure which the assessee has quantified while selling the shops and flats in future. Purview of Section 263 comes in the picture when Assessing Officer has passed the erroneous order or the order which is prejudicial to the interest of the Revenue. But in the present case, the Assessing Officer has taken utmost care while raising queries during the assessment proceedings and after verifying all the aspects of Section 69A as well as that of other similar provisions of the Income Tax Statute and has taken view that the same income of the assessee will be taxed in the regular course and not that of Section 115BBE of the Act. The PCIT at this juncture is taking a second view which is not allowable in the revisionary powers as envisaged under Section 263 of the Act. Hence, appeal of the assessee is allowed.
In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on this 6th March, 2024.