TaxTMI 
TaxTMI 
2023 (3) TMI 305
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.... “1. That the Ld. PCIT, Rohtak has erred in assuming the jurisdiction u/s 263 of the Income Tax Act, 1961 and, thereby, holding that the assessment as framed by the Assessing Officer is erroneous and prejudicial to the interest of revenue and further erred in setting aside the order, dated 20.12.2019 as passed by the Assessing Officer. 2. That the Ld.PCIT has failed to appreciate the fact that during the course of assessment proceedings by way of specific questionnaire, dated 11.12.2019 fixed for 13.12.2019, specific query was made by the Assessing Officer with regard to application of provisions of section 115BBE on the Income offered during survey to the tune of Rs. 1 crore, which was replied in detail and after considering that reply, the Assessing Officer has taken a possible view and, therefore, the order of Ld. PCIT for setting aside the already completed assessment u/s 143(3), dated 20.12.2019 by the Assessing Officer is void abinitio. 3. That the Ld. PCIT has failed to appreciate the fact that there was due application of mind by the Ld. Assessing Officer and, thus, no valid jurisdiction could have been assumed by the Ld. PCIT. 4. Notwiths....
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....sessee in the present proceedings. 4. The ld. AR inviting attention to the Paper Book filed and the specific queries raised by the AO in the course of the hearing and the replies of the assessee submitted that the AO has passed an order after due enquiries and with full application of mind. Specific attention was invited to Paper Book pages 39 to 40 wherein the AO vide notice dated 11.12.2019 required the assessee to address why the higher rate as per the amendment in the Statute should not be applicable to the surrendered income. Referring to the reply filed also available on record at pages 41 to 46 it was submitted it would show that the assessee had offered the same justification relying on facts and law as applicable on the date of surrender. That it was argued that only after duly enquiring from the assessee and considering the reply, the AO has taken a possible view. Accordingly, the order passed, it was argued is passed after full enquiry and due application of mind and hence is a valid order wherein there was no error. Thus, it was his submission that the order cannot be set aside merely on the ground that according to the ld. PCIT, the rate of tax ought to have been hi....
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....uently. It was his submission that the DR’s Paper Book filed on 29.07.2022 is also available with him. It was his submission that the copy of the Taxation Law, Second Amendment Bill, 2016 has been filed by the assessee in its Paper Book-III at pages 117 and 122 at Sr.No. 12 and copy of the Statement of Objects and reasons of the Second Amendment at pages 123-129 at Sr.No. 3 has also been filed for the re-consideration of the Bench. 4.3 In the said factual background, at the outset, the ld. AR taking the Bench directly to page 123 and 124 of the Paper Book it was submitted that the Taxation Laws, Second Amendment Bill, 2016 passed by the Parliament received the Presidential assent on 15th December 2016. It was highlighted that the survey took place in August,2016 and the amendment proposing a higher tax rate admittedly was not available on the Statute. Thus, it was submitted that a surrender made on a day as per the law prevalent well considered by the AO by raising due enquiries cannot in the Revisionary order be re-visited on the ground that subsequently the provision was amended with a higher tax rate. It was submitted that this issue had itself been fully considered by the ....
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....for the poor. 4. Therefore, an alternative scheme namely, the 'Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016' (PMGKY) is proposed to be provided in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income and penalty @ 10% of the undisclosed income. Further, a surcharge to be called 'Pradhan Mantri Garib Kalyan Cess'@33% of tax is also proposed to be levied. In addition to tax surcharge and penalty, the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the Central Government in consultation with the Reserve Bank of India under the 'Pradhan Mantri Garib Kalyan Deposit Scheme, 2016'. This amount is .proposed to be utilised for the programmes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc.; so that there is justice and equality. 5. The Bill seeks to achieve the above objectives. New Delhi ARUN JAITELY The 26thNovember,2016 4.4 Addressing the facts available on record, attention of the Bench was invited to the copy of the surrender letter dated 05.08.2016 of the assessee f....
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.... and business related receipts and any other discrepancy in this business etc. hence, the surrendered income was clearly under the head “business income”. The reason given is already spelt out as to “buy peace” “avoid litigation” and source is explained as “over and above my regular business income”. 4.6 Addressing the facts available in the Paper Book (running upto 65 pages) it was submitted that pages 1 to 4 of the same is a copy of the acknowledgement of return and computation of income for the year under consideration. Pursuant to the filing of the return, the AO, it was submitted, issued notice u/s 142(1) on 20.08.2019 which is available at pages 23 to 27. For the purposes of present proceedings, attention was invited to Paper Book page 24 which would show the nature of the queries raised by the AO : 1. Nature of your business activities & exact location of all your business premises/sister concerns including space taken on rent. 2. Please furnish details of your income tax assessments for the previous 3 years. If any assessment has been made u/s 143(3) in the earlier 3 years, a copy of the same may be furnished. 3. Please furnish ....
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....side of Balance Sheet of the ITR for the year under consideration alongwith documentary evidence. 17. Please furnish details of other provisions of Rs. 3,12,392/- appearing on Liability side of Balance Sheet of the ITR for the year under consideration alongwith documentary evidence. 18. Please furnish details of other income of Rs. 1,15,00,000/- shown in Schedule OS Income from Other Sources in your ITR for the year under consideration alongwith documentary evidence. 19. Please furnish copy of ledger account alongwith narration of the following expenses:- i) Freight Expenses ii) Power & Fuel Expenses iii) Repair to Building Expenses iv) Repair to Machinery Expenses v) Insurances Expenses vi) Workmen and Staff Welfare Expenses vii) Entertainment Expenses viii) Telephone Expenses ix) Festival Celebration Expenses x) Loading & unloading Expenses xi) Interest Expenses 4.6 Referring to the same, specific attention was invited to the queries raised at Question No. 1, 11 and 18. It was submitted that the detailed comprehensive enquiries have been made by the AO ....
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.... 2. During the Survey Operation carried out on 04.08.2016 at your business premises, you have surrendered an amount of Rs. 1,00,00,000/- as additional income for the A.Y. 2017-18 on the following accounts:- Excess stock - Rs. 75,50,000/- Misc. Discrepancy - Rs. 15,00,000/- Excess Cash - Rs. 9,50,000/- Please show cause why the surrendered amount may not be taxed separately at the maximum tax rate in view of the provisions of section 115BBE of the Act. You are requested to furnish the above mentioned information/documents online electronically in 'E-proceeding' facility through your account in 'e-filing website of Income Tax Department. Now, your case is fixed for 13.12.2019 at 11:00 AM. (Emphasis supplied) 4.10 It was submitted that this query also was replied to by the assessee. This fact, it was submitted, is evident from Paper Book pages 41 to 46. Specific attention was invited to paras 1 and 2 of the assessee made available to the AO which read as under : From : RAM KUMAR Partner : M/s Neelkanth Breeding Farm, Village-Jandhera, P.O. Ban, Tehsil- Ladwa, Kurukshetra PAN-AAJFN0024C ....
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....as further amended by Taxation Law (2nd amendment) Act 2016 w.e.f. 01.04.2017. Referring to pages 4344, it was submitted that the assessee has addressed before the AO the amended provisions, the purpose and object of the latest amendments as explained in the statement of objects and reasons. On the basis of these documents available in the Public domain, it was submitted that the amendment of the provision brought into play which was considered by the AO as it had been specifically enquired into and considered which the ld. PCIT wants to take as a reason for setting aside the assessment order was specifically directed and related to the demonetization announced on the night of 8th November, 2016. Thus, considering the concerns expressed by the professionals that the rate of 30% as it stood before the last amendment would possibly be not appropriate the enhanced tax was introduced. The amendment was brought to prevent such disclosures to overcome the views expressed. The ld. AR submitted that for consideration of the AO, the assessee had also highlighted the other important amendments which were carried out. In the said backdrop, the total tax in these cases covered u/s 115BBE @ 60%....
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....g tax @30% as applicable at the time of survey conducted dt. 04-08-2016 and not (5)77.25% which was levied, retrospectively w.e.f. F.Y. 2016-17 as the last amendment to section 115B8E was made through Taxation Laws (2n amendment Act 2016) which received the assent of the President on 15.12.2016 and was published vide gazette dt. 15.12.2016 & oblige.” 4.13 It was submitted that the said issue had also come up for consideration by way of Audit Memo on this very issue and the assessee has filed the very same reply to the said authority. In the said backdrop, it was objected that the very same issue is once again being looked into by the ld. PCIT as a formality and considering the reply of the assessee without addressing the background , facts, the legal position as argued and considered the impugned order has been passed. 4.14 Addressing the legal position on the issue, attention was invited to the order of the Amritsar Bench of the Tribunal in the case of Dev Raj Hi-tech Machines Ltd. Vs DCIT Ferozepur 174 TTJ 9 it was submitted, that the facts in the said case are exclusively identical as herein also, there was a surrender and after due enquiries, the return filed was accept....
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....ention was also invited to Judgement Set-II wherein decision of the Bombay High Court in the case of CIT Vs Nirav Modi 71 taxmann.com 272 wherein the Hon'ble Apex Court upheld the views taken by the AO after due enquiries which was set aside by the ld. PCIT exercising powers u/s 263. This order stood quashed by the Tribunal. The appeal of the Revenue was dismissed by the Hon'ble High Court, following which in the SLP filed by the Revenue, the Apex Court refused to interfere and dismissed the Revenue’s petition. Thus, where on facts, all relevant facts stood duly considered and due application of mind was evident from the record in the present facts of the case also following the said decision, it was his prayer that the impugned order may be quashed. Attention was invited to Paper Book pages (page 129-130 in CIT Vs Nirav Modi 77 taxmann.com 15 (S.C.). Reliance was also placed upon the decision of the Apex Court in the case of Pr. CIT Vs Shreeji Prints Pvt. Ltd. 130 Taxmann.com 294 wherein the Court categorically held that where detailed enquiries have been made by the AO, the Revisionary Powers exercised by the Commissioner invoking Explanation-2 to Section 263 cannot be upheld. ....
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....ess stock, Rs. 9,50,000/- on account of excess cash and Rs. 15,00,000/- to cover misc. discrepancies and all these discrepancies were related to the one and only hatchery business of the assessee. 5. The surrender letter filed by the assessee during the course of assessment proceedings is forming part of paper book at Pg 22 and as evident from the surrender letter, the surrender of Rs. 1,00,00,000/- as made by the assessee is over and above the regular business income of the assessee and it is also mentioned in the surrender letter that tax shall be paid on such additional business income at normal tax rates. 6. Thereafter, the assessee had filed his return of income for the relevant year on 22.01.2018 at an income of Rs.1,17,06,270/-which includes income of Rs. 1,00,00,000/- as surrendered during the survey proceedings. 7. Then the case of the case was selected for compulsory scrutiny under CASS and various notices u/s 142(1) of the Act were issued to the Assessee. 8. The AO, during of the course of assessment proceedings, vide point no. 18 of the questionnaire dated 20.08.2019 (Pg 25 of PB), asked the assessee to furnish details of Rs. 1,15,00,....
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....ated 11.02.2022 was issued to the assessee u/s 263 of the Act to show cause as to why the order passed by the AO should not be considered as erroneous as well as prejudicial to the interest of the revenue and why the tax rates as mentioned in section 115BBE of the Act should not be applicable to the income surrendered by the assessee. The copy of the said notice issued u/s 263 of the Act is forming part of paper book at Pg 53-54. 15. In response to the said notice, the assessee filed a detailed reply containing facts of the case as well as judicial pronouncements supporting the case of the assessee. The copy of the said reply is forming part of paper book at Pg 55-65. 16. However, the said reply filed by the assessee was not accepted by the PCIT and order dated 17.03.2022 was passed u/s 263 of the Act wherein case of the assessee was set aside to the file of the AO on the issue of chargeability of tax @ 60% on income surrendered by the assessee. 17. Now, against the order passed by the Worthy PCIT, the assessee is in appeal before your goodself and our brief synopsis are as under: OUR SUBMISSION: 1.1 At the outset, it is submitted that t....
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....cisions, following submissions have been made : Therefore, based on the above judgments, merely because the AO has not put up the issue in detail in the assessment order does not mean that the issue has not been verified in detail by him. In the case of assessee, specific queries were raised on the issue under consideration and detailed replies were filed by the assessee which were duly considered by the AO and decision has been taken by him on the basis of the facts of the case which clearly identifies that that the surrender pertains to the business income of the assessee and therefore, the same has been taxed at normal rates of tax. 4.17.2 Objection to the action of the ld. PCIT has also been posed on the following grounds in the synopsis filed: “ Further, the Worthy PCIT has held the order passed by the Ld. AO as erroneous as well prejudicial by applying the explanation 2 to section 263 which is totally incorrect as the case of the assessee does not fall in any of the limb of explanation 2 to section 263. The AO has made in depth enquiries on the issues concerned and there is no lack of enquiry as specific enquiry was asked by the AO on the concerned issu....
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....harampal Contractor Hot Mix Plant vs. PCIT in ITA No. 211/Asr/2017 order dated 14.06.2019 (Amritsar Bench); ix) Smt. Savita Goyal vs. ITO, Khanna in ITA No. 438/Chd/2007 Chandigarh Bench of the ITAT; x) Surindra Enterprises vs. ITO (Chandigarh Bench) as reported in 18 ITR 325 2012); xi) Ganga Acrowools Ltd. Vs PCIT ITA No.196/CHD/2021 xii) Jaswinder Singh Vs CIT (2013) 31 taxmann.com 80 (Chandigarh Tribunal) 4.17.5 Further, it has also been submitted that the notice u/s 263 is bad in law as it has been issued on the basis of audit objection. 4.18 As per the brief Synopsis-II on which also, ld. AR has placed reliance. A perusal of the same shows that therein reliance was placed upon the order dated 06.11.2019 in the case of Arora Alloys Ltd. Vs DCIT ITA 1481/CHD/2017 relied upon. It was submitted that the order is passed by two Hon'ble Vice Presidents sitting as Accountant Member and Judicial Member. Attention was also invited to the following decisions:- Famina Knit Fab vs. ACIT reported in 104 Taxmann.com 306 (Chd-Trib.); DCIT vs. Marshal Machines Pvt. Ltd. of ITAT, Chandigarh Bench in ITA No. 57/Chd/2017; Sh. Harish Sharma vs. ITO of ITAT....
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.... Hon'ble Prime Minister of India declared on 08.11.2016 that after 12 am on 08.11.2016, Indian Currency Rs. 500/- and Rs. 1000/- notes will not be the legal tender. Due to several developments in the country subsequent to 08.11.2016, the government feared that the persons may use section 115BBE as a tool to convert their black money by paying 30% tax and therefore, the amendment was made in section 115BBE to tax the incomeat a higher rate of 60%. 6. It is submitted that the bill is a legislative proposal which is brought before the two houses of the Parliament of India. A bill is the draft of a legislative proposal, which, when passed by both houses of Parliament and assented to by the President, becomes an Act of Parliament. By the Taxation Laws (Second Amendment) Act, 2016, which was passed by the Parliament on 29.11.2016 and got its assent from the Hon'ble President on 15.12.2016, the tax rate as per section 115BBE was increased from 1.4.2017 i.e. applicable from the financial year 2016-17. Prior to the said Amendment Bill, which became an Act on 15.12.2016, the tax was leviable at 30% on the income covered u/s 68, 69, 69A, 69B, 69C or 69D of the Act. Subsequently the t....
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....sclosure Scheme' was 45%. The general view at the time of demonetisation was that the 'undisclosed income' held in the form of demonetization currency can be deposited in the banks and can be offered to taxation under the specified six sections and the tax thereon could be paid at the rate mentioned in section 115BBE (as stood before last amendment) i.e. 30% plus applicable surcharge and cess. No penal provisions were attracted if these amounts are declared in the respective returns of income. However, if the same are not reflected in the return of income, the penalty shall be levied u/s 271AAC @ 10%. This section was also introduced by the Second Amendment Act, 2016 w.e.f. 1st April 2017. 9. It is a settled law that for the purpose of the assessment of the income of the assessee, the Act, which is applicable on the first day of the financial year for which the income is to be assessed will be applicable. The second amendment was made effective from the 1st day of April, 2017 i.e. it is applicable for the Asst. Year 2017-18. When an amendment is made retrospectively, it should specifically state the date from which the said section would be applicable. Even though it has b....
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....sessee if books of account or documents pertaining to him or containing information relating to him have been seized during the course of search, within the fold of that section, this question assumes significance, in as much as in the facts of the present case, as on the date of search, it was only if such material belonged to a person other than the searched person, that the Assessing Officer of the searched person could record such satisfaction and forward the material to the Assessing Officer of such other person. However, subsequent to the date of search, the amendment has been brought into force and based on the amendment, the petitioners who were not included within the ambit of section 153C as on the date of the search, are now sought to be brought within its fold on the ground that the satisfaction note and notice under section 153C have been issued after the amendment came into force. Therefore, this case does not relate to the interpretation of the provisions of any of the sections, but relates to the stage at which the amended section 153C can be made applicable, as to whether it relates to the date of search; or the date of recording of satisfaction by the Assessing Of....
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....ranging the financial affairs. He cannot foresee the amendment to be taken with retrospective effect and imposing the liability on him. This is unreasonable and shows the arbitrariness on the part of the legislature. The Hon'ble Supreme Court in the case of Lohia Machines Ltd. v. Union of India [1985] 20 Taxman 9 (SC) has opined: Even the power and competence of the Parliament to amend any statutory provision with retrospective effect cannot be doubted. Any retrospective amendment to be valid must, however, be reasonable and not arbitrary and must not be violative of any of the fundamental rights guaranteed under the Constitution. Unreasonableness or arbitrariness of any such amendment with retrospective effect has necessarily to be judged on the merits of the amendment in the light of the facts and circumstances under which such an amendment is made. 4.19.6 Relying on these decisions, it was submitted that the AO has taken a plausible view and in the present facts of the case the ld. PCIT was not justified to supplant his view with that of the AO. This position of law has been followed and considered by the Hon'ble Rajasthan High Court in the case of Niharika Jain Vs. ....
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....extension or implication. [Para 83] 4.19.7 Similar position, it has been submitted, came up for consideration before the Hon'ble Gujrat High Court as canvassed in para 25 of the synopsis relied upon by the ld. AR. For the sake of completeness, it is extracted hereunder: 25. In the case of Niko Resources Ltd. Vs Union of India [2015] 55 A taxmann.com 455 (Gujarat), the disputed issue was relating to the amendment /made in section 80-IB(9) by adding an Explanation to section 80- IB(9), by Finance (No.2) Act, 2009 with retrospective effect from 1-4-2000 purporting to explain the meaning of the term 'undertaking' providing that all blocks licensed under a single contract shall be treated as a single undertaking which took away accrued and vested right of petitioner enjoying seven years tax holiday on each undertaking in block. The Hon'ble High Court held that, " any law or amendment to the law made by Parliament or legislature overrides or is made in violation of fundamental rights or any other constitutional provision without sufficient objective and justification, the Court are empowered to declare the law arbitrary and violative of article 14 of the Constitution....
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....(9) (ii).[Para49.18] 4.19.8 Inviting attention to order dated 06.11.2019 in ITA 1418/CHD/2017 in M/s Arora Alloys Ltd. Vs DCIT and order dated 24.08.2022 in ITA 570/Del/2022 in Balwinder Singh Vs PCIT also pertaining to 2017-18 assessment year near similar set of facts and circumstances, it is argued that the issue is fully covered in assessee's favour. 4.19.9 Referring to the ld. DR’s Paper Book, it was submitted, that the questions raised from the two employees namely Shri Madan Mohan and Shri Nishant Narwal would show that there was no other business of the assessee except the hatchery business as questions only on birds and their feed etc. were asked. Referring to the surrender made, it was submitted that it can be seen that repeatedly it is being stated that the surrender was from business income over and above the normal business income. Thus, for all concerned the business of hatchery was the only source of income. Accordingly, it was his submission that considering the facts and position of law, the orders may be quashed. 5. The ld. CIT-DR relied upon the order. It was his submission that the order passed is erroneous as well as prejudicial to the interests of th....
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..... Accordingly, in the absence of any discussion by the AO, it was argued that the ld. PCIT was fully justified to set aside the order. However, considering the fact that the assessee itself appears as per the replies available on record that Section 115BBE itself was applicable, it was submitted that the only issue which thus remained for consideration was whether the second Amendment was retrospective or prospective. The ld. CIT-DR addressing the decisions relied upon by the ld. AR submitted that these are distinguishable on facts and not applicable. Addressing the decision dated 24.08.2022 of the Delhi Bench in the case of Shri Balvinder Singh V PCIT (ITA No.570/Del/2022), it was his submission that the facts are distinguishable as in the said decision, the applicability of Section 69 was an issue for consideration as is evident from para 10 of the said decision. 6. We have heard the rival submissions and perused the material available on record. On a careful consideration of the same we are of the view that in the peculiar facts of the present case in order to address the grievance of the assessee posed against the impugned order what primarily needs to be seen is whether the....
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....after the survey having been conducted, the record has been seen by the Tax Authorities wherein we find that despite this there is not even a whisper of any allegation on record of any other source of income of the assessee. It is for the Revenue to prove that there were some other sources noticed. We cannot expect the assessee to prove the negative. In the peculiar facts of the present case as available on record we find that the surrender was from the normal business income of the assessee. In the facts of the present case, the ledger entries and the treatment of the surrender made in the books of account of the assessee has not only been considered by the AO it has also been made available to the Revisionary Authority and has also been placed before us. On a consideration thereof, we find that in the facts of the present case the action of the Revisionary Authority in re-looking at the very same facts and position of law solely to bring a higher rate of tax to the kitty of the Revenue cannot be countenanced in the Revisionary proceedings. It would tantamount to being legally unsustainable. The powers cannot be exercised merely because on the same set of facts, the view found by ....
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.... facts or an incorrect application of law will satisfy the requirement of the order being erroneous ". 15. The Hon'ble Bombay High Court in the case of Gabriel India Ltd 203 ITR 108 has held as under: “The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black's Law Dictionary. According to the definition, "erroneous" means "involving error; deviating from the law". "Erroneous assessment" refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amoun....
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....ich was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power ....
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....wer of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the decision of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 Taxmann.com 272 (Bombay). 17. The Hon'ble High Court of Gujarat in the case of CIT vs. Nirma Chemical Works Ltd. 309 ITR 67 has observed as under: “if assessment order were to incorporate the reasons for upholding the claim made by an assessee, the result would be an epitome and not an assessment order. In this case, during the assessment 13 proceedings for both the Assessment Years, the Assessing . A.Y. 2009-10 Officer issued a query memo to the assessee, calling upon him to justify the genuineness of the gifts. The RespondentAssessee responded to the same by giving evidence of the communications received from his father and his sister i.e. the donors of the gifts along with the statement of their Bank accounts. On perusal, the Assessing Officer was satisfied about the creditworthiness/capacity of the donors, the source from where these funds have come and also the creditworthiness/ capacity of the don....