TaxTMI 
TaxTMI 
2021 (10) TMI 1136
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.... assessment years): "1.On the facts and in circumstances of the case as well as law on the subject, the learned Pr.CIT has erred in passing the order u/s. 263, although the assessment order passed u/s.143(3) r.w.s 153C of the I. T. Act, 1961 was neither erroneous nor prejudicial to the interest of the revenue. 2. It is therefore prayed that above order passed by Pr. CIT u/s. 263 may please be quashed or modified as your honours deem it proper. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 2. Brief facts of the case are that the assessee is a partnership firm. The assessee is engaged in the construction and development activities. A survey action under section 133A of the Act was carried out on assessee's business premises. A survey action was carried out in SRK Group, Surat on 19.07.2016. The assessee is part of SRK Group. During the course of search and survey proceedings certain incriminating documents were found and seized. During the search, certain entries pertaining to the assessee were also found. Consequent upon, notice under section 153C dated 29.11.2018 was issued on ....
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....ction note under section 153C of the Act (in AY 2015-16, 2016-17), • Validity of disclosure made under Income Tax Disclosure Scheme (IDS) ( in AY 2015-16, 2016-17 & 2017-18), • Non verification of unsecured loan ( in AY 2017-18 only) and • Non verification of investment in immovable property (in AY 2017- 18 only). 5. The assessee filed its separate replies dated 24.03.2021 in all cases. In the reply, the assessee besides making reply on various issues identified by ld. PCIT, the assessee explained that they are engaged in the activity of construction, development, sale of project, Radhika Optima as FP No.42, TP No.24, Yamuna Chowk, Mota Varachha, Surat. The assessee filed its return of income under section 139 of the Act for subject assessment year 2015-16 and 2016-17 in time declaring Nil income. A survey was carried out on the assessee group along with a search in case of SRK Group. There was only survey action on the assessee. Despite carrying out the survey action, the AO issued notice under section 153C of the Act on 29.11.2018 for AY 2015-16 & 2016-17. The assessee filed its return of income for AY 2015-16 & 2016-17 on 07.12.2018 decl....
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....Act, the assessee submitted that income disclosed under IDS does not form part of total income as per section 188 of the Finance Act, 2016. Further, section 195 of Finance Act, 2016 has laid down the provision of section 119, section 138 and 189 shall be applicable in case of declaration under IDS accordingly, and other provisions are not applicable. On the observation of ld. PCIT that AO failed to carried out proper enquiry on certain issues, the assessee stated that during the course of assessment proceedings certain issues was raised which has been considered by AO which were reproduced in the reply of assessee. The assessee also stated that assessee on the applicability of section 40A(3), which was identified by ld. PCIT that it has not been considered in respect of various contractual payment made by assessee which are unaccounted, the assessee explained that all accounted receipts and payments as reflected in the impounded material stands covered by the income disclosed by assessee firm under IDS and the provision of section 40A(3) are not applicable in respect of income disclosed under IDS. The assessee in its reply also reproduced the contents of the reply filed before the ....
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....igh Court in CIT vs. Gabriel India Ltd 203 ITR 108 (Bombay) on the point of distinction on "lack of enquiry" and "inadequate enquiry" and had submitted that ld. PCIT cannot initiate proceedings with a view to start fishing and roving enquiries which are already concluded. The assessee also relied on various case laws. 12. The ld. PCIT recorded that assessee filed written submission along with point wise explanation through ITBP Portal vide letter dated 24.03.2021 [para 3 of the revision order]. The some of the contents of reply of the assessee is recorded in para 4 of the order of ld. PCIT. The ld. PCIT after considering the submissions of the assessee held that assessee simply considered the net figure of undisclosed receipt and expenses without computing undisclosed income chargeable tax as per provisions of IDS- 2016. The ld. PCIT held that this would have entailed computing the business income after making various disallowances as per provision of section 28 to 43 and the addition under section 68/69 of the Act. The survey was carried out on 19.07.2016 and declaration of IDS was made on 30.09.2016, thus, the AO failed to examine the implication of cash transaction on the tax....
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.... of unaccounted and unexplained income based on impounded material is much more than the disclosure made under IDS. The ld. PCIT after considering the other submission held that assessment order passed by the AO is erroneous and prejudicial to the interest of the Revenue is proved by fact that issue of cash loan, cash payments for purchase of land, on money receipts have not been verified and inquired by AO as it should have been done. The AO passed assessment order without making enquiry or verification which should have been made. The ld. PCIT after examining the advance booking, purchase of movable property held that it attract the penalty under section 271D of the Act, similarly cash expenses above would be in violation of provision of section 40A(3) of the Act and required appropriate disallowance. Cash expenses payment to contractor without deducting TDS would attract disallowance under section 40a(ia) of the Act, the assessee submitted unsigned unaccounted Profit and Loss Account which so direct and indirect expenses of Rs. 10.66 crore in violation of 4A(3) /40a(ia) of the Act. Further, cash receipt on account of booking in A.Y. 2015-16 to 2017-18 were available on record. T....
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....S; Name of firms Discloser amount AY's Radhika Construction Rs. 3.50 Crore 2015-16 Rs. 53 Lakhs 2016-17 Total (1) Rs. 4.03 Crore Amrut Sarovar Rs. 2.05 Crore 2014-15 Rs. 1.55 Crore 2015-16 Rs. 1.90 Crore 2016-17 Total (2) Rs. 5.50 Crore Satyam Textile Park Rs. 5.00 Crore 2016-17 Total (3) Rs. 5.00 Crore Radhika Corporation Rs. 1.00 Crore 2016-17 Total (4) Rs. 1.00 Crore Radhika Infrastructure Rs. 1.70 Crore 2015-16 Rs. 1.80 Crore 2016-17 Total (5) Rs. 3.50 Crore Vallabhai B. Paghdal Rs. 60 Lakhs 2012-13 Total (6) Rs. 1.20 Crore Total (1+2+3+4+5+6) Rs. 19.63 Crore 15. In the IDS, the assessee declared income of Rs. 1.70 crore for the A.Y. 2015-16 and Rs. 1.80 crore for the A.Y. 2016-17. Thus, the assessee declared total income of Rs. 3.50 crore for the A.Y. 2015-16 and 2016-17. The disclosure made by assessee was accepted by ld. PCIT vide Form No.4 under Rule 4(5) of IDS, vide receipt No. 223012610141017 dated 14.10.2017. The income declared by ....
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....he seized material, the net profit for the A.Y. 2015-16 was Rs. 1.69 crore and for the A.Y. 2016-17, it was Rs. 1.66 crore, thus, total of Rs. 3.36 crore. However, the assessee has already declared more profit in IDS of Rs. 3.50 crore. The ld.AR of the assessee invited our attention on page 72 to 74 of the paper book, which is copy of IDS, filed before the AO. The ld.AR also shown us the copy of Form No.4 issued by ld. PCIT in accepting the disclosure made by assessee. The ld.AR submits that during the assessment, the assessee furnished the brake-up of income assessed on the basis of seized material, unaccounted booking advance and ratio of net profit on the basis of seized material. Net profit percentage wise on unaccounted booking advance as well as net profit derived on per square feet on commercial properties. Such working is also placed on record at page No. 86 of paper book (PB). Sr no. Particulars AY 2015-16 AY 2016-17 Total A Income as per seized material Net profit Rs. 16944330/- Rs. 16669236/- Rs. 33613566/- B Asset as per seized material-cash Rs. 12193830/- Rs. 15565589/- Rs. 27759419/- -receivable/ sundry debtor ....
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....advances received in the Financial Year relevant to 2016-17 and 2017-18. Even the AO in the notice under section 142(1) mentioned that amount of Rs. 1.26 crore including amount of Rs. 37,89,000/- accepted in the A.Y. 2016-17 and Rs. 88,20,500/- accepted in the A.Y. 2017-18. The AO thoroughly examined the issue and after examination, the AO accepted the explanation furnished by assessee, therefore, the assessment order is neither erroneous nor prejudicial to the interest of the Revenue. The AO while accepting the reply of the assessee has took a legal reasonable and plausible view. 21. On the third issue which relates to unaccounted cash payment of purchase of land, the ld.AR for the assessee submits that AO in its show cause noticed issued under section 142(1) of the Act has raised this query. Before the ld. PCIT, the assessee submitted that there was no such evidences in the impounded material that assessee paid on money for purchase of land. It was also submitted in without purchase submission that it is covered by the total on money receipt of Rs. 23.14 crore disclosed under IDS. The transaction reflected in the impounded material was duly accounted on day to day basis by pre....
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....63 of the Income Tax Act. 24. On the sixth issue which relates to non-reference of seized documents/evidence in the satisfaction note under section 153C of the Act, the ld.AR of the assessee submits that even when no reference was made, the AO verified all the seized material and after considering the same, the assessment order under section 153C of the Act was framed under the supervision of ld. JCIT. In without prejudice and alternative submission, the ld.AR for assessee submits that if it be so, the assessment framed is itself invalid being void-ab-initio. And if the assessment is invalid and void-ab-initio, the ld. PCIT cannot give new lease of life to such assessment order, accordingly, the revision order passed by ld. PCIT will not survive. 25. On the validity of disclosure under IDS, (seventh issue) the ld.AR submits that when the IDS declaration was made, notice under section 153C of the Act was not issued and therefore, proceedings were not pending. The IDS declaration was accepted by ld. PCIT and therefore, the AO or supervision ld. JCIT could not reject the IDS declaration. The IDS declaration was not made by misrepresentative of fact and therefore, it was perfectl....
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....atement of income of project (issue No.3 in AY 2017-18), the ld AR for the assessee submits that the assessee did not file the return of income previously as it was current year of the search and survey action. Accordingly, all the materials found in the course of search / survey action conducted in cases of the group were incorporated in the audited accounts. The AO did not find any defects in the books of accounts produced before him. Even ld PCIT also did not point out any irregularity in the audited accounts filed in the course of assessment proceedings. The tax audit report along with financials is filed on record. The impounded materials referred by the ld PCIT relate to preceding years for which assessee has filed the explanation in detail for A.Y. 2015- 16, thus, the assessment order is not erroneous as the AO has passed the order after considering the relevant material and took a reasonable and legally plausible view. 29. On the issues of non-verification of unsecured loan of Rs. 5.44 Crore (issue No. 5 in AY 2017-18), the ld AR for the assessee submits that it was explained by the assessee in its submission that it had already furnished the details of unsecured loans g....
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....f Hon'ble Allahabad High Court in CIT Vs Dr. Ashok Kumar in ITA No. 192 of 2000 dated 06.08.2012. 32. The ld.AR for the assessee further submits that if the AO during the course of assessment made detailed enquiry, the assessee given detailed explanation in writing, all the questions and answers furnished by the assessee are part on record of the case and claims of assessee are allowed by AO being satisfied with the explanation of assessee. Such order of the AO cannot be held to be erroneous, simply because in his order, the AO did not make elaborate discussion. The ld. PCIT himself even after initiating the proceedings and considering the submission of assessee have not given any finding as to how the claims are not allowable. The ld. PCIT has not given any finding as to what other enquiry was required to be made by the AO. If the assessment order is revised in such an approach, there would no end for such enquiries. The ld.AR of the assessee further submitted that assessee made declaration under IDS which is more than the income that can be accessed on the basis of impounded / seized materials. The assessee was eligible to make declaration under IDS as declaration was filed be....
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....inancial Statements and details of expenses for AY 2015-16to 2017-18, • Notice issued u/s. 142(1) dated 03.12.2018 with its Annexure, • Reply filed in response to notice u/s.142(1) for AY 2015-16 to 2017-18, along with annexure, • Exhibit - Showing calculations under IDS Scheme, • Copy of Form - 4 IDS, 2016 for AY 2015-16 and 2016-17, • Notice issued u/s.263 for AY 2015-16 , 2016-17 & 2017-18 and • Copies of reply filed in response to notice u/s. 263 for AY 2015-16 to 2017- 18. 33. To buttress his all submissions, the ld.AR of the assessee relied upon the following decisions: Sr.No. Particulars 1. CIT vs. Max India Ltd. [295 ITR 0282 (SC)] 2. Malabar Industries Co. Ltd. vs CIT [ 243 ITR 0083] (SC) 3. CIT vs M. Mittai Stainless Steel Pvt Ltd [263 ITR 0255] (SC) 4. CIT vs Amit Corporation [81 CCH 0069] (Guj HC) 5. CIT vs Arvind Jewellers [259 ITR 05021 (Guj HC) 6. Bilag Industries Pvt. Ltd. vs. CIT(A) [SCA No. 24128 of 2005] (Guj HC) 7. CIT vs. R K Construction Co. [313 ITR 0065] (Guj HC) 8. CIT vs. Nirma Chemicals Works. Pvt. Ltd. [309 STR 0067] (Guj....
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.... elaborately discussing the issue. Failure on the part of AO to carry out proper verification on the various issues, which were taken for enquiries at the initial stage by AO himself, shown lack of application of mind or proper appreciation of facts. It was the duty of the AO to ascertain all the facts on the basis of material available on record. The AO in not carrying out further verification or enquiries to assess total income of the assessee as evident from the incriminating material and to verify if it has any co-relation with the disclosure made in the IDS as claimed by assessee. Failure on the part of AO to carry out such enquiries as discussed shown that assessment order passed by AO is erroneous insofar as prejudicial to the interest of the Revenue. The ld. CIT-DR for the revenue submits that the twin condition as enunciated in section 263 are fulfilled in the present case. The ld. CIT-DR for the revenue prayed for upholding the order of ld. PCIT. 35. In rejoinder submission, the ld.AR of the assessee submits that on careful perusal of show cause notice under section 263 of the Act issued by the ld. PCIT, it is clearly discernible that the ld. PCIT identified issues onl....
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.... 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 without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be....
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....the order, unless the decision is held to be erroneous. Cases may be visualized where the ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision bec....
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....ctional High Court in CIT Vs Arvind Jewellers (259 ITR 502), while relying on the decision of Hon'ble Apex Court has taken a view that the provisions of section 263 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 section will be attracted and incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. The Supreme Court has also made it clear that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer and that every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. It was further emphatically stated that when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in ....
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....nd. Assuming this to be so (though there does not appear to be any justification for the aforesaid observation), this may make the order erroneous, but how it is prejudicial to the interest of the revenue has not been stated by the Commissioner as he did not deal with the explanation given by the assessee in the course of section 263 proceedings. (*underline by us) 41. Now adverting to the facts of the present case. We find the there is no dispute that the AO while passing the assessment order accepted the claims of the assessee in non- speaking order. It is not the case of ld PCIT that the AO is not authorised (empowered) to accepted the return of income in non-speaking order. We have seen that the AO while passing the assessment order in para 4 recorded that "the Authorized representative of the assessee vide various order sheet entries have furnished the relevant details and information called for. After affording ample and adequate opportunities of being heard to the assessee, assessment proceedings have been completed on the basis of the submissions and details collected and in consequence upon the conclusion of proceeding and hearing of evidences, assessment is made by thi....