TaxTMI 
TaxTMI 
2022 (7) TMI 682
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.... the Act by holding that assessment was made by assessing officer in a very causal and mechanical manner and without any corroborative evidence obtained in respect of receipts noted in the partner's diary or in respect of the subsequent WIP expenses claimed by the appellant. 3. The learned Principal Commissioner of Income-tax - 3, Rajkot failed to appreciate that necessary inquiries were made by the assessing officer during assessment proceedings u/s 143(3) in respect of claim of remuneration and interest paid to partners and hence the order could not have been considered as erroneous u/s 263. 4. The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal." 3. The brief facts of the case are that the Principal Commissioner of Income Tax noticed from the records that a survey under section 133A of the Act was conducted at the premises of the assessee firm during the year under consideration. During the course of survey, a disclosure of Rs. 75,15,000/- has been made by the assessee. The PCIT noted that in verification of computation of income, it is seen that the assessee has claimed an amount of ....
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.... of having received on-money on sale of the units comes to surface (which could be correct explanation of the amounts noted on the partner's diary) * Had the survey not happened at the premises of the assessee-firm, the diary of partner would never have come in light and the receipts mentioned therein remained undisclosed forever. Consequently, the expenses incurred from it would also remained undisclosed forever and the cycle of suppressing the profits this way would go on for long. Without verifying all these possibilities, the AO has finalized the assessment accepting the claims of the assessee without any corroborative evidence either in respect of the receipts noted in the partner's diary or in respect of the subsequent WIP expenses claimed by the assessee. As explained above, accepting these claims without culling out exact facts may result in lower profitability in subsequent sale which is not desirable either for the Assessee or for the Revenue. 8. The above discussion makes it clear that the assessment order is passed without making inquiries or verification which should have been made. Resultantly, the order passed by the Assessing Officer i....
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....ention to page 16 of the paper book wherein the income of 75 lakhs disclosed during survey was declared as "business income" in the return of income by the assessee for the impugned assessment year. The counsel for the assessee drew our attention to the Gujarat High Court decision in the case of Babulal K. Daga 387 ITR 114 (Gujarat High Court) to contend that if assessee can point out that even on unaccounted receipts, expenditure was incurred for purpose of business, it would be only reasonable profit on such receipts which should be taxed. In response, the Ld. DR relied upon the observations made by the PCIT in the 263 order. 5. We have heard the rival contentions and perused the material on record. What can be seen from the assessee's facts is that the survey was done at the premises of the assessee in which diary was found in survey conducted under section 133A of the Act, during which a disclosure of Rs. 75,15,000/-was made by the assessee. In the return of income, the assessee disclosed the above amount as "business income" and against the same claimed an amount of Rs. 3,53,280/- as interest paid to partners and Rs. 44,85,820/- as remuneration paid to partners. The PCIT pa....
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....xcess stock found during search was not specifically identifiable from profits which had accumulated from earlier years, AO was justified in holding that said excess stock was not undisclosed investment of assessee and no case of perversity or lack of enquiry on part of Assessing Officer was made out so as to render his decision erroneous under Explanation 2 to section 263. The ITAT Chandigarh in the case of Bajaj Sons Ltd. [2021] 128 taxmann.com 406 (Chandigarh - Trib.) held that where director of assessee-company surrendered a certain sum during search, and Assessing Officer treated said sum as income from unexplained sources and invoked provisions of section 115BBE and charged tax at a higher rate, since Assessing Officer had not pointed out any unexplained credit in books of account, provisions of sections 68, 69, 69A, 69B, 69C and 69D were not attracted on surrendered amount and aforesaid surrender not being covered under provisions of sections 68, 69, 69A, 69B, 69C and 69D, provisions of section 115BBE were not attracted. The ITAT Jaipur in the case of Hari NarainGattani [2021] 123 taxmann.com 8 (Jaipur - Trib.) held that where assessee surrenders undisclosed income during se....