TaxTMI 
TaxTMI 
2022 (2) TMI 375
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.... The A.O., while completing the assessment, had made addition of "Profit on unaccounted sales" in all the 3 years. Unaccounted turnover was determined by the A.O. on the basis of certain incriminating materials found during the course of search. The seized material consisted of papers wherein receipts and payments have been noted down. Before the search officials, the assessee explained the transactions of receipt of cash represent both accounted and unaccounted sale proceeds. The assessee also collated details of unaccounted sales for the three years under consideration. It also agreed to offer gross profit from unaccounted sales. The gross profit rate as declared in the books of accounts was adopted. The relevant details are tabulated below:- Assessment year Unaccounted Sales G.P Rate Gross Profit 2013-14 5,13,01,400 1.26% 6,46,000 2014-15 7,32,98,380 1.82% 13,34,500 2015-16 24,19,34,050 1.51% 36,29,100 The assessee offered above said gross profit as additional income in its return of income filed for all the three years. The AO also accepted the same in all the three years. 3. The Ld. PCIT examined the assessment record and t....
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....ls of unaccounted sales only from the transactions of "receipts of money" shown in the seized materials. Since the assessee could not have sold the materials without purchasing them, the assessee agreed to offer gross profit on the unaccounted sales, which has been accepted by the search officials and also by the AO in all the three years. For this purpose, the assessee has adopted the rate of gross profit shown in the books of account. He reiterated that the noting made in the seized material do not contain any details relating to alleged unaccounted purchases. He further submitted that the AO has, since passed the consequential order to give effect to the revision order passed by Ld PCIT. After examination of seized materials, the AO also could not identify the details of unaccounted purchases from them. Hence he has proceeded to estimate the income from unaccounted sales @ 50% of the sales value. He submitted that the action of the AO only shows that the direction given by Ld PCIT to determine gross profit from seized materials is not capable of implementation. Hence the view of Ld PCIT that the AO should have computed profit on the basis of unaccounted purchases and unaccounted....
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....ndustrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision "cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer" and "it is only when an order is erroneous that the section will be attracted". The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression "prejudicial to the interests of the Revenue", the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote) : "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 treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permiss....
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.... new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstances. If this is permitted, litigation would have no end, "except when legal ingenuity is exhausted". To do so, is ". . . to divide one argument into two and to multiply the litigation". 11. The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this subsection, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black's Law Dictionary. According to the definition, "erroneous" means "involving error; deviating from the law". "Erroneous assessment" refers to an assessment that deviates from the....
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....nnot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed." 10. We shall now examine the issues applying the legal principles discussed above. A perusal of the assessment order would show that the assessing officer has discussed in detail about the unaccounted sales in paragraph 5 to 5.5 of the assessment order. Hence it cannot be said that the assessing officer did not make any enquiry on the impugned issue. We notice that the AO has taken a conscious decision to adopt the Gross profit rate declared by the assessee in its books of account for estimating the income from unaccounted sales. 11. The Ld PCIT has taken the view that the AO should have computed the gross profit on the basis of entries found in the seized materials. Accordingly, he has taken the view that AO has passed the assessment order without making enquiries or verification which should have been done. During the cours....