TaxTMI 
TaxTMI 
2022 (9) TMI 1028
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....n 143[3] of the Act dated 17/12/2019 and direct the assessing 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 ....
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....her as per the provisions of section 153D of the Act an approval has been sought for passing the order of assessment 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 s....
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....xed u/s 115BBE of Income Tax Act. Further cash investment amounting to Rs.4.5 crore made during the period under consideration needs to be verified 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 declarat....
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....pted the taxation of the said alleged inadvertent declaration as business income. 8. The learned D.R. supported the order of the PCIT. 9. We have heard the rival contentions and perused the material 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 Additio....
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....rcise of revisional jurisdiction under section 263 of the Act i.e., firstly, the order of the Assessing Officer is erroneous; and secondly, it is prejudicial to the interests of the revenue on account of error in the order of assessment. The Bombay High Court in the case of Gabriel India Ltd. (1993) 203 ITR 108 has explained as to when an 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 ma....
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....tracted above, and has also verified the fact that the income declared by the assessee includes the additional income offered towards excess stock. In our view the error envisaged by Section 263 of the Act is not one that depends on possibility as a guess work, but it should be actually an error either of fact or of law. 13. With regard to the argument 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 th....
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....ion in the case of the assessee. The language of audit objection and show-cause notice under section 263 is same meaning thereby that the show cause notice u/s.263 has been issued by the PCIT Without going through assessment records and without exercising his own application of his mind. The assessee has not only filed complete details of Income-tax Return, audited 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 cro....
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....IT [2018] 97 taxmann.com 671 (Ahd. - Trib.). it is clear from the enquiries made by the Assessing Officer and submissions made by the assessee that the Assessing Officer has taken the plausible view which is valid in the eyes of law. The Assessing Officer was satisfied consequent to making enquiry and after examining the evidences produced by the assessee, he accepted the assessee'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 p....
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.... by the Revisional Commissioner in the light of the Explanation 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to section 263 of the Act and, in 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 Explanatio....
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....recorded during the course of search the Shri Anand Kumar, one of the partners in the assessee firm, he has admitted that there is difference in the stock recorded in the books and the physical stock and agreed to offer the same as additional income. The PCIT has not brought anything contrary to record to state that the amount admitted towards excess stock is from a difference source. When the additional income is offered towards excess stock, 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....