TMI Blog2021 (10) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of su motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objectives were available from the records called for and examined by such authority. The decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso we find that the assessee has specifically in its reply to the SCN to the ld PCIT has stated that the cash was received only against the booking and no loan or such transaction was undertaken by them. PCIT failed to specify the transaction on which initiation of penalty either under section 271D or 271E was warranted. And on the issues of validity of discloser in IDS, the ld PCIT has not specified that while making declaration the assessee made any misrepresentation of any facts. Once the IDS in all cases were accepted by ld. PCIT, the AO or the Range head no authority to relook or power to revoke or to examine its validity. We further find that the ld PCIT while directing the AO has not himself revoked the IDS nor directed to refund the payment of tax to the assessee. In the IDS the assessee has paid more tax to the revenue then the rate of normal tax, so there is no loss of revenue. At the cost of repetition, we note that the AO while passing the assessment order in all years have made inquiry and took reasonable, plausible and legally sustainable view. The Hon ble Delhi High Court in CIT Vs Kelvinator of India Ltd [ 2002 (4) TMI 37 - DELHI HIGH COURT] held that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal. 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 subject assessment year. In response to notice under section 153C of the Act, the assessee filed its return of income for the A.Y. 2015-16 2016-17 on 07.12.2018. The Assessing Officer (AO) recorded that notice under section 142(1) along with detailed questionnaires were issued to assessee on 13.12.2018 which was duly served upon the assessee. In response thereto, the assessee filed detailed reply. The assessee also furnished relevant details and information as required by the AO. The AO after providing adequate opport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 undisclosed income of ₹ 1.70 crore and ₹ 1.80 crore respectively. Accordingly, the assessee made a total disclosure of ₹ 3.50 crore under IDS. The certificate of acceptance of disclosure made by assessee was also furnished. The assessee further stated that in the course of assessment proceedings, the assessee filed complete books of accounts of unaccounted transaction based on material impounded during the course of survey. As per the impounded material, profit of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 non-initiation of penalty under section 271D of the Act, the assessee explained that cash money received by assessee firm on account of booking and section 269SS of the Act are not applicable. 8. On the issue of non-reference of seized documents in satisfaction note under section 153C of the Act the assessee explained that when ld. PCIT himself is holding the notice as well as order under section 153C of the Act as being issued/passed without ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the legitimate tax liabilities. The contention of assessee that there was complete application of mind by Investigation Wing, AO and Range head while passing the assessment order. This contention of assessee is not tenable, as the Investigation Wing only gives the factual report based on the evidences gathered at the time of survey proceedings and no conclusive findings is given by Investigation Wing and the same is left to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld 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 ₹ 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 order is erroneous insofar as prejudicial to the interest of the Revenue. The ld. PCIT also held that AO while recording satisfaction for initiating assessment proceedings shown no reference of seized document/evidence. All the documents referred to AO were impounded during the course of survey proceedings, thus, the assessment order passed under section 143(3) r.w.s 153C suffer from lack of application of mind and void-ab-i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1.90 Crore 2016-17 Total (2) ₹ 5.50 Crore Satyam Textile Park ₹ 5.00 Crore 2016-17 Total (3) ₹ 5.00 Crore Radhika Corporation ₹ 1.00 Crore 2016-17 Total (4) ₹ 1.00 Crore Radhika Infrastructure ₹ 1.70 Crore 2015-16 ₹ 1.80 Crore 2016-17 Total (5) ₹ 3.50 Crore Vallabhai B. Paghdal ₹ 60 Lakhs 2012-13 Total (6) ₹ 1.20 Crore Total (1+2+3+4+5+6) ₹ 19.63 Crore 15. In the IDS, the assessee declared income of ₹ 1.70 crore for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a specific query in the Annexure-A1 attached with notice issued under section 142(1) of the Act. The assessee in its reply to a specific query of the AO stated that assessee has already made declaration under IDS of ₹ 3.50 crore, which is more than the actual profit of ₹ 3.36 crore on the basis of impounded /seized material. As per the seized material, the net profit for the A.Y. 2015-16 was ₹ 1.69 crore and for the A.Y. 2016-17, it was ₹ 1.66 crore, thus, total of ₹ 3.36 crore. However, the assessee has already declared more profit in IDS of ₹ 3.50 crore. The ld.AR of the assessee invited our attention 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 worki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 crore by taking 15% estimated unaccounted booking advance for entire project, though the income as per seized material was computed at ₹ 3.36 crore only. The ld.AR for the assessee further submits that the Hon ble Jurisdictional High Court in various decisions held that only net profit of suppressed receipt is required to be as estimated as income and not the entire receipt. The rate of 15% is most reasonable in the construction project, particularly when in the course of search and survey action, no unexplained expenditure was deducted. To support his submission, the ld.AR relied upon the decision of Hon ble Gujarat High court in the Abhishek Corporation (ITR 15 of 2003) dated 07.11.2014. The ld.AR finally submits that assessee has paid more tax more than normal rate under IDS, so even a normal assessment, the income assessed would have been less than the declaration made under IDS. Therefore, the assessment on this issue is neither erroneous nor prejudicial to the interest of the Revenue. 20. On second issue which relates to non-verification of cash loan of ₹ 1.26 Crore as identified ld. PCIT. The ld.AR of the assessee submits that AO raised issue about cash l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t his submission, the ld.AR relied on the decision of Hon ble Gujarat High Court in Pr.CIT vs. Juned B. Memon [2018] 95 taxmann.com 20(Guj). The ld.AR for assessee further submits that once income is declared under IDS, the provision of Income Tax is not required to be considered as per section 195 of Finance Act, 2016, except provision of chapter XV, section 119, 158 and 189 of Income Tax Act. The ld.AR for the assessee accordingly submits that identification of this issue is misplaced. Thus, the assessment order cannot be granted as erroneous and insofar as prejudicial to the interest of the Revenue. 23. On the fifth issue which relates to non-initiation of penalty under section 271D of the Act. The ld.AR for the assessee submits that assessee made declaration under IDS, the provision of section 271D of the Act are not applicable. On merit of the issue, the ld.AR submits that assessee did not take any loan and therefore, the provisions of section 271D of the Act are not attracted or applicable. The amount involved was booking advance and not loan. The ld.AR for the assessee submits that non-initiation of penalty proceedings, the revision proceedings under section 263 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duly accounted on day to day basis by preparing books of accounts and the P L account and balance sheet and all ledgers were filed before the assessing officer. It is submitted that the entire impounded material stands explained and no adverse cognizance can be taken in respect thereof since an income of ₹ 3,50,00,000/- stands offered under IDS which is much above the income reflected in the impounded material. 27. The ld AR for the assessee further submits that in AY 2017-18, the ld PCIT raised some additional issues in addition to common issues in two earlier AYs. Issue no. 2 in AY 2017-18 relates to non-verification of cash loan. The ld AR for the assessee submits that the AO raised the query in the notice issued u/s. 142(1) that cash loans of ₹ 88,20,500/- reflected in the impounded materials at Annexure A 22 were not verified. The amount of ₹ 88,20,500/- is a part of the amount of ₹ 1,26,10,000/- as mentioned by AO in his show cause notice. The assessee filed a detailed submission along with Annexure explaining alleged cash loan of ₹ 1.26 Crore. The assessee stated that the amount of ₹ 1.26 Crore is the booking advance received in F.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of search and survey action conducted in various cases of the group assessee, no evidences were found indicating that assessee received any bogus loan or accommodation entry. Thus, the AO accepted the contention of the assessee after making complete inquiry and passed a reasonable and plausible order on the issue. 30. On the issue of non-verification of investment in immovable property of ₹ 2.34 Crore (issue No. 6 in AY 2017-18), the ld AR for the assessee submits that the AO raised the issue in notice under section 142(1) issued on 03.12.2018. The assessee filed the ledger account along with registered purchase deed of the land at Annexure 7, with the assessee s submission filed in the course of assessment proceedings. (Page 76 of the paper book). Thus, the AO fully examined the facts and passed the assessment order after considering the material evidence. Thus, the order is not erroneous. 31. The ld.AR for the assessee submits that assessment in AY 2015-16 2016-17 case is completed under section 143(3) r.w.s 153C of the Act after taking prior approval of ld. JCIT and no revision of such order is permissible as has been held by various Tribunals and Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to give information regarding the source of income, assessee disclosed the source of income at the time of assessment by incorporation all the entries of impounded / seized materials in the books of accounts. The assessee also filed the calculation in support of declaration filed under IDS at the time of filing the declaration as well as in the course of assessment proceeding. The survey and search actions is ultimate weapon with the department to unearth the black money. In this case, the survey actions were conducted in case of firms and search actions were conducted in the case of the partners of the firms. Even after these actions, the discrete inquiry was made by the assessing officer and the assessments were made in the group cases on the basis of incriminating materials impounded / seized in course of search / survey action. In the course of these actions, no unexplained valuables were found. Accordingly, assessments were framed considering all these facts and circumstances of the case and therefore, they are not liable for revision. Accordingly, it is a case of sufficient and proper inquiry made by the assessing officer. The ld PCIT did not make any inquiry althou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exmann.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.)] 18. PCIT vs. Delhi Airport Metro Express Pvt. Ltd. [ITA No. 705/2017(Del 19. CIT V/s. Vika Polymers [341 ITR 537] (Delhi HC) 20. CIT vs Ganpat Ram Bishnoi [296 ITR 0292] (Raj HC) 21. CIT vs. Jain Constructions Co [257 ITR 0336] (Raj HC) 22. CIT vs. Kelvinator of India Ltd. [ 256 ITR 1 ](Dei. HC) 23. CIT vs. Sr. Suresh G. Shah [ 289ITR 110 ]( Guj. HC ) 24. CIT vs. Parmanand M. Patel [ 278 ITR 3 ]( Guj. HC ) 25. CIT vs. Abhishek Corporation [ IT Ref. No. 15 of 2003 ] ( Guj. HC ) 26. R.Srin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 ld.PCIT in the approval granted by Range head. In absence of any finding as to how the order on particular issue is erroneous, the revision order under section 263 of the Act is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roneous 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 sub-section (1) of section 263 is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 order to exercise power under section 263(1) there must be material before the Commissioner to consider that the order passed by the ITO was erroneous insofar as it is pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests 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 law, Commissioner cannot invoke his jurisdiction under section 263 of the Act. (emphasis added by us) 16. The Hon ble Delhi High Court in CIT Vs Vikas P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or lack of inquiry rather recorded that the AO called detailed inquiry. We find that the ld. PCIT has not specified that what kind of further inqu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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