TaxTMI 
TaxTMI 
2021 (10) TMI 1144
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....d 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. On the facts and in the circumstances of the case as well as law on the subject, the learned Pr CIT has erred in passing ex-parte order under section 263 without providing reasonable opportunity to the assessee. It was practically impossible to file reply in bulk cases of group in short time when the proceedings u/s 263 was initiated at the fag end of limitation period in the month of March, 2021. The first notice u/s 263 was issued only on 08.03.2021. 3. 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. 4. 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 business of construction and development of housing projects. There is four....
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.... of Rs. 2.75 Crore (only in AY 2015-15), • (vi) Genuineness of cash loan (in all three AYs), • (vii) Non-initiation of penalty under section 271B&271D of the Act ( in all three AYs), • (viii) Non-verification of loan availed from ManishbhaiSheladiya (in AY 2014-15 only). 4. The ld. PCIT recorded that the assessee was given opportunity of being heard on 05.03.2021 and on 12.03.2021, however, the assessee neither attended the hearing nor filed written submission in respect of proposed revisions proceedings under section 263. The ld PCIT, accordingly presumed that the assessee has nothing to say and he decided to pass order on the basis of material available on record in AY 2014-15 to 2016-17. The ld. PCIT after considering the record of assessment held that in the search and survey of SRK group and it related parties, of which the assessee is also part, has resulted in to impounding of documents/ books of accounts and evidence related with evidence of undisclosed receipt and expenses in respect of project "Amrut Sarovar Residenty". The ld. PCIT also held that AO passed assessment order in haste and without making proper inquiry and verificati....
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....rvey took place. During the course of search proceedings in assessee group, certain incriminating material in the form of papers and documents were found. The assessee and its group i.e. Radhika Construction, Radhika Corporation, Radhika Infrastructure, and Shyam Textile Park all are engaged in construction and development of various projects. On the basis of material found in the course of search and survey action, the assessee prepared books of accounts. The books of accounts so prepared were produced during the course of assessment proceedings. Before issuing the notice under section 153C of the Act, the assessee made disclosure under income disclosure scheme (IDS) 2016. The ld AR for the assessee filed the following bifurcation of amount disclosed in IDS; 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 AmrutSarovar 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 &nbs....
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....entified by ld. PCIT, which relates to validity of declaration made under IDS ( in all three AYs), the ld AR for the assessee submits that when the IDS declaration was made, the notice under section 153C was not issued and therefore the proceedings were not pending. Further it is submitted that IDS declaration was accepted by the ld PCIT-Surat and therefore, the assessing officer, or supervisory Joint Commissioner of Income -tax (JCIT) could not reject IDS declaration. The IDS declaration was not made by misrepresenting facts and therefore it is perfectly valid. The certificate issued by PCIT was not revoked and tax paid under IDS was not refunded to the assessee. Even otherwise, assessee declared more income and paid more tax than payable as per normal provisions of the Act. Assessee made a declaration of Rs. 5,50,00,000/- while the income on the basis of seized / impounded materials was of Rs. 2,49,74,748/- for all the years. For A.Y. 2014-15, assessee made declaration of Rs. 2,05,00,000/- while income on the basis of impounded / seized material was 2,01,72,794/-. The ld AR for the assessee submits that during the assessment the assessee filed detailed submission to justify the I....
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....of expense cannot be accepted. The ld AR for the assessee submits that during assessment the assessing officer specific raised a query in notice issued under section 142(1) regarding various expenses that were recorded in the impounded / seized material, which is clearly mentioned in Para 19 and 20 of the said notice, copy of which is filed at page No 48 to 56 of PB. The assessee filed its submission vide its reply, copy of which is placed at Page No 35 to 43 of PB. The ld AR for the assessee submits that further submission was again filed, copy of which is placed at Page No 44 to 45 of PB. Further with reference to personal hearing assessee field further submission which is placed at Page No 33 and 34. The assessee prepared the day to day books of accounts on the basis of the impounded / seized materials which were verified by the assessing officer. As per section 292C of the Act, the material found in the course of search / survey are required to be presumed to be true unless rebutted otherwise, the PCIT did not rebut the presumption as required under section 292C. Further out of the total expenses of Rs. 41,25,04,436/- debited in the books of accounts for all three assessment ye....
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....source of the expenses is the advance booking receipts of Rs. 25.64 Crores credited to the Profit & Loss account (Page no 65 of PB). The AO raised the query regarding on money paid for possession of the land in the case of Bhavesh Paghdal and Vallabhbhai, Hasmukhbhai who are partners in the assessee firm where it was explained that the payment of the on money for purchase of the land were made by assessee firm out of the booking advance which is part of the disclosure made under IDS. It is submitted that net profit on basis of seized material comes to Rs. 2,49,74,748/- and assessee made declaration of Rs. 5,50,00,000/- under IDS which is far in excess of the actual income. In course of assessment proceedings, assessee filed Exhibit 2A (Page No 71 of PB). Assessee filed the submission before assessing officer in the course of assessment proceedings on this issue vide letter dated Nil which can be found at Page No 35 to 43. In form of the IDS, assessee is required to shown only the undisclosed asset and not the source of the income as explained by the Circular 25 of 2016 issued by CBDT dated 30.04.2016 by Question and Answer No 9 of the said circular. Although the assessee was not re....
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....ion of the assessee and took reasonable and plausible view. The ld. PCIT did not lead any evidence for rebutting this presumption. Accordingly, assessing officer rightly didn't draw any adverse inference. 17. On the seventh issue identified by ld PCIT, which relates to non-initiation of penalty under section 271D & 271B ( in all three AYs), the ld AR for the assessee submits that the assessee made declaration under IDS, the provisions of section 271D are not applicable. On merits it is submitted that the assessee did not take any loan and therefore the provisions of section 271D are not applicable. The amount involved was booking advances and not loan. The ld AR for the assessee further submits that for non initiation of penalty proceedings, the revision proceedings under section 263 cannot be made as held by Honourable Gujarat High Court in case of CIT v/s. Suresh G. Shah [289 ITR 110 (Guj)] and CIT v/s. Parmanand M. Patel [287 ITR 3 (Guj)]. Thus, the issue raised/ identified by ld PCIT will not survive. 18. On the eighth issue identified by ld PCIT, which relates to non-verification of loan from Manishbhai Sheladiya. The ld AR for the assessee submits that during assessment....
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....Net Profit as per Sq. Yard Residential Plots 113750 Sq. Yards X Rs. 400 per sq. Yard 4,55,00,000 Higher of A, B & C 4,55,00,000 Income disclosed under IDS, 2016 5,50,00,000 20. It was submitted that the amount of Rs. 5.50 Crore, includes the declaration for all three assessment years i.e. AY 2014-15 to 2016-17. In the show cause notice issued by the same assessing officer on 07.12.2018, he raised specific issue that assessee collected amount in cash against booking receipts for F.Y. 2014-15 to 2016-17 of the said notice, the assessee filed satisfactory reply stating that the said transactions were duly covered in the income offered under IDS for the year ended 31.03.2016 in the form of "Receipt" and "expenses" as at the year end. Accordingly, assessing officer has duly considered the issue. The ld AR for the assessee submits that the jurisdictional Gujarat High court in various decision held t....
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....r Courts. To support his submission, the ld.AR relied upon the various decision; • Rasiklal M. Dhariwal (HUF) vs. CIT in ITA No.1102 to 1104/ PUN/ 2014dated 28.12.2016, • B. U. Bhandari Schemes Versus PCIT in ITA No.637 to 641/PUN/2018 dated 14.11.2018, • Vishwa Infraways Pvt. Ltd., vs. CIT in ITA No.596, 597 and 599/PUN/2015 dated 28.11.2018 and, • CIT Vs Dr. Ashok Kumar in ITA No. 192 of 2000 dated 06.08.2012 (Allahabad High Court). 24. 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 wa....
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.... PCIT did not make any inquiry although in his opinion, the inquiry was insufficient. Accordingly, the PCIT arrived at subjective satisfaction. Needless to say the satisfaction must be one which is objectively justifiable and cannot be the mere ipse dixit of the PCIT. The assessee has placed following documents on record. • Notice under section 263 dated 25.02.2021 & 08.03.2021, • Notice issued under section 153C dated 29.11.2018, • Return of income with computation of total income for all three AYs, • Notice issued under section 142(1) dated 03.12.2018 with its Annexure, • Reply filed in response to notice under section 142(1) for AY 2014-15 to 2016- 17, along with annexure, • Exhibit - Showing calculations under IDS Scheme, • Form- 1& 4 of IDS-2016 • Copy of Form - 4 IDS, 2016 for AY 2015-16 and 2016-17, 26. To buttress his all submissions, the ld.AR of the assessee relied upon the following decisions: • CIT vs. Max India Ltd. [295 ITR 0282 (SC)], • Malabar Industries Co. Ltd. vs CIT [ 243 ITR 0083] (SC)' • CIT vs M. Mittai Stainless St....
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....ving relevant evidence on record and calling for explanation in detailed questionnaire, the AO has not made any further effort to verify the same or carried out necessary enquiries thereof and accepted the submission on the issues identified by ld. PCIT. The AO accepted the explanation of assessee 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....
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....x Act, 1961, makes it clear that the prerequisite for the exercise of the jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous insofar 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 interests 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 without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an exp....
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....t' means 'one rendered according to course and practice of Court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles. The Hon'ble Court further held that from the above said definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an assessing officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the ITO, who passed 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 ....
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.... record to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objectives were available from the records called for and examined by such authority. The decision of the ITO could not be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous, he simply asked the ITO to re-examine the matter, which was not permissible. 32. The Hon'ble Jurisdictional 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 ....
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....n, etc., it is incumbent upon the Commissioner not to exercise his suomotu revisional powers unless supported by adequate reasons for doing so*. It was further held that applying the aforesaid law to the facts of the present case, we are of the view that the exercise of revisional power by the Commissioner in the instant case was uncalled for and unjustified. It was more in the nature of roving and fishing enquiry. The Commissioner has proceeded on the assumption that no such information, as was furnished to him, was furnished at the time of assessment. The Commissioner has mentioned that the Income-tax Officer has not examined the cash credits of the partners or deposits of Chit Fund. 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) 34. Now adverting to the facts of the present case. We find the there is no dispute that the AO while passing the assessment order accepte....
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....made required inquiry and came to a plausible, reasonable and legally sustainable conclusion in allowing the claims to the assessee. So far as non initiation of penalty under section 271D/ 271E is concerned, We find that Hon'ble jurisdictional High Court in case of CIT Vs Suresh G. Shah [289 ITR 110 (Guj)] and CIT Vs Parmanand M. Patel [287 ITR 3 (Guj)] it was held that CIT cannot exercise his jurisdiction under section 263 for the purpose of initiation of penalty proceedings. Otherwise also we find that the assessee has specifically in its reply to the SCN to the ld PCIT has stated that the cash was received only against the booking and no loan or such transaction was undertaken by them. The ld PCIT failed to specify the transaction on which initiation of penalty either under section 271D or 271E was warranted. And on the issues of validity of discloser in IDS, the ld PCIT has not specified that while making declaration the assessee made any misrepresentation of any facts. Once the IDS in all cases were accepted by ld. PCIT, the AO or the Range head no authority to relook or power to revoke or to examine its validity. We further find that the ld PCIT while directing the AO has not....