TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 650
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....ll vital points are common in both the assessment years. Even the impugned orders are almost verbatim except variation in dates and quantum mentioned in each year. Therefore, we deem it appropriate to take facts for the facility of reference from A.Y. 2015-16. We deem it appropriate to dispose of both these appeals by this common order. 4. Brief facts of the case are that the assessee at the relevant time was engaged in trading of cloth including sarees. He has filed his returns of income on 28th May, 2015 and 29th July, 2016 declaring total income at Rs. 3,41,700/- and Rs. 4,15,530/- in A.Y. 2015-16 and 2016-17 respectively. These returns were filed by the assessee under presumptive taxation scheme contemplated in section 44AD of the Income Tax Act. In other words, section 44AD would provide that if a small assessee, whose gross turnover does not exceed 50 lakhs rupees, then such an assessee can compute his income @ 8% of the gross receipts achieved by him. The assessee has gross turnover of Rs. 39,48,887/- in A.Y. 2015-16 and Rs. 49,48,857/- in A.Y. 2016-17. He claimed deduction under Chapter VI-A of Rs. 1,11,708/- from the gross total income of Rs. 4,53,403/- in A.Y. 2015-16. S....
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....oss turnover of Rs. 43,08,96,425/-. 9. The Additional Commissioner of the Range forwarded a proposal to the ld. CIT for initiating proceedings under section 263 of the Income Tax Act against the assessee. The ld. CIT has reproduced the proposal made by the ld. Addl. CIT, Range-43, Kolkata. Thereafter issued a notice under section 263 and invited explanation of the assessee as to why assessment orders are not to be set aside being erroneous and prejudicial to the interest of Revenue. The ld. CIT was of the view that the alleged credit of sales ought to be treated as unexplained cash credit against the name of assessee. The ld. Assessing Officer has erred in treating it as a gross turnover. The copy of the show-cause notice has been placed on record by the ld. Counsel for the assessee. These are available on pages no. 58 to 66 for A.Ys. 2015-16 and 2016-17. 10. In response to the show-cause notice, the assessee appeared and filed written explanation. We will refer such explanation while taking note of the submissions made by the ld. Counsel for the assessee. In brief, the stand of the assessee was that somebody has personated his identity and opened these fake accounts in his name.....
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....ing therein a sum of Rs. 4,29,475/- under Profits from Business on presumptive income @ 8% of the turnover and Income from Other Sources of Rs. 23,928/- (i.e. Saving Bank Interest). 4. The Assessee for FY 2015-16 (AY 2016-17) reported Gross Turnover of Rs. 49,48,857/- and Return was duly filed u/s 139(1) of the Act in Form ITR-4S on 29.07.2016 declaring therein a Gross Total Income of Rs. 5,01,272/- comprising of Rs. 4,81,690/- under Profits from Business on presumptive income @ 8% of the turnover and Income from Other Sources of Rs. 19,582/- (i.e. Saving Bank Interest). 5. On 01.04.2016 the Assessee randomly received certain information from Commercial Tax Authorities that he had by the fraudulent act of opening seven bank accounts under five alleged proprietary concerns received total amount of Rs. 1,12,41,47,898/- over the years tabulated below: Financial Year Assessment Year Amounts received (Rs.) 2012-13 2013-14 Rs. 7,77,42,891/- 2013-14 2014-15 Rs. 31,96,40,421/- 2014-15 2015-16 Rs. 30,03,78,690/- 2015-16 2016-17 Rs. 42,63,85,896/- TOTAL Rs. 1,12,41,47,898/- The impugned 7 Bank A/cs is as follows: S. No Name of the Bank Branch ....
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....ar card used to initiate the Bank Accounts and the Trade Licences of the 5 Proprietary concerns it was found that forged photo and signature of the Assessee was used on both the said cards used to open the impugned bank accounts. Thus it was then revealed to the knowledge of the Assessee that a huge fraud was committed wherein the identity of the Assessee was stolen and tampered with and on the basis of the forged/fraud KYC documents, the said Trade Licences, bank accounts were opened and the said huge transactions were carried out all fraudulently in the name of the Assessee. 10. The Assessee was constantly interrogated in the said case by the Commercial Tax Authorities (VAT) (Investigation Unit) and the Officers of Economic Officer Wing, Enforcement Branch (Kolkata Police) Co-operating with the Police and the VAT Authorities, the Assessee provided all explanations and documents that were in his possession. 11. Next, on 15.06.2018, due to the constant interrogation and the Notices received by the VAT Authorities, the Assessee filed a Reminder to the Police Station to speed up the investigation process and to clear the fraud. Further FIR was also filed on 08.03.2020, copy enclo....
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.... assessee were all submitted before the learned AO. The original Pan Card, Aadhar Card and Voter Id of the Assessee was also submitted. The assessee also submitted the details of the Bank A/cs actually held by him and year wise receipts in these bank accounts as follows: S.No. Bank Name Account Number Total Credit during FY 2014-15 Total Credit during FY 2015-16 1. HDFC Bank Ltd 12421930004224 Rs. 14,18,355/- Rs. 11,77,356/- 2. Indusind Bank Ltd 100004703638 Rs. 13,02,550/- Rs. 30,83,475/- 3. State Bank of India 322523821922 Rs. 15,12,218/- Rs. 1,22,057/- 4. United Bank of India 1840010011556 Rs. 1,23,983/- Rs. 1,27,641/- Total Credits Rs. 43,57,106/- Rs. 45,10,529/- Copy of the ITR and bank accounts were also submitted. Copy of the reply is enclosed at page 1-57 of Paper Book 2. 14. However, the learned AO was not satisfied with the submissions of the assessee. He passed the Assessment Order u/s 147 r.w.s 144 of the Act wherein he opined the impugned receipts as per Commercial Tax Authorities of Rs. 30,03,78,690/- for AY 2015-16 and Rs. 42,63,80,896/- for AY 2016-17 to be the trading receipts of the Assessee and ....
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....nder oath. Copy of the said Affidavit is enclosed at page 36-42 of the P/b for AY 2015-16. 17. Subsequently, revision notice u/s 263 of the Act dated 14/07/2023 was issued by the learned PCIT for both the assessment years on the sole ground that the learned AO erred in adding only 8% of the total receipts as per the information of the Sales Tax Authorities instead of adding the entire receipts credited in the impugned bank accounts which has made the assessment order erroneous and prejudicial to the interest of the revenue. Copy of the notice is enclosed at page 58-66 of paper book 2. 18. In reply, the assessee filed a detailed reply, enclosed at page 20-35 of paper book filed for AY 2015-16, wherein it was submitted that none of the 7 impugned bank accounts as mentioned in the assessment order and its transactions pertained to or belonged to the Assessee. The same was opened by some unknown person misusing the Pan Card and Aadhar card of the assessee. It was submitted that the assessee has filed various police complaints explaining his case. It was also submitted that the assessee has filed an affidavit under oath stating that the said bank accounts does not belong to the asse....
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....ich reads as follows: "263. Revision of orders prejudicial to revenue.-(1) The 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." Vide Finance Act, 2015 w.e.f. 01-06-2015 a new explanation 'Explanation 2' was added to section 263 of the Act which reads as follows: Explanation 2.- For the purposes of this section, it is hereby declared that an order passed by the AO shall be deemed to be 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....
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.... is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. ''The phrase "prejudicial to the interests of the Revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law." In CIT v. Max India Ltd [2007] 295 ITR 0282-SC it was held that: "The phrase "prejudicial to the interests of the Revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of th....
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....96 + Rs. 45,10,529) during the financial year 2015- 16 comprising of undisclosed receipts as per information from the Sales Tax Department and disclosed receipts as shown by the assessee in the return filed for the year respectively represents the total turnover of the assessee and since the assessee had filed return u/s. 44AD of the Act under presumptive taxation and had shown net profits @ 8% on the turnover, net profits were computed by him @ 8% on total turnover of Rs. 30,47,35,796/- and Rs. 43,08,96,425/- for AY 2015-16 and AY 2016-17 respectively. 4. Subsequently, revision notice u/s 263 of the Act dated 14/07/2023 was issued by the learned PCIT for both the assessment years on the sole ground that the learned AO erred in adding only 8% of the total receipts as per the information of the Sales Tax Authorities instead of adding the entire receipts credited in the impugned bank accounts which has made the assessment order erroneous and prejudicial to the interest of the revenue. The relevant extract of the notice is reproduced below: "On verification of the records it is found that the amount of Rs. 30,03,78,690/- (Rs. 30,47,35,796/- minus Rs. 43,57,106)/- was to be added....
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.... information received by the learned AO from the Sales Tax Department, the assessee has undisclosed receipts on account of undisclosed sales. It is a trite law that entire undisclosed sales cannot be added. Additions can be made only to the extent of the estimated profits embedded in these sales. Since the assessee had offered net profits @ 8% of the total turnover in his return of income, the learned AO rightly considered only the profit element in the alleged supressed sales as per the Sales Tax Department. Here, your kind attention is invited to the judgment of the Hon'ble High Court of Gujarat, in the case of President Industries vs CIT (2002) 124 taxmann 654 wherein it was held that, "2. The facts giving rise to the present case are that during the course of survey conducted on the premises of the assessee on 1-12-1994, from the excise records found, inference was drawn by the Assessing Officer from the movement of finished goods from the premises of the assessee to godowns that sales amounting to Rs. 29,01,300 have not been disclosed in the books of account. The Assessing Officer made the addition of the entire sum of the said undisclosed sales as income of the assessee for....
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....y the learned AO with respect to the transactions in the 7 impugned bank accounts. The assessee had filed written submissions along with documentary evidences before the learned AO explaining that the said bank accounts does not belong to him. On perusal of the submissions made by the assessee, the learned AO took a possible view which is not unsustainable in law, that 8% of the total receipts in the impugned bank accounts should be taken as the total turnover of the assessee as per section 44AD of the Act. As such, it cannot be said that the AO had failed to examine this issue during the assessment stage to render the assessment order erroneous. Here, please note that if a query has been raised at the time of assessment and the same was duly responded to by the assessee, it would not lead to the conclusion that the AO has passed the assessment order without making adequate enquiries/verification which he was required to make so as to render the assessment order erroneous and prejudicial to the interests of the revenue. Further, it is a trite proposition that in a case where the AO has taken a plausible view, then the CIT is not permitted to substitute his own view because he dis....
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.... 46 taxmann.com 215 (Calcutta) held that, "If the Assessing Officer has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the Assessing Officer in that case can be set aside in revision. It has to be shown unmistakably that the order of the Assessing Officer is unsustainable. Anything short of that would not clothe the Commissioner with jurisdiction to exercise power under section 263 The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered by the Tribunal to be a possible view, strengthens the presumption under clause (e) of section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus, converted into a conclusive proof of the fact the order was passed by the Assessing Officer after due application of mind. [Para 89] The Tribunal had before them the records of both the Assessing Officer and the Commissioner After examining the records both of the Commissioner and the Assessing Officer, the Tribunal reached the conclusion ....
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....an order in revision. 7. In the light of the above, we are of the considered view that the learned Tribunal had rightly granted reliefs in favour of the assessee. " Reliance is also placed on the judgment of the Bombay High Court in the case of Commissioner of Income-tax v. Sunbeam Auto Ltd [2011] 332 ITR 0167-DEL wherein it was held that: "The Assessing Officer in the assessment order is not required to give a detailed reason in respect of each and every item of deduction, etc. Whether there was application of mind before allowing the expenditure in question has to be seen. If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income- tax Act, 1961, merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open. Commissioner of Income-tax v. R. K. Construction Co [2009] 313 ITR 0065-Guj, On appeal by the Department dismissing the appeal, it was held that "since all the necessary details were furnished to the Assessing Officer, there was no reason for the Commissioner to invoke the revisional jurisdiction unde....
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.... than the stamp duty value as justified by it was not acceptable. No such reference, however, was made by the Assessing Officer and keeping in view the same as well as all the facts of record, we find merit in the contention of the Id. Counsel for the assessee that the explanation/justification offered by the assessee in the matter was found acceptable by the Assessing Officer and on appreciation thereof a well considered view was taken by the Assessing Officer. This issue thus was examined by the Assessing Officer during the course of assessment proceedings and after having satisfied himself with the explanation/justification offered by the assessee, which was duly supported by the valuation report of the Registered Valuer, a possible view was taken by the Assessing Officer accepting the stand of the assessee. In the case of R.K. Construction Co. (supra) cited by the Id. Counsel for the assessee, it was held by the Hon'ble Gujarat High Court that when the necessary details and documents were furnished by the assessee to the Assessing Officer and a particular view was taken by the Assessing Officer on the basis of the same, it was not open for the Commissioner to take a different....
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....f Income-tax as well as the tribunal has failed to appreciate that the Assessing Officer had put 36 questions to the assessee to ascertain the nature of business of the assessee and from perusal of questions Nos. 16 and 18, it is evident that the aforesaid questions specifically pertain to issue of classification of income. It is pertinent to note that several notices were issued to the assessee and detailed hearings were conducted and the Assessing Officer in its order has mentioned the details of all the properties with dates of purchase and sale and from perusal of the same, it is evident that the properties were brought and sold within a maximum period of 20 months, from which it is evident that the assessee was engaged in real estate business. The Assessing Officer has conducted sufficient enquiry as required under Explanation 2(a) to Section 263 of the Act and there was material available on record to arrive at a conclusion, which was recorded by the Assessing Officer. It is trite law that merely because a different view can be taken, the powers under section 263 of the Act cannot be invoked. In view of preceding analysis, the substantial question of law framed by this cour....
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....es Ltd. vs PCIT dated 27-09-2023 [2023] 156 taxmann.com 369, wherein it was held that, "11. On the second issue of the claim of loss in the return of income to the tune of Rs. 7,52,06,488/- as opposed to a meager Rs. 7 lakhs reflected in the computation sheet attached to the assessment order, we have noted from the Id. Pr. CIT order that the assessee had explained that there was a mistake in the computation sheet, and the assessee had filed an application seeking rectification of the same. The Id. Pr. CIT taking note of the above facts, has directed verification of the said claim of the assessee. It is settled law that the power under section 263 of the Act cannot be exercised for verification of the issue. There has to be a finding of error causing prejudice to the Revenue, by the Id. Pr. CIT, for valid exercise of revisionary power under section 263 of the Act. Verification precedes finding of the error. Therefore, any direction for verification of the claim u/s. 263 of the Act is not in consonance with the requirement of law. Accordingly, the ld. Pr. CIT's order, directing verification of claim of carry forward of current year's business loss is also set aside.. 12. In sum a....
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....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- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income Tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) "record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deem....
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....the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. 15. A perusal of sub-clause (c) of the above would contemplate that if any order, which is subject matter for revision under section 263 is challenged in appeal, then, on the items which are subject matter of appeal, no power under section 263 could be exercised by the ld. Commissioner. We may elaborate further, for example- an assessment order was passed, it contains five issues, which were challenged before the ld. CIT(A), but ld. Assessing Officer failed to look into few issues, which may arise from the record, then inspite of the assessment order being challenged before the ld. CIT(A), the ld. Commissioner would have jurisdiction on such items, which are not subject matter of appeal in that assessment order. 16. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various....
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....t ld. Commissioner has narrated the brief background of the assessment proceedings, namely assessee has filed the return under section 44AD, ld. Assessing Officer got information from Sales Tax Authorities, Bureau of Investigation, Commercial Taxes. He has recorded the reasons and reopened the assessment. The ld. CIT further observed that in the information, it has been exhibited that specific amounts were received by the Bank account maintained in the name of assessee's proprietorship. These facts were supplied to him by the ld. Additional CIT, Range-43, Kolkata. Thereafter the contribution of the ld. Commissioner for forming the opinion that action under section 263 is required to be very limited, which can be noticed in the following paragraph:- "On verification of the records, it is found that the amount of Rs. 42,14,37,039/- (Rs. 42,63,85,896/- - Rs. 49,48,857/-_ was to be added and taxed instead of 8%. Hence an under-assessment occurred which is adverse to the Revenue and an addition to the tune of Rs. 38,74,47,015/- (Rs. 42,14,37,039/- minus Rs. 3,39,90,024/-) is to be made. In view of the above, the impugned assessment order under section 147 read with section 144 of t....
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....rough Email ID [kolkata, [email protected]] yours faithfully, Sd/- (Tajinder Pal Singh) Pr. Commissioner of Income Tax-13, Kolkata This notice remain non-complied from the end of the assessee. Hence, another opportunity was provided to the assessee on 17/11/2023 vide DIN: ITBA/COM/F/17/2023- 24/1058032103(1). 4.3. Through letter dated 07/11/2023 and 17/11/2023, the assessee was asked to submit his audited Balance Sheet and Books of Accounts for the F.Y. 2014-15 along- with proof of vouchers/ Invoices in original, purchase and sales register, details of transactions through cash and banking channel for the relevant Financial Year. Furthermore, the assessee was asked to apprise about the progress of complaint lodged by him in Konnagar Police Station. In response to the notices dated 17.11.2023, the authorized representative of the assessee has appeared with partial reply and requested for additional time to bring on record the evidences regarding the progress about the complaint lodged by the assessee before the law enforcing authority. Subsequently, he was granted time up-to 04.12.2023. It is observed that till date i.e. 14.12.2023, the assessee has failed to f....
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....uch penalty shall not be levied when the income under Section 68, 69, etc., has been included in return of income and tax has been paid on or before the end of relevant previous year. No deduction in respect of any expenditure or allowance [or set off of any loss] shall be allowed to the assessee in computing his income referred to in clause (a) of sub-section (1) of Section 115BBE. In view of the encompassing facts and circumstances of the case and respectfully following the ratio of judgment of Hon'ble Supreme Court, various High Courts as well as the other authorities including the Hon'ble ITAT Bench, Mumbai, as discussed in detail in the preceding paragraphs, the Assessing Officer is directed to re-compute income at Rs. 30,07,20,390/- and give necessary effect as per law and pass necessary order accordingly". 20. It is pertinent to observe that at the first instance, the assessee submitted that he has not opened any bank accounts, rather somebody has personated him. His case is based on the issue that his IDs have been misused and some unknown person has carried out these transactions in his name. He could only know about this when he received information from Sale Tax Autho....
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....ee. Once the assessee has been emphasizing that these accounts do not belong to him and he has lodged a FIR in such situation, there should be adjudication of this aspect but ld. CIT simply ignored this aspect under the garb that the assessee failed to substantiate this issue. It cannot be substantiated by the assessee. It is to be investigated by the ld. Assessing Officer or by the ld. CIT. The role of the ld. Assessing Officer is not only a prosecutor but he has to play a role of an adjudicator. That very role has to be played by the ld. Commissioner while exercising the powers under section 263. 22. We could have set aside to the issue to ld. CIT for recording a categorical finding on this fold of issue but for the reasons to be recorded by us in the subsequent paragraph, we do not deem it necessary to set aside this issue. 23. As observed earlier, we have construed the meaning of clause (c) of section 263(1). The ld. CIT in the present proceeding has treated the assessment orders as erroneous and prejudicial to the interest of the revenue, but failed to note that these assessment orders are challenged before the ld. CIT(Appeals). The assessee has been disputing before the ld.....