TaxTMI 
TaxTMI 
2024 (8) TMI 1641
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.... are being disposed off by this common order. 3. At the outset, the ld. AR has submitted that the matter in ITA No. 644/JP/2024 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 644/JP/2024 is taken as a lead case. 4. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal in ITA No. 644/JP/2024 on the following grounds; "1. Under the facts and circumstances of the case, order passed by the Ld. PCIT u/s 263 is illegal & bad in law and the same be quashed. 2. The Ld. PCIT has erred on facts and in law in holding that the assessment order dt. 23.04.2021 passed u/s 143(3) is erroneous in so far as it is prejudicial to the interest of revenue as the excess stock of Rs. 15,21,176/- found during the course of survey proceedings which has been disclosed by the assessee in his....
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.... noticed by the ld. AO that the assessee has declared the amount of Rs. 15,21,176/- in the return of income filed for the year under consideration and paid due taxes thereon. Accordingly, the assessment was completed as per provisions of section 143(3) of the Act on 23.04.2021. 6. On culmination of the assessment proceedings, the ld. PCIT called for the assessment records for examination. Upon examination of the assessment record, the ld. PCIT noted that though the assessee has disclosed the additional income on account of excess stock found as other income. But there is no finding by the ld. AO that the income so surrendered has been determined as income referred to in sec. 69. Secondly, in the computation of tax liability, the tax liability on the undisclosed income has been determined as per slab rate of taxation applicable to an individual and not as specified in sec. 115BBE. Thus, none of the aforesaid provisions referred in sec. 115BBE has been invoked by AO during the assessment proceedings. 6.1 Based on these set of facts, the ld. PCIT noted that in this case, the ld. AO has not applied proper provisions of the Act on the income declared and offered in the return....
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....erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind." Further in the case of Commissioner of Income Tax V/s Paville Projects (P) Ltd, the A.O had allowed the cost of Improvement to the assessee which was not as per law, the Honourable Apex Court upheld the action of the Commissioner of Income Tax u/s 263 while observing that "the scheme of the Income Tax Act is to levy and collect tax in accordance with the provisions of the Act, and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be erroneous and prejudicial to the interests of the Revenue" 7. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 23.04.2021 for A.Y. 2018-19 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO in a routine and casual manner without applying the applicable sections of the Act. T....
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....ed that clause (a) & clause (b) of Explanation 2 to section 263 provides that order passed by AO is deemed to be erroneous in so far as prejudicial to the interest of revenue if the order is passed without making enquiries or verification which should have been made or the order is passed allowing any relief without enquiring into the claim. In the present case, the AO after examining the facts has specifically noted that the surrender of excess stock of Rs. 15,21,176/- is income of the year under consideration. Thus when AO has taken a view, it is incorrect on part of Ld. PCIT to take a view that AO has not examined this issue and therefore invocation of clause (a) & (b) of Explanation 2 to section 263 is unjustified. Reliance in this connection is placed on the following cases:- Smt. Rekha Shekhawat Vs. PCIT (2022) 99 ITR (Trib.) 69 (Jaipur) (Trib.) In view of the fact that the unrecorded trade advances and cash in hand admitted during the course of survey u/s 133A emanated from and related to the real estate business carried on by the assessee and the same were later incorporated in the regular books of accounts, the additional income was in the nature of ....
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....me and also justification for various exemptions and deductions claimed in the return of income including the profit on sale of investments and the assessee having filed the break-up details of exempt income including exemption of long-term capital gain claimed u/s 10(38) in reply thereto, the Principal CIT was not justified in initiating revision proceedings on the basis that the AO has allowed the exemption without examining the claim. 2. It is a settled law that when the stock found in survey is clearly identifiable and related to the regular business of assessee, the alleged excess stock can be brought to tax only under the head business income and section 115BBE is otherwise not applicable. In this connection reliance is placed on the decision of Hon'ble Rajasthan High Court where the appeal filed by the department against the order of ITAT, Jaipur Bench in case of PCIT Vs. Bajargan Traders DBITA No. 258/2017 order dt. 12.09.2017 was dismissed. The Hon'ble ITAT in this case at Para 2.10 & 2.11 of the order held as under:- "2.10. We have heard the rival contentions and perused the material available on record. During the course of survey, the assessee has....
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....e. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head "business income" and not under the head income from other sources". In the result, ground No. 1 of the assessee is allowed." Similar view has been taken by Hon'ble ITAT, Jaipur Bench in case of DCIT Vs. Sh. Ram Narayan Birla ITA No. 482/JP/2015 order dt. 30.09.2016 and Sanjay Gupta Vs. ACIT ITA No. 292/JP/2023 order dt. 17.07.2023 (copy enclosed). In the present case also, excess stock has been duly incorporated in the books of accounts (PB 13) and the same has arisen in normal course of business of assessee. Therefore, such income is taxable at normal rate and not u/s 115BBE of the Act. Thus when there are favorable decisions on this issue, proceedings u/s 263 is bad in law for which the cases referred at Point No. 1 is relied upon. In view of above, order passed u/s 263 be quashed." 8. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: Sr. ....
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....income so disclosed is the same as of the business carried out by the assessee, the contentions raised by the ld. AR of the assessee is different and the case laws relied upon the ld. AR of the assessee are being on the different set of facts not applicable to the present facts of the case. Accordingly, the ld. DR relied upon the detailed finding as recorded in the order of ld. PCIT. 10. We have heard the rival contentions and perused the material placed on record. As the facts of the case reiterated in the order of the lower authority are not disputed the same are not repeated and the same is also reproduced to the extent required to deal with the facts of the case. The bench noted that in this case a survey action u/s 133A of the Act was carried out on 11.10.2017 at the business premise of the assessee firm Sandeep Micron, H-19, RIICO Industrial Area, Rajgarh, Alwar. In that survey proceedings, the stock of Rs. 22,60,188/- was found on physical verification, whereas as per books of account the available stock was Rs. 7,39,012/-. Thus, the stock of Rs. 15,21,176/- (Rs. 22,60,188 less Rs 7,39,012) was found in excess. In this regard the assessee was asked vide que....