TMI Blog2022 (11) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... the stock being part of the business of the assessee is offered to tax as business income. PCIT has merely substituted his views to the extent that the AO should have done further enquiry when PCIT himself admits that the additional income is from the excess stock. We are of the considered opinion that the revisionary jurisdiction could not be allowed to be exercised by the PCIT either for substituting his own opinion for that of the AO or for making a fishing and roving enquiry. We are of the opinion that the PCIT in the present case has wrongly invoked the jurisdiction under section 263 and the controversy in the present case is fully covered by the judgment of the Hon'ble Bombay High Court in the case of Gabriel India Ltd. [ 1993 (4) TMI 55 - BOMBAY HIGH COURT] Accordingly the impugned order of the PCIT is quashed. Appeal is allowed in favour of the assessee . - ITA No. 511/Bang/2022 - - - Dated:- 21-10-2022 - SHRI GEORGE GEORGE K. , JUDICIAL MEMBER AND Ms. PADMAVATHY S , ACCOUNTANT MEMBER Appellant by : Smt. Sheetal Borkar , Advocate Respondent by : Shri Manjunath Karkihalli , CIT ( DR ) ( ITAT ) , Bengaluru ORDER Per Padmavathy S. , Accounta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. During the course of survey, the officials noticed that as per the books of accounts maintained in the business premises, the stock of finished goods of cashew kernels was 5,389.80 kgs. and raw materials was 81,583 kgs. On physical verification, the officials found the finished goods of 5,021 kgs. And raw material of 69,864 kgs. 4. In the assessment proceedings u/s. 143(3), the AO made an addition of Rs.50 lakhs admitted by the partner of the assessee as additional income during the course of survey. The AO set off the said additional income against the returned loss and concluded the assessment u/s. 143(3). 5. The PCIT issued a show cause notice u/s. 263 for the reason that the addition made by the AO towards difference in stock is an unexplained investment for which the assessee failed to provide satisfactory explanation and therefore the undisclosed stock should have been considered as an unexplained investment u/s. 69 which is required to be tax at special rate u/s. 115BBE. The assessee submitted before the PCIT that the addition made by the AO while completing the assessment u/s. 143(3) is appealed against by the assessee and therefore prayed for acceptance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on review of the statement recorded specifically called all details pertaining to difference in stock. It is submitted that the AO after analysing the various contentions of the assessee has applied his mind while making the addition under the head income from business since the addition is attributable to the difference in stock. The ld. AR drew our attention to the order of the AO where a detailed discussion on the impugned addition has been made by the AO. 8. The ld. DR, on the other hand, submitted that in the AO s order there was no mention explaining the source for the difference in stock but discussed the aspect that the retraction of statement cannot be the basis for not offering the additional income admitted during survey to tax. The ld. DR also submitted that in response to show cause notice, the assessee has simply stated that the impugned addition is appealed before the CIT(A), but did not offer any explanation on the source of such addition. Therefore, the ld. DR submitted that the PCIT is correct in invoking the provisions of section 263 to state that the difference in stock is an unexplained investment for which the AO has not done any enquiry with respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... briel India Ltd. (1993) 203 ITR 108 has explained as to when an order can be termed as erroneous as follows:- From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the Income tax officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the AO has brought out the facts clearly that the additional income is offered towards excess stock found during the course of survey. In our view the error envisaged by Section 263 of the Act is not one that depends on possibility as a guess work, but it should be actually an error either of fact or of law which is not clearly brought out by the PCIT in the given case. 12. With regard to the argument that the assessee s case requires to be considered in the light of the explanation (2) to Section 263 of the Act, we notice that the Hon ble Gujarat High Court in the case of Shreeji Prints (P) Ltd. (130 taxmann.com 293 Guj) while considering the explanation of Section 263 of the Act, has held that : - 4 Being aggrieved by the order passed by the PCIT under section 263 of the Act, 1961, the assessee went before the Tribunal. The Tribunal, after considering the submissions made by the assessee and after considering the scope of power to be exercised by the PCIT under section 263 of the Act, 1961 came to be conclusion that the Assessing Officer has made inquiries in detail about two unsecured loans taken by the respondent assessee and observed as under: 13 In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-3-2016. We also note that there was audit objection in the case of the assessee. The language of audit objection and show-cause notice under section 263 is same meaning thereby that the show cause notice u/s.263 has been issued by the PCIT Without going through assessment records and without exercising his own application of his mind. The assessee has not only filed complete details of Income-tax Return, audited balance sheet, profit and loss account and bank statement. The assessee further explained that both the these unsecured loans stands fully repaid as on the date and there is no capital creation by the assessee on this count. In view of these facts and circumstances, we are of the considered opinion that the order of the Assessing Officer is not erroneous nor it is prejudicial to the interest of revenue. It was also brought to the notice of the PCIT that entire share capital of GTPL being already tax, all the investment made by the said company recorded in its balance sheet stands explained tax in its hands itself and hence, there is no question of adding the same amount in the hands of the assessee. As regards loans from PAFPL, it was submitted that assessee company has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Torrent Pharmaceuticals Ltd. v. DCIT [2018] 97 taxmann.com 671 (Ahd. - Trib.). it is clear from the enquiries made by the Assessing Officer and submissions made by the assessee that the Assessing Officer has taken the plausible view which is valid in the eyes of law. The Assessing Officer was satisfied consequent to making enquiry and after examining the evidences produced by the assessee, he accepted the assessee's claim of loan similar view were also expressed by the Hon'ble Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. [2013] 212 taxman 0184. We observe the Pr.CIT has drawn support from newly inserted Explanation 2 below section 263(1) of the Act introduced by Finance Act, 2015 w.e.f. 1-6- 2015 for his action. The Explanation 2 inter alia provides that the order passed without making inquiries or verification 'which should have been made' will be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue. It is on this basis, the assessment order passed by the AO under section 143(3) of the Act has been set aside with a direction to the AO to pass a fresh assessment order. It will be therefore imperative to dwell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as interpreted by the Revisional Commissioner in the light of the Explanation 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to section 263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. The AO in the present case has not accepted the submissions of the assessee on various issues summarily but has shown appetite for inquiry and verifications. The AO has passed after making due enquiries issues involved impliedly after due application of mind. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filing the return of income, the assessee did not offer the additional income offered during the course of survey. The AO raised this issue during the course of assessment and called on the assessee as to why the additional income offered during the course of survey was not admitted as income at the time of filing the return of income. The assessee had submitted before the AO that the partner had retracted the statement vide letter dated 28.7.2018 and the stock taking was not done properly. The assessee also submitted that the production wastage was not taken into account and furnished the stock workings as on the date of survey as per books and as per physical stock to substantiate that the difference was minimal if wastage was considered. The AO in his order has made a detailed finding with regard to the retraction of the statement and has relied on several judicial pronouncements before concluding the assessment by stating as under:- 9.7 in the instant case, it can be seen that the Managing Partner of the assessee company admitted additional income voluntarily on being specifically asked about the stock discrepancy. It is not the case of the assessee that the Managing par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee as well as material available on record have been considered carefully. The crucial question is whether the addition can be made on the basis of statement recorded under section 131 and 132(4) which is now retracted by the assessee in as much as the income declared by the assessee during the course of search/survey as additional income has not been declared in the return of income. 9.16 It is settled law that admission by a person is good piece of evidence and the same can be used against a person who makes it. The reason behind this is, a person making a statement stops the opposite party from making further investigation. 9.17 This principal is also embedded in the provisions of the Evidence Act. The statement recorded under section 132(4) is on a different footing. The Legislature in its wisdom has provided that such a statement may be used in evidence in any proceedings under the Income-Tax Act, 1961. Therefore great evidentiary value has been attached to such statement by the legislature for the purpose of determining the income of the assessee post search. 9,18 in view of this the admission made in statement under section 132(4) has great evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to discharge the burden of proving that the statement was obtained under coercion or intimidation. He did not make any complaint to the Higher Authorities alleging intimidation or coercion for retracting the statement under section 132(4), 9.31 Hence there are ample cogent reasons for not accepting the retraction of the statement under section 132(4) by the assessee. 9.32 The assessee had failed to discharge the onus of proving that confession made by him under section 132(4) was as a result of intimidation, duress and coercion or that the same was made as a result of mistaken belief of law or facts. 15. From the above, it is clear that the AO has conducted a detailed enquiry with regard to the deviations in stock and has made the addition under the head business income. Further, in the statement recorded during the course of search the Shri Anand Kumar, one of the partners in the assessee firm, he has admitted that there is difference in the stock recorded in the books and the physical stock and agreed to offer the same as additional income. The relevant extract of which is given below Q5. During the course of Survey proceedings u/s.133A of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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