TaxTMI 
TaxTMI 
2022 (11) TMI 1427
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.... 18(6) of ITAT Rules. 4. Briefly stated, the facts of the case are that a survey action u/s 133A of the Act was carried out at the premises of the assessee on 15.09.2016 wherein the assessee admitted additional income of Rs. 9.50 lakhs largely on account of unexplained cash. 5. Return for the year was e-filed on 17.10.2017 declaring an income of Rs. 13,52,590/-. Return was selected for scrutiny assessment. During the course of scrutiny assessment proceedings, vide notice dated 01.11.2019, the Assessing Officer raised the following queries: "1. Necessary explanation w.r.t. fail in G.P. rate as compared to immediate preceding year from 21.01% to 16.09% in the year under consideration. 2. Comparative chart of expenses debited to P & L account as compared to immediate preceding year as the same has not been found enclosed with the reply. 3. Details of additions made in unsecured loan alongwith copy of bank statements". 6. Relevant reply of the assessee reads as under: "To The Income tax Officer Ward-1, Karnal Sub : Supply or information in connection with assessment proceedings for the assessment year 2017-18 Reg : Bharat Malhotru Prop M s Shri Nathji Jewels, ....
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....46% which is even more then the G.P. rate of 2101% as declared in the earlier year. That however, as for as the question of purchase and sales vouchers is concerned, a chart of purchase rate and sale rate on monthly basis reflecting the purchase rate of the purchases made by the assessee and sales made by the assessee is hereby submitted. As per this chart the maximum sale rate during the y ear is Rs. 30000 - per 10 gras and the minimum purchase rate of Rs. 25200/- per 1C gras. Even it die entire sale rale is taken at Rs. 30000/- and purchase rate at Rs. 25200/-, the G.P. rate comes to 16% and the assessee have already disclosed the G.P. rate as ! 6. 9%. Copies of purchase and sales vouchers mentioned in the chart are hereby submitted." 9. After considering the reply of the assessee, the Assessing Officer framed assessment order u/s 143(3) of the Act at the returned income of the assessee. 10. Assuming jurisdiction conferred on him by provisions of section 263 of the Act, the PCIT issued the following show cause notice: "M/s/Mr/Ms Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of THE INCOME TAX ACT, 1961 - Assessment Year 2017-18. In this regar....
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.... so far as it is prejudicial to the interest of revenue. The same is, therefore, required to be suitably amended/modified u/s 263 of the Income Tax Act, 1961. You are, therefore, required to show cause as to why an appropriate order u/s 263(1) of the Act setting aside the assessment order passed as on 23.12.2019 should not be passed. In this connection, you may send your written reply along-with supporting documentary evidences on the email-id( [email protected]) or through e-proceedings by 14.03.2022. In case of no reply is received, it shall be assumed that you do not wish to say anything in the matter and the matter would be decided as per material on record without any further notice/intimation to you. PRATAP SINGH PCIT, Rohtak" 11. The assessee filed detailed reply strongly contending as to why provisions of section 263 of the Act are not applicable on the facts of the case. Detailed reply of the assessee is exhibited at pages 101 to 107 of the Paper Book. 12. The reply of the assessee did not find any favour with the PCIT who was of the strong belief that the surrendered income was in the nature of unexplained cash and the same was liable to be added u/s 6....
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....tated sections so defined which is either not reflected in the return of income or determined by the assessing officer and in both the cases it will be covered by the provisions of section 115BBE of the Act and the rate of taxation has been increased from 30% to 60% on such specified income. 20. There is, therefore nothing stated in the pre-amended or post amended provisions of section 115BBE of the Act that where the assessee surrenders undisclosed income during search action for the relevant year, the tax rate has to be charged as per provisions of section 115BBE of the Act. Therefore, the applicability of the amended provisions which prompted the PCIT to assume jurisdiction under section 263 of the Act is highly debatable issue, and therefore, in our understanding of the law, the PCIT has wrongly assumed jurisdiction. 21. In light of the above, reliance placed by the ld. DR/PCIT on the decision of the Hon'ble Punjab & Haryana High Court [supra] is misplaced, in as much as in that case, the Hon'ble High Court has considered the following facts: "5. The point for determination in this appeal is, whether Rs. 5,00,000 which was surrendered by the assessee during the cour....
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....efore, the income surrendered by the assessee is also part of business income. 24. Merely because in the return of income inadvertently an amount has been shown under the head "Income from other sources", would not change the colour of income surrendered. 25. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio: "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, 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. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessi....
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....ecords, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at 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 requiremen....
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....oner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income- tax Officer to re-examine the matter. That, in our opinion, is not permissible. Hence the provisions of section 263 of the Act were not applicable to the instant case and, therefore, the commissioner was not justified in setting aside the assessment order." 27. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercis....