TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 807
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....emonetization period. 3) The ld. PCIT has erred in law and on facts in directing the ld. A.O to tax the cash deposits made into the bank account during the demonetization period under the provisions of section 115BBE of the Act. 4) The learned PCIT has erred in law and on facts in observing in the order dated 30-03-2022 passed u/s 263 of the Act that in the submission made in response to show cause notice dated 19-03-2022 issued u/s 263 of the Act, the appellant did not make any counter submissions to the issues raised while proposing to revise the assessment u/s 263 of the Act vide above show cause notice. 5) The ld. PCIT has erred in law and on facts in assuming jurisdiction u/s 263 of the Act. 6) The appellant craves leave to add, amend, alter, modify, substitute, delete, change or vary all or any of the ground or grounds of appeal." 3. Brief facts as discernable from the orders of lower authorities are that assessee is engaged in the jewellery business and filed his return of income for the assessment year 2017-18 on 10.07.2017, declaring total income of Rs.3,11,330/-. Thereafter the assessee`s case was selected for scrutiny under CASS. The assessment u/s143(3) has bee....
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....osit or by electronic transfer. It is noted that assessee is a firm and the firm has accepted depositing Rs.12,50,000/- towards PMGKS 2016. However, the source of this amount has not been routed through the P & L account. How the taxes have been paid and accounted for and whether the balance amount has been taken to balance sheet is also not clear. The accounts are audited and it is not clear how the assets have been matched without routing the amount through the profit and loss accounts. This was a vital flaw and as firm as well as the chartered accountant who has audited the accounts should have been asked to explain. However the AO has not done that and instead adopted the higher GP method which is patently wrong. On this issue itself the assessment order needs to be revised. It is apparent from the assessment record that during the demonetization period the assessee had deposited cash in form of Specified Bank Notes amounting to Rs.71,73,500/- on 10.11.2016 in its bank account maintained with Bank of Baroda. The assessee stated that the said cash was deposited during the demonetization periods are part of the business receipts/sales only. On verification of cash balance sum....
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....ry regarding shortage of gold and accepted the claim of assessee without examination of genuineness of assessee's claim. 3.4 Further also noticed from the month-wise stock gold and gold ornaments available on record, it is noticed that the assessee has shown average closing stock of gold and gold ornaments at 2224.485 grams upto September, 2016. However, the stocks of gold and gold ornaments have been decreased abnormally in the month of October 2016 and November 2016. The AO has not examined the abnormal decease in stock just before demonetization period. 3.5 On verification of details regarding cash advance received from debtors during the period from 01.09.2016 to 30.11.2016 available on record, it is noticed that the assessee has claimed to have been received advances from different 9 parties aggregating to Rs.8,63,000/- and sales were made on later date after demonetization period. The assessee has submitted ledger account and copy of sales bills. However the AO has not made any inquiry and accepted the claim of the assessee without examination of veracity of assessee's claim. 4. Further total cash deposit of Rs.59,23,500/- made by the assessee has not been verified by t....
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....ny expenditure or allowance (or set off of any loss) shall be allowed to the assessee under any provision of the income-tax Act in computing his income referred to in Sections 68,69A to 60D. 6. In view of the above, you are therefore, required to show-cause as to why the said assessment order be not set-aside by invoking the provisions of section 263 of I.T. Act, 1961. You are request to submit your reply on or before 25.03.2022." 5. In response to the notice, the assessee submitted his reply dated 25.03.2022. The Ld. PCIT after considering the reply of the assessee observed that in the assessee`s case in the Audit Report submitted along with the return while explaining the method of valuation of stock it is stated that it is at lower of cost (average cost price of the year or net realizable value). So the method described is such a vague method and Assessing Officer has not verified whether the stock has been valued properly or not. The assessee has shown loss of 170 gram of gold in two days i.e. on 10.09.2016 and 28.02.2017, the value of loss is more than Rs.4.5 lakhs but no question has been asked by Assessing Officer. The purchases are inclusive of VAT, however sales do not ....
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....ing Officer as well as ld. PCIT passed under section 263 of the Act. Before adverting to the facts of the present case, we may refer the scope of provisions of section 263 of Income tax Act. The Supreme Court in case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 832 (SC), held that the prerequisite for the exercise of jurisdiction by the Commissioner suo-motu is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1) of the Act. It can be exercised only when an order is erroneous, the section 263 will be attracted. 16. Further, Hon'ble Bombay High Court in CIT Vs Gabriel India Ltd (233 ITR 108 Bom /71 Taxman 585) held that the power of suo-motu revision under subsection (1) of section 263 is in the na....
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.... a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. But that by itself will not be enough to vest the Commissioner with the power of suo-motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the revenue, then also the power of suo-motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which 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. Therefore, in order to exercise power under section 263(1) there must....
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....s deposited in cash from the sale in the month of October, 2016 and Rs.49,57,789/-was on account of cash sale from the period of 01.11.2016 to 08.11.2016 respectively. Further, the Assessing Officer compared such details with earlier year and find certain discrepancy. The Assessing Officer issued fresh show cause notice to the assessee to furnish complete details of customers to whom the sales were made in cash from 01.10.2016 to 08.11.2016 and was asked to furnish supportive evidence to explain the genuineness of such sales for such period. The assessee filed its reply, vide reply dated 17.12.2019. The assessee in its reply explained that there is nothing abnormal about cash sales, which took place in the current year, just there was a currency note demonetization during the assessment under consideration should not lead to presumption that this transaction is abnormal and suspicious. The assessee provided the details with date of sales, name of customers, address of customers, description of sales gross weight of jewellery, diamond weight and amount utilized on such sales. The assessee took plea that as per Rule 114B of the Income Tax Rules, 1963, the assessee is not under obliga....
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....rma Chemical Works (P) Ltd (supra), the Hon'ble High Court also held that when assessing officer after making due inquiries had adopted one of the view and granted partial relief, merely because Commissioner took a different view of the matter, it would not be sufficient to permit commissioner to exercise his powers under section 263. The Hon'ble Court in para 22 of its order on the objection of the revenue that there is no discussion of the issue in the assessment order held that the contention on behalf of the revenue that the assessment order does not reflect any application of mind as to the eligibility or otherwise under section 80-I of the Act requires to be noted to be rejected. An assessment order cannot incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic some. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he carries and the period of limitation within which an order is required to be made; and, secondly, the order is an appealable order. An appeal lies, would be filed, only against disallowa....
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....posit and no explanation about the negative stock has been submitted by assessee during the assessment stage, hence order passed by ld PCIT may be upheld. 12. Per contra, Ld. Counsel submitted that assessee has explained the issue in respect of increased sales and closing stock, which is placed at Paper Book page no.1 and during the assessment proceedings, the Assessing Officer has raised same query as raised by the Ld.PCIT and assessee has submitted his reply during the assessment stage, which is placed at PB page-6, therefore the order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of revenue. 13. We have heard the rival parties and have gone through the material placed on record. We note that Assessing Officer has framed the assessment order u/s 143(3) dated 31.12.2019, wherein the issue raised by Ld. PCIT has been discussed in para-7 and 8 of the assessment order, which is reproduced below: "7. In this case, the assessee had deposited substantial amount of cash during demonetization period (Rs.71,73,500) and had also submitted cash book, stock register and sale & purchase register with bill and vouchers. Further, the assessee had submit....
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.... the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one o....