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2023 (2) TMI 986 - AT - Income TaxRevision u/s 263 - Scope of the notice issued - Unexplained investment made in the excess stock found during survey proceedings - violation of Sec. 69B of the Act attracting provision of Sec. 115BBE to charge tax at 60% of the income - disclosure made by the assessee on account of excess stock and cash found during survey as business income - HELD THAT:- More notably in DECCAN JEWELLERA (P) LTD. [2021 (9) TMI 424 - ANDHRA PRADESH HIGH COURT] has in identical background of facts held the disclosure of excess stock of gold ,diamond silver jewellery by an assessee dealing in such stock to be in the nature of business income and not income from undisclosed sources and in response to queries raised by the AO seeking explanation as to why the surrender should not be treated as unexplained investment in the said case, the assessee had merely submitted that excess stock was part of its mixed lot of stock both declared and undeclared, invested out of its undisclosed business income of earlier years and further the assessee had disclosed the same as its business income in its Profit and Loss account. This explanation was found to be correctly accepted by the AO, by the Hon’ble High Court. In the present case before us the assessee had admitted to the same explanation in statement of partners recorded during survey, reproduced above admitting to the excess stock of gold, silver etc as out of its unaccounted business income and had also reflected the surrendered stock as part of stock of its business and shown the same as its business income. There is in fact no factual distinction between the said case and that before us. Therefore the proposition laid down by the Hon’ble High Court will apply to the present case also. It is very much clear, therefore and we agree with the ld.counsel for the assessee, that facts relating to the disclosure in excess stock of the business of the assessee were there before the AO, and he had taken a plausible view on the same by treating it as business income of the assessee. Therefore, we hold, that there was no error in the order of the AO. Pr.CIT had invoked Explanation 2 to section 263 without first confronting the assessee with the same - non-mentioning of Explanation 2 to section 263 in the show cause notice - As section 263 empowers Commissioners/ Pr.Commissioners to exercise revisionary power where they find any order passed by the AO to be erroneous so as to cause prejudice to the interest of the Revenue. Explanation 2 to the section lists circumstances in which the assessment order passed will be deemed to be erroneous, which amongst other, includes an order passed without making inquiries or verification which should have been made as per clause (a) of the Explanation, which clause has been invoked by the ld.Pr.CIT in the present case. Once the ld.Pr.CIT brings to the notice of the assessee the reason why he finds the assessment order to be erroneous, which in the present case was inadequate inquiries conducted by the AO on the nature of disclosure made by the assessee during the survey in excess stock found, he need not specifically point out that he has invoked Explanation-2 to sub-clause (a) to the section which is to the same effect of inadequate inquiries conducted qualifying as error in assessment order. The fact that he clearly brings out the reason why he found assessment order erroneous, is sufficient in itself and self-explanatory. It need not to be technically qualified by pointing out the specific clause in respect to which the reason pertained. The entire objectives of confronting anything to the assessee in the process of rendering justice is to offer an opportunity to other party to come up with his/her arguments or contentions in defense. In the present case, it is not disputed that the assessee had been specifically pointed out the error in the order of the AO of nonconducting inquiry relating to the particular issue. The assessee was required to respond to the same, which he did by pointing out that due inquiry was conducted. As we mentioned above, the Explanation did not expand the scope of section but only explained the scope of section, and therefore, once the specific section has been invoked, it is not necessary to mention any specific Explanation thereto which has been invoked. Therefore, this contention of the ld.counsel for the assessee is rejected outrightly that the order needs to be set aside for the reason that ld.Pr.CIT did not confront the assessee before invoking Explanation 2 to sub-clause (a) to section 263 of the Act. As for the decision of the jurisdictional High Court in the case of Shreeji Prints [2020 (2) TMI 1021 - GUJARAT HIGH COURT], relied upon by the ld.counsel for the assessee in support of this contention, the assessee, we hold, cannot derive any benefit from the same. We hold that the assessee cannot derive any benefit from the judgment of Hon’ble High Court in the case of Shreeji Prints P. Ld. (supra), to the effect that non-mentioning of Explanation 2 to section 263 in the show cause notice will render entire revisionary order as non-est in the eyes of law. This contention raised by the ld.counsel for the assessee, is therefore, rejected. Appeal of the assessee is allowed on merits, and the legal contention raised by the assessee is dismissed.
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