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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
अपीलधथी की ओर से/ Appellant by : Shri C.Subrahmanyam, AR प्रत्यधथी की ओर से / Respondent by : Shri MN Murthy Naik, CIT(DR) सुनवधई की तधरीख / Date of Hearing 30.05.2022 : घोर्णध की तधरीख/Date of Pronouncement : 28.07.2022 O R D E R
Per Shri Duvvuru RL Reddy, Judicial Member :
This appeal is filed by assessee against the order of the Principal Commissioner of Income Tax [in short, “Pr.CIT”], Vijayawada in DIN No.IFRA/Confi/17/2019-20/108648919510 dated 05.03.2020, passed u/s 263 of the Income Tax Act, 1961 (in short ‘Act’) for the Assessment Year (A.Y.) 2016-17.
Sri Gurram Venkateswara Rao, Vijayawada
Brief facts of the case are that the assessee is an individual, engaged in the business of iron scrap, e-filed his return of income for the A.Y.2016- 17 on 11.11.2016, admitting total income of Rs.18,79,430/-. In this case a survey operation u/s 133A was conducted on 09.02.2016. During the survey operations, deficit cash balance was found in the hands of the assessee which resulted in at Rs.19,93,291/- as additions to the income of the assessee. Consequently, proceedings u/s 147 were initiated and notice u/s 148 was issued and served on the assessee. In response to the notice, the assessee filed his return of income declaring the same income as disclosed in the original return of income filed by the assessee. The AO considering the return filed by the assessee, accepted the return of income and assessed accordingly. Subsequently, the AO wrote to Ld.Pr.CIT to initiate action u/s 263 of the Act. After receiving the communication from the Ld.Pr.CIT, the AO passed order u/s 144 r.w.s. 263 of the Act which was rendered as void-ab-initio by Ld.CIT(A). Thereafter, the Ld.Pr.CIT once again initiated proceedings u/s 263 of the Act and issued show cause notice dated 18.02.2020. The assessee’s representative filed detailed reply dated 25.02.2020. Considering the reply filed by the assessee, the Ld.Pr.CIT considered the order of the AO passed u/s 143(3) r.w.s. 147 dated 05.12.2017 for the A.Y.2016-17 as erroneous and prejudicial to the Sri Gurram Venkateswara Rao, Vijayawada interest of the revenue. The Ld.Pr.CIT directed the AO to re-examine the issues and complete the assessment de-novo in accordance with law after providing reasonable opportunity to the assessee. Based on the directions of the Ld.Pr.CIT, the AO passed consequential order u/s 147 r.w.s. 263 r.w.s.144B of the Act, making an addition of Rs.19,93,291/-, being the deficit cash balance found during the survey proceedings.
Aggrieved by the order of the Ld.Pr.CIT, the assessee is in appeal before us and raised the following grounds of appeal :
1. That under the facts and circumstances of the case the order passed under the provisions of section 263 of the I.T.Act is contrary to the provisions of law and facts of the case.
2. The Ld.Pr.CIT did not initiate action u/s 263 of the IT Act on his own accord but initiated action basing on the recommendations of the same Assessing Officer who passed the original order 143(3) r.w.s 147 of the IT Act dt.05.12.2017, therefore, the impugned order is not a valid order in the eyes of law.
3. The legal requirement under the provision of sec.263 of the IT Act is that the ld.Pr.CIT is empowered to call for and examine the records and in this case without examining the records, the Ld.Pr.CIT has come to adverse conclusions basing on the recommendations of the same Assessing Officer who passed the original order.
4. The Ld.Principal Commissioner of Income Tax, Vijayawada failed to appreciate the fact that the issue relating to the admission given during the course of survey u/s 133A dt.09.02.2016 and which income was included in the returned income, was an issue examined by the Assessing Officer (in short “AO”) in the assessment proceedings carried out u/s 147 r.w.s. 143(3) of the Act, hence, the subject issue
Sri Gurram Venkateswara Rao, Vijayawada cannot be a matter of review u/s 263 of IT Act by terming the AO order as erroneous causing prejudice to the revenue.
5. The Ld.Pr.CIT ought to have known that the proceedings u/s 263 of the IT Act can be initiated only when the AO order is, not only erroneous but also prejudicial to the interest of the revenue, both the conditions shall co-exist, however, in the present case, AO order is not erroneous in as much as the issue that was considered for review u/s 263 of the IT Act has been examined in the assessment proceedings, therefore, AO order is not prejudicial to the interest of the revenue.
6. For these and other reasons that are to be urged at the time of hearing of the appeal the appellant prays that the order passed by the learned Pr.CIT is erroneous both on facts and as well as in law, therefore, the same needs to be set aside in the interest of justice.
The Ld.AR submitted that the Ld.Pr.CIT erred in treating the order of the AO as erroneous and prejudicial to the interest of the revenue, because of the fact that the AO has considered the income admitted by the assessee during the survey proceedings totalling to Rs.19,93,291/- while filing the return of income, which was duly recorded in the assessment order dated 05.12.2017. The Ld.AR therefore pleaded that the assessee has declared the income over and above the undisclosed income found during the survey and paid the taxes accordingly, hence, the order of the AO is not erroneous and prejudicial to the interest of the revenue. He prayed for quashing the order u/s 263 of the Act.
Per contra, the Ld.DR relied on the order of the revenue authorities.
Sri Gurram Venkateswara Rao, Vijayawada
We have heard both the parties and perused the orders of the authorities below. We find from the order of the AO passed u/s 143(3) r.w.s. 147 of the Act dated 05.12.2017 that the AO has observed as follows : “As per the final report the additional income to be offered for the A.Y.2016-17 is at Rs.19,93,291/-. Whereas the assessee has disclosed the undisclosed income for the A.Y.2016-17 to the tune of Rs.20,27,335/-. The income disclosed is more than the additional income to be offered for the issues as per the final report of the survey. The assessee has produced the tax payment challans as per the From-3 of the IDS Scheme 2016. After careful consideration completed the assessment and computed the tax liability.” The AO has carefully considered the additional income offered by the assessee during the survey proceedings and concluded that the assessee has paid the tax including the undisclosed income detected during the survey. Explanation 2 to section 263 of the Act requires the AO to cause enquiries and verification before passing the assessment order. We find from the order of the AO that the show cause notice was issued to the assessee to disclose the undisclosed income and pay tax accordingly. The assessee has rightly discharged his duty of disclosing the undisclosed income as intimated to the assessee by the AO and paid taxes accordingly, which was also recorded in the order of the AO.
Sri Gurram Venkateswara Rao, Vijayawada
The Jurisdictional High Court in the case of PCIT vs Deccan Jewellers P Ltd held as follows : “In the present cases, the Assessing Officer has issued show-cause notices calling for explanations from the assessees whether excess stock be not treated as “undisclosed investment” under Section 69 of the Act. In response to the notices, elaborate explanations were offered by the assessees, which were fortifiable by consistent views by various Benches of the Tribunal as well as the High Courts. The Assessing Officer, upon consideration, accepted the explanation and taxed the additional income as “business income” @30% instead of 60% as per Section 115BBE of the Act. No contrary view either of any High Court or the Apex Court has been placed before us to demonstrate that the explanations offered by the assessee in the course of assessment were either perverse or contrary to law. In view of such matter, we are constrained to hold no case of perversity or lack of enquiry on the part of the Assessing Officer is made out so as to render his decision erroneous under Explanation 2 of Section 263 of the Act. Thus, the revisional powers under the said provision were illegally invoked by the Principal Commissioner and his order was rightly set aside by the Tribunal.” The Hon’ble High Court of Delhi in the case of CIT vs Vikas Polymers held as follows: This is for the reason that if a query is raised during the course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision.
Respectfully following the above, we, therefore, find that the order of the AO is neither erroneous nor prejudicial to the interest of the revenue. We hereby set aside the order of the Ld.Pr.CIT passed u/s 263 of the Act and restore the order of Ld.AO
Sri Gurram Venkateswara Rao, Vijayawada
In the result, appeal of the assessee is allowed.
Order Pronounced in open Court on 28th July, 2022.
Sd/- Sd/- (एस बालाकृष्णन) (दुव्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER Dated : 28.07.2022 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– Sri Gurram Venkateswara Rao, Prop. M/s G.K.Enterprises, Plot No.56, K.L.Rao Park Road, Syndicate Bank, Vijayawada 2. रधजस्व/The Revenue – Income Tax Officer, Ward 1(1), Vijayawada 3. प्रधान आयकर आयुक्त / The Pr.Commissioner of Income Tax, Vijayawada 4. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/DR,ITAT, Visakhapatnam 5 .गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER
Sr. Private Secretary ITAT, Visakhapatnam