TaxTMI 
TaxTMI 
2023 (5) TMI 272
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....f excess stock of Rs.30,01,449. b. Disallowance on account alleged cash payments in violation of Section 40A(3). even though, as was substantiated in the submission to the Ld. PCIT, there is neither any violation of S.40A (3) nor the excess income declared during survey has remained to be disclosed, which fact was duly examined by the AO during the assessment proceedings u/s 143(3). The appellant therefore prays that the order of the PCIT be annulled. The appellant craves leave to add to amend, alter, modify, delete or add a new ground of appeal before or at the time of hearing." Brief facts of the case: 2. As per the assessment order and the paper book of the assessee, the assessee is in the business of Manufacturing, trading of Gold & Silver Ornaments. The assessee is a firm. It had filed return of Income for A.Y. 2015-16 on 16/10/2015 declaring total income of Rs.15,06,560/-. The assessee's case was selected for scrutiny assessment. The assessment order u/s 143(3) for AY 2015-16 was passed on27/11/2017 accepting the returned income. 2.1 The Pr.CIT Pune after verification of records issued notice u/s.263 dated 16/2/2021 and then passed....
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....ment order. Since the order of the Assessing Officer has become infructuous in view of the order of the Hon'ble ITAT and hence, the stand taken by the Assessing Officer cannot be pleaded against this addition. Nothing else has been submitted by the assessee on this issue and hence, I presume that the assessee has nothing to submit further. I, therefore, add Rs.8,23,642/- in the returned income of the assessee." Unquote. Submission of Ld. Authorised Representative (ld.AR): 3. The Ld.AR of the assessee filed a factual paper book. The Ld.AR submitted that the assessee had declared undisclosed stock of Rs.30,01,499/- during the survey conducted on 19/12/2014. The Ld.AR submitted that the said stock has been shown in the Profit and Loss Account for A.Y.2015-16 by the assessee as the assessee had time to file the return of Income for AY 2015-16. This fact has been explained to the AO during the scrutiny assessment. The Ld.AR invited our attention to Paper book page 28 which was notice u/s 142 dated 29/09/2017 vide which specific question was asked regarding survey declaration. The assessee replied the said notice vide his letter dated 14/10/2017 which was at page number 31-39 of th....
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....f silver was not recorded in the books. The statement of the partner was recorded in the presence of Authorized representative Mr. S.P. Vaidya CA. The partner of the Assessee firm had admitted additional income as under : Excess Cash Found Rs.4,98,550/- Excess stock of gold Rs.29.64.321/- Excess stock of Silver Rs.37128/- Total for AY 2015-16 Rs.34,99,999/- 5.1 In answer to question number 18, the partner of the firm has specifically admitted that he has discussed the issue with the CA Mr. S.P. Vaidya who was present during the entire survey operation, and then admitted the declaration of additional income of Rs.34,99,999/- for AY 2015-16. Thus, there is no dispute that there was excess stock of Gold and Silver which was not recorded in the books. 5.2 The assessee in the return of Income for AY 2015-16 has shown the said excess stock found during the survey in the Trading Account in Closing Stock. The AO has accepted the returned Income of the assessee. It is the claim of the appellant assessee that AO had verified the issue of excess stock. However, the question before us is that had the assessee shown the unaccounted Excess Stock found during the sur....
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.... declared during the survey. Therefore, the assessment order is erroneous and prejudicial to the interest of the revenue. 6. The relevant Section 263 as applicable at that point of time is reproduced here as under : Revision of orders prejudicial to revenue. 263. (1) The 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 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 an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- ****** (b) "record" shall include and shall be deemed always to hav....
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.... erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which, should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. This amendment will take effect from 1st day of June, 2015. [Clause 65]" Unquote. 7. Thus, the Memorandum has clarified that the expression "erroneous inso far as prejudicial to the interest of revenue" was a contentious issue hence in order to provide clarity the explanation 2 has been introduced w.e.f. 01/06/2015. Thus, as per Explanation 2 of Section 263 an assessment order is Erroneous and Prejudicial to the Interest of the Revenue if the ld. Commissioner or ld. Pr. Commissioner of Income Tax is of the o....