AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 650
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.... each year is sustainable or not? 3. The facts on all 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....
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....able income at Rs. 3,44,05,554/- , which is 8% of the alleged gross 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....
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.... 139(1) of the Act in Form ITR-4S on 28.08.2015 declaring therein a Gross Total Income of Rs. 4,53,403/- comprising 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 2....
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....request to investigate the matter, copy enclosed at Page 3 of the P/b for AY 2015-16. 9. Pursuant to the above, the Assessee duly submitted and produced his original PAN Card and Aadhaar Card. On verification of the PAN card and Aadhar 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....
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....e. The same was opened by some unknown fraudulent person in the forged Pan and Aadhar card of the assessee. It was submitted that the assessee has filed various police complaints explaining his case. Copy of the forged PAN and the Aadhar along with all the Police Complaint and the FIR filed by the 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....
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.... AY 2015-16. 16. The Assessee once again submitted a complain to the Local PS, Uttarpara, West Bengal on 25/10/2021. Copy of the said Complaint is enclosed at page 6-8 of the P/b filed for AY 2015- 16. In the given set of facts, the Assessee also filed an Affidavit dated 25/11/2021 before the Notary Public, Kolkata, wherein all the facts of the case of the Assessee were stated and put under 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 men....
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....the relevant years. 20. Aggrieved, the assessee is in appeal before Your Honours. SUBMISSIONS: Grounds 1-4: Order passed u/s 263 of the Act dated 14-12-2023 is not as per law since the assessment order dated 28-09-2021 is neither erroneous nor prejudicial to the interest of the revenue as a plausible view was taken by the AO during assessment. 1. At the outset, it is relevant to quote and analyse the said Section 263 of the Act which 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....
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....tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suomotu 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 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 Co....
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....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 in the forged Pan card and Aadhar card of the assessee. It was submitted that the assessee has filed various police complaints explaining his case and also submitted all his personal and business details including its bank details and accounts. On the basis of the submissions filed by the assessee, the learned AO took a plausible view that the total receipts of Rs. 30,47,35,796/- (Rs. 30,03,78,690 + Rs. 43,57,106) during the financial year 2014-15 and Rs. 43,08,96,425/- ( Rs. 42,63,85,896 + 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....
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....on 68 of the Act and find that the provisions of section 68 of the Act are applicable to the money credited during the year in the books of the accounts qua which the assessee has failed to furnish any details thereby not proving the identity, creditworthiness of the creditors and genuineness of the transactions. But this is not the case before us. We observe that these liabilities represented trading liabilities and are beyond the ambit of Section 68 of the Act." As such, the very foundation of initiation of proceedings u/s 263 of the Act is without jurisdiction and hence bad in law. 6. Even otherwise, the assessment order is neither erroneous nor prejudicial to the interest of the revenue. As per the 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 supre....
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....also not been disclosed, the question, whether entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative. The record goes to show that there is no finding nor any material has been referred to about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales. " 7. Here, it may kindly be noted that since the assessee outrightly denied having opened the impugned 7 Bank accounts and having made any such transactions, appeal was filed before the learned CIT(A) by the assessee against the impugned assessment orders. 8. In the present case, it is evident from the facts that during assessment a specific query was raised by 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 ....
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.... Reliance in this regard is placed on the judgment of the jurisdictional ITAT, Kolkata in the case of J L Morison (India) Ltd Vs ACIT (ITA No. 786 (Koi) of 2010) wherein it was held that "Zt is now settled law that if, while making the assessment, the AO examines the accounts and other details, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the Id. C.I.T., while exercising his power under sec. 263 of the Act, is not permitted to substitute his own view about the computation of income in place of the income assessed by the A.O., unless the order of the A.O. is patently unsustainable in law. " Aggrieved, the Revenue went in appeal before the Hon'ble Calcutta High Court. Dismissing, the appeal of the revenue, the Hon'ble HC vide its judgment dated 15-05-2014 [2014] 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 wo....
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....f Revenue ; or where two views are possible and the Income-tax Officer has taken one view 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." 6. Further, the Hon'ble Supreme Court in the case of Pr. CIT v. Canara Bank Securities Ltd. [2020] 114 taxmann.com 545 dismissed the department's appeal affirming the view taken by the Bombay High Court in Pr. CIT v. Canara Bank Securities Ltd. [2020] 114 taxmann.com 544, wherein the High Court held that the question whether the income should be taxed as business income or has arisen from other source was a debatable issue and the Assessing Officer had taken the plausible view that it was a business income after due enquiries and therefore not open for the Commissioner to take such 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 Au....
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....d on 19-03-2021 in the case of The Peerless General Finance & Investment Company Limited vs DCIT (I.T.A. No. 892/KOL/2019) wherein it was held that, 16. As is evident from the submission made by the assessee before the Assessing Officer during the course of assessment proceedings, the actual sale consideration adopted by the assessee for computation of capital gain arising from the sale of concerned flats which was lower than the stamp duty valuation was duly explained by the assessee and the same was also supported by a valuation report of the registered valuer, which had valued the market value of the flats at Rs. 5.84 crores just before its sale by the assessee. It is also relevant to note here that a specific request was also made by the assessee to the Assessing Officer to refer the matter relating to the valuation of the property to DVO in terms of section 50C(2) of the Act if the lower sale consideration actually received by the assessee 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 I....
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....e Commissioner does not agree, the order passed by the Assessing Officer cannot be treated as erroneous order prejudicial to the interest of the revenue. The principles laid down in the aforesaid decision were reiterated by the Supreme Court in CIT v. Max India Ltd. [2008] 166 Taxman 188/[2007] 295 ITR 282 and recently in Ultratech Cement Ltd. v. State of Rajasthan [2020] 117 taxmann.com 807 (SC). 9. In the backdrop of aforesaid well settled legal position, we may advert to the facts of the case. From perusal of the order passed by the Commissioner of income Tax, it is evident that he has invoked powers under section 263 of the Act, on the ground that the Assessing Officer has not satisfied itself that the assessee was engaged in the business of purchase and sale of plots and Assessing Officer has not brought any material on record to show that investment in the property was made for the purposes of trading. However, it is pertinent to mention here that the Commissioner of 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 questio....
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....order is erroneous and prejudicial to the interest of the revenue as has been decided in the case of D. G Housing (India) Pvt. Ltd. (supra). We also note that the AO has examined these issues and has taken a plausible view on the issue. In case where the view taken by the AO is according to the PCIT is not correct view and AO should have taken an another view. In our opinion when the AO has taken a plausible view then the PCIT cannot be invoked u/s 263 of the Act to justify the assessment framed on the ground that he does not agree with the view of the AO and that the AO should have taken a different view. The case of the assessee finds support from the decision of Hon 'ble Bombay High Court in the case of Gabriel India Ltd. (supra). Accordingly we are not in a position to sustain the order of PCIT and same the thereby quashed. 6. In the result, appeal of the assessee is allowed. " Reliance is also placed on recent the judgment of the Hon'ble ITAT Ahmedabad in the case of Conitrade Commodities Services 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 inco....
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....in these accounts. Therefore, instead of treating them as a gross turnover, the ld. Assessing Officer should have made additions on account of unexplained credits. 13. We have heard the ld. Representatives and with their assistance gone through the record carefully. Before we embark upon an enquiry on the facts and issues agitated before us to find out whether the action u/s 263 of the Act, deserves to be taken against the assessee or not, it is pertinent to take note of this section. It reads as under:- "263(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 interest 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.- For the removal of doubts, it is hereby declared that, for the purposes of this su....
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....the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show-cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by m....
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.... (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 17. A perusal of the show-cause notice issued by the ld. Commissioner ....
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.... 06.10.2023. As per your explanation it is seen that a huge fraud was committed wherein the identity of you was stolen and tampered with and on the basis of the forged/fraud KYC documents, and trade licences, bank accounts were opened and a huge transactions were carried out of fraudulently in your name. Please substantiate the same with proper documentary evidences. You are requested to produce the following documentary evidences on the day of hearing i.e. on 17.11.2023 at 2PM before the undersigned: (i) Books of accounts. And Balance Sheet for the F. Y. 2014-15 (Audited books of accounts, if any) including Ledger for the F.Y 2014-15 as well as proof of Vouchers invoices (in original). (ii) Purchase and sales register for the F.Y. 2014-15. (iii) Cash transaction and Bank transaction details of all banks for F.Y. 2014- 15. (iv) Please furnish details regarding the result of the enquiry / investigation made by Police, of Konnagar PS against your FIR dated 24.04.2016 and 25.10.2021. Your case is fixed for hearing on 17.11.2023 at 2 PM in Room No. 2/30 of Income Tax Building, 3, Government Place, Kolkata - 700001. ....
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....of the cumulative amount of the disclosed and undisclosed deposit as turnover income of the assessee for the Assessment Year 2015-16 and added the shortfall profit amount of Rs. 2,43,78,864/- coupled with returned income as assessed income vide order u/s 147 read with section 144 and 144B of the Income Tax Act, 1961. The Assessing Officer has made an estimated addition of Rs. 2,80,70,534/- which is not based on proper appreciation of facts and law. The Assessing Officer has not given any reason whatsoever and arbitrarily computed the income of Rs. 2,43,78,864/- @8% on entire amount deposited instead of making an addition of the total credit of Rs. 30,03,78,690/- in the Bank accounts of the assessee. 7.6. It is also relevant to note that as per Section 115BBE, income tax shall be calculated at prescribed rate for the relevant A.Y. where the total income of assessee includes following income: 1. Income referred to in Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D and reflected in the return of income furnished under Section 139; 2. or b) Which is determined by the Assessing Officer and includes any income referred to in Section....
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....he Tax liability without concluding the finding. He ought to have issued notice to the Police Authorities as well as to the Commercial Tax Investigating Authorities for submission of their report. He ought to have first determined whether these accounts belong to the assessee, only thereafter taxability of the amounts available in those accounts would have fallen upon the assessee. 21. A perusal of the impugned orders would reveal that neither the ld. CIT has applied his mind analytically while assuming jurisdiction for taking cognizance under section 263. We have specifically noticed that details in paragraph no. 17 of this order and we find that after narrating the facts, ld. CIT just observed on verification of the record, it is found that the amount of Rs. 42,14,37,039/- was to be added and taxed instead of 8%, hence under- assessment occurred, which is adverse to the revenue. We failed to appreciate, which aspect was verified by him because he has just reproduced the proposal sent by the Additional CIT, Circle-43. There is no independent application of mind at his end for taking cognizance under section 263. 21.1. Apart from the above, while dealing with explanation of a....