TaxTMI 
TaxTMI 
2003 (2) TMI 25
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....payment of cash over what is available as per cash book and also unaccounted investment in properties and suppression of receipt and inflation of expenses. In the course of such statement given by the managing partner he offered an amount of Rs. 43 lakhs as additional income for the three years, i.e., for 1998-99 at Rs. 13 lakhs, for 1999-2000 at Rs. 10 lakhs and for 2000-2001 at Rs. 20 lakhs. The Assessing Officer determined the business income for the assessment year 1998-99 at Rs. 8,26,550, taking the net profit at 8 per cent. of the total receipt of Rs. 1,22,92,150. For the assessment year 1999-2000 the business income was determined at Rs. 7,72,960, taking the net profit at 8 per cent of the total receipts of Rs. 1,14,41,748, and for the assessment year 2000-01 at Rs. 8,18,255, at the same rate of net profit from the total receipt of Rs. 1,22,46,673. But according to the Commissioner of Income-tax this was erroneous and prejudicial to the interests of Revenue. He also noted that certain receipts other than transport receipts such as discount, interest, compensation, etc., shown by the assessee in the profit and loss account and considered by it for the computation had however ....
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....al, that there is no error in law in the order of the Assessing Officer and, therefore, the action of the Commissioner of Income-tax amounts to illegal exercise of jurisdiction vested in him under section 263 of the Act and that the Assessing Officer has correctly exercised the judicial discretion vested in him while estimating the income of the appellant and hence interference with such judicial exercise of powers of the Assessing Officer under section 263 of the Act amounted to unlawful exercise of the jurisdiction conferred on the Commissioner of Income-tax, as the order of the Assessing Officer is neither erroneous nor prejudicial to the Revenue. The conditions, therefore, for invoking section 263, according to the assessee, are not satisfied in the case and, accordingly, the order in revision of the Commissioner of Income-tax has to be held not sustainable in law. The Tribunal pointed out that the Commissioner has entirely relied on the depositions made during the course of survey under section 133A on January 23, 2001, and virtually brushed aside everything which the Assessing Officer considered subsequent thereto in the course of the assessment proceedings. The declaratio....
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....come-tax Act whereas in the present case, the Commissioner while invoking section 263 of the Income-tax Act on completion of the income-tax assessment has exceeded his jurisdiction virtually directing the Assessing Officer to reframe the assessment in a particular manner. He also drew a distinction between the provisions for search under section 132(4) of the Income-tax Act and survey under section 133A of the said Act. According to him, under section 133A of the Income-tax Act, there is no provision to administer oath or to take any sworn statement. He also contended that a mere admission or an acquiescence cannot be a foundation for an assessment and that any statement given during a survey has no effect as an "admission" nor can it be a statement on oath. According to him, the assessee's statement during the survey with reference to any books of account can hardly be the basis for any assessment. According to him, after the perusal of the accounts, the assessee himself has volunteered to make a disclosure as per annexure D fetter dated February 6, 2001, addressed to the Additional Commissioner of Income-tax and the Income-tax Officer was perfectly justified in considering the di....
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....tax authority, who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place, at, which a business or profession is carried on, whether such place be the principal place or not of such business or profession, and require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession- (i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, (ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and (iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act." The provision also enables the income-tax authority to impound and retain in his custody for such period as he thinks fit any books of account or other documents inspected by him, provided the authority records his reasons for doing so and also shall not retain the books of accou....
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....ue. According to him, the order passed by the Assessing Officer is not erroneous nor prejudicial to the interest of the Revenue and the twin conditions for invoking the power under section 263 are not satisfied. We have perused the statement made by the managing partner of the assessee during the course of the survey. According to the Commissioner of Income-tax, the assessee has stated during the course of survey to question No. 13 that there were unaccounted investments in properties and suppression of receipts and inflation of expenses and has offered an additional income of Rs. 43 lakhs (Rs. 13 lakhs for the assessment year 1998-99, Rs. 10 lakhs for the year 1999-2000 and Rs. 20 lakhs for 2000-2001). While completing the assessment, the Assessing Officer did not take this aspect into consideration and determined the business income at Rs. 8,26,550 for the assessment year 1998-99, taking the net profit at 8 per cent. of the total receipt of Rs. l,22,92,150, at Rs. 7,72,960 taking the net profit at 8 per cent. of the total receipts of Rs. 1,14,41,748 for the assessment year 1999-2000 and for the assessment year 2000-2001 at Rs. 8,18,255 at the same rate of net profit from the t....
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.... 11,64,906 --------- Assessment year 1999-2000 : Net income before salary to partners 9,15,430 Add: Interest on capital debited in the account 1,73,615 Capital gain &....
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....; 14,80,130 --------- According to the assessee, for the assessment year 1998-99 out of an amount of Rs. 19 lakhs received by the partners, the assessing authority had accepted the explanation for Rs. 13 lakhs and balance six lakhs rupees was telescoped and they have estimated an income of Rs. 12 lakhs before payment of salary to partners for the asse....
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....of income for the assessment years 1999-2000 and 2000-2001 shall be filed by March 20, 2001, after paying tax under section 140A..." It can be seen that Rs. 13 lakhs offered for the assessment year 1998-99 is credit from Mr. M.A. Pappu and Estappan (from out of the advance of Rs. 19 lakhs received) and this submission was made according to the appellant, as the deponent was made to believe that only Rs. 6 lakhs has been accounted by the creditors but it was found that another sum of Rs. 7 lakhs was found to be genuine by the Assessing Officer. According to him, it is pertinent to note that the, entire sum of Rs. 19 lakhs was considered in the block assessment completed as early as on October 28, 1999, in the case of M.O. Devassy alias Pappu much before the survey on January 23, 2001, and such block assessment orders were also produced before the Tribunal. Thus, according to him, these facts clearly proved that the purported offer of the appellant for the assessment year 1998-99 of a sum of Rs. 13 lakhs is one imposed upon him and one made by the appellant on the mistaken understanding of facts. Similarly, the purported offer for Rs. 10 lakhs and Rs. 20 lakhs for the assessment y....
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.... date. It was further found that the assessee has not paid the amount of employees State insurance on the due date and accordingly, that amount and the amount of provident fund were disallowed and added to the total income of the assessee. However, the amount of provident fund was allowed as deduction in the assessment year 2001-2002. It can thus be seen that the Income-tax Officer has not accepted the income declared by the assessee in a mechanical way, but applied his mind to the various aspects of the matter before completing the assessment. The Income-tax Officer also found that during the course of hearing, certain details filed showed that the assessee had received an advance of Rs. 19 lakhs (from M.O. Pappu, Rs. 10 lakhs and from Sri M.D. Estappan Rs. 9 lakhs) and the advances received from Pappu of Rs. 10 lakhs has been explained. Regarding the advance of Rs. 9 lakhs received from M.D. Estappan only rupees three lakhs is found to be genuine. Hence, the balance of Rs. 6 lakhs is to be explained which is telescoped in the income already disclosed at Rs. 8,26,550. It was in such circumstances that no separate addition was made to the account. It was also found by the Income....
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....us order. Dealing with the matter, the apex court held that: "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interest of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue--recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. 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 with....
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....he Income-tax Officer cannot be said to be unsustainable in law so as to call it an order passed erroneously. The Income-tax Officer has seized books of account and elicited certain answers which have no evidentiary value. However, making also these figures and finding that there were certain omissions and commissions on the part of the assessee, the assessee has voluntarily offered certain amounts to be treated as additional income for the assessment years in question and certain statements made during the course of such survey especially regarding the advance received from M.O. Pappu and Estappan. But the same has been explained by the assessee, which explanation was accepted after referring to the records and the assessment orders passed in their case, The Income-tax Officer was satisfied about the actual amount received towards advance and only an amount of Rs. 6 lakhs out of the balance was to be further explained and they were telescoped. The entire sum of Rs. 19 lakhs was considered for the block assessment completed as early as on October 28, 1999, in the case of M. 0. Devassy alias Pappu much before the survey. In these circumstances, the statement of the assessee that the....