TaxTMI 
TaxTMI 
2024 (8) TMI 1673
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....three appeals have been heard together with the consent of both the parties, and as such are being disposed off vide this common order. 3. At the outset, Ld. AR for the assessee has submitted that the matter in ITA No. 477/JP/2024 may be taken as a lead case for discussions and disposal of this bunch of appeals, as the issues involved in the lead case are common on similar facts and grounds raised by the assessee. Ld. DR did not raise any objection to the taking up ITA No.477/JP/2024 as the lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 477/JP/2024 is taken up as the lead case. 4. The grounds of appeal raised by the assessee in the lead case, when reproduced read as under : "1. Under the facts and circumstances of the case, the order passed by ld. PCIT (Central) Jaipur u/s 263 of the Income Tax Act, 1961 is void ab-initio and deserve to be quashed. 2. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing." 5. It is seen that the only grievance raised by the assessee is that PCIT erred in holding the order of the assessment as erroneous in so far as ....
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....eedings resulting into the surrender of undisclosed income by the assessee. In view of that, after considering all the material facts a lumpsum addition of Rs. 7,00,000/- is being made on account of showroom construction over and above the amount declared in the return of income." 5.3 It may be mentioned here that in that survey proceeding, the assessee also surrendered the excess stock of Rs. 7,87,459/-. In this regard also, ld. AO asked how that excess stock was dealt by the assessee while filling the ITR. The assessee submitted ; "In this regard, we would like to state that the assessee is doing sanitary and tiles trading business. The survey team ask value of stock to the staff of the assessee who has stated sale price instead of actual cost price. The assessee is maintaining books of accounts on mercantile basis and the method of valuation of stock is adopted as cost or market price which ever is less. Since the assessee is showing GP rate as 15.23% during the year which means the stock was valued at 6,70,761 on this ground. Further it is general practice of each trading business, that there are some scrap/damaged material/defective/out dated material available ....
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....115BBE of the Act, and as such erroneous and causing prejudice to the interest of revenue. Ld. PCIT while holding so stated : "I wish to make it clear that I am not disturbing the assessment that has already been made. I am only passing an order whereas applicability of the provisions of section 69A and 69 are considered. The order of the AO is therefore, liable to revision under the explanation (2) clause (a) of section 263 of the Act. The assessment order is set aside and restored to the file of the assessing officer to verify the applicability of provisions of section 69A and 69 of the Income Tax Act." 7. Feeling aggrieved by the order of the learned PCIT, the assessee is in appeal before us. 8. In support of the grounds raised on behalf of the assessee, ld. AR of the assessee has filed a detailed written submission which reads as under: "The assessee is an individual. A survey u/s 133A was carried out on 26.02.2019 at business premises of the assessee, M/s Nirankar Tiles and Sanitary, Village Sikandra, Dausa. The assessee has filed his return of income on 07.01.2020 on total income at Rs. 19,10,920/- including surrendered income of Rs. 15,00,000/-. The a....
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....considering the reply in proper perspective, passed the order u/s 263, directing the AO to examine and verify the applicability of provisions of Sec. 69 A & 69 of the Income Tax Act. It is submitted that there was no case with the Learned PCIT (Central) for setting aside the assessment order just for purposes of verification of applicability of Sec. 69A & 69. The Learned Assessing Officer had passed the assessment order after careful examination of each and every fact. It is submitted that while passing the assessment order, the Learned Assessing Officer had adopted one of the courses permissible under law or where two views were possible, the Assessing Officer has taken one view with which the PCIT does not agree...... this shall not justify invoking provisions of Sec. 263. (I) Income surrendered by the assessee in the return of income : Rs. 15,00,000/- It is submitted that the assessee filed return of income on 07/01/2020 surrendering income of Rs. 15,00,000/-. This income was surrendered with reference to survey conducted in the case of the assessee. It is submitted that when the assessee has shown income in the return filed by him such income cannot be treated....
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....rmal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted; (b) "specified previous year" means the previous year- (i) which has ended before the date of search, but the date of filing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the said date; or (ii) in which search was conducted.'." The above definition of undisclosed income has no reference to section 133A. In view of this it is submitted that the assessee is justified in disclosing the income offered during survey. In view of this the provisions of section 115BBE are not attracted even distantly. The provisions of section 115BBE are discussed below:- b) Provisions of section 115BBE The provisions of section 115BBE are quoted below "115BBE. Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D.-(1) Where the total income of an assessee includes any income ....
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....regard the following case laws is quoted in support. a. DCIT Vs Dr Satish B Gupta (2011) 49 DTR 262 Ahemdabad Trib order dated 06.08.20103. In this case the assessee declared income in the return of income as offered during the course of survey under section 133A - held section 133A is an action for calling of information, in itself it is not a proceeding. There can be no undisclosed income until there is duty to disclose. The duty to disclose income arises only at the time when the assessee furnish return of income. If assessee furnishes return of income including income offered during survey then there remains no undisclosed income b. CIT Vs. SAS Pharmceuticals (2011) 335 ITR 259 (Delhi HC) ".........We, thus, answer the questions as formulated above, in favour of the assessee and against the Revenue finding no fault with the decisions of the CIT (A) as well as the Tribunal. As a result, this appeal is dismissed" In the aforesaid decisions it has been held that penal provisions are applicable unless otherwise specified w r t return of income. Penal provisions of section 69/115BBE cannot be made applicable on the ground that if there ha....
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....essee then and there stated that the only source of income was business. It is submitted that the stock, investment in construction of show-room and unaccounted receipts were not having any independent existence and the same were part and partial of the business set up. It is not the case of the learned CIT that excess stock was found separately or for that matter excess stock was also found kept separately. The unexplained investment in construction of show-room was also part and parcel of the business structure. None of these were having any separate and independent identity. Similarly excess stock was also found mingled with regular stock,. It is further submitted that it is not the case that stock was found excess in quantity. The excess stock had been worked out on account of valuation, which is nothing but based on estimate. In view of this, such excess stock is part and parcel of business income and provisions of Sec. 69/69A cannot be invoked. (b) Investment in construction of show-room : Rs. 7,00,000/- In so far as addition of Rs. 7,00,000/- is concerned on account of investment in construction of show-room, the Learned PCIT Central has observed i....
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.... AO is not erroneous nor prejudicial to the interest of the revenue. It is further submitted that the order passed by the learned AO under section 143(3) cannot be termed as erroneous and prejudicial to the interest of the revenue simply if he has followed one view out of two views available on the same issue and the view followed by him does not agree with the view of the learned CIT. In this regard following decisions are quoted. (a) Pr. CIT, Alwar Vs. Bajargan Traders Appeal NO. 258 of 2017 (Rajasthan High Court) order dated 12.09.2017 In this case the Hon,ble Jurisdiction High court has held as under i) In this case unrecorded stock of Rs. 70,04,814/- was found during survey under section 133A. The assessee while filing the return accounted for the same in the books of accounts and disclosed it as business income. The High court has upheld the action of the assessee in regularizing the stock as business income. ii) The ratio of this case is fully applicable to the facts of the case of the assessee. In the case of the assessee excess cash of Rs 7,30,000/- unrecorded debtors of Rs. 11,95,,000/- and unrecorded investment in the construc....
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....closed income (VI) No other source of income during survey. It is submitted that during the course of survey no other source of income was found except that of running business of tiles, sanitary and fitting etc. The learned AO has also not given any findings that the assessee enjoys any other source(s) of income. When the revenue authorities have conducted survey on the business premises of the assessee and have failed to locate any document/books of accounts or any other material establishing that assessee was enjoying any other source of income in addition to his regular business of sanitary wares pipe fitting than the learned PCIT is precluded in holding that excess stock, investment in construction of show-room etc. were not out of regular business. In these circumstances the natural conclusion is that the excess stock etc were not disclosed in the books of accounts upto the date of survey but were out of disclosed sources of income. i. e. business of the PVC pipe fitting and sanitary fittings. At the stage of survey the assessee failed to account for the aforesaid stock etc. but these were out of disclosed sources of income i e business of sanitary and pipe ....
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.... The PCIT thus alleged that the Assessing Officer had incorrectly adopted the normal rate of taxation at 30% as offered by the assessee overlooking the countervailing provisions of Section 115BBE of the Act. It is submitted that the income surrendered was clearly attributable to the business operations and therefore the applicability of Section 69/69C of the Act were thus excluded having regard to the nature of income declared and consequently Section 115BBE was not attracted in the facts of the case. (VIII) Case Laws in support quoted by the Learned PCIT Central It is submitted that in the order passed under section 263 by the learned CIT has quoted certain case laws. It is submitted that the issue involved is such where divergent opinions are available in the decisions of the Hon'ble courts. It is submitted that it is settled position of law that if there are divergent opinions on an issue, one which is favourable to the assessee shall apply. The following case laws are quoted in support (i) Vegetable Products 88 ITR 192 (SC) (ii) CIT Vs. Straw Board Manufacturing Ltd. 177 ITR 431 (SC) Ground No. 2 - The asses....
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.... of the assessee and there is no finding in the order of ld. AO that the income so offered by the assessee is undisclosed income chargeable to tax as per provisions of section 68, 69 & 69A of the Act. To drive home this contention, Ld. AR of the assessee relied upon the decision of Co-ordinate Bench of Delhi ITAT in the case of Hema Raman vs. PCIT in ITA No. 1012/DEL/20222 dated 12.05.2023. Besides this, Ld. AR contended that while accepting the income disclosed, surrendered and added in the assessment, Ld AO has not given any finding that the income surrendered or added fell under the provision of section 68, 69 or 69A of the Act. Once ld. AO did not arrive at the conclusion that income fell within the deeming provision u/s 68, 69 & 69A of the Act, the question of charging the same at the special rate did not arise. 11. On the other hand, ld. DR representing the revenue submitted that the assessee accepted in the statement recorded that the income offered was undisclosed income, not recorded in the regular books of the assessee [ Q.28 page 27 of the paper book], therefore, the same is in the nature covered as per provisions of section 68, 69 & 69A of the Act, subjecxt to ....
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....ct. 13. Besides the above, we also note that the assessee in the statement recorded during the survey operation also accepted to have offered additional income for the year under consideration and that he would offer the amount as his income of the year. The survey statement is available at page 11 to 27 of the paper book. Likewise, ld. AO in the assessment framed u/s 143(3) of the Act, also examined all the aspects of the disclosure, made variations and after examination referred to provisions of section 68, 69 & 69A of the Act, but at the same time, did not levy higher tax as per provision of section 115BBE of the Act. Since a conjoint reading reveals that there was due application of mind by the AO during the assessment proceedings, the assessment cannot be held as erroneous in so far prejudicial to the interest of revenue on account of levy of higher tax as per provision of section 115BBE of the Act. 14. In the order, Learned PCIT has referred to Explanation 2 to section 263 of the Act, in holding that the necessary inquiries were not carried out by the AO during the assessment proceedings. However, we find that the Ld. PCIT in the notice issued u/s 263 of the Ac....
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....d profession. The similar view has been taken by the co-ordinate bench of Delhi ITAT in the case of Hema Raman vs. PCIT in ITA No. 1012/DEL/20222 dated 12.05.2023. The observation of the bench on the issue, when reproduced, reads as : "13. On appraisal of facts, we are persuaded by the first limb of the arguments. The determination of true nature and character of income is highly contextual and law has not devised any straight jacket formula in this regard. The classification of income under a particular head of income may significantly vary having regard to the nuanced facts of each case. When seen contextually, the additional income in instant case was conceded by the assessee in the course of survey operations at her business premises. The income surrendered is sort of lumpsum figures offered in the form of excess stock, unaccounted advance to staff, excess cash generated etc. from business operations. Such additional income 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....