TaxTMI 
TaxTMI 
2025 (2) TMI 1340
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in Invoking provisions of 263 of the Act and in holding in the impugned assessment order dated 26.03.2024 passed by the Id. ACIT, Central Circle, Kota is found to be erroneous in so far as it is prejudicial to the interest of the revenue. 1.1 That the Id. Principal Commissioner of Income-tax (Central), Jaipur failed to appreciate and consider that the Id. ACIT, Central Circle, Kota has passed the assessment order after appreciating all the documents, evidences, statutory provisions of law and after thorough examination of facts and the same was just and proper and the assessment order is neither erroneous nor it is prejudicial to the interest of the revenue. 1.2 That the Id. Principal Commissioner of Income-tax (Central), Jaipur has not appreciated the correct facts of the matter and has erroneously erred in holding that in the impugned assessment order the Id. Assessing officer has failed to add the sum of Rs 1,44,35,000/- as unexplained investment of assessee u/s 69 consequently liable to be taxed u/s 115BBE. 1.3 That the impugned order dated 26.03.2024 passed by the learned Id. Principal Commissioner of Income-tax (Central), Jaipur is based upon ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the assessment the ld. PCIT (Central), Jaipur called for the assessment records for examination as per provision of section 263 of the Act. Upon examination of the record the ld. PCIT noted that the assessee was not able to explain the transactions mentioned in diaries, which were impounded during survey proceedings vide annexure "B" exhibit 1- 6. Ld. PCIT further noted that various financial transactions were recorded on these documents. On analysis it was found that the assessee had made transaction to the tune of Rs 1,44,35,000/- during the year under consideration. Ld. AO made an addition of Rs 2,88,700/- under the head commission on the transactions of Rs 1,44,35,000/-. On that aspect of the matter she observed that there was по confirmation / ownership of the money said to have been given by various persons to assessee for purchase of property & no confirmation on record to show that the seller has received the sum for the transaction recorded on that material. In absence of supporting evidence as regard to the ownership of the transactions, the AO failed to add the sum of Rs 1,44,35,000/- as unexplained investment of assessee u/s 69 consequently, liable to be t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he farmers/ mukutbihari/ babu khan /sabir khan and others for receipt of cash. The copy of ITR of these persons to prove that these people have paid capital gain tax has also not been submitted. Hence the submission of the assessee is not acceptable. 6. Accordingly, in exercise of powers conferred upon me as per provisions of section 263 of the Income Tax Act 1961, I direct the assessing officer to initiate that clarification/explanation of the transactions recorded on the impounded documents is ascertained and examined by the Assessing Officer. The tax implication of the same has also not been examined or considered while making the assessment by the AO. Accordingly, the error relating to addition made on account of unexplained money u/s 69 of the Act and taxed as per provision u/s 115BBE of the Act by the Assessing Officer has caused prejudice to the interests of Revenue I wish to make it clear that I am not disturbing the assessment that has already been made. I am only passing an order for initiation /to adding on account of unexplained money u/s 69 of the Act and taxed as per provision u/s 115BBE of the Act as detailed above based upon independent satisfactio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....c transactions, and the assessee provided supporting documentation, including ledger entries, agreements of sale, and receipt books. Furthermore, the ld. AO evaluated the evidence with due diligence, identifying and accounting for brokerage income that arose from these transactions. The addition of Rs.2,88,700 as commission income was a logical conclusion based on substantiated findings and careful examination. 6. That based on these submissions, the ld. AO passed assessment order u/s. 143(3) dated 30.03.2022. The ld. AO determined the total income at Rs. 16,50,300/-, which included specific additions, such as Rs. 9,00,000/- under section 69A for unexplained cash found during the survey and Rs. 2,88,700/- under the head of commission income. The ld. AO concluded that the transaction amount reflected brokerage business dealings. Accordingly, the ld. AO determined a commission income of Rs. 2,88,700/- (calculated @ 2% of the transaction value) and made an addition under this head. The ld. AO did not treat the entire transaction value as unexplained investment, as the assessee-appellant's evidence sufficiently clarified the source and nature of the funds. Relevant ledger entr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inancial flows. Importantly, as a broker, the assessee-appellant neither holds ownership of the funds nor claims any rights to them. Copies of sale deeds related to these transactions are attached as [Annexure 14, pages 75-89]. 3. That for instance, consider a hypothetical scenario where the assessee-appellant arranges the sale of agricultural land. The buyer pays Rs. 10,00,000/- to the assessee-appellant, which is then transferred to the seller. The broker retains a commission of 2% (Rs. 20,000/-). Such transactions were recorded in the impounded diaries, illustrating the flow of funds through the assessee-appellant rather than ownership. Consequently, these transactions do not meet the criteria of investments as defined under section 69 of the Act. 4. That the ld. Assessing Officer's thorough examination of the transactions documented in the seized diaries was in-depth and well- supported by robust evidentiary materials: * Ledger Records: Notable entries such as "Rs. 5,00,000/- received from Party A for Property X" distinctly articulate the transactional nature of the funds, positioning them within the context of legitimate business operations. Thes....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) and clause (b) of sub-section (1). 6. That section 69 tackles the issue of unexplained investments, focusing on scenarios where ownership or possession by an assessee comes into play. For example where a courier drops off a parcel filled with cash-just because the courier temporarily holds it doesn't mean they own it. Similarly, the funds handled by the assessee-appellant shouldn't be viewed as unexplained investments either. Since Section 69 is not applicable here, referencing Section 115BBE to impose higher tax rates loses its footing. The essential criterion-ownership of unexplained investments-is missing. The ld. Assessing Officer after verification of data & documents and after being satisfied, correctly did not invoke the same as the same is inapplicable in the instant case. 7. That for Section 69 to apply, the so-called investments in question must be owned or possessed by the assessee-appellant. However, in this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is compensated via commission for his role in connecting the two parties and aiding in the completion of transactions. It is imperative to note that the income generated by the assessee is exclusively derived from brokerage. In the capacity of a real estate broker, the operations encompass negotiating deals, coordinating the fulfillment of contractual obligations, and ensuring compliance from both parties involved in the transaction. Notably, the broker does not take ownership of the subject property and is therefore insulated from the financial risks typically associated with real estate investments. The revenue model for the broker is strictly fee-based, reflecting the professional services rendered without assuming the risks inherent to property ownership. 11. That the assumption made by the ld. PCIT that the transaction amounts represent unexplained investments of the assessee fundamentally misinterprets the genuine intermediary role of the assessee-appellant. Moreover, the ld. PCIT's insistence on obtaining third-party confirmations places an unreasonable burden on the assessee-appellant. The role of the assessee-appellant doesn't require them to seek confirmatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee-appellant, Section 69 cannot be invoked because: * No Personal Investments: The assessee-appellant does not make any personal investments in the property market. His role is restricted to that of a broker, and he does not own or hold any real estate for personal or investment purposes. Ledger Records, Receipt Books, and Agreements of Sale confirm that the sums recorded in the impounded diaries pertain to brokerage activities, not personal investments. These are supported by [Annexure 7 (pages 36-39)] and [Annexure 10 (pages 46-47)]. * No Ownership of Assets: The properties involved in the transactions that the assessee-appellant facilitates are owned by third parties (the buyers and sellers), not by the assessee-appellant. The real estate broker's role is purely intermediary, and there is no question of the broker owning or investing in the properties being transacted. The assessee-appellant's role as an intermediary is corroborated by agreements authorizing the facilitation of transactions. These agreements are available in [Annexure 8 (pages 40-43)] and [Annexure 11 (pages 48-50)]. * No Investment by the Assessee-appellant: Since Section 69....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nvoking S.115BBE. 21. That the assessee-appellant, operating as a broker, does not possess any unexplained investments or income arising from property transactions. Consequently, the application of Section 115BBE is unwarranted, as the income derived by the assessee-appellant solely stems from commissions earned while facilitating transactions, rather than from unidentified sources. 22. That in this case, the department has not provided any compelling evidence to substantiate claims of unexplained investments or income related to the assessee-appellant. Consequently, the application of S.69, along with S.115BBE, lacks a firm foundation. 23. That the following judicial precedents are being relied upon to substantiate the proposition that the invocation of the provisions of sections 69 and 115BBE by the Ld. PCIT (Central) are untenable in law: * In Gupta Prime Resorts Pvt. Ltd. v. DCIT 2024 (1) TMI 843 - ITAT JAIPUR it was held: After analyzing the facts of the present case and documentary evidences, we also noticed that the addition in the present case was made by the AO under section 69 of the Act which relates to unexplained investment not recor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come offered by the assessee during the survey operation. On this aspect, we find that the Assessing Officer had asked the assessee to give details of the disclosure made by the assessee and get the same verified from the income tax return filed by the assessee. The Assessing Officer not only verified the details of that amount disclosed by the assessee, but has also went on examining the correctness of the disclosure. There were three disclosure statements made by the assessee. One is business receipt, regarding which the ld. AO made addition of Rs. 1,62,000/- in addition to the disclosure of Rs. 15 lac made by the assessee. The assessee made disclosure of construction expenses which were also enhanced by a sum of Rs. 7 lac by the ld. AO. So far as the excess stock found to the tune of Rs. 7,87,459/-, ld. AO converted it to Rs. 2,36,628/-. So, exchange of information by the assessee and verified by the Assessing Officer clearly appear in the body of the assessment order. Thus, it transpires that there was application of mind by the AO during the assessment proceedings. Accordingly, it cannot be said that the assessment has been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e confessed in survey at business premises gives a facial impression of business attributes. In the light of assertions made in statement in survey and post survey proceedings placed in the paper book, the assessee appears to have made out an arguable case that such income is concomitant of business activities and thus impressed with the character of business income as correctly disclosed in the ROI. The action of AO is not open to attack as erroneous where a view taken is in the realm of a possible view and not found to be wholly incongruous to facts or law. On the face of available facts, one can not say without any reservation that no plurality of opinion can exist on the point and such additional income cannot be treated as business income at all as adjudged by AO. This makes the action of the AO is the league of being plausible. The power of review cannot be exercised to collect more taxes merely owing to the reason that the law now provides for penal and steep rate of taxation by bringing such income within the ambit of S. 68/ 69 etc. 13.1 Significantly, the PCIT, while seeking to set aside the action of AO and remitting the matter back for further enquiries, did not bring an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oth the parties and perused the materials available on record. The issue raised by the assessee in these appeals No. 478 & 479/JP/2024 is equally similar, on same set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties. Hence, the Bench feels that the decision taken ITA Nos. 477 to 479/JP/2024 Mukesh Kumar Saini vs. PCIT by us in ITA No. 477/JP/2024 for the Assessment Year 2019-20 shall apply mutatis mutandis in the cases of Laxmi Narayan Saini & Prakash Chand Saini i.e. ITA Nos. 478 & 479/JP/2024 for the Assessment Year 2019-20. In terms of these observations, three appeals of the assessee are allowed. * In Kamlesh Singhal v. PCIT (Central) [ITA No. 664/JPR/2024] it was held: We have heard the rival contentions and perused the material placed on record. As there is not dispute about the facts of the case the same are not repeated and are already reiterated herein above. The bench noted that in the case a Survey action u/s 133A Sh. Kamlesh Singhal vs. PCIT of the Act was carried out on 31.01.2019 at the business premise of the assessee firm M/s Singhal Timber & Hardware Store, Prop. Sh. Kirodi Mal Singhal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l vs. PCIT has been completed after conducting all the enquiries and verification and ld. AO has taken the plausible view on the matter the ld. PCIT cannot quashed that assessment order u/s. 263 of the Act. As it is transpired from the record of the proceedings, in the present case, no presumption can be drawn that the Assessing Officer had not applied his mind to the aspects for verification of income so disclosed by the assessee. Be that as it may, when the issue of applicability is examined by the ld. AO and the assessee has given a detailed reply about the applicability of the provision section 115BBE of the Act, the ld. PCIT cannot impose her view on the view taken by the ld. AO. We get support of our view from the decision of apex court in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 where in the Court has taken the view that the phrase "prejudicial to the interests of the revenue " under Section 263 has to be read in conjunction with the expression "erroneous" order passed by the assessing officer. Every loss of revenue because of an order of the assessing officer cannot be treated as prejudicial to the interests of the revenue and where two view....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9, 68, 69B etc. as they are penal in nature. In present case, the income surrendered was to be classified u/s 68, 69 & 69A of the Act. As per the direction of the Ld. PCIT, however, we find that the Ld. PCIT has nowhere pointed out that the income surrendered by the assessee falls within the provision of section 68, 69 & 69A of the Act. As such, the assessee was able to justify the source of income surrendered during survey operation. Therefore we are of the view that the same cannot be treated as deemed income. Once, the income goes out of the preview of the deeming provision, the provision of section 115BBE of the Act cannot be applied. 17. Thus, we note that the AO has taken one of the plausible view by treating the income offered during survey operation as income under the head of business and profession." 24. That in conclusion, it is most respectfully submitted that the amount of Rs. 1,44,35,000/- does not constitute unexplained investment of the assessee so as bring it within the ambit of taxability under Section 69. The original assessment order is neither erroneous nor prejudicial to revenue, and the invocation of Section 115BBE is unjustified. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T's order is primarily based on conjectures and presumptions, stating that the ld. AO should have added the entire amount of Rs.1,44,35,000 as unexplained investment under Section 69. It is submitted that the ld. AO's decision to only add commission income was after due verification of facts and is neither erroneous nor it is prejudicial to the interest of Revenue. It is settled law that loss of revenue is not equivalent to prejudicial to the interest of revenue. 29. That during the course of assessment proceedings, the ld. AO issued specific show cause notice to the assessee-appellant to explain the transactions noted in the impounded documents. The ld. AO analyzed the details recorded in the impounded diaries and other materials to identify the nature of transactions and their relevance to the assessee-appellant's brokerage activities. The assessee-appellant responded to all inquiries, providing a range of supporting documents. These included ledger books, which recorded transactions with buyers and sellers, receipt books that detailed payments received, and agreements of sale that provided evidence of brokerage activities. All these documents were scrutinized by the ld.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The Ld. PCIT's contention that the ld. AO failed to add the amount under Section 69 is speculative and overlooks the documentary evidence provided by the assessee- appellant. The ld. AO's actions adhered strictly to procedural norms, ensuring that the assessment order was both fair and lawful. 33. That the Ld. PCIT's assumptions conflict with established precedents and the evidence presented during the assessment process. Established jurisprudence holds that tax authorities must base their conclusions on factual evidence rather than speculative or hypothetical interpretations. In this case, the ld. PCIT presumed that the entire transaction value of Rs.1,44,35,000 was unexplained investments by the assessee-appellant without adequately considering the brokerage role documented in the impounded materials. This assumption overlooks the detailed ledger and receipt books submitted, which clearly delineate the assessee-appellant's role as an intermediary in these transactions. 34. That precedents emphasize the necessity of direct and conclusive evidence to substantiate claims of unexplained investments. However, the ld. PCIT ignored agreements of sale, power of attorne....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were subsequently disbursed to the sellers, a fact supported by documentary evidence such as receipt books and bank account records. This effectively refutes the claim that the amounts represented unexplained investments. 38. That in contrast, the AO's findings were grounded in factual evidence, corroborating the assessee-appellant's role as an intermediary and justifying the addition of commission income. The ld. PCIT's reliance on unsubstantiated assumptions undermines the credibility of the revision order and is inconsistent with the evidentiary record. 39. That the Ld. PCIT's revision order under Section 263 is founded on hypothetical interpretations of the impounded documents, ignoring the substantiated explanations provided by the assessee-appellant. The assessee-appellant had demonstrated, with supporting evidence, that the transactions recorded in the diaries pertained to brokerage services and not unexplained investments. 40. That the Ld. PCIT ignored the fact that the amounts received were subsequently paid to sellers, as evidenced by ledger and receipt books. The absence of ownership over the recorded amounts invalidates the assumption of unex....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... one of such views, the case goes outside the purview of revisional power exercisable by the ld. Principal Commissioner of Income-tax u/s. 263 of the Act. Proceedings u/s. 263 cannot be sustained where the ld. Principal Commissioner of Income-tax holds a view which was different from that of the ld. Assessing Officer. Section 263 of the Act does not visualize a case of substitution of the judgment of the Revisional Commissioner for that of ld. Assessing Officer unless the decision of the ld. Assessing Officer is found to be erroneous. 44. That the language used by the legislature in section 263 is to the effect that the Principal Commissioner of Income-tax may interfere in revision, if he considers that the order passed by the ld. Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. It is quite clear that two conditions must coexist in order to give jurisdiction to the Principal Commissioner of Income-tax to interfere in revision. The order of the Assessing Officer in question must not only be erroneous but also it must be prejudicial to the interest of the revenue. In other words, merely because the assessment order is erroneous, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 has held: 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. It has been held by this court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC). * Hon'ble Jurisdictional Rajasthan High Court in PCIT v. M....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atisfy the dual requirements of being both erroneous and prejudicial to the Revenue. The AO conducted a diligent and reasoned assessment, making appropriate additions where warranted. Therefore, the order of the Ld. PCIT, Central, Jaipur deserves to be quashed & set aside. 6. To support the contentions so raised in the written submission ld. AR of the assessee also submitted a paper book containing the following documents:- S. No. Particulars Page No. From To 1. Copy of notice dated 09.03.2024 issued by the respondent u/s 263 of the Act 01 02 2. Copy of Written Submission Filed Before the Principal Commissioner of Income-Tax (Central), Jaipur 03 10 3. Copy of statement recorded on 02.03.2020 u/s 133A of the Act 11 19 4. Copy of statement recorded on 12.03.2020 u/s 131 of the Act 20 31 5. Copy of Show Cause Notice dated 24.03.2022 issued u/s 142(1) of the Act 32 33 6. Copy of reply dated 24.03.2022 filed by the assessee appellant 34 35 7. Copy of ledger account of Mukut Bihari Meena at pg. no. 34,49,56 and 58 of Exhibit-3 36 39 8. Copy of Jamabandi/Nakal and Power of Attorney ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y in accordance with the guidelines issued by the Central Board of Direct Taxes (CBDT) on account of the survey. In the assessment proceeding the ld. AO vide point no. 3 of the notice issued on 24.03.2022 called for the following details from the assessee: "3. During the survey proceedings, various incriminating documents were found and impounded. On perusal of these incriminating documents, it is noticed that the assessee has made transactions with Shri Uchab Lal of Rs. 14,20,000/-, Shri Mukut Bihari Meena (Rajnagar) of Rs. 90,00,000/- and Shri Babu Khan of Rs. 60,15,000/-. The totaling amount of Rs. 1,44,35,000/- was involved in these transactions. The assessee has claimed these transactions are not belongs to him. But, in support of his claim, the assessee has not submitted completed details and relevant documents. Kindly submit your explanation in this regard. Kindly note that failure to comply with the same may entail an ex-parte assessment u/s 144 of the Act besides initiation of penalty proceedings u/s 272A(1)(d) of IT Act, 1961. As is evident from the issue of notice by ld. AO he called for all the details considering those documents having incriminating in natu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rds relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer 82[or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 82[or the Transfer Pricing Officer, as the case may be,] 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 Chief Commissioner or Chief Commissioner or 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 w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, then the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue because of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Pr. CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. In this process even the AO has no power to review his own order. In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) wherein it was held that: * "The phrase "prejudicial t....