TaxTMI 
TaxTMI 
2023 (4) TMI 1162
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.... and adopted a course permissible in law. 3. The Ld CIT erred in law and on facts in observing that the appellant has claimed expenses of Rs 21,55,500/- against the amounts declared during survey and ought to have been disallowed by AO. 4. Ld CIT erred in law and on facts in disallowing the above expenses of Rs.21,55,500/- which is not claimed at all and levying the tax of Rs 6,46,650/- on the said expenses u/s 115BBE. 5. The Order of the ld CIT being unjustified in law and on facts may kindly be cancelled." Brief facts of the case : 2. Brief facts as noted from the assessment order, ld.CIT(A)'s order and submission are that the Assessee filed return of Income on 13/10/2016 for A.Y.2016-17 declaring total income at Rs.1,06,90,320/-. The assessee derives income from Manufacturing of Electrical Meters, repairing of power transformers. 3. There was a survey u/s.133A of the Act in the case of the assessee on 26/08/2015. Certain documents were impounded during the survey. Based on the discrepancies noted during the survey the director of the assessee company in his statement declared following additional income : Unexplained Cash Rs.7,50,000/....
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....ani. Director of the Company was recorded and in the statement Shri Raman G Modani, Director of the Company declared an amount of Rs.7,50.000/ on account of excessive Cash, Rs 10.03,700/- on account of unaccounted advances and Rs.72,95.500/. On account of difference in stock totaling to Rs. 90,49,200/-. It is further observed from the P & L account and its notes no.15,16,17 an amount of Rs. 90,49,200/-( declared during the survey) is credited to P &L A/c correctly. However, it is noticed that you have claimed net expenses to the tune of Rs. 21,55,500/- (47,25,500 25,70,000) in respect of the income declared during the survey (on account of excess stock) and the AO had allowed this claim while finalizing the assessment. The disclosure made Rs. 90,49,200/-i.e.Rs.7,50.000/ on account of excessive Cash, Rs 10.03,700/- on account of unaccounted advances and Rs. 72,95.500/. on account of difference in stock fall within the purview of section 69 (unexplained investments) / 69A (unexplained money) /69 C (unexplained expenditure) as you could not offer any explanation about these amounts either during survey proceedings or during assessment proceeding and hence only offered them as....
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....s claimed net expenses of Rs.21,55,500/-. Once the Pr.CIT has observed in the notice u/s.263 and the order u/s.263, that the assessee has rightly credited the declaration made during survey of Rs.90,49,200/- to the profit & loss account, there is no question of invoking provisions of Section 69, 69A and 69C. The AO has verified all these facts as observed form the Order sheet entry dated 25/12/2018 which is at page 32 of the Department's Paper book. Therefore, once after verification the AO has accepted the return of income, the ld.Pr.CIT cannot invoke provisions of Section 263 as the assessment order is not erroneous and prejudicial to the interest of Revenue. 9. Ld.AR further submitted that the Pr.CIT has referred in the order u/s.263 that the Assessee's case falls under Compulsory Scrutiny as there was survey and books of accounts have been impounded, however, the Ld.AO even in the last order sheet entry passed on 25/12/2018, mentioned that the case of the assessee was selected for "Limited Scrutiny". The AO has not mentioned in the said order sheet entry anything regarding Compulsory Scrutiny. Therefore, once the AO was convinced that the case was selected for "Limited Scrut....
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....to P&L A/c, he cannot advocate that the declaration should have been assessed u/s.69, 69A and 69C. The amounts assessed under Section 69, 69A and 69C are never part of P & L A/c. Whereas in the case under consideration, the assessee has included survey declaration in P & L A/c and the ld.Pr.CIT has observed it to be correct entry. In these facts and circumstances of the case, the Assessment Order cannot be said to be erroneous and prejudicial to the interest of the Revenue. 14. Therefore, we hold the order u/s.263 as not sustainable in law. Thus, the ground of appeal number 1 & 5 of the assesseeare allowed. 15. In this case ld.AR claimed that the AO had verified all the facts related to the disclosure made by assessee during the survey and verified that the same has been offered for taxation. On perusal of the order sheet entry dated 25.12.2018, it is observed that the Assessing Officer has mentioned following things in the order sheet : "A survey action u/s.133A of the Act was carried out on 26/08/2015 at the business premises of the assessee company. The assessee has declared an amount of Rs.7,50,000/- on account of excess cash, Rs.10,03,700/- on account of unaccou....
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....iction under section 263 of the Act. " Unquote. 16.4 The Hon'ble Bombay High Court in the case of CIT Vs. Future Corporate Resources Ltd in IT Appeal No.1275 of 2017 vide order dated September 29, 2021 held as under : Quote ," 7. In the order of PCIT it is stated "in paragraph 4.3 of the assessment order, the Assessing Officer has recorded that from the details submitted by the assessee and the explanation given by him, it was observed that assessee had regular business connection with the company in which investment had been made and also there was business income to the assessee from the same. Therefore, interest expense debited by the assessee has not been considered for the calculation of disallowance under section 14A because the same has been incurred for the purpose of business." The PCIT therefore agrees that the Assessing Officer has recorded from the details submitted by respondent and the explanation given by respondent that the assessee had regular business connection with the company in which investment has been made and also there was a business income to the assessee from the same. He notes that the Assessing Officer, therefore did not consider the calcul....