TaxTMI 
TaxTMI 
2024 (9) TMI 1872
X X X X Extracts X X X X
X X X X Extracts X X X X
.... concluding that the Learned Assistant Commissioner of Income Tax, Central Circle-1, Raipur ("the Ld. AO") has failed to carry out the necessary enquiries and investigation in relation to the issues which pertains to the material already on record. Hence, it is prayed that the Order passed by the Ld. PCIT under the provisions of section 263 of the Act may please be cancelled & quashed in limine. 2. That the Revision Order passed by the Ld. PCIT u/s. 263 of the Act cancelling/modifying the reassessment order is highly unjustified, bad in law, clearly exceeding the revisional jurisdiction and not in accordance with the provisions of law. It is prayed that the Revision Order passed u/s. 263 of the Act may please be cancelled/set-aside on this ground alone. 3. That the Revision Order passed by the Ld. PCIT u/s. 263 of the Act is highly unjustified, bad in law, without jurisdiction & void ab initio since, the Ld. PCIT has grossly erred in concluding that the Ld. AO has failed to carry out the necessary enquiries and investigation in relation to the issues relating to valuation of stock and taxability of the appreciated value of leased stock thereby resulting into subst....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee. In response to the statutory notices, the assessee submitted replies through the E-proceeding functionality in ITBA from time to time, which has been verified by the Ld. AO. The assessee filed his written submissions enclosing Audit Report, computation sheet and copy of ITR which are placed on record after perusal by Ld. AO. 4. During the Assessment proceedings u/s 143(3), Ld. AO accepted the income declared by the assessee in his return, considering the submissions and explanations furnished by the assessee. The observations of the Ld. AO qua the survey proceedings and while completing the assessment are culled out hereunder for the sake of completeness of facts: 4. Findings of the survey: Survey operation under section 133A of the Act was carried out at the business premises of M/S Pappu Seth & company Prop: Shri Sanjay Bothra (Father of the assessee). During the survey proceedings Shri Sanjay Bothra has made voluntary disclosure of income in his statement and the form of additional business income in the case of his proprietorship firm M/S Pappu Seth & Company. During physical verification at the showroom of M/S Pappu Seth & Company excess stock of Rs. 1,11,45....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated that he has purchased the gold jewellery from farmers might be the reason for lower valuation of the jewellery. The explanation is totally evasive and implausible. As while purchasing the jewellery, jewellers necessarily adjudge the accuracy / purity of gold and pay the value to the extent of purity of gold only. Further, purchased jewellery is used in new form after melting the same and procuring gold therefrom. Moreover, even during the course of statement the assessee has failed to furnish the details of the farmers from which the inferior types of jewellery were purchased and price paid for such inferior purchase. Further, the BIS notification was made vide notification no 802421 (E) dated 14,06.2018 with respect to gold jewellery and gold artefacts and acknowledges the categories of jewellery on 22K, 18K, 14K. No evidence was found which implies the assessee has furnished categories wise (purity in carets) details of the stock maintained by him. The reply even contradicts the claim of the assessee that leased out stock will be used by M/S Pappu Seth and Company for display attracting the promising customers. Why a jeweller would display the infe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt of AO to evaluate correctly / appropriately the value of stock on this date. (b) The survey report also emphasized that no proper explanation was given by the assessee during the survey regarding the valuation of the closing (leased out) stock and accordingly this issue needs examination at the time of assessment. 8. It may be seen from the above that the AO has not conducted any inquiries / verifications on the above issue of valuation of the closing (leased out) stock and taxability of at least Rs 29,03,075/- being the appreciated value of leased out stock as on 02.12.2018, which he should have examined before passing the assessment order making the order prima facie erroneous in so far as it is prejudicial to the interest of revenue, among other aspects, within meaning of Explanation 2(a) and / or 2(c) to section 263(1) of IT Act. 6. In response to the aforesaid show cause notice, assessee submitted his reply on 22.03.2024, stating that the Ld. AO has passed the assessment order u/s 143(3) of the Act after due considerations of submissions made by the assessee, with a conscious application of mind to the tangible material on record, hence the assessment o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee have furnished before us a written submission along with brief facts of the case adducing various aspects, stating that the order passed by Ld. PCIT deserves to be set aside. The written submission furnished by the Ld. AR is extracted as under: Brief Facts of the case 1.1 The Appellant herein is an individual engaged in the business of Trading of Gold Ornaments, Silver Ornaments, Articles, Gold Bullion etc. on wholesale & retail basis and the business of leasing out or renting of Stock of Gold Ornaments etc. under the Proprietorship Concern M/s. Shrenik Jewellers at Nawapara Rajim (C.G.). The appellant filed his ROI u/s. 139(1) vide E-filing Ack. No. 727567701290719 on 29th July, 2019 declaring a Total Income of Rs. 5,83,450/- (ITR, Computation, Audited Financial Statements & Tax Audit Report etc. for the A. Y. 2019-20 enclosed at Pg. No. 25 to 87 of PB). 1.2 That a survey operation u/s. 133A was conducted on 7th March, 2019 at the business premises of the appellant & his father Shri Sanjay Bothra (Prop. M/s. Pappu Seth & Co.). Pursuant to the survey u/s. 133A of the Act, the assessment case for the A. Yr. 2019- 20 was selected for scrutiny ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Order u/s. 263 vitiated, bad in law and legally unsustainable: 2.1 That, during assessment, the Ld. AO issued Questionnaire/Notice u/s. 142(1) dated 26th September, 2021 with specific queries as to Sales & Purchases etc. (Query No. 6) and explanations & justification as regards the documents impounded during survey u/s. 133A and Trading Account of the appellant for the pre-survey period & post-survey period (Query No. 7) (Notice dated 26.09.2021 at Pg. No. 92 to 95 PB). Simultaneous questionnaire/notice u/s. 142(1) dated 8th September, 2021 was issued in the case of Shri Sanjay Bothra with specific queries as to Lease Agreement Dated 02.12.2018 impounded during survey (Query No. 11) and pertinently, the stock of gold ornaments pertaining to M/s. Shrenik Jewellers weighing 16.589 Kgs. valued at Rs. 11.67 Lakhs per kg. being lower than the prevailing market rate at that time and detailed justification was sought for the 'low valuation' (Query No. 12) (Notice dated 08.09.2021 at Pg. No. 109 to 110 PB). 2.2 That in response to the said questionnaire u/s. 142(1), the appellant filed detailed written submissions with extensive documentary evidences before the Ld....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... applied his mind properly on the facts and material on record [particularly when the Ld. AO raised specific & pointed queries as to valuation of closing stock, the aspect of leasing out of stock & the -low valuation of closing stock on the date of leasing out compared to prevailing market rate]. The Ld. AO, when in wake of such credible material has accepted the factum of valuation of closing stock, coupled with other material placed by appellant before him, then there could have been no infirmity in his order either in law or on facts as has been fallaciously construed by the Ld. PCIT in his revisional order u/s. 263. 2.4 That it is indubitable that the appellant has been, and continues to be, the owner of the stock of leased Gold Ornaments etc. to Shri Sanjay Bothra all along and that the same could not be sold by the said lessee, further, the leased stock has all along been reflected in the Audited Financial Statements, Tax Audit Report, Return of income etc. as Stock in Trade' of the appellant and has been treated/construed as such all along and pursuant to such leasing out/renting, the appellant has earned 'Stock Usage Fees' which has been offered to tax ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of closing stock is an integral part of accounting method and should be unequivocally adopted if the method of valuation of closing stock is consistently followed and further, the valuation of closing stock can never be the source of 'profits/income' of the assessee. Reliance in support is placed upon the following judicial pronouncements. (i) Chainrup Sampatram v. CIT [1953] 24 ITR 481(SC) (Pg. No.5 & 7 CLC); (ii)CIT v. Dynavision Ltd. [2012] 348 /TR 380 (SC) (Para No.3) (Pg. No.9 CLC). 2.6 It is a settled proposition of law that the twin conditions as envisaged in Section 263, i.e., firstly, it is erroneous and secondly, it is prejudicial to the interest of the Revenue should be satisfied simultaneously. Further, where the Assessing Officer adopts one of the courses permissible in law and it had resulted in loss of revenue or where the AO resorts to a plausible view (which is not legally unsustainable) or where two views are possible and he has taken one view with which the Commissioner does not agree, then such order of AO cannot be termed as erroneous or prejudicial to the interests of the Revenue. Reliance in support is placed upon the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2023) 101 ITR (Trib.) 688 (ITAT Raipur) (Held Part Pg. No. 146 147 CLC); (iii) Ashfaque Quamar v. PCIT in ITA No. 83/RPR/2021 (Date of Order: 06.04.2022) (ITAT Raipur) (Para No. 9 Pg. N0. 173 CLC); (iv) PCIT v. Klaxon Trading (P.) Ltd. (2023) 7 NYPTCR 1705 (Del. HC) (Para No. 25 Pg. No. 135 CLC); (v) PCIT v. Clix Finance (P.) Ltd. (2024) 7 NYPTCR 237 (Del. HC) (Para No. 27 Pg. No. 114 CLC). In view of the above, it is most humbly submitted that the original assessment order has been passed after conducting necessary inquiries and complete application of mind and is not erroneous in so far as it is prejudicial to the interest of revenue and further, the revision order passed by the Ld. PCIT (Central), Bhopal is highly unjustified, without jurisdiction, void ab initio, not proper and not in accordance with the provisions of law and hence, it is requested that the revision order may please be set aside and appeal of the appellant may please be allowed. 11. Ld. AR of the assessee, backed by aforesaid submission have raised multifold contentions so as to establish that the revision order passed u/s 263 by the Ld. PCIT was unjustified, without juris....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssed in the present case is that whether the issue raised by the Ld. PCIT by invoking the provisions of section 263 in revisionary proceedings against the assessee was within the powers conferred upon him. In present case, the revisionary proceedings are initiated with the conviction that necessary inquiries / verifications which are obvious and imperative on the part of Ld. AO qua the issue of valuation of leased out stock, leading to the change nature/ mode of business of the assessee effective from 02.12.2018, are not carried out / conducted. Such mistake on the part of Ld. AO, allows the Ld. PCIT to adopt the recourse of revision under the mandate of law, the relevant provisions of explanation 2(a) to section 263 invoked by the Ld. PCIT are culled out for better appreciation of the issue: 263. (1) The [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or 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 -[or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssued to the assessee, placed at page 92-95 of the PB. The notice along with annexures comprising of queries raised therein is extracted hereunder for the sake of clarity of facts: ANNEXURE 1. please file details of all loans taken/ accepted by you during the year under consideration i.e. F.Y.2018-19. Establish the identity & creditworthiness of the loan creditors by filing their confirmation of account, ITR, computation of income. Please file the bank statements of the loan creditors to establish the genuineness of the transactions. Please also file ledger of loan account. 2. File details of bank account with address. Also file the copies of bank statements for all the bank accounts, loan accounts, CC account of the concern (soft copy) for the relevant year i.e. F.Y.2018-19 3. Please give the details/ heads of expenses liable for Sec- 40(a) (ia) of the Income tax Act, 1961, tax deduction on the expenses and details of deposit of the amount of TDS. File details in the following format: Expense head Total expense Amounts which are subjected to TDS. Amounts which are not subject to TDS Payments exceeding Rs. 20000/- with details from co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ern of the business by the assessee and its impact on the value of the stock, which may cause certain taxable income in the hands of assessee. Also, as per the assessment order framed by Ld. AO, we are unable to find any observation on this aspect. On the contrary in reply made by the assessee, it is categorically mentioned by the assessee that, the assessee has changed his pattern of business from retail trade and had accordingly given his stock of gold bullion, gold ornaments, silver articles etc. on lease/ rent to M/s Pappu Seth & Company. Assessee's contention that the leased-out stock constitutes stock in trade of the assessee is also incomprehensible as the same was never intended to be sold and in fact was never sold thereafter, thus, assessee's intention to trade with such stock are not established. Further, on perusal of assessee's audited final accounts for the ensuing FY 2019-20 (AY 2020-21), the assessee has not recorded any transaction of sale of gold bullion, silver and gold ornaments. Such facts borne from records indicates that the nature / mode of the business of the assessee was substantially changed, as rightly observed by the Ld. PCIT. Whereas Ld. AO....