TaxTMI 
TaxTMI 
2022 (8) TMI 791
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....under preview of S. 68 and 69 of the Act and thus, the tax u/s 115BBE was to be paid, as against the tax at normal rates. The assumption of jurisdiction u/s 263 being contrary to the provisions of law and facts on record. Hence, the proceedings initiated u/s 263 of the Act and the impugned order dated 25.02.2019 deserves to be quashed. 2.2 Alternatively and without prejudice to the above The ld. Pr. CIT erred in law as well on the facts of the case in holding that the income declared Rs. 28,95,300/- during survey, being recovery of cash amount of advance paid for purchase, comes under preview of S. 68 and 69 of the Act and u/s 115BBE, is completely contrary to the provisions of the law and the facts available on the record. Hence, the impugned finding that the assessment order passed u/s 143(3) 25.02.2019 was erroneous set-aside. 3. The ld. Pr. CIT seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 of the Act by wrongly and incorrectly holding that the subjected assessment order u/s 143(3) dated 25.02.2019, was passed without initiating penalty proceedings u/s 271AAC of the Act. The assumption of jurisdiction u/s 263 of the Act with....
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....ee on 14-12-2020 in respect of revision proceedings u/s 263 of the Act and the notice for hearing of the case was fixed on 29-12-2020. The ld. Pr.CIT noted that the assessment u/s 143(3) of the Act for the A.Y. 2017-18 was completed by the AO on 25-02-2019, determining the income of the assessee at Rs.41,09,530/- and the ld. Pr. CIT called for the assessment records which were examined by him and thereafter noticed following points. ''On examination of assessment record, it is noticed that in the F.Y. 2016-17 relevant to A.Y. 2017-18, the assessee had declared income of Rs. 28,95,300/ under the head income from other source (income declared at the time of survey) and included the same in the return of income for the A.Y. 2017-18. This income pertains to recovery of cash amount of advances made by the assessee to the other persons for purchase of land / plots and thus comes under the purview of section 68 of the IT. Act (unexplained cash credit) and section 69A of the IT. Act (unexplained money) and tax @ 60% was to be charged as per the provision of section 115BB of the IT. Act. However, in the ITR the assessee has failed to declare the income of Rs. 28,95.300/- u/s 1158BE of the....
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.... the same were not acceptable to him. He further noted that the assessee had cited certain judicial pronouncements challenging the proceedings u/s 263 of the 1.T. Act, but the facts of the case were not identical with the citations made by the assessee. Therefore, the same are not acceptable to him The ld. PR. CIT after examining the assessment record noticed that in the FY 2016-17 relevant to AY 2017-18, the assessee had declared income of Rs 28,95,300/- under the head income from other source (income declared at the time of survey) and included the same in the return of income for the A.Y. 2017-18 which pertains to recovery of cash amount of advances made by the assessee to the other persons for purchase of land / plots and thus comes under the purview of section 68 of the IT. Act (unexplained cash credit) and section 69A of the 1.T. Act (unexplained money) and tax @ 60% was to be charged as per the provision of section 115BBE of the IT. Act. The ld. Pr. CIT thus noted from the ITR that the assessee has failed to declare the income of Rs. 28,95,300/- u/s 115BBE of the IT. Act. Thus, the Income Tax of Rs. 24,31,566/- was to be charged on assessed income under the provisions of sec....
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....er passed by the Assessing officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if, in the opinion of the Principal Commissioner of Commissioner:- (a) the order is passed without making inquiries or verification which should have been made, (b)the order is passed allowing any relief without inquiring into the claim, (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119, or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdiction High Court or Supreme Court in the case of the assessee or any other person." Thus taking into consideration the above facts and circumstances of the case, the ld. Pr. CIT observed that the order of the AO is erroneous and prejudicial to the interest of the revenue and he, therefore, set aside the order of the AO back to his file with following directions. The relevant para 7 of ld. Pr. CIT's directions as to the issue of invoking the provision of Section 263 of the Act is reproduced as under:- 7. From the above, it is clear that the assessment ord....
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....se of jurisdiction by the Commissioner u/s 263, is that the order of the Assessing Officer is established to be erroneous in so far as it is prejudicial to the interest of the Revenue. The Commissioner has to be satisfied of twin conditions, namely (1) The order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e. if the assessment order is not erroneous but it is prejudicial to the Revenue, S.263 cannot be invoked. This 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 as also prejudicial to revenue's interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the tw....
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....ot be held to be erroneous simply because in his order not make an elaborate discussion in that regard 1.5 Abdul Hamid vs. ITO (2020) 117 taxmann.com 986 (Gauhati Trib.) it was held that only probability and likelihood to find error in assessment order is not permitted u/s 263. Ratio of these cases fully apply on the facts of the present case in principle. 2. Due application of mind: 2.1 In the present case jurisdiction u/s 263 of the Act is on the ground that the while completing assessment proceedings the AO did not verify / examine the income pertains to recovery of cash amount of advances made by the assessee to the sellers. for purchase of land / plots which comes under purview of S. 68 or u/s 69A hence the AO failed (1) to tax the additional income under the provisions of S.115BBE and (2) to initiate penalty proceeding u/s 271AAC consequent thereto. At the outset it is wrong to say that the AO completed the assessment without verification and examination of the issue and incorrect and incomplete appreciation of facts and law in as much as the AO after making a detailed enquiry and examination of books of account, other records viz impounded diary etc., statemen....
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.... of the case under CASS on the ground of heavy cash deposits based on the AIR information followed by the issuance of the notices u/s 142(1) along with questionnaire to the assessee. The AO raised very specific and relevant queries/called for explanation and evidences asking various details w.r.t. the source of cash deposits, Loans and advances, to produce Cash Book, Bank Book etc., goes to fully establish that the AO was fully alive to the issue in hand from all angles, whether it is factual or legal aspect involved. (viz not only the source but also the taxability of the additional income stated during survey was regular business income or undisclosed income so as to be taxed at normal rate or higher rates u/s 115BBE. In the response of the notices, the assessee filed complete documents w.r.t. queries raised along with production of Cash Book, Bank and Account books etc. which was required by the AO time to time through the A/R, and the same were duly verified and examined by the AO. 3. Additional income- Business income only: 3.1 It is submitted that the only source of income in the case, is the Real Estate business through proprietary M/s Jaipdeep Construction. There i....
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....ccounts during the relevant assessment year. These accounting entries were certainly before the AO who duly examined, which furnished a strong ground to him to take a decision that it was a business income only and S. 115BBE was not applicable. 3.4 The very fact that the subjected diary which included the details of the business transactions also included the relevant page/s relied upon by the revenue, sufficiently proved that such noting related to unrecorded advances towards the purchase of plot etc. and the stated cash was part of the real estate business. The unrecorded advances and cash remained mixed up with the other recorded advances and cash of the property business. The AO duly verified and examined the documents and details filed before him these facts certainly influenced his decision making process. The AO after due application of mind accepted and assessed the income. 4. Legal Position w.r.t S.115BBE: 4.1 At the outset it is submitted that S.115BBE specifically refers to the income which are of the nature as referred in S. 68,69,69A of the Act being the income from other sources. Therefore, subjected income has essentially to be classified u/s 14 of the Act a....
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....ts and those in ROI, there will be no difference. Consequently, it cannot be said that there was some excess shortage/undisclosed/unaccounted income, etc. 5. Binding judicial guideline: The Hon'ble Rajasthan High Court as also Tribunals whose decision are binding upon the assessing officer as a juridical precedence have also been consistently holding so. 5.1 The Hon'ble Rajasthan High Court in case of CIT va Bajargan Traders in ITA No. 258/2017 dated 12.09.2017 (DPB 1-5) has held that when the assessee is dealing in sale of food grains, rice and oil seeds and the excess stock which is found during survey is stock of rice then, it can be said that investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. Therefore, the investment in the excess stock is to be brought to tax under head "business income" and not under the head income from other sources. It was held as under: ''2.10. We have heard the rival contentions and perused the material available on record. During the course of survey, the assessee has surrendered an amount of Rs. 70,04,814/- towards investment in stock of rice which had not....
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....ard. Therefore, the investment in the excess stock has to be brought to tax under the head "business income and not under the head income from other sources In the result, ground No. 1 of the assessee is allowed.'' 5.2 The Hon'ble ITAT Jaipur, Jaipur in its decision in the case of Shri Ram Narayan Birla in ITA No. 482/JP/2015 dated 30.09.2016 (DPB 6-13) has held that unrecorded/excess investment or expenditure surrendered during the course of the survey has to be assessed as business income only and not under the head income from other sources. The Hon'ble ITAT Jaipur followed the case of Choksi Hiralal Mangal vs. DCIT 131 TTJ 1 (Ahd). 5.3 The Hon'ble Ahmedabad Tribunal in case of Chokshi Hiralal Maganlal vs DCIT (ITA No. 3281/Ahd/2009 AY 2004-05 dated 05.08.2011) held that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable investment or asset or expenditure (i.e. in our understanding not connected with business so as to make convenient to invoke aforesaid sections). In case source of investment or asset or expenditure is clearly identifiable and has no independent existence of its own where a case arises to claim t....
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....s evident that the AO has taken a possible view but it appears nothing but a case of substitution of opinion. However, the law is well settled that CIT cannot substitute his own opinion and if a legally possible view has been taken by the AO, the CIT cannot invoke revisionary powers. 7. Merely because the order is brief and cryptic, that does not render it to be erroneous and prejudicial to the interests of revenue. The Id. Pr. CIT has no jurisdiction u/s 263 to revise the order of the AO simply because he has not made elaborate discussion in the order with regard to the reason mentioned in the CASS. Kindly refer Ved Prakash Contractors vs. CIT (2016) 175 TTJ UO 19 (Chd.) held as under: "Revision-Erroneous and prejudicial order-Lack of proper enquiry-Order of the AO may be brief and cryptic but that by itself is not sufficient to brand the assessment order as erroneous and prejudicial to the interests of the Revenue AO having considered all the issues, the exercise of power under s. 263 was bad in law-If an enquiry is made by the AO, the CIT would have no jurisdiction under s. 263 to revise the order of the AO on the ground that such enquiry is not adequate-Therefore, the ord....
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.... Principal Commissioner of Income-tax, Surat-2 Vs. Shreeji Prints (P.) Ltd. [2021] 130 taxmann.com 294 (DPB 43-48) wherein vide the Hon'ble Supreme Court held as under. "Section 69, read with section 263, of the Income-tax Act, 1961 Unexplained investments (Unsecured loans)- Assessment year 2013-14 Assessee-company had. received unsecured loans from two different companies Commissioner noting that said loans were shown as investment in assessee's name in balance sheet of respective companies exercised his revisionary powers and passed an order without giving an opportunity to assessee of being heard, invoking Explanation 2 to section 263 High court by impugned order held that since Assessing Officer has made inquiries in details and accepted genuineness of loans received by assessee, such view of Assessing Officer was a plausible view and same cannot to be considered erroneous or prejudicial to interest of revenue Whether SLP against said impugned order was to be dismissed-Held, yes (Para 21 [in favour of assessee)" Since the facts are admitted and undisputed hence the impugned order deserved to be quashed in toto. 8.3.1 Even the amendment (Expl. 2(a)) does not confer....
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....ial of liability by assessee within the meaning of S.246(1)(c)-Has wide import and such denial may be by way of appeal-It is not necessary that assessee should have denied liability in return itself 9.1.2 CIT vs. Apar Limited (2002) 175 CTR 312 (Bombay), wherein it was held that: "Appeal [CWT(A) Maintainability of appeal-Intimation under s. 16(1)(a)(i) Return filed under protest-Thereby assessee disputed his very liability to wealth-tax-AO could not have foreclosed assessee's right to appeal by issue of intimation under s.16(1)(a)(i)-Appeal maintainable under s. 23(1A)(a)" 9.1.3 Mayank Poddar (HUF) vs. WTO (2003) 181 CTR 362 (Calcutta) (DPB 36-39),wherein it was held that: "Estoppel-Applicability of principle-Interpretation of statutes-Scope-There is no estoppels against statute Property, though not taxable under the WT Act, included by assessee in taxable net wealth by misconception of law-Property does not become taxable. x x x A property, which is not otherwise taxable, cannot become taxable because of misunderstanding or urong understanding of law by the assessee or because of his admission or on his misopprehension. If in law an item is not taxable, no amoun....
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....al to the interest of revenue. Since S. 263 regulates the revisional powers of the CIT hence, the strict requirements of a jurisdictional provision cannot be compromised. In this case, the proceeding and consequent order is assessment order and not the penalty proceedings because the same were not existing hence no proceedings u/s 263 could be invoked. 11.1 The issue is covered by the binding decision in case of CIT vs Keshrimal Parasmal [1986] 27 Taxmann 447 (Raj) (DPB 40-42), holding that: "In J.K. D'Costa's case (supra), it was held that the Commissioner was not entitled to set aside the assessment order passed by the ITO on the ground that there was no mention of initiation of penalty proceedings in the order and that he could not direct the ITO to make fresh assessment to initiate penalty proceedings. The Supreme Court has dismissed the special leave petition in the said case in Special Leave Petition (Cit) Nos. 11391 and 11392 of 1981, dated 2-3-1984 [1984] 147 ITR (S) 1. As the position was concluded and settled by the Supreme Court, the question which was sought to be referred could not be said to be a substantial question of law arising out of the Tribunal....
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....l position, the proposed action u/s 263 is completely beyond the S. 263 and therefore, the impugned order deserves to be quashed.'' 2.4 During the course of hearing, the ld. DR strongly relied upon the order of the ld. Pr. CIT and submitted that he has rightly invoked the provisions of Section 263 of the Act. 2.5 We have carefully considered the finding recorded in the impugned order passed under S. 263, the rival contentions raised by both the parties as the material placed on record as well as gone through the judicial pronouncements. The bench notes that the prerequisite exercise of jurisdiction by the learned Principal CIT under s. 263 of the Act is that the order of the AO is established to be erroneous insofar as it is prejudicial to the interest of the Revenue. The Principal CIT has to be satisfied of twin conditions, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent i.e., if the assessment order is not erroneous but it is prejudicial to the Revenue, s. 263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed ....
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....rectness and incompleteness in the appreciation of facts made by the AO. Hence we do not agree on this aspect to this extent with Ld. Pr. CIT. However, we now proceed to consider whether the AO has also incorrectly appreciated and assumed the law while making the subjected assessment to be termed, as erroneous and prejudicial to the interest of the revenue. The facts are not disputed that the assessee engaged was in the Real Estate Business through her proprietary M/s Jaipdeep Construction, purchasing & selling of plots, lands, construction of properties and the like. A survey u/s 133A was carried out on dated 04.07.2016, during the course of which, statement of the husband of the assessee lady Shri Sankar Singh Sekhawat were recorded u/s 133A/131. Shri Sankar Singh Sekhawatis also engaged in the similar types of real estate business in its property namely M/s Rajshree Properties at Kota. Shri Sankar Singh Sekhawat admitted unrecorded income in the case of his wife/assessee of Rs. 28,95,300/- for F.Y. 2016-17 (A.Y. 2017-18) which, consisted of the property advances of Rs. 19,15,000/- and cash of Rs. 9,80,300/- and there was no other known or unknown source of business. We further n....
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....tated that such details related to said propriety of his wife (the assessee) given on account of the construction activities and purchase of plot as advanced (Sai). Thus, the impounded material has also the very questions which were raised and the answers given shows that the additional income declared on account of advances and the cash found emanated from and related to the real estate business only. It is imperative to mention that as claimed above, in AY 2016-17 also, the assessee lady has admitted the additional income of Rs. 1.71 crore and the assessment of that year was completed under the scrutiny in the order dated 31.10.2018 passed under S. 143(3). In the similar case of Shri Shekhawatalso admitted additional income in A.Y 2016-17 & 2017-18, where also assessment were completed under scrutiny u/s 143(3) on 21.07.2017. However, such contentions were not controverted by the ld. DR. Moreover, it is clear from a bare reading of the order under challenge that the Ld. Pr. CIT has not disputed rather admitted these facts in para 5 that this income pertains to recovery of cash amounts of advances made by the assessee to the other persons for purchase of land/plots. Hence, the und....
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....ee. Therefore, the investment in the excess stock is to be brought to tax under head "business income" and not under the head income from other sources. The finding of ITAT Jaipur Bench in the case of CIT vs Bajargan Traders (supra) is as under: "We have heard the rival contentions and perused the material available on record. During the course of survey, the assessee has surrendered an amount of Rs. 70,04,814/- towards investment in stock of rice which had not been recorded in the books of accounts. Subsequently, in the books of accounts, the assessee has incorporated this transAction by debiting the purchase account and crediting the income from undisclosed sources. In the annual accounts, the purchases of Rs. 70,04,814/- were finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/- in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of RS. 70,04,814/- also found credited in the profit and loss account as income from undisclosed sources. The net effect of t....
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....ce of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to theassessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head." Similar view has been expressed by the ITAT Jodhpur in case of Shri LovishSinghal vs ITO (ITA No 142 to 146/Jodh/2018 for AY 2014-15 dated 25.05.2018) applying the ratio propounded in case of Bajargan Traders (supra) holding that the lower authorities were not justified in taxing the surrender made on account of e....
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....me enumerated under Sec. 14 read with various other heads, is a highly technical task and even the Tax Consultants and Charted Accountants may not correctly decide the proper classification under which head such income to be declared and/or assessed. Therefore, merely because the assesse had taken the mistaken view of the correct legal position by wrongly showing such additional income under head income from other sources, of the surrounding circumstances and the binding decisions of Hon'ble Rajasthan High Court and ITAT, Jaipur. Such an acquaintance cannot take away the right of a party to which he is otherwise entitled to, or in other words, to be assessed as business income. Law is also, well settled that, no tax can be collected without the authority of law as guaranteed by Article 265 of the Constitution of India. Therefore, even if the assessee has made some commitment but later on found wrong in law, it cannot work as an estoppel and the assessee, if still feels aggrieved in any manner, can pursue legal remedy. Hence, showing income under a wrong head in the return of income cannot be taken as an admission. We are fortified in our view by various decisions of different Hon'b....