AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 1028
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....ng officer to modify the original assessment passed by the learned assessing officer, on the facts and circumstance of the case 3. The learned Principal Commissioner of Income tax is not justified in passing an order under section 263 of the Act, as the order passed under section 143 [3] of the Act, was pursuant to proper enquiry by the learned assessing officer on the facts and circumstances of the case. 4. The learned Principal Commissioner of Income tax has grossly erred in revising the order passed by the learned Assessing officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the learned PCIT is ultra vires to the scope of Section 263 and requires to be cancelled on the facts and circumstances of the Appellant's case. The direction to make thorough and detailed enquiry amounts to ordering fishing and roving enquires without any material in support thereof and consequently the impugned order passed is bad in law and is liable to be cancelled. 5. The learned Principal Commissioner of Income tax failed to appreciate that the said alleged declaration made on accoun....
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....sessment and having applied their mind and considering the facts the order of assessment has been passed. Hence on the very same issue no action can be taken under Section 263 of the Act as the actions of the Assessing Officer is pursuant to applying his mind to the matter and in accordance with law. 10. The learned Principal Commissioner of Income tax failed to appreciate that the provisions of section 269ST of the Act is not applicable for the amounts paid by the appellant of Rs.4,50,00,000/- and the said provisions are applicable only for the amounts received and consequently the said observation of the learned Principal Commissioner of Income tax to examine the applicability of the provisions of section 269ST is devoid of merits and consequently the said direction of the learned Principal Commissioner of Income tax requires to be cancelled, on the facts and circumstances of the case." 3. The assessee is a partnership firm and filed the return of income for assessment year under consideration on 29.11.2018 declaring an income of Rs.7,58,25,710/-. A search and seizure operation was conducted on 08.02.2018. The case was selected for scrutiny and notice under Section 143(2) of t....
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....ified as to whether the said transaction arc in violation of section 269ST of the Act. The claims of the assessee made during current proceedings require in depth enquiry and investigation by the Assessing Officer. Hence, the assessment order dated 17.12.2019 is hereby partly set-aside to the file of the Assessing Officer for passing a fresh Assessment Order after making thorough enquiry on above issues and after considering the submissions made by the assessee during current proceedings." 6. Aggrieved by the order of the PCIT the assessee is in appeal before the Tribunal. Additional income towards excess stock 7. With regard to whether the excess stock should be assessed as unexplained expenditure u/s.69C of the Act the learned A.R. made the following submissions: - i) That the additional amount declared on account of alleged difference in stock amounting to Rs. 1,82,70,000/- itself is not correct, for the reason that actually there was no difference of stock as alleged during the course of search conducted and the declaration was made by the assessee only to buy peace with the department. ii) That the assessee is in the business of manufacturing and sale of Fish Meal and a....
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....ial on record. We notice that during the search proceedings the inventory of physical stock was verified and the difference between the stock as per the books and the physical stock was compared and then addition of Rs.1,82,70,000/- was computed as under: - Book Stock Physical Stock Excess Stock (metric tonne) Rate Per kg. Rate per metric tonne Value of excess stock Fish Meal 2,225 2,391 166 80 80,000 1,32,80,000 Soluble Paste 980 1069 89 35 35,000 31,15,000 Powder 26 41 15 125 1,25,000 18,75,000 1,82,70,000 The AO has made a note on this difference in stock being offered as other addition to the income under the head profits and gains from business or profession as under: - "9.3 In the computation of income filed with the return of income filed on 9.11.2018 the assessee has added Rs.4,92,61,199/- as "Other Additions" to the income under the head "Profits and gains of business or profession". As per Schedule-4 this amount of Rs.4,92,61,199/- includes Rs.1,82,70,000/- being the difference in stock valuation admitted u/s. 132(4). 10. The PCIT has stated the order of the AO to be erroneous t....
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.... order can be termed as erroneous as follows:- "From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the 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 visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the Income tax officer 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 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 Income tax officer. That would not vest the Commissioner with power to e....
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....gument that the assessee's case requires to be considered in the light of the explanation (2) to Section 263 of the Act, we notice that the Hon'ble Gujarat High Court in the case of Shreeji Prints (P) Ltd. (130 taxmann.com 293 - Guj) while considering the explanation of Section 263 of the Act, has held that : - "4 Being aggrieved by the order passed by the PCIT under section 263 of the Act, 1961, the assessee went before the Tribunal. The Tribunal, after considering the submissions made by the assessee and after considering the scope of power to be exercised by the PCIT under section 263 of the Act, 1961 came to be conclusion that the Assessing Officer has made inquiries in detail about two unsecured loans taken by the respondent assessee and observed as under: "13 In the light of the aforesaid judicial precedents in the present case what has to be seen is whether the AO has made enquiries about two loans taken from GTPL and PAFPL. If the answer is affirmative, then second question arises whether the acceptance of the claim by the AO was a plausible view or on the facts of the finding on the facts that the said funding of the AO can be termed as sustainable in law. We find that....
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....ed balance sheet, profit and loss account and bank statement. The assessee further explained that both the these unsecured loans stands fully repaid as on the date and there is no capital creation by the assessee on this count. In view of these facts and circumstances, we are of the considered opinion that the order of the Assessing Officer is not erroneous nor it is prejudicial to the interest of revenue. It was also brought to the notice of the PCIT that entire share capital of GTPL being already tax, all the investment made by the said company recorded in its balance sheet stands explained tax in its hands itself and hence, "there is no question of adding the same amount in the hands of the assessee. As regards loans from PAFPL, it was submitted that assessee company has made voluntary disclosure of income of Rs. 1.5 crore under IDS 2016 in September 2016 and the said loan was repaid before making declaration. In view of these facts and circumstances, we find that the AO has made due enquiries. Since we find that the AO had made enquiries regarding unsecured loans and accepted the claim of the assessee after detailed enquiries." 15 The Pr.CIT had observed that Explanation 2 of....
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....ssee's claim of loan similar view were also expressed by the Hon'ble Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. [2013] 212 taxman 0184. We observe the Pr.CIT has drawn support from newly inserted Explanation 2 below section 263(1) of the Act introduced by Finance Act, 2015 w.e.f. 1-6-2015 for his action. The Explanation 2 inter alia provides that the order passed without making inquiries or verification 'which should have been made' will be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue. It is on this basis, the assessment order passed by the AO under section 143(3) of the Act has been set aside with a direction to the AO to pass a fresh assessment order. It will be therefore imperative to dwell upon the impact of Explanation 2 for the purposes of section 263 of the Act. The aim and object of introduction of aforesaid Explanation by Finance Act, 2015 was explained in CBDT Circular No. 19/2015 [F.NO.142I14/2015T PL], Dated 27-11-2015 which is reproduced hereunder: "53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue. 53.1 The provisions contained in sub-sectio....
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....turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. The AO in the present case has not accepted the submissions of the assessee on various issues summarily but has shown appetite for inquiry and verifications. The AO has passed after making due enquiries issues involved impliedly after due application of mind. Therefore, the Explanation 2 to section 263 of the Act do not, in our view, thwart the assessment process in the facts and the context of the case. Consequently, we find that the foundation for exercise of revisional jurisdiction is sorely missing in the present case. 18 In the light of above facts and legal position, we are of the considered view that the AO had made detailed enquiries and after applying his mind and accepted the genuinene....
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...., the stock being part of the business of the assessee is offered to tax as business income. The PCIT has merely substituted his views to the extent that the AO should have done further enquiry when PCIT himself admits that the additional income is from the excess stock. We are of the considered opinion that the revisionary jurisdiction could not be allowed to be exercised by the PCIT either for substituting his own opinion for that of the AO or for making a fishing and roving enquiry. 16. In view of the above discussion, we are of the opinion that the PCIT in the present case has wrongly invoked the jurisdiction under section 263 and the controversy in the present case is fully covered by the judgment of the Hon'ble Bombay High Court in the case of Gabriel India Ltd. (supra). Accordingly the impugned order of the PCIT with regard to the issue of setting the order of AO u/s.143(3) with regard to this issue is quashed Applicability of section 269ST to the investments made in cash 17. With regard to whether the provisions of Section 269ST of the Act is applicable in the payments made to the extent of Rs. 4.5 crores in cash, learned A.R. submitted that provisions of Section 269....