TMI Blog2021 (6) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... as it is his satisfaction as what is required under law. CIT cannot pass the order u/s 263 of the Act on the ground that further/thorough enquiry should have been made by Assessing Officer. We note that assessing officer has examined the issue of On-money of ₹ 8,20,00,000/-(vide para 4 of the assessment order passed under section 143(3) of the Act, dated 11.12.2017) and applied his mind, therefore such order passed by him is neither erroneous nor prejudicial to the interest of revenue. Based on the above discussion on assessee`s facts as well as on various precedents applicable to assessee s facts, we are of the view that revisionary jurisdiction exercised by the Ld. Pr. C.I.T. u/s. 263 of the Act was not in tune with the facts and evidences on record duly explained to the Ld. A.O. and verified by him and that being so the order passed u/s. 263 of the Act on such erroneous stand is liable to be quashed. - Decided in favour of assessee. - ITA Nos.107 And 108/SRT/2020 - - - Dated:- 27-5-2021 - Shri Pawan Singh, JM And Dr. A. L. Saini, AM For the Assessee : Shri Mehul Shah, CA For the Respondent : Shri S. T. Bidari, Sr. DR ORDER PER Dr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT noticed from the records that a survey action u/s 133A of the Income Tax Act was carried out on 16.12.2014 and statement of Shri Jigneshbhai Naranbhai Balar, one of the partners of the firm, was recorded on oath under section 131 of the Act. In his statement, the partner admitted receipt of unaccounted income of the firm, in the form of 'on money' at ₹ 8,20,00,000/-. He disclosed the same as 'income over and above the regular income' of the firm for the F.Y. 2014-15, relevant to A.Y. 2015-16. The firm has shown the amount of ₹ 8,20,00,000/- in the Profit and Loss account under the head 'Income declared in Survey' and computed the income accordingly. Against the disclosed income of ₹ 8,20,00,000/-, the firm has shown total income of ₹ 7,88,56,573/- in the return of income for Assessment Year 2015-16, which is less by ₹ 31,43,427/- (₹ 8,20,00,000-₹ 7,88,56,573). The Ld. PCIT took his view that assessee has claimed this amount of ₹ 31,43,427/- as expenses against the disclosed income, which is irregular in view of the provisions of section115 BBE of the Act. 6. In view of the above facts, ld PCIT has is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. PCIT as the show cause notice was not served on the postal address of the assessee, therefore, ld. PCIT has issued another letter dated 17.02.2020. Against the said letter, the assessee appeared before the ld. PCIT and submitted the written submission which is reproduced below: ......In this regard, we strongly object to pass as order u/s 263 of the Act and it will not affect the revenue of the government because it is revenue neutral and the order passed by the AO is not erroneous. In this matter, we are submitting our reply as under: We are engaged in the business of construction of the project in this firm and the firm was established for construction and sale of the project and hence there is no other activity other than the project on which the survey proceeding has been conducted by the income tax department. During the survey proceedings recorded statement and taken declaration of undisclosed income as on-money of the project which is sufficient evidence that declared income is a business income of the project. We have declared on-money of ₹ 820,20,000/- for the A. Y. 201 5-1 6 of the projects which is a part of business income of this proje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f scrutiny assessment u/s 143(3) of the Income Tax Act. Further, the rule of principle of consistency applied as we have debited these expenses i.e. (Service Tax + VAT) in the year of payment and if you are not allow to set off against the additional business income disclosed in the income tax survey than it will be set off against the subsequent year profit of the business. Further, we would like to bring to your kind attention that the liability of such expenses arises because of income disclosed in the survey otherwise it will not be debited to the profit and loss account Further, the Hon'ble Supreme Court in the case of CIT vs. Realest Builders and Services Limited (2008) 307ITR202 held that: In cases where the department wants to tax an assesses on the ground of the liability arising in a particular year, it Should always ascertain the method of accounting followed by the assessee in the past and subsequent year on the ground that profit is being underestimated under the impugned method of accounting. If the Assessing Officer comes to the conclusion that there is underestimation of profits, he must give facts and figures in that regard and demonstrate that the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total expenses debited to the profit and loss account and claimed against the declared income for the AY 2015-16 on which income tax duly paid therefore entire exercise is revenue neutral and therefore it is requested to your honour considered the facts and drop the proceeding u/s 263 of Act. The addition, if any, is revenue neutral, if seen in a macro perspective and, therefore, no adjustment is called for. Reliance was placed on Nagri Mills Company Ltd.: 33 ITR 681 (Bom.): Triveni Engineering Industries Ltd.: 336ITR 374 (Del). Copy of the Income tax return of the partnership firm from AY 2015-16 to AY 2019-20 is enclosed herewith for your record. So, it is most humble submission that please do not pass the order u/s 263 of the Income tax act as it is revenue neutral and no prejudicial to the interest of revenue. However, if you are not satisfied with our submission and wants to make addition to our total income than please given us a personal hearing before taking any decision in this matter....... 8. However, the ld. PCIT rejected the contentions of the assessee and observed that assessee has claimed expenses towards total service tax paid of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Learned Counsel also took us through paper book page no.42 wherein answer and questions are mentioned which were taken by the survey team during the survey proceedings, wherein assessee has stated that Nagad Rashi was kept in Shrungal Residency office, which belonged to M/s. Shyam Corporation. Therefore, based on these facts, ld Counsel stated that the order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue and hence order of the PCIT under section 263 may be quashed. 10. On the other hand, Learned Departmental Representative (in short the ld. DR ) for the Revenue submitted that there is no whisper in the assessment order passed by the Assessing Officer under section 143(3) of the Act about the discussion of on money whether it pertains to business income or other sources. The ld. DR pointed out that Assessing Officer has not examined whether the on money relates to business income or other sources, so ld. PCIT exercised his jurisdiction under section 263 of the Act, correctly. The ld. DR for the Revenue took us through page no.4 of the order of the ld. PCIT under section 263 of the Act and argued that the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm does not mean that it is not a business income of the firm. The on money of ₹ 8,20,00,000/- is business income of the firm and the assessee nowhere stated that it is the net of expenses income . Answer to question No.13, statement taken during the survey clearly says that Nagad Rashi (means cash ) is kept in Shrungal Residency, which belonged to M/s Shyam Corporation, and related to the project which is going on. The Sum of Money of ₹ 8,20,00,000/- is business income of the firm, although declared in survey statement as over and above the regular income, that does not mean that it is the income of net of expenses, thus, expenses connected to said income has been claimed by the assessee. The assessing officer, taking into account these facts allowed the claim of the assessee, therefore, order passed by the assessing officer cannot termed as erroneous and prejudicial to the interest of revenue. In relation to his project, he received on-money which is declared by him as income from business, over and above the money disclosed by him under the head business income. Learned Counsel took us through paper book page no.14, wherein computation of total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during assessment stage, it can be said that Assessing Officer has applied his mind and hence the order passed by the Assessing Officer should not be erroneous. 14. The ld Counsel submits before us that indirect taxes i.e. service tax and VAT are directly related to the disclosed income which is credited to profit and loss account hence the claim of such taxes made by assessee against the income disclosed in the survey is correct and allowed by the assessing officer, following the principle of natural justice. We note that assessing officer has himself acknowledged the books of accounts, documents and evidences submitted by the assessee during the assessment stage. The assessing officer has mentioned in his assessment order that assessee had submitted before him, books of accounts, return of income, tax audit report, profit and loss account, balance sheet etc. The assessing officer has examined the issue of on money of ₹ 8,20,00,000/- which is mentioned in para 4 of the assessment order and the same is reproduced below: 4. During the year, the assessee was engaged in the business of builder, to this case, a survey action U/S.133A of the I.T. Act was carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment records derived satisfaction for issuing the impugned show-cause notice u/s. 263 of the Act. The expression record as used in section 263 of the Act is comprehensive enough to include the whole record of evidence on which the original assessment order is based. At the same time, if any information asked for by the assessing authority from the assessee or from others to whom he referred the matter during the course of assessment proceeding was not received but received subsequent to the completion of the assessment, in that situation the assessment order passed without receiving such report may appear to be erroneous within the meaning of section 263 of the Act. In the case of the assessee, there is no denying the fact, as detailed above and acknowledged in the assessment order u/s. 143(3) dated 11.12.2017, that in response to notices u/s 143(2)/142(1) and further requisitions made during the course of assessment proceeding, the A/R of the assessee appeared from time to time and produced/ submitted necessary details/documents as per requisitions in relation to the issues raised by the Ld. Pr. C.I.T., which were examined by Assessing Officer. Therefore, it is the apprai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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