TaxTMI 
TaxTMI 
2021 (6) TMI 600
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....T 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 considered and decided during the proceedings u/s 143(3) of the Act. 3. The learned CIT erred in law and in fact in not dropping the proceedings u/s 263 and observing that the order passed u/s 143(3) was made without proper examination and inquiry despite the fact that the learned Assistant Commissioner of Income Tax, Valsad Circle, Valsad ("the AO") had examined the matter and the order u/s 143(3) was passed after application of mind. 4. The learned CIT erred in fact and in law in not dropping the proceedings u/s 263 despite the fact that the original order passed by the learned AO was not erroneous nor was prejudicial to the interest of the Revenue. 5. The learned CIT erred in fact and in law in not dropping the proceedings u/s 263 despite the fact that the Assessee had given full explanation with respect to the issues raised by the learned CIT. Alleged Undisclosed Income: 6. The learned CIT erred in fact and in law in directing the learned AO to frame a fresh assessment in the case of the Assessee des....
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....tors for land development and land leveling expenses were shown as outstanding at the end of the year, but no details of the parties were furnished before the assessing officer. 3.Facts of case which can be stated quite shortly are as follows: The Assessee before us is a partnership firm engaged in the business of development and construction of real estate projects.The assessee filed its return of income for the assessment year 2014-15, on 26.09.2014 by declaring total income of Rs. 2,11,99,030/-. The case was manually selected for scrutiny and the assessment under section 143(3) was finalized on 20.12.2016 determining total income of Rs. 2,14,30,830/-. A survey under section 133A was conducted on the business premises of the Assessee on 30.09.2013 and in pursuance of the same, the assessee had disclosed additional income of Rs. 2,10,00,000/- in its return of income. During the course of the survey as well in the course of the assessment proceedings, the disclosure made by the assessee was thoroughly verified and the disclosure made at Rs. 2,10,00,000/- in the return of income filed was accepted by the assessing officer. 4. After that, Learned Principal Commissioner of Incom....
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....er has considered in his assessment order at 4 Lacs only, therefore, ld PCIT concluded in his order that assessing officer has not applied his mind, as assessing officer has read 400 Lacs, as 4 Lacs only, instead of 4 crores.Therefore, Ld.PCIT observed that Assessing Officer has not made enquiry about the undisclosed income declared by the assessee at Rs. 2.10 crores, (it must be considered by the assessing officer at Rs. 210 crores). The observation of Ld.PCIT for the main issue is reproduced below: (i)As can be seen from the contents of para-4 of letter dated 01.03.2018, the figures in hundreds have been taken as figures in singular for example, 400L which should mean 400 Lacs or 4 crores has been taken as 4 lacs on the basis of the assessee's submissions during the course of survey proceedings. (ii)Going by common sense and usual practice one is likely to find examples of writing/jotting down big amounts in short form/abbreviated form, for example, 400 lacs (400L) may be abbreviated and written/jotted down 4L but not otherwise i.e. no reasonable person will write/jot-down 4 lacs (4L). This is completely absurd and the AO has caused serious damage to the cau....
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....he assessee has pleaded a lot before the Bench. The sum and substance of his arguments are that assessee has disclosed Rs. 2.10 croes during the survey and not Rs. 210 crores as alleged by the ld.PCIT in his order. The ld Counsel took us through the impounded diary and explained the Bench that during the survey proceedings, in response to a question asked by the survey team, the assessee has categorically stated that say for example, the figure written in diary at 400 Lacs, means 4 lacs only and not 4 Crores. Therefore, the assessee has disclosed in the return of income (the total of all figures in lacs) at Rs. 2.10 crores. The assessing officer has applied his mind and examined Rs. 2.10 crores during the assessment proceedings. The assessee submitted books of accounts, documents and evidences before the assessing officer therefore, assessing officer has examined the other issues raised by the ld PCIT, such as returned income, the pre-survey period and post -survey period land leveling expenses, and sundry creditors for land development and land leveling expenses. Therefore, order passed by the assessing officer is neither erroneous nor prejudicial to the interest of Revenue, hence....
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....ng relevant & essential examination and without making proper verifications. The findings of the Id PCIT is discussed below at length. 2.1 The LD AO has not even mentioned the fact of survey u/s 133A even though case is selected for scrutiny manually, presumably for this reason. 2.2. From the records the Ld. PCIT found that for the following 3 reasons there appears to be no inquiry from the AO, during scrutiny assessment proceedings. Though the assessee had declared Rs. 2,10,00,000/- in the survey proceedings, the returned income was only Rs. 2,11,99,030/-, which means apart from the disclosure in the survey proceedings, the assessee had a mere Rs. 1.99 lacs as regular income for the year. In the pre-survey period for 6 months, the land development and land leveling expenses were Rs. 34.82 lacs, whereas in the post- survey half of the year the expenses are Rs. 1.19 Crs. The Sundry Creditors for land development and land leveling expenses were shown as outstanding at the end of the year, but no details of the parties or details of work done by the parties were furnished nor called for by the Id AO. During the assessment proceedin....
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....possible or in most cryptic manner possible. Hence, 4 lacs would be recorded as 4L and not 400L. Clearly 400 L would indicate 400 lacs or 4 Crs. By application of logic, the ld AO ought to have alteast examined these aspects before blindly accepting what is stated by the assessee in its sworn statement. 2.6.2 From the perusal of the above impounded material it can be seen that, on the top of the page the month and the year 2013 is mentioned, below that a series of numbers such as 400 L, 200 L, 1000L, etc are mentioned one below another with a noting J or " K " against each entry. It can be seen that no names or any other details of the transactions is mentioned in any page. From the incriminating notings , it is not clear whether they are receipts or payments. The Id AO has not discussed these incriminating notings in assessment order. It is evident that Id AO has not made inquiry to ascertain the nature of transactions indicated by the notings. 2.6.3 The partner of the assessee - firm has stated that the notings denote advances received for the plots. ( ref Ans to Q No. 11 in statement dated 30.09.2013), but no co- relation of an advance to any specific ....
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....2.6.6 From the above discussions it is evident that the Id AO has not examined the issue. He has not conducted relevant and essential enquiries or verifications, which should have been made." 10. Therefore, based on the above submissions, ld PCIT stated that assessing officer has not applied his mind and he accepted the figure explained by the assessee during survey proceedings, therefore order passed by the assessing officer is erroneous and prejudicial to the interest of revenue, hence the order passed by the ld PCIT may be upheld. 11. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld PCIT and other materials brought on record. The law with regard to exercise of jurisdiction u/s.263 of the Act on the ground that the AO failed to make enquiries which he ought to have made in the given circumstances of a case is well settled. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries b....
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.... the same was accepted by the Department. The Statement of Jainul K Desai ("JKD") was recorded on 30-09-2013, wherein he explained the entries made in the long book. (vide paper book Pg. No. 38-48). During the course of survey, the Department has sought clarification regarding letters J, K and L mentioned in the long book. The JKD in his statement had explained that J & K stood for Jainul and Kirtikumar and L stood for Lakh. It was also explained that 400L meant Rs. 4 lakhs, 200L meant Rs. 2 lakhs and similarly the other entries were explained during survey proceedins (vide paper book Pg. No. 46). Accordingly, a disclosure of Rs. 2.10 crores was made during the survey and the income was offered by the Assessee. All these documents and evidences were examined by the assessing officer, while making the assessment under section 143(3) of the Act, therefore assessing officer has made sufficient inquiries. 13. We note that during the course of assessment proceedings, the assessing officer has issued detailed questionnaire and conducted thorough inquires. (vide paper book Pg. No. 59). After examination of the books of accounts, evidences and details submitted by the assessee, th....
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....approval of Village Kosamba is complete and NA application is made for Bhagdawada Village. Month-wise entries of advances received against plots of both these lands are done in this note book. These whole amount, I have received in cash. Question-12 On each of the Page No.1 to 7 of this Annexure, after number "L" and "J" or "K" is written. Please tell us the meaning of it. Answer: The letter "L" written in the notebook after number indicates lakhs and "j" and "k" indicates as "j" means Jainul and "k" means Kirtibhai. These means the name of the person who received this money. Question-13.In the answer of above question you said that "L" indicates lakhs, then does it mean that 400L means 400 lakhs and 200L means 200 lakhs? Answer: No. 400L means 4 lakhs and 200L means 2lakhs and all the other entries are also like wise. Question-14: In this notebook, entries are made from April-2013 to September-2013, the total of which amounts to 2.10 crores, tell us in which firm you received these advances? Answer:Above shown land is of my partnership frim M/s. Rudra Developers and this advances, I have received under this firm. Quest....
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....see himself it is necessary for the assessee to establish, if asked, what the source of that money is and to prove that it does not bear the nature of income. The department is not at this stage required to prove anything. It can ask the assessee to bring any books of account or other documents or evidence pertinent to the explanation if one is furnished, and examine the evidence and the explanation. If the explanation shown that the receipt was not of an income nature, the department cannot act unreasonably and reject that explanation to hold that it was income. If however, the explanation is unconvincing and one which deserves to be rejected, the department can reject it and draw the inference that the amount represents income either from the sources already disclosed by the assessee or from some undisclosed source. The department does not then proceed on no evidence, because the fact that there was receipt of money is itself evidence against the assessee which he fails to rebut, and being unrebutted, that evidence against him by holding that it was a receipt of an income nature. The very words "an undisclosed source" show that the disclosure must come from the assessee and not f....
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....ing officer while completing the assessment did make specific inquiries with regard to amount disclosed in survey at Rs. 2.10 crores. Besides the above, as rightly pointed out by the learned counsel for the assessee that ld PCIT has not set out as to why and how this disclosed amount in survey need to be investigated and as to what type of inquiry ought to have conducted by the assessing officer. In Fact, the assessing officer made lot of inquiry. Hon'ble Delhi High Court in the case of Gee Vee Enterprises (supra) held that Income-tax Officer is not only an adjudicator but also an investigator. In the assessee`s case, as facts narrated above, clearly shows that assessing officer did sufficient inquiry about the amount disclosed in survey to the tune of Rs. 2.10 crores, therefore assessing officer had worked as an adjudicator and also an investigator. We have also noted that no asset worth Rs. 210 crores held by the assessee and it is impossible to earn Rs. 210 crores from the land held by the assessee. The ld. PC1T has not brought any material to justify the alleged income of Rs. 210 crores.Thus, we note that allegation made by the ld PCIT is based merely on suspicion and conjectur....