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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri George George K, JM & Ms.Padmavathy S, AM
O R D E R
Per George George K, JM :
This appeal at the instance of the assessee is directed against Principal Commissioner of Income tax’s (PCIT) order dated 11.05.2020 passed u/s. 263 of the I.T.Act. The relevant assessment year is 2014-15.
The Registry had noted a delay of ‘110’ days in filing this appeal. The impugned order passed u/s. 263 of the Act was served on the assessee on 12.05.2020. The appeal should have been filed on or before 11.07.2020. However, the same has been filed only on 21.10.2021. But, the Hon’ble Apex Court judgment in Miscellaneous Application No. 665/2021 in SMW(c) No.3/2020 dated 23.09.2021 has excluded the period from 15.03.2020 to 02.10.2021 for computing the . Alliance Steel period of limitation in view of COVID-19 pandemic. When the above period is excluded, the appeal is deemed to be filed within the time. Hence, we proceed to dispose of the appeal on merits.
The brief facts of the case are as follows: The assessee is a Partnership firm engaged in scrap business. There was a survey u/s. 133A of the Income tax Act on 18.09.2014 in the business premises of the assessee. During the course of survey, one of the partners admitted that the turnover of the assessee firm is about Rs. 2 crores and that the returns of income have not been filed. Consequent to the survey, the AO issued a notice u/s. 148 of the I.T.Act on 25.08.2016 for the AY 2014-15. Thereafter, a notice u/s. 142(1) dated 02.06.2017 was issued to the assessee. In response to the same, the assessee filed a return of income on 21.12.2017 declaring the income at Rs..6,94,580/- on a turnover of Rs.1,26,15,480/-. As the return of income filed on 21.12.2017 was filed in response to notice u/s. 142(1), the AO informed the assessee that the same is defective and cannot be considered for assessment purposes and directed the assessee to file the return of income in response to the notice u/s. 148 issued on 25.08.2016. Accordingly, the assessee e- filed the return of income on 30.12.2017 in response to the notice u/s. 148 of the Act. However, as the return of income filed by the assessee could not be retrieved from the CPC, the AO proceeded to complete the assessment u/s. 144 of the . Alliance Steel I.T.Act. The assessment was thus completed by order u/s. 144 r.w.s. 147 of the I.T.Act on 30.12.2017 determining the income at Rs.13,00,000/-. While determining the income at Rs.13,00,000/-, the AO relied on the sworn statement given by one of the partner, that the turnover of the assessee firm would be about Rs. 2 crores and that the income would be declared at 6.5% of the same. The assessee accepted the assessment order and did not file any appeal against the same.
Subsequently, the Commissioner of Income tax, Trivandrum issued a proposal for revision u/s. 263 of the I.T.Act on 23.10.2019. The Commissioner of Income tax was of the view that the action of the AO in assessing the additional income at 6.5% of the undisclosed sales turnover only and not on the total sales turnover without giving due weightage to the sworn statement, resulted in the assessment order being erroneous and prejudicial to the revenue. The assessee filed detailed objections to the proposal for revision u/s. 263 of the I.T.Act. However, the PCIT dismissed the objections and held that the entire alleged undisclosed turnover of Rs.73,92,970/- (i.e 2,00,08,450/-1,26,15,480/-) should have been added as income. The AO was directed to redo the assessment on the above lines by order u/s. 263 of the Act dated 11.05.2020. . Alliance Steel 5. Aggrieved by the Commissioner of Income tax’s order u/s. 263 dated 11.05.2020, the assessee has filed the present appeal before the Tribunal raising the following grounds:
1. The order of the Commissioner of Income tax is against facts, law and circumstances of the case.
2. The Commissioner of Income tax has erred in revising the assessment order on the basis of surmises and conjectures
3. The Commissioner of Income tax has erred in concluding that the assessment order is erroneous and prejudicial to the interest of revenue in the facts and circumstances of the case. The Commissioner of Income tax ought to have found that the twin conditions required for exercising the revisionary jurisdiction are absent in the present case.
4. The order u/s. 263 is bad in law in as much as the order has been passed on a ground different from that mentioned in the notice issued u/s 263 of the Income tax Act.
5. The Commissioner of Income tax has erred in placing reliance on a sworn statement recorded during the course of survey u/s. 133A of the I.T.Act to conclude that the assessment order is erroneous and prejudicial to the revenue.
6. The Commissioner of Income tax has erred in directing the AO to complete the assessment in a particular manner in the order passed u/s. 263 of the I.T.Act
7. The Commissioner of Income tax has grossly erred in presuming that the turnover declared by the appellant is over and above the turnover estimated by the AO in the ex-parte assessment order u/s. 144 of the I.T.Act. The CIT failed to note that the turnover declared by the appellant has been ignored by the AO and a higher turnover estimated and substituted while completing the assessment.
8. Without prejudice to the above contentions it is urged that the Commissioner of Income tax has erred in concluding that the entire alleged undisclosed turnover constitutes the income of the appellant.
9. Any other ground that may be adduced at the time of hearing.
6. The assessee has filed a paper book comprising of 42 pages, enclosing therein, the sworn statement recorded during . Alliance Steel the course of survey u/s. 133A of the Act, P&L account, communications during the course of proceedings u/s. 263 of the Act etc. The Ld.counsel for the assessee argued that the AO has considered the statements recorded during the course of the survey and concluded the assessment accordingly. Therefore, no prejudice has been caused to the interest of revenue as the addition is consistent with the statements during the course of survey.
In response, the ld.DR relied on the impugned order passed u/s. 263 of the Act.
We have heard the rival submissions and considered the material on record. We are of the view that AO after undertaking requisite enquiries had taken one of the plausible views that only the profit element in the turnover has to be considered. The AO has not considered the returned income as the same is not valid in the eyes of law owing to technical difficulties/procedural lapses. The PCIT has selectively relied upon the sworn statements only to consider the turnover sans expense and selective reference is made to returned income without any regard to its validity. The PCIT has erred in treating the undisclosed turnover (difference in sale turnover as per the sworn statements and returned income) as undisclosed income. In the absence of a valid return of income, the AO has rightly considered the turnover as per the sworn statement, which is also accepted by the PCIT and imputed only the profit percentage. The AO has taken a . Alliance Steel plausible view that the assessee was liable to tax on profit embedded in the turnover. It could be concluded that the AO has not accepted the income declared by the assessee during the survey proceedings, in a mechanical manner but has applied his mind to various aspects of the matter( by rejecting the returned income) before completing the assessment. The same cannot be considered erroneous in so far as it is prejudicial to the interest of revenue. Therefore, the PCIT order u/s. 263 of the Act to set aside the assessment is bad in law and same is quashed. Thus, the grounds of appeal by the assessee are allowed.
In the result, the appeal filed by the assesee is allowed.
Order pronounced on this 08th day of March, 2023.