TMI Blog2021 (10) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, were issued by the assessing officer, except the issue of initiation of penalty 271D. The ld PCIT in his show cause notice (SCN) under section 263 has accepted that the AO made detailed questionnaire dated 03.12.2018. And on perusal record and details /evidences available on record, the PCIT noted that AO has not made further inquiry. 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 inquiry was required, when the income disclosed in IDS was duly accepted by higher authority. And the acceptance of IDS was never questioned by Board or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 - DELHI HIGH COURT] held that if the AO has adopted one of the course permissible in law, which resulted in loss of revenue or where two view is possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as erroneous order prejudicial to the interest of revenue unless view taken by the AO is not sustainable in law. At the cost of repetition, we may note that the ld PCIT neither in his show cause notice nor in ultimate / final order has held that the order passed by the AO is unsustainable in law. We are of the considered view that the ld PCIT was not justified in subjecting the assessment order for all three years to revision proceedings by taking view that the AO has not made further inquiry, therefore we quash the revision order (s) in all three assessment years.- Decided in favour of assessee. - ITA Nos.92, 93 And 94/SRT/2021 - - - Dated:- 21-10-2021 - Shri Pawan Singh, Judicial Member And Dr. Arjun Lal Saini, Accountant Member For the Assessee : Shri Rasesh Shah CA For the Revenue : Shri Ritesh Mishra CIT-DR ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 2014-15 to 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 03.12.2018 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 opportunity and hearing the submission of the assessee accepted the return of income filed by assessee. The AO passed the assessment order under section 143(3) r.w.s 153C of the Act after obtaining prior approval of Joint Commissioner of Income Tax (ld. JCIT) Central Range passed the assessment order accordingly on 29.12.2018. 3. Subsequently, the assessment order in all three assessment years were revised by ld. PCIT by exercising his power under section 263 vide order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the assessee was based on misrepresentation or suppressions of facts. There was non-application of mind the AO not made full inquiry and assessment is made without making due disallowances / additions under section 37,40A(3), 40(a)(ia) 68 and other provisions of the Act. The AO has not examined the payment of interest in cash and sources of cash payment made for purchase of land in village Kathore is also not examined either in the hand of firm or partners. Further arrangement regarding use of partners land and its related expenses of conversion of agriculture to non-agriculture is not verified. Thus, clause (a) of Explanation 2 of section 263(1) is also applicable. The assessment order passed under section 143(3) r.w.s 153C suffer from lack of application of mind and void-ab- initio deserved to be annulled. The ld. PCIT held that assessment order to be erroneous insofar as prejudicial to the interest of the Revenue and accordingly annulled the same directing the AO to take necessary action for fresh assessment keeping in view the issue of limitation. Aggrieved by the order of the ld. PCIT, the assessee has availed present appeal before this Tribunal. 5. We have heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 6. In the IDS, the assessee declared income of ₹ 2.05 crore for the A.Y. 2014- 15 and ₹ 1.55 Crore for the A.Y. 2015-16 and ₹ 1.90 Crore for AY 2016- 17. Thus, the assessee declared total income of ₹ 5.50 crore for three A.Ys. The disclosure made by assessee was accepted by ld. PCIT vide Form No.4 under Rule 4(5) of IDS, vide receipt No. 244695740151017 dated 15.10.2017. The income declared by assessee under IDS was accepted without any variation or objection. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the income on the basis of seized / impounded materials was of ₹ 2,49,74,748/- for all the years. For A.Y. 2014-15, assessee made declaration of ₹ 2,05,00,000/- while income on the basis of impounded / seized material was 2,01,72,794/-. The ld AR for the assessee submits that during the assessment the assessee filed detailed submission to justify the IDS declaration for all the years vide its submission, copy of is placed at Page No 35 to 43 of the Paper Book. Thus, this issue was looked into it by AO. The ld PCIT in the show cause notice simply mentioned that IDS was made by misrepresentation. The ld. PCIT failed to specify the nature of misrepresentation. Had there was any misrepresentation the ld PCIT could inquire or investigate the matter further. No such exercise was done by ld PCIT. The ld AR for the assessee submits that AO was not empowered to liked into the validity of IDS when it was duly accepted by PCIT. 10. On the second issue identified by ld PCIT, which relates to validity of return of income (in all three AYs), the ld AR for the assessee submits that ld PCIT raised the issue that the assessment framed by the assessing officer was not valid as ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e verified by the assessing officer. As per section 292C of the Act, the material found in the course of search / survey are required to be presumed to be true unless rebutted otherwise, the PCIT did not rebut the presumption as required under section 292C. Further out of the total expenses of ₹ 41,25,04,436/- debited in the books of accounts for all three assessment years, the expenditure of ₹ 29,18,06,000/- relates to the land payment made in cash. This land was developed for the project. Assessee has given the details of all the expenses under the head Direct and Indirect expenses in the P L account. The balance sheet was also drawn on the basis of impounded / seized material. The completed financial statements is filed on record at Page No 65 to 75 of the paper book. The ld PCIT also raised the issue that expenses of donation of ₹ 13,04,000/- has been wrongly allowed by the AO. The ld AR for the assessee submits that the assessee made far more declaration than income detected under the impounded /. Seized materials, so AO rightly did not draw any adverse inference. The provision of Income Tax Act is not applicable under IDS scheme as per section 195 of the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before assessing officer in the course of assessment proceedings on this issue vide letter dated Nil which can be found at Page No 35 to 43. In form of the IDS, assessee is required to shown only the undisclosed asset and not the source of the income as explained by the Circular 25 of 2016 issued by CBDT dated 30.04.2016 by Question and Answer No 9 of the said circular. Although the assessee was not required to disclose source of earning undisclosed income, the source is evident from the seized material and the revised books of accounts produced by the assessee in the course of assessment proceedings on the basis of impounded material. 15. The ld AR for the assessee submits that Hon ble jurisdictional Gujarat High court in various decision held that only net profit of suppressed receipts is required to be estimated as income. The assessee declared more than the reasonable profit in plotting of land, particularly when in course of search and survey operation, no unexplained investment or unexplained expenditure was detected. The reliance is places on decision of Gujarat High Court in case of Abhishek Corporation [I.T. Reference No 15 of 2003] pronounced on 07.11.2014. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings under section 263 cannot be made as held by Honourable Gujarat High Court in case of CIT v/s. Suresh G. Shah [289 ITR 110 (Guj)] and CIT v/s. Parmanand M. Patel [287 ITR 3 (Guj)]. Thus, the issue raised/ identified by ld PCIT will not survive. 18. On the eighth issue identified by ld PCIT, which relates to non-verification of loan from Manishbhai Sheladiya. The ld AR for the assessee submits that during assessment the AO raised specific query in notice under section 142(1) dated 03.12.2018 requiring assessee to give explanation on Annexure BS 83 seized from residence of Shri Manish Sheladiya at Para No 20(h) of the said notice, copy of which is placed at page No 56 of PB. The assessee filed a detailed reply on this issue in its reply vide para 5 of reply, copy of which is filed at page No 39 40 of PB. In its reply the explained that it was a booking advance received from Abhed Enterprise which was returned back to the party i.e. duly evident in the seized Rojmal. The AO accepted the explanation after his satisfaction. 19. The ld AR for the assessee submits that assessee made declaration on estimated basis of ₹ 5.50 Crore for all three AYs by offering mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,23,627 - Cash 1,52,94,078 1,78,56,531 (1,73,96,778) 1,57,53,831 - Other Asset 25,000 - 2,00,000 2,25,000 - Liabilities - (56,84,500) (4,55,94,893) (5,12,79,393) 1,52,72,478 1,26,19,031 (96,18,594) 1,87,72,95 C Net Profit as per Sq. Yard Residential Plots 113750 Sq. Yards X ₹ 400 per sq. Yard 4,55,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate 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. 22. The ld AR for the assessee submits that the transaction reflected in impounded material were 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 ₹ 5.50 Crore stands offered under IDS which is much above the income reflected in the impounded material. 23. The ld.AR for the assessee submits that assessment in AY 2014-15 to 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 Higher Courts. To support his submission, the ld.AR relied upon the various decision; Rasiklal M. Dhariwal (HUF) vs. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment 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 although in his opinion, the inquiry was insufficient. Accordingly, the PCIT arrived at subjective satisfaction. Needless to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd vs. CIT [ ITA 596,597 599/Pun/2015 ], SreeAlankar vs. PCIT [ ITA no. 108/CTK/2018 ] ( CTK Trih.), JRD Tata Trust t vs. DCST [ 122 taxmann.com 275 ] (Mum. Trib.), Narayan TatuRane v/s ITO [2016] 70 taxmann.com 227 (Mum) (Trib), Indus Best Hospitality Realtors Pvt Ltd. vs. PCIT [ITA No. 3125/Mum/2017] (Mum Trib) 27. On the other hand, the ld. CIT-DR for the Revenue supported the order of ld. PCIT. The ld. CIT-DR submits that in the show cause notice under section 263 of the Act, the ld. PCIT has elaborately discussed the non-examination of various issues. In para 5 of this show cause notice, the ld. PCIT clearly held that inspite of having relevant evidence on record and calling for explanation in detailed questionnaire, the AO has not made any further effort to verify the same or carried out necessary enquiries thereof and accepted the submission on the issues identified by ld. PCIT. The AO accepted the explanation of assessee elaborately discussing the issue. Failure on the part of AO to carry out proper verification on the various issues, which were taken for enquiries at the initial stage by AO himself, shown lack of application of mind or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. We have noted that the assessee in all three years appeal has raised ground of appeal vide Ground No.2 that no reasonable opportunity of hearing was given by ld PCIT. During the hearing no specific submission was made, therefore, this ground of appeal is treated as not pressed hence dismissed. In the result, the ground No. 2 is appeal for AY 2014-15 to 2016-17 is dismissed as not pressed. 30. Before adverting to the facts of the case let us referred certain leading case laws on the scope of revisionary jurisdiction of ld. PCIT. The Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 832 held that a bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of the jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income-tax Officer is er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. One finds that the expressions 'erroneous', 'erroneous assessment' and 'erroneous judgment' have been defined in Black's Law Dictionary. According to the definition, 'erroneous' means 'involving error; deviating from the law'. 'Erroneous assessment' refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, 'erroneous judgment' means 'one rendered according to course and practice of Court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles. The Hon ble Court further held that from the above said definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an assessing officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to the interests of the revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. 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 suo 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 ITO could not be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interest of the revenue will not suffice. The exercise of the power being quasi-judicial in nature, the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income-tax Officer was not only erroneous but was prejudicial to the interest of the revenue. Thus, while the Income-tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suomotu revisional powers unless supported by adequate reasons for doing so*. It was further held that applying the aforesaid law to the facts of the present case, we are of the view that the exercise of revisional power by the Commissioner in the instant case was uncalled for and unjustified. It was more in the nature of roving and fishing enquiry. The Commissioner has proceeded on the assumption that no such information, as was furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that the assessee made declaration on the basis of misrepresentation of fact. However, the ld PCIT failed to mentioned the nature of misrepresentation or the basis of his such observation. Further, the ld. PCIT failed to give any specific finding on his observation while revision the assessment order. After going through the entire material, we find that the AO had taken a conscious decision on the basis or explanation furnished by assessee. Furthermore, the assessment order was duly approved by the ld JCIT. There in not finding of ld PCIT that the approval granted by the JCIT is not proper or non-application of proper procedure. 36. We find that in the case in hand the AO has made required inquiry and came to a plausible, reasonable and legally sustainable conclusion in allowing the claims to the assessee. So far as non initiation of penalty under section 271D/ 271E is concerned, We find that Hon ble jurisdictional High Court in case of CIT Vs Suresh G. Shah [289 ITR 110 (Guj)] and CIT Vs Parmanand M. Patel [287 ITR 3 (Guj)] it was held that CIT cannot exercise his jurisdiction under section 263 for the purpose of initiation of penalty proceedings. Otherwise also we f ..... 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