9911796707
TMI Blog2021 (10) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case as well as law on the subject, the learned Pr.CIT has erred in passing the order u/s. 263, although the assessment order passed u/s.143(3) r.w.s 153C of the I. T. Act, 1961 was neither erroneous nor prejudicial to the interest of the revenue. 2. It is therefore prayed that above order passed by Pr. CIT u/s. 263 may please be quashed or modified as your honours deem it proper. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 2. Brief facts of the case are that the assessee is a partnership firm. The assessee is engaged in the construction and development activities. A survey action under section 133A of the Act was carried out on assessee's business premises. A survey action was carried out in SRK Group, Surat on 19.07.2016. The assessee is part of SRK Group. During the course of search and survey proceedings certain incriminating documents were found and seized. During the search, certain entries pertaining to the assessee were also found. Consequent upon, notice under section 153C dated 29.11.2018 was issued on assessee firm for various assessment years including for the subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S) ( in AY 2015-16, 2016-17 & 2017-18), * Non verification of unsecured loan ( in AY 2017-18 only) and * Non verification of investment in immovable property (in AY 2017- 18 only). 5. The assessee filed its separate replies dated 24.03.2021 in all cases. In the reply, the assessee besides making reply on various issues identified by ld. PCIT, the assessee explained that they are engaged in the activity of construction, development, sale of project, Radhika Optima as FP No.42, TP No.24, Yamuna Chowk, Mota Varachha, Surat. The assessee filed its return of income under section 139 of the Act for subject assessment year 2015-16 and 2016-17 in time declaring Nil income. A survey was carried out on the assessee group along with a search in case of SRK Group. There was only survey action on the assessee. Despite carrying out the survey action, the AO issued notice under section 153C of the Act on 29.11.2018 for AY 2015-16 & 2016-17. The assessee filed its return of income for AY 2015-16 & 2016-17 on 07.12.2018 declaring Nil income. The assessee further stated that before issuing notice under section 153C for AY 2015-16 & 2016-17 they have filed declaration under IDS declaring undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 2016 has laid down the provision of section 119, section 138 and 189 shall be applicable in case of declaration under IDS accordingly, and other provisions are not applicable. On the observation of ld. PCIT that AO failed to carried out proper enquiry on certain issues, the assessee stated that during the course of assessment proceedings certain issues was raised which has been considered by AO which were reproduced in the reply of assessee. The assessee also stated that assessee on the applicability of section 40A(3), which was identified by ld. PCIT that it has not been considered in respect of various contractual payment made by assessee which are unaccounted, the assessee explained that all accounted receipts and payments as reflected in the impounded material stands covered by the income disclosed by assessee firm under IDS and the provision of section 40A(3) are not applicable in respect of income disclosed under IDS. The assessee in its reply also reproduced the contents of the reply filed before the AO on various issues raised in Para -5 of show cause notice by ld PCIT. 7. On the applicability of section 269SS of the Act in respect of cash money received by the firm and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings with a view to start fishing and roving enquiries which are already concluded. The assessee also relied on various case laws. 12. The ld. PCIT recorded that assessee filed written submission along with point wise explanation through ITBP Portal vide letter dated 24.03.2021 [para 3 of the revision order]. The some of the contents of reply of the assessee is recorded in para 4 of the order of ld. PCIT. The ld. PCIT after considering the submissions of the assessee held that assessee simply considered the net figure of undisclosed receipt and expenses without computing undisclosed income chargeable tax as per provisions of IDS- 2016. The ld. PCIT held that this would have entailed computing the business income after making various disallowances as per provision of section 28 to 43 and the addition under section 68/69 of the Act. The survey was carried out on 19.07.2016 and declaration of IDS was made on 30.09.2016, thus, the AO failed to examine the implication of cash transaction on the tax liability and penal consequences of assessment year under consideration. Even the assessee deliberately not covered the above anomalies in the petition of IDS and thereby avoided to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order passed by the AO is erroneous and prejudicial to the interest of the Revenue is proved by fact that issue of cash loan, cash payments for purchase of land, on money receipts have not been verified and inquired by AO as it should have been done. The AO passed assessment order without making enquiry or verification which should have been made. The ld. PCIT after examining the advance booking, purchase of movable property held that it attract the penalty under section 271D of the Act, similarly cash expenses above would be in violation of provision of section 40A(3) of the Act and required appropriate disallowance. Cash expenses payment to contractor without deducting TDS would attract disallowance under section 40a(ia) of the Act, the assessee submitted unsigned unaccounted Profit and Loss Account which so direct and indirect expenses of Rs. 10.66 crore in violation of 4A(3) /40a(ia) of the Act. Further, cash receipt on account of booking in A.Y. 2015-16 to 2017-18 were available on record. The AO failed to make necessary enquiry and verification while computing income and failed to make proper reference for levy of penalty under section 271D of the Act, thus, the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 2014-15 Rs. 1.55 Crore 2015-16 Rs. 1.90 Crore 2016-17 Total (2) Rs. 5.50 Crore Satyam Textile Park Rs. 5.00 Crore 2016-17 Total (3) Rs. 5.00 Crore Radhika Corporation Rs. 1.00 Crore 2016-17 Total (4) Rs. 1.00 Crore Radhika Infrastructure Rs. 1.70 Crore 2015-16 Rs. 1.80 Crore 2016-17 Total (5) Rs. 3.50 Crore Vallabhai B. Paghdal Rs. 60 Lakhs 2012-13 Total (6) Rs. 1.20 Crore Total (1+2+3+4+5+6) Rs. 19.63 Crore 15. In the IDS, the assessee declared income of Rs. 1.70 crore for the A.Y. 2015-16 and Rs. 1.80 crore for the A.Y. 2016-17. Thus, the assessee declared total income of Rs. 3.50 crore for the A.Y. 2015-16 and 2016-17. The disclosure made by assessee was accepted by ld. PCIT vide Form No.4 under Rule 4(5) of IDS, vide receipt No. 223012610141017 dated 14.10.2017. The income declared by assessee under IDS was accepted without any variation or objection. 16. The ld AR for the assessee submits that the AO issued notice under section 153C of the Act on 29.11.2018 requiring the assessee to file return of income for the A.Y. 2011-12 to 2016-17 within 5 days of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on page 72 to 74 of the paper book, which is copy of IDS, filed before the AO. The ld.AR also shown us the copy of Form No.4 issued by ld. PCIT in accepting the disclosure made by assessee. The ld.AR submits that during the assessment, the assessee furnished the brake-up of income assessed on the basis of seized material, unaccounted booking advance and ratio of net profit on the basis of seized material. Net profit percentage wise on unaccounted booking advance as well as net profit derived on per square feet on commercial properties. Such working is also placed on record at page No. 86 of paper book (PB). Sr no. Particulars AY 2015-16 AY 2016-17 Total A Income as per seized material Net profit Rs. 16944330/- Rs. 16669236/- Rs. 33613566/- B Asset as per seized material-cash Rs. 12193830/- Rs. 15565589/- Rs. 27759419/- -receivable/ sundry debtor Rs. 298900/- ------ Rs. 298900/- -Flat at C-412, Matawadi Rs. 4430000/- ----- Rs. 4430000/- -Withdrawal by partner Rs. 21,600/- Rs. 1699097/- Rs. 1720697/- -Mobile ------- Rs. 4550/- Rs. 4550/- Less: current liability ------- (Rs. 600000/-) (Rs. 60000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order is neither erroneous nor prejudicial to the interest of the Revenue. The AO while accepting the reply of the assessee has took a legal reasonable and plausible view. 21. On the third issue which relates to unaccounted cash payment of purchase of land, the ld.AR for the assessee submits that AO in its show cause noticed issued under section 142(1) of the Act has raised this query. Before the ld. PCIT, the assessee submitted that there was no such evidences in the impounded material that assessee paid on money for purchase of land. It was also submitted in without purchase submission that it is covered by the total on money receipt of Rs. 23.14 crore disclosed under IDS. The transaction reflected in the impounded material was duly accounted on day to day basis by preparing books of accounts and Profit and Loss Account. Complete details of Profit and Loss Account, Balance Sheet and ledgers were filed before the AO. Entire impounded material was explained and no adverse cognizance can be taken in respect thereof as the assessee has already offered Rs. 3.50 crore, which is much more than the income reflected in the impounded material. Accordingly, the ld.AR of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n without prejudice and alternative submission, the ld.AR for assessee submits that if it be so, the assessment framed is itself invalid being void-ab-initio. And if the assessment is invalid and void-ab-initio, the ld. PCIT cannot give new lease of life to such assessment order, accordingly, the revision order passed by ld. PCIT will not survive. 25. On the validity of disclosure under IDS, (seventh issue) the ld.AR submits that when the IDS declaration was made, notice under section 153C of the Act was not issued and therefore, proceedings were not pending. The IDS declaration was accepted by ld. PCIT and therefore, the AO or supervision ld. JCIT could not reject the IDS declaration. The IDS declaration was not made by misrepresentative of fact and therefore, it was perfectly invalid. The certificate issued by the ld. PCIT was not revoked and the tax paid under IDS was not refunded. Hence, IDS cannot be questioned at this stage, which is otherwise valid. The assessee declared more income in IDS and paid more tax than the tax payable under normal provision of the Act. 26. The ld AR for the assessee submits that in AY 2016-17, six issues are common. The ld. PCIT raised one differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s produced before him. Even ld PCIT also did not point out any irregularity in the audited accounts filed in the course of assessment proceedings. The tax audit report along with financials is filed on record. The impounded materials referred by the ld PCIT relate to preceding years for which assessee has filed the explanation in detail for A.Y. 2015- 16, thus, the assessment order is not erroneous as the AO has passed the order after considering the relevant material and took a reasonable and legally plausible view. 29. On the issues of non-verification of unsecured loan of Rs. 5.44 Crore (issue No. 5 in AY 2017-18), the ld AR for the assessee submits that it was explained by the assessee in its submission that it had already furnished the details of unsecured loans giving names, address, PAN, amount in the Tax Audit Report filed with the return of income for A.Y. 2017-18 and also during the course of survey, cash book of the firm showing all the unaccounted transactions were found and impounded and in these transactions, there was no evidence of any non genuine unsecured loan availed by the firm. Further the assessing officer required the assessee to furnish the details of unsec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation of assessee. Such order of the AO cannot be held to be erroneous, simply because in his order, the AO did not make elaborate discussion. The ld. PCIT himself even after initiating the proceedings and considering the submission of assessee have not given any finding as to how the claims are not allowable. The ld. PCIT has not given any finding as to what other enquiry was required to be made by the AO. If the assessment order is revised in such an approach, there would no end for such enquiries. The ld.AR of the assessee further submitted that assessee made declaration under IDS which is more than the income that can be accessed on the basis of impounded / seized materials. The assessee was eligible to make declaration under IDS as declaration was filed before issue of notice u/s. 153C. By declaring the income under IDS, the assessee in fact paid more tax than the tax payable as per normal provision. The assessing officer is not competent to disregard the IDS declaration which was accepted by the PCIT. It is not the case of PCIT that assessee has made any misrepresentation of any facts in IDS declaration. The declaration under IDS was neither revoked nor the tax paid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to notice u/s. 263 for AY 2015-16 to 2017- 18. 33. To buttress his all submissions, the ld.AR of the assessee relied upon the following decisions: Sr.No. Particulars 1. CIT vs. Max India Ltd. [295 ITR 0282 (SC)] 2. Malabar Industries Co. Ltd. vs CIT [ 243 ITR 0083] (SC) 3. CIT vs M. Mittai Stainless Steel Pvt Ltd [263 ITR 0255] (SC) 4. CIT vs Amit Corporation [81 CCH 0069] (Guj HC) 5. CIT vs Arvind Jewellers [259 ITR 05021 (Guj HC) 6. Bilag Industries Pvt. Ltd. vs. CIT(A) [SCA No. 24128 of 2005] (Guj HC) 7. CIT vs. R K Construction Co. [313 ITR 0065] (Guj HC) 8. CIT vs. Nirma Chemicals Works. Pvt. Ltd. [309 STR 0067] (Guj HC) 9. Rayon Silk Mills vs. CIT(A) [221 ITR 0155] (Guj HC) 10. PCIT vs. Shreeji Prints Pvt. Ltd. [Tax Appeal No. 828 of 2019] (Guj) 11. CIT vs. Nirav Modi [390 ITR 0292 (Bom. HC)] 12. CIT vs Gabriel India Ltd. [203 ITR 108(Bom) 13. Moil Ltd. vs CIT [ 81 taxmann.com 420 (Bom. HC)] 14. CIT vs. Fine Jewellery India Ltd. [55 texmann.com 514 ] (Bom HC) 15. Anil kumar Sharma [335 ITR 0083] (Delhi HC) 16. ITO vs. DG Housing Projects Limited [343 ITR 329](Dei HC)] 17. CIT vs. Sunbeam Auto Ltd. [189 Taxman 0436 (Del.)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arry out such enquiries as discussed shown that assessment order passed by AO is erroneous insofar as prejudicial to the interest of the Revenue. The ld. CIT-DR for the revenue submits that the twin condition as enunciated in section 263 are fulfilled in the present case. The ld. CIT-DR for the revenue prayed for upholding the order of ld. PCIT. 35. In rejoinder submission, the ld.AR of the assessee submits that on careful perusal of show cause notice under section 263 of the Act issued by the ld. PCIT, it is clearly discernible that the ld. PCIT identified issues only on the basis notice issued by AO under section 142(1) of the Act. No new issues are identified by ld. PCIT. The ld. PCIT has not made any enquiry of his own before holding that assessment order is erroneous or erroneous and insofar as prejudicial to the interest of the Revenue on any of the issue. The ld. PCIT has not specified as to what kind of information or further details or questionnaire or effort was required to be made by AO. The AO before accepting the submission of assessee obtained prior approval of Range Head. The approval granted by Range head is in accordance with law. No deficiency is pointed out by l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. (* underline by us) 38. The Hon'ble Bombay High Court in CIT Vs Gabriel India Ltd (233 ITR 108 Bom /71 Taxman 585) held that the power of suo motu revision under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. Therefore, in orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the Assessing Officer and that every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. It was further emphatically stated that when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. 40. The Hon'ble Jurisdictional High Court in Aryan Arcade Ltd., vs PCIT (2019) 412 ITR 277 (Gujarat) held that merely because Commissioner held a different belief that would not permit him to take the order in revision, it if further held that when Assessing Officer made full enquiry, he made up his mind, the notice of revision is not valid. (emphasis added by us). Further, Hon'ble Madras High Court in CIT Vs Mepco Industries Ltd., (2007) 207 CTR 462 (Madras) held that when two views are possible on an issue and it is not the case of the Commissioner that the view taken by Assessing Officer is not permissible in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted the return of income in non-speaking order. We have seen that the AO while passing the assessment order in para 4 recorded that "the Authorized representative of the assessee vide various order sheet entries have furnished the relevant details and information called for. After affording ample and adequate opportunities of being heard to the assessee, assessment proceedings have been completed on the basis of the submissions and details collected and in consequence upon the conclusion of proceeding and hearing of evidences, assessment is made by this order". A perusal of show cause notice under section 263 dated 08.03.2021, clearly demonstrate that the ld PCIT identified all the issues which were the subject matter of the notice under section 142(1) and the questionnaire attached thereto, except the issue of initiation of penalty 271D and validity of IDS. The ld PCIT in his show cause notice (SCN) under section 263 has accepted that the AO made detailed questionnaire (para -5) dated 03.12.2018. And on perusal record and details /evidences available on record, the PCIT noted that AO has not made further inquiry. Thus, the ld. PCIT has not made a case that there was "no enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X
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