TaxTMI 
TaxTMI 
2025 (11) TMI 409
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....ection 263 of the Act. 3. Facts of the case, in brief, are that the assesse is a partnership firm engaged in the business of trading in cloths. It filed its return of income on 09.10.2019 declaring total income of Rs. 43,62,190/-. In this case a survey action 133A of the Act was conducted on 06.03.2019 during which the assessee had made total declaration of Rs. 75,25,200/- as additional income out of which Rs. 2,04,120/- was on account of excess cash found and Rs. 73,21,080/- on account of excess stock. The assessee disclosed the above amount of Rs. 75,25,200/- in ITR for assessment year 2019-20. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 144B of the Act on 26.08.2021 accepting the returned income of Rs. 43,62,190/-. 4. Subsequently the Ld. PCIT on examination of records observed that the Assessing Officer has completed the assessment without making due verification and enquiries which were warranted in the facts and circumstances of the case. He noticed that the assessee has declared total income of Rs. 43,62,190/-. During the course of survey proceedings excess cash and excess stock of Rs. 75,25,200/- was found unrecorded in the books of account of the....
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....excess cash and excess stock found during the survey action to be business income and the provisions of section 115BBE of the Act are not attracted. 7. Referring to the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT reported in (2000) 243 ITR 83 (SC), he submitted that the Hon'ble Supreme Court in the said decision has held that where two views are possible and the Assessing Officer has taken one of the possible views which is legally acceptable, then such order cannot be subjected to revision u/s 263 of the Act. 8. Referring to the decision of Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. reported in (1993) 203 ITR 108 (Bom), he submitted that the Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well accepted policy of law that there must be a point of finality in all legal proceedings that stale issues should not be re-activated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of huma....
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....22) 145 taxmann.com 109 (Chandigarh - Trib.) iii) Hema Raman vs. PCIT vide ITA No.1012/Del/2022, order dated 12.05.2023 iv) DCIT vs. Vaishali Agro Soya Products vide ITA No.634/PUN/2024, order dated 11.09.2024 v) DCIT vs. Tulshiram Vithalrao Koyale vide ITA No.624/PUN/2024, order dated 31.07.2024 vi) Late Harilal Mavjibhai Patel vs. ACIT vide ITA No.2698/PUN/2024, order dated 25.04.2025 13. The Ld. DR on the other hand while relying on the order of the Ld. PCIT invoking the jurisdiction u/s 263 of the Act referred to the decision of the Hon'ble Punjab & Haryana High Court in the case of PCIT vs. M/s. Khushi Ram & Sons Foods (P.) Ltd. vide ITA No.126 of 2015, order dated 21.07.2016 and drew the attention of the Bench to para 13 of the order which reads as under: "13. It is not necessary that the surrendered amount is from business income. It could be on account of any other transaction legal or otherwise. Merely because an assessee carries on certain business, it does not necessarily follow that the amounts surrendered by him are on account of its business transactions. There is no presumption that absent anything else an amount surren....
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....ading operations duly reflected in books and computation of income. The assessee has established the business nexus and therefore, the surrendered income rightly constitutes the business income assessable under the head 'Profits and gains of business or profession". 18. So far as the decision in the case of Dhanush General Stores vs. CIT (supra) is concerned, he submitted that in that case the assessee had shown excess stock in the trading account / Profit & Loss Account of the firm. However, it was not reflected in the computation of income and the Assessing Officer treated it as income u/s 69 of the Act. The Tribunal treated it as deemed income u/s 69B of the Act on the ground that such surrendered income was not a business income as it was not taken directly to the computation of income but in the trading account or the profit and loss account only. Under these circumstances, the Hon'ble High Court has upheld the view of the Tribunal. 19. So far as the decision in the case of Kim Pharma (P.) Ltd. vs. CIT (supra) is concerned, he submitted that in that case the assessee has surrendered cash found during survey which was not recorded in the books of account and failed to exp....
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....specifically asked the explanation from the side of the assessee regarding the treatment of excess cash and excess stock so found during the course of survey. It is his submission that the assessee vide letter dated 06.08.2021 has explained the nature and source of such excess cash and excess stock found during the course of survey and based on the explanation given by the assessee, the Assessing Officer has accepted the returned income. It is also his submission that since in view of various decisions of the Coordinate Benches of the Tribunal, such excess cash and excess stock found during the survey has to be treated as business income and the provisions of section 115BBE of the Act are not attracted and since the Assessing Officer in the instant case, after due enquiry, has accepted the contention of the assessee, therefore, such order cannot be held to be erroneous and therefore, the Ld. PCIT cannot invoke jurisdiction u/s 263 of the Act on account of non-fulfilment of the twin conditions. 23. We find some force in the above arguments of the Ld. Counsel for the assessee. A perusal of notice issued u/s 142(1) of the Act dated 05.08.2021, copy of which is placed at pages 25 & ....
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....ons of the Hon'ble High Court read as under: "13. When there are two possible views on the matter and one view has been accepted by the Assessing Officer after inviting explanation from the assessee and upon being satisfied on such explanation such view cannot be said to be erroneous. 14. As discussed above, explanations had been given by the assessee's with regard to the additional income, which were considered and duly accepted by the Assessing Officer. Assessee's relied upon various authorities in support of their explanations which had been duly accepted by the Assessing Officer. Views of the Assessing Officer appear to have been approved by the Joint Commissioner, Income Tax, Central Range, under section 153D of the Act. In this factual matrix, it cannot but be accepted that a possible view on the matter had been followed by the Assessing Officer. In doing so, the Assessing Officer, in fact, followed the consistent view of various judicial authorities binding on him, namely, where excess stock found in the course of search is neither separately identifiable nor had independent physical existence, it cannot be treated as undisclosed investment under section 69....
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.... 19. Relying on the decision of this Court in Spectra Shares and Spectra Shares & Scrips (P) Ltd. v. CIT (2013) 36 taxmann.com 348/219 Taxman 61 (Mag.)/ 354 ITR 35 the Tribunal held non-recording of reasons cannot be a ground to come to a conclusion that the opinion of the Assessing Officer was erroneous for the purposes of section 263 of the Act. Explanation (2) of section 263 of the Act elucidates cases where the opinion of the Assessing Officer can be treated to be erroneous and prejudicial to the interest of the revenue Explanation (2) reads as follows: "Explanation 2.- For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 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 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)....
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....ht to be revised was erroneous and whether it was prejudicial to the interests of the Revenue. In the present case, the Principal Commissioner of Income Tax i.e. the revisional authority though recorded a finding that the order is erroneous and prejudicial to the interests of the Revenue, but only on the basis that no inquiry has been conducted on the issue and it smacks non-application of mind by the Assessing Officer, reached to the conclusion that the order sought to be revised is erroneous and prejudicial to the interests of the Revenue and proceeded to invoke jurisdiction under Section 263(1) of the IT Act and proceeded to quash the order of the assessing authority. However, in appeal preferred by the assessee before the ITAT, the ITAT in paragraph 7 of the order impugned, has proposed two issues which state as under:- "17. In exercise of powers conferred under section 263 of the Act, the PCIT has proposed revision of the assessment order on two counts: (i) The excess stock surrendered by the assessee during the survey, returned as business income, is liable to be considered as unexplained investment under section 69 of the Act and consequently tax was requir....
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....usiness premises of the assesses Company and duly recorded in the books of accounts of the concerned year, Section 69 of the IT Act would not he attracted to the assessee Company. The assessee has also stated in the reply that as far as nature and source of investments is concerned, the investments are in the form business stock of Gold and Silver Ornaments found in the business premises and explanation of the business source of investments given on the basis of documents available in the business premises during the course of survey proceedings by the Director of the assessee Company was very well verified by the survey team and accepted, and hence, the excess stock of Rs. 2,25,75,951 declared during the course of survey proceedings in the business premises cannot be treated as unexplained investment under Section 69 of the IT Act and as Section 69 does not attract in this situation, question of applicability of tax rate of 60% under Section 115BBE of the IT Act does not arise. The AO considered the reply and found substance in the submission raised on behalf of the assessee and only added Rs. 1,42,715/- to the business income of the assessee for the year under consideration. ....
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.... the parties to bear the own cost(s)." 28. Since the Assessing Officer in the instant case during the course of assessment proceedings has raised specific queries to which the assessee has duly replied and it has been explained that the only source of income of the assessee is from business, therefore, such excess cash and excess stock found during the course of survey has to be treated as business income in the light of the decisions cited (supra). Therefore, the order passed by the Assessing Officer cannot be held to be erroneous although it may be prejudicial to the interest of Revenue in the opinion of the Ld. PCIT on account of not invoking the provisions of section 115BBE of the Act. It has been held in various decisions that for invocation of jurisdiction u/s 263 of the Act, the twin conditions viz. (a) the order is erroneous and (b) order is prejudicial to the interest of Revenue must be fulfilled. However, as stated earlier, the order passed by the Assessing Officer cannot be held to be erroneous since the Assessing Officer has taken a plausible view although the order may be prejudicial to the interest of Revenue. Therefore, the twin conditions are not satisfied. There....