AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 986
X X X X Extracts X X X X
X X X X Extracts X X X X
....ification to invoke revisional jurisdiction. 2. Ld. Pr. CIT erred in law and on facts holding order erroneous on the alleged ground that the order was framed without any inquiry or verification to examine the source of investment made in the excess stock found during survey proceedings which could be considered as made out of undisclosed sources of income. 3. Ld. Pr. CIT erred in law and on facts in passing impugned order on the alleged ground of possible violation of Sec. 69B of the Act attracting provision of Sec. 115BBE to charge tax at 60% of the income. 4. Ld. Pr. CIT further erred in law and on facts holding scrutiny assessment order as erroneous in so far as prejudicial to the interest of revenue on the alleged ground of AO charging penalty u/s 270A of the Act whereas income was required to be charged u/s 69B attracting penalty u/s 271AAC of the Act. 5. Ld. Pr. CIT erred in law and on facts revising scrutiny assessment order relying on Hon'ble Delhi high court judgments on completely different set of facts." 3. The ld.counsel for the assessee began by pointing out that revisionary power ,under section 263 of the Act ,was exercised b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order passed under section 263 of the Act, which briefly put were to the effect: i) That all proper disclosure regarding the surrender made during survey and regarding source of investments therein, was made by the assessee, and was there before the AO, who after considering the same, had allowed claim of the assessee of treating the disclosure as "business income" of the assessee. ii) That considering the fact of the surrender relating to excess stock of business and cash found, the view taken by the AO of treating the disclosure as "business income" of the assessee was in conformity with judicial pronouncements and hence a probable view. That therefore there was no error in the order of the AO accepting disclosure of the surrender made by the assessee as its business income; iii) That since the stand taken by the assessee of returning surplus stock and cash surrendered during survey as business income was supported by various judicial decisions the AO , by accepting the same, had taken one of the possible view which could not be said to be in error. iv) That ld.Pr.CIT had applied Explanation 2 to section 263 of the Act without confronting the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngly as per law, the disclosure was to be subjected at special higher rate of tax as per the provisions of section 115BBE of the Act, as opposed to the normal rate on which taxes were paid by the assessee by including the same as being part of its business income. Further, penalty as per the law, on such unexplained investment was tobe levied as per the provisions of section 271AAC which specifically dealt with the levy of penalty in case of income determined under section 69B of the Act. The ld.Pr.CIT found that the AO had conducted no inquiry on the source of these investments in stock as disclosed by the assessee, and therefore, by accepting them as "business income", the assessment order passed was in error ,causing prejudice to the Revenue. 14. We shall now deal with the various contentions raised by the ld.counsel for the assessee against the said revisionary order by the ld.Pr.CIT. 15. The first contention of the ld.counsel for the assessee, * That the matter had been examined during assessment proceedings and all facts relating to the disclosure, as to the nature and source of the investment, being there before the AO which showed clearly that such investment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g to Rs.1,60,329/- and discrepancy in gold coated frame stock amounting to Rs.1,24,252/- and the reply of the assessee as under: 18. Our attention was thereafter drawn to the statement of Shri Nilaykumar Soni another partner in the firm recorded during survey placed before us at PB Page no.13 to 19, more particularly page no.19 where at question no.20, it was pointed out that the assessee was asked to explain discrepancy in cash as under: Ques: As per books of account cash-in-hand is Rs.33,13,803 whereas cash found physically is Rs.16,98,550/- . Please justify the difference ? Ans: At the time of taking customer booking orders, some customers are giving old ornaments as part of order advance. The said advance is received in old ornaments. However, the same is wrongly entered in the books as cash receipt. Further, some partners withdrawal may not be 4entered in the books. Expenses may be pending for recording. So due to those three reasons, physical cash in hand is less than cash shown in the books. 19. Thereafter to question nos.22 and 23 the assessee was asked to explain discrepancy in gold as under: "Ques.22 : As per physical stock of record, stoc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es and old ornaments purchase transactions is taken place at Nadiad Branch. Consolidated financial statement of Anand-HO and Nadiad - Branch is prepared after auditing individual accounts of Anand-HO and Nadiad Branch. (f) Survey under section 133A of Income Tax Act was beer conducted en 03.01. 2017, On verification of Copy "Statement of Oth" and other details, it is found that Excess of stock of Gold ornament & silver is found in Survey and the same accepted by an Assessee as Income of the year. Further excess Cash on Hand is also found during the Survey and the same is also accepted as current year income. Total Excess Cash found during Survey is of Rs.1,09,045/- (One Lakhs Nine Thousand Forty Five). The same is taken as Direct Income in Books of Accounts. Excessof Gold Ornament found during Survey is 3391.081 grams and the same is recorded in books of account by considering rate of Rs.2830 per gram. So total value of excess gold stock recorded in books is Rs.95,96,759/- (i.e. 2830 x 3391.081 grams) similarly excess stock of silver ornaments found during the survey is 4111.00 grams at rate of Rs.39.00 per gram of Silver Ornaments (Rs.39,000/- per kg.) is taken. So Rs.1,6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder made on account of business stock of the assessee was to be treated as part of its business income only reference was made to the following decisions: i) Shri Lovish Singhal Vs. ITO, ITA No.143 to 145/Jodh/2018 dated 25.5.2018 wherein our attention was drawn to para-13 of the order as under: "13. I have heard the rival contentions and record perused. I have also carefully gone through the orders of the authorities below. I have also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld AR during the course of hearing before the ITAT in the context of factual matrix of the case. From the record, I find that during the course of survey, income was surrendred by the assessee on account of stock, excess cash found out of sale of stock and also in respect of incriminating documents. As per judicial pronouncements cited by the ld. AR and also the decision of Hon'ble Rajasthan high court in the case of Bajrang Traders in Income Tax Appeal No. 258/2017 dated 12/09/2017 I observe that the Hon'ble High Court in respect of excess stock found during the course of survey and surrender made th....
X X X X Extracts X X X X
X X X X Extracts X X X X
...." Before us, the limited question is that whether business receipts/business turnover is taxable under section 115BBE of the Act? As per the intention of legislature, the burden to apply section 115BBE and section 68 to section 69D of the Act rest on revenue shoulder. That burden cannot be discharged on the basis of assumption and presumption made by the assessing officer. Having gone through the section 115BBE, as noted above, we are of the view that business activity related income may not ordinarily get placed u/s 68 to section 69D of the Act. In the assessee's case under consideration, the assessee submitted before the assessing officer that deposits of Rs. 91,48,326/- in bank account No. 21956697434, were business receipts. The relevant para of the assessment order is reproduced below: "On being confronted the assessee made submission on 27/12/2016 stating that out of aggregate deposits of Rs. 95,33,717/- made in the said bank account A/c No. 2195697434 Rs. 91,48,326/-was his business receipt, Rs. 3,73,870/- are maturity proceeds of daily deposit accounts and Rs. 11,521/- was interest Income on savings account. After his father's death, the assessee w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Judgment of the Coordinate Bench of Mumbai in the case of ACT Central Circle-13 Mumbai v. Rahil Agencies, order dated 23 November, 2016 wherein it was held that section 115BBE does not apply to business receipts/business turnover. The findings of the Coordinate Bench are given below: 27. Our attention was also drawn to the decision of the Hon'ble Andhra Pradesh High Court in the case of Principal Commissioner of Income Tax vs Deccan Jewellers (P) Ltd (2021) 132 taxman.com 73(Andhra Pradesh) pointing that the issue was identical with the facts of the assesses case and the hon'ble court had set aside the order passed u/s 263 of the Act holding that in view of the consistent view of judicial authorities, the excess stock of gold and diamond jewellery surrendered by the assessee, dealing in the same, could not be treated as unexplained investments u/s 69B of the Act. Copy of the order was placed before us. 28. The Ld.DR though pointed out that no pointed queries relating to the stock surrendered by the assessee was made by the AO and therefore it could not be said that inquiries were conducted on the issue by the AO.As for the reliance on the decision of the Hon'ble Andhra Prades....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly accepted as business income by the AO. More notably the Hon'ble Andhra Pradesh High Court has in identical background of facts held the disclosure of excess stock of gold ,diamond silver jewellery by an assessee dealing in such stock to be in the nature of business income and not income from undisclosed sources. The Hon'ble High Court has noted that the acceptance by the AO of excess stock as business income was consistent with the view taken by various judicial authorities and the AO had therefore taken a plausible view on the matter. That therefore there was no question of any error in the order of the AO so as to justify exercise of revisionary power by the Ld.PCIT in the said case. Though the Ld.DR has pointed out factual distinction in the said case as proper inquiries were noted to be conducted by the AO on the issue, but we find that the same is of no consequence and does not alter the applicability of the said decision to the facts of the present case before us. We have noted that in the said case in response to queries raised by the AO seeking explanation as to why the surrender should not be treated as unexplained investment in the said case, the assessee had merely su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section 263(1) of the Act along with the Explanation2 to the same are reproduced hereunder: 263. (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, [including,- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- .... ..... ..... .... Explanation 2.-For the purpos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same. Explanations are not substantive provisions and are inserted to clear up any ambiguity in the section. They only clarify an existing law. Normally Explanations do not enlarge the scope of the section but only explain the scope. Explanation 2 to section 263, clearly provides additional support to the dominant object of section 263, specifically pointing out situations where assessment orders will be deemed to be erroneous. The main provision of the section and its import has not been altered by the explanation. Therefore where section 263 itself has been invoked and the reason for finding the assessment order erroneous clearly pointed out to....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... outrightly that the order needs to be set aside for the reason that ld.Pr.CIT did not confront the assessee before invoking Explanation 2 to sub-clause (a) to section 263 of the Act. 37. As for the decision of the jurisdictional High Court in the case of Shreeji Prints (supra), relied upon by the ld.counsel for the assessee in support of this contention, the assessee, we hold, cannot derive any benefit from the same. 38. On going through the decision of the Hon'ble High Court ,we find that the decision is not on the question framed before it whether Explanation to section 263 of the Act can be said to be validly invoked without first confronting it to the assessee. In the case before Hon'ble High Court in the decision relied upon by the Ld.AR, the Revenue had proposed the following questions as substantial question of law before the Hon'ble High Court: "(a) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is correct in holding that the PCIT was not empowered and entitled to revise assessment order u/s. 263 of the Act r/w Explanation 2 thereto by ignoring that the order passed by the AO is erroneous in so far as it is prejudi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....kdrop of this question before the Hon'ble High Court, nor does the Hon'ble High Court hold so in its order. What is noted in the order to this effect is only its noting of the findings of the ITAT while setting aside the order passed u/s 263 of the Act. Therefore the decision of the Hon'ble jurisdictional High Court cannot be read as holding that order passed u/s 263 of the Act is invalid when Expl to section 263 is invoked without confronting it to the assessee. 43. It is settled law that a precedent is an authority only for what it actually decides and a decision on a question that has not been argued cannot be treated as a precedent. Judgments must be read as a whole and observations in judgements should be considered in the context in which they are made and in the light of the questions that were before the court. The Hon'ble apex court has held so in the case of CIT vs Sun Engineering Works Pvt. Ltd.198 ITR 297 (SC). In the case of Padma Sundra Rao v State of TN 255 ITR 147(SC) the Hon'ble Apex Court had laid down that a ratio laid down by the Court have to be read in the context of the entire facts leading to the said ratio. 44. In view of our elaborate discussion as a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ल 115.257 kgs silver मिला है जब कि as per books मेरे यहाठपर 111.146 kgs silver मिला है। यह 4.111 kgs का silver stock difference जिसकी कà¥à¤² value Rs. 1,60,329/- होता है मेरी premise से ही मिला है तथा मैं इस Rs. 1,60,329/- पर Tax à¤à¤°à¤¨à¥‡ को तैयार हूà¤à¥¤ Q.22 सरà¥à¤µà¥‡ की कारà¥à¤¯à¤µà¤¾à¤¹à¥€ के दौरान आपके Books of A/c को देखने से पता चलता है कि gold coated frames के stock में आपके पास Rs. 4,63,059/- के value के ....