TMI Blog2023 (3) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... hown to be an erroneous view. There are many orders of the Co-ordinate Benches supporting the view taken by the AO. At this stage, to argue that this was not the business income of the assessee and was amenable to tax under the deeming head and thus, Section 115BBE de-hors facts cannot be accepted. On facts, a conscious and reasonable possible view has been taken by the AO. Thus, merely because the view is not to the liking of the ld. PCIT by itself cannot make the order passed by the AO as an erroneous order. We find that the reliance placed upon by the ld. CIT-DR on the decision of the jurisdictional High Court in the case of Kim Pharma (P) Ltd. ( 2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT ] is misplaced. On a consideration of the peculiar facts, circumstances and position of law, we find that the impugned order at best can be said to attempting to make out a case of a debatable view, however, even then the order cannot be upheld. Revenue has failed to point out the error in the order accepting the surrendered income under the stated heads and hence, no prejudice can be said to be caused in the absence of any error in the order pointed out. We may refer here to the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding the order passed by the Ld. Assessing Officer as erroneous and prejudicial to the interest of revenue and setting-aside the assessment already framed to the file of the Assessing Officer, with the direction to pass the assessment order, afresh in accordance with law, after granting sufficient opportunity to the assessee. 2. That the Ld. PCIT has failed to appreciate the fact that the assessment as framed by the Assessing Officer vide order dated 28.06.2019, was after considering various replies as filed during the course of assessment proceedings and after complete application of mind on the issues, raised by the Ld. PCIT in the notice u/s 263. 3. That the Ld. PCIT has failed to consider that in the letter filed during survey proceedings conducted at the premises of the assessee on 18.05.2016, offer of surrender was made over and above the normal business income, meaning, thereby, that the amount offered during survey was in respect of business income only and the Ld. Assessing Officer has taken a possible view and, thus, the finding of the Ld. PCIT for taxing the income offered during survey, at special rate of tax is not proper. 4. Notwithstanding, with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r itself under the heading DOH' (date of hearing). It was submitted that the AO was conscious of the fact that this case was selected for compulsory manual selection because it was a survey case and hence after making all necessary due enquiries, the order was passed. 5.2 Inviting attention to the impugned order, it was submitted, that the ld. PCIT has passed the order ignoring the detailed reply filed by the assessee to the Show Cause Notice dated 08.11.2019 and another Show Cause Notice dated 10.08.2021. Referring to the record, it was submitted that the assessee has also made available a detailed parawise reply to the notice on 20.09.2021 available at pages 58 to 66. Referring to the Paper Book, attention was also invited to yet another notice u/s 263 issued on 22.02.2022. Copy is available at pages 67 and 68. The detailed reply filed to this dated 28.02.2022, it was submitted, is available at pages 69 to 72. These replies, it was submitted, is based on the basis of the replies and queries by the AO. Copies available in Paper Book No.1 filed in the present proceedings. Referring to the said Paper Book, it was submitted, that pages 1 to 4 of the same would be evidence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 8,92,500/- Unexplained investment in building Rs. 5,02,800/- Total Rs.44,39,500/- Subsequently, you have filed ITR forA.Y. 2017-18 in which you have disclosed the surrendered income of Rs.44,39,500/- in the profit and loss account (PartA-P L of ITR 2017-18) and paid tax at the rates applicable to normal business income. After that your case was selected under compulsory manual selection guidelines. The Assessing Officer, while framing the assessment order u/s 143(3) dated 28/06/2019 accepted the returned income of the assessee. However, you ought to have disclosed the unexplained income u/s 115BBE of the act which would have resulted in an effective tax rate of 77.25%. In view of the above narrated facts, the assessment seems to be erroneous so far as prejudicial to the interest of revenue. Please state as to why on above issue, your case may not be considered for revision u/s 263 of the Act. 5.4 Relying on the record, it was submitted that the ld. PCIT does take note of the reply dated 20.09.2021 and also captures the assessee's submission in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was still required. Explanation has been offered, supporting evidences from assessee's books of account have also been filed. In the circumstances, it was questioned what further remained to be explained. The fact that the AO has not examined the same is also not the case. The amended position of the provision was another factor taken into consideration and the ld. PCIT held that Section 68 to 69D were applicable. Reliance was incorrectly placed upon the decision of the jurisdictional High Court in the case of Kim Pharma Pvt. Ltd. V CIT 216 Taxman 153 (P H) and various other decisions of the Courts which have no direct applicability to the facts of the present case. The order, it was argued is whimsical and arbitrary. 5.6 In para 9 ld. PCIT, it was submitted, it has been held that the provisions of Section 115 BBE are consequential in nature. Accordingly, following discrepancies were pointed out : (xi) In the case of the assessee, survey u/s 133A was conducted on 18.05.2016 i.e. relevant assessment year 2017-18. The following discrepancies were found, confronted and accepted by the assessee during the course of survey proceedings. Unexplained A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. The order is passed allowing any relief without inquiring into the claim. c. The order has not been made in accordance with any order, direction or instruction issued by the board u/s 119 or d. The order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional high court or Supreme Court in the case of the assessee or any other person. 6. Hence, keeping in view the above discussed facts, figures of the case and lapses on the part of the A.O., I hold the assessment order dated 28.06.2019 for the A.Y. 2017-18 in the case of the assessee is erroneous as well as prejudicial to-the interests of the revenue and therefore set aside the order to the file of the A.O. for passing a fresh order in accordance with law in respect of the issue discussed above and also raised in show cause notice u/s 263(1) of the Act, after giving sufficient opportunity of hearing to the assessee. 5.9 . It was his submission that the order passed may be quashed as the ld. PCIT is proceeding as though Section 115 BBE is automatic in nature which is not so. Enquiries have to be made in the nature of surrendered income an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h after the date of the survey. The AO, it was submitted, had considered the record which consisted of the surrender accepted the view of the Survey Team. Thus, where on facts the Survey Team has accepted the post dated cheques calculating the prevalent tax rate available on the Statute and the AO after enquiring and looking into the facts has also accepted that the tax was to be levied at the rate which was available on the Statute as on the date of the survey. Thus, in these undisputed facts on record, the action of the ld. PCIT in seeking to impose a higher tax rate as opposed to the tax rate correctly imposed even otherwise in the facts of the present case which was debatable. It was submitted that this issue not only on the facts of the surrender made when the amendment was not on the Statute but even otherwise by a play of facts as two separate Revenue authorities had already accepted the tax rate applicable as the prevalent tax rate on the date of the surrender the assessment order is a valid order, hence the impugned order may be quashed. The Revisionary Powers exercised by the ld. PCIT in the peculiar facts and circumstances of the case went beyond the scope of the power v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the anothernotice dated 20.05.2019 issued u/s 142(1) of the Act. 32-33 8. Copy of the reply dated 10.06.2019 filed in response to the notice issued dated 20.05.2019. 34-35 9. Copy of another notice dated 26.06.2019 issued u/s 142(1) of the Act. 36-38 10. Copy of the reply dated 27.06.2019 to the letter dated 26.06.2019 issued u/s 142(1) of the Act by the Ld. Assessing Officer. 39-40 11. Copy of the letter dated 21.10.2019 of the Worthy DCIT, Circle Sangrur with respect to the proposal sent to the Worthy CIT for taking action u/s 263 of the Act. 41-42 12. Copy of the letter dated 01.02.2021 as sent by the Income Tax Officer, Sangrur to the Audit Officer regarding the issue of 115 BBE of the Act is highly debatable, and as such AO had taken possible view. 43-44 13. Copy of letter dated 17.08.2021 by the ITO, Ward- Sangrur sharing the details of the audit objections, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has clearly stated therein that the surrender is made to cover the discrepancies and differences found during the survey which is over and above the normal business income and is out of business transactions of the firm. For ready reference, relevant extract is reproduced hereunder : 5.13 It was his submission that the assessee has been subjected to a survey and no other source of income was found. In the circumstances, it is for the Revenue to show that the surrendered income was not from the known business sources but was from some other sources. Attention was invited to Paper Book page 25 which are postdated cheques dated 15.06.2016, 15.09.2016, 15.12.2016 and 15.03.2017 calculating the tax due on the surrendered income at the prevalent rate of tax. Attention was invited to Paper Book page 26 and 27 which is questionnaire issued to the assessee on 10.09.2018 on the ITBA Portal. Specific attention was invited to page 28 which is another questionnaire dated 31.12.2018 issued by the AO to the assessee accompanied by an Annexure at pages 29 to 32 wherein the nature of queries raised would show that all questions raised were on the normal business of the assessee. No othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench to the ld. AR that the flow of information to the Revisionary Authority can be from any source and thus if the flow of information is coming from the AO, the objections of the assessee have no relevance. The ld. AR in response submitted that he is not objecting to the flow of information to the ld. PCIT, he is objecting to the conduct of the AO who has passed an order after due enquiries and after passing the order herself, the officer states that there is an error in the order. In the said situation, it was his submission that the invoking of Revisionary Authority causes prejudice to the assessee. As if on a debatable issue, the AO was of the view that 154 proceedings could not have been done, the Revisionary provisions consequentially also become inapplicable on this ground. Thus, it is upsetting the vested right of the assessee which is under challenge in such a manner, where first the AO passed an order after full and due enquiries and then attempt to unsettle a settled position by resiling from the view taken. From the body of the assessment order, it was highlighted the number of hearings recorded by the AO herself before the passing of the order itself would show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to make some changes in the Act to ensure that defaulting- assessees are subjected to tax at a higher rate and stringent penalty provision. In the wake of declaring specified bank notes as not legal tender, there have been representations and suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy. Thus, money coming from additional revenue as a result of the decision to ban Rs.1000 and Rs. 500 notes can be utilized for welfare schemes for the poor. 5.19 It was submitted that it had been highlighted that the amendment received the Presidential assent on 25.12.2016 and in view of the fact that survey stood conducted on 18.05.2016 on which date the assessee had surrendered, the relevant provision was not in existence. The documentary evidences which are on the basis of the seized records, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the order and prejudiced caused to the Revenue following decisions were relied upon : SI. No. PARTICULARS 1. Copy of judgment of ITAT, Chandigarh Bench, Chandigarh in the case of Surinder Pal Singh reported in 94 ITR (Trib.) 458 vide order dated 31.01.2022 on the issue of u/s.263. 2. Judgment of ITAT, Chandigarh Bench in the case of Ganga Acrowools Limited Vs PCIT in ITA No.196/Chd/2021 for application of mind and on audit objection. 3. Commissioner of Income Tax vs. Anil Kumar Sharma 335 ITR 83 Delhi-HC. 4. CIT vs. Hindustan Marketing 8t Advertising Co. Ltd. 341 ITR 180 Delhi-HC. 5. Loil Continental Foods Ltd. vs. Pr. Commissioner of income Tax ITA No. 577/Chd/2019 Chd-Trib. 6. Commissioner of income Tax vs. Late Shri Vijay Kumar Koganti 195 DTR 428 (Mad High Court). 7. Copy of judgment of ITAT, Surat Bench in the case of Pramod Kasharich and Shah ITA No. 43/SRT/2018. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Statute on the date of the survey. Hence, section 115BBE could not be invoked. In the facts of the said case also, the Ld. PCIT sought to impose higher rate of tax at 60% instead of 30% which had been imposed by the AO as it was the tax rate available on the statute on the relevant point of time i.e. on the date of survey. Considering the position of law, as laid down by the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd 243 ITR 83 (SC); Hon'ble Bombay High Court in Gabrial India Ltd. 203 ITR 108(Bom.); Hon'ble Gujarat High Court in the case of CIT Vs. Nirmal Chemical Work Ltd 309 ITR 67 (Guj.); Hon'ble Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.); the order passed by the Ld. PCIT u/s 263 was set aside and was quashed. Accordingly, it was his submission that this decision was fully applicable to the facts of the present case also. 5.23 Even on merits, it was his submission that the provisions of section 115BBE are not attracted. For the said purpose, attention was invited to the decision at Sl.No. 3 (pages 33 to 90) of the Chandigarh Bench of the Tribunal in M/s Sham Jewellers Others in ITA NO. 375/Chd/2022 order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pharma Pvt. Ltd (supra) would not apply on the facts of the present case. 5.24 Heavy reliance was paced at Des Raj Hi-Tech Machines Ltd Vs. DCIT, 174 TTJ 0009 Asr-Trib. Copy available at pages 95 to 106 at Sl.No. 4. Head Note of the said decision was read out. On the basis of the same it was argued that merely because the PCIT has a different view than that of the AO, it is not a good ground for setting aside the order. 5.25 The decision mentioned at S.No. 5 in CIT Vs. NiravModi 71 Taxmann.com 272 Bombay-High Court, it was submitted, has already been referred. Attention was invited to the decision at Sr.No.6 Harish Sharma dated 11.05.2021 in ITA 327/CHD/2020 at pages 116 to 124, attention was invited to page 119 of the same, it was highlighted that considering the issue in para 7 to 10, again the fact that in the peculiar facts, deeming provisions were not attracted from the proposition relied upon. 5.26 Reliance was placed on the decision mentioned at Sr. No. 7 i.e. Smt. Rekha Shekhawat Vs. PCIT (2022) 218 DTR 171 (Jaipur-Trib.) Reading from the Head Note therein it was submitted that the issue herein was also the revisionary powers of the PCIT and the deeming provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission that in the facts of the present case, the AO had applied her mind and sent a proposal to the Ld. PCIT for invoking the powers u/s 263 of the Act and ld. PCIT has also applied his mind and noticed that the source remains unexplained. The arguments of the assessee that the disclosure is voluntary and cheque payments have been received in the advance tax, it was submitted are meaningless. It was argued that the advance tax is also filed as per assessee s estimate and possibly section 154 of the Act was not resorted to by the AO as the issue was considered to be debatable. He conceded that there may be a situation where on a debatable issue a fact may operate as a bar to the PCIT to invoke Section 263. However, the present case does not fall in that category. In a case like this, it cannot be a bar. Accordingly, it was his prayer that the amended provision would fully apply in terms of the decision of the Ld. PCIT. It was further submitted that anyway the ld. PCIT has left the issue open and assessee's case has not been outrightly discarded. The assessee, accordingly, is still free to argue before the AO. Accordingly, it was his prayer that the order may be upheld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the sources duly stood addressed by the impounded documents. The tax calculated on actual, it was argued, was not estimate and it was calculated at the normal tax rates as per the prevalent rates then on the Statute. It was his submission that if the issue is debatable for 154 proceedings, then it is debatable even for 263 proceedings. The view taken by the AO was as a complex legal issue and if at best the Revenue can argue it to be a debatable issue which the AO could not address in 154 proceedings then 263 action was also not maintainable. It was submitted that however complicated the issue may be, due enquiries were made by the AO, a view was formed after examining the facts, consistent orders of the ITAT also support this view, thus in terms of the decisions of the various Courts relied upon therein which have held the case to be allowable, the AO forming his view after due enquiry has passed a valid order and may not be permissible to be upset by the order passed. Accordingly, it was his prayer that the impugned order may be quashed. 8. We have heard the rival submissions and perused the material available on record. In the facts of the present case, on a perusal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is not shown to be an erroneous view. We find that there are many orders of the Co-ordinate Benches supporting the view taken by the AO. At this stage, to argue that this was not the business income of the assessee and was amenable to tax under the deeming head and thus, Section 115BBE de-hors facts cannot be accepted. On facts, a conscious and reasonable possible view has been taken by the AO. Thus, merely because the view is not to the liking of the ld. PCIT by itself cannot make the order passed by the AO as an erroneous order. We find that the reliance placed upon by the ld. CIT-DR on the decision of the jurisdictional High Court in the case of Kim Pharma (P) Ltd. (cited supra) is misplaced. This fact is evident from the findings of the Hon'ble Court. For ready reference, we reproduce the relevant finding from the aforesaid decision : 3. We have heard learned counsel for the assessee. 4. Learned counsel for the assessee submitted that the amount surrendered by the assessee was business income and assessable as such. He relied upon a decision of the Karnataka High Court in CIT v. S.K. Srigiri Bros. [20081 298 ITR 13/171 Taxman 264. 5. The point for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey or the value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of such assessee.lt follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, when these provisions apply because no source is disclosed at all on the basis of which the income can be classified under one of the heads of income under s. 14 of the Act, it would not be possible to classify such deemed income under any of these heads including income from 'other sources' which have to be sources known or explained. When the income cannot be so classified under any one of the heads of income under s. 14, it follows that the question of giving any deductions under the provisions which correspond to such heads of income will not arise. If it is possible to peg the income under any one of those heads by virtue of a satisfactory explanation being given, then these provisions of ss. 69, 69A, 69B and 69C will not apply, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... san Vs CIT (2001) 247 ITR 290 which had also possibly been relied upon by the ITAT. A reading of the said decision also clearly illustrates the fact that a plea that surrender was from business income or some other specific source could always be taken by the assessee. Thus, we find that the legal precedent relied upon by the ld. CIT-DR does not help the Revenue in any manner. The issues to be considered necessarily are very fact specific and in case supporting facts are available, assessees are permitted to argue that surrendered income be considered under specific heads. Thus, the issue is to be decided on a case to case basis and it is only the facts of a case which will enable the adjudicating authority to decide whether the plea qua the surrendered income is to be accepted or not. From the aforesaid decision of the Hon'ble Court, their Lordships have extracted in para 6, ..lt follows that the moment a satisfactory explanation is given about such nature and source by the assessee, then the source would stand disclosed and will, therefore, be known and the income would be treated under the appropriate head of income for assessment as per the provisions of the Act. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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