TMI Blog2022 (11) TMI 1427X X X X Extracts X X X X X X X X Extracts X X X X ..... he total income of the assessee includes any income referred to in sections 68, 69, 69A, 69B, 69C, and 69D and reflected in the return of income furnished under section 139 or total income of the assessee determined by the assessing officer, any income referred to in sections 68, 69, 69A, 69B, 69C, or 69D if such income is not reflected in the return of income furnished under section 139 of the Act, income tax payable shall be @ 60% on income so referred in the said section. Change which has been brought about in the provisions relates to income so referred to in the afore-stated sections so defined which is either not reflected in the return of income or determined by the assessing officer and in both the cases it will be covered by the provisions of section 115BBE of the Act and the rate of taxation has been increased from 30% to 60% on such specified income. There is, therefore nothing stated in the pre-amended or post amended provisions of section 115BBE of the Act that where the assessee surrenders undisclosed income during search action for the relevant year, the tax rate has to be charged as per provisions of section 115BBE of the Act. Therefore, the applicability of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee on 15.09.2016 wherein the assessee admitted additional income of Rs. 9.50 lakhs largely on account of unexplained cash. 5. Return for the year was e-filed on 17.10.2017 declaring an income of Rs. 13,52,590/-. Return was selected for scrutiny assessment. During the course of scrutiny assessment proceedings, vide notice dated 01.11.2019, the Assessing Officer raised the following queries: 1. Necessary explanation w.r.t. fail in G.P. rate as compared to immediate preceding year from 21.01% to 16.09% in the year under consideration. 2. Comparative chart of expenses debited to P L account as compared to immediate preceding year as the same has not been found enclosed with the reply. 3. Details of additions made in unsecured loan alongwith copy of bank statements . 6. Relevant reply of the assessee reads as under: To The Income tax Officer Ward-1, Karnal Sub : Supply or information in connection with assessment proceedings for the assessment year 2017-18 Reg : Bharat Malhotru Prop M s Shri Nathji Jewels, Outside Karan Gate, Karnal PAN : AFFPM3182H Sir, That in connection with assessment proceedings for the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, as for as the question of purchase and sales vouchers is concerned, a chart of purchase rate and sale rate on monthly basis reflecting the purchase rate of the purchases made by the assessee and sales made by the assessee is hereby submitted. As per this chart the maximum sale rate during the y ear is Rs. 30000 - per 10 gras and the minimum purchase rate of Rs. 25200/- per 1C gras. Even it die entire sale rale is taken at Rs. 30000/- and purchase rate at Rs. 25200/-, the G.P. rate comes to 16% and the assessee have already disclosed the G.P. rate as ! 6. 9%. Copies of purchase and sales vouchers mentioned in the chart are hereby submitted. 9. After considering the reply of the assessee, the Assessing Officer framed assessment order u/s 143(3) of the Act at the returned income of the assessee. 10. Assuming jurisdiction conferred on him by provisions of section 263 of the Act, the PCIT issued the following show cause notice: M/s/Mr/Ms Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of THE INCOME TAX ACT, 1961 - Assessment Year 2017-18. In this regard, a hearing in the matter is fixed on 14/03/2022 at 11:00 AM. You are requested to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, required to be suitably amended/modified u/s 263 of the Income Tax Act, 1961. You are, therefore, required to show cause as to why an appropriate order u/s 263(1) of the Act setting aside the assessment order passed as on 23.12.2019 should not be passed. In this connection, you may send your written reply along-with supporting documentary evidences on the email-id( rohtak.pcit@incometax.gov.in) or through e-proceedings by 14.03.2022. In case of no reply is received, it shall be assumed that you do not wish to say anything in the matter and the matter would be decided as per material on record without any further notice/intimation to you. PRATAP SINGH PCIT, Rohtak 11. The assessee filed detailed reply strongly contending as to why provisions of section 263 of the Act are not applicable on the facts of the case. Detailed reply of the assessee is exhibited at pages 101 to 107 of the Paper Book. 12. The reply of the assessee did not find any favour with the PCIT who was of the strong belief that the surrendered income was in the nature of unexplained cash and the same was liable to be added u/s 68 of the Act and tax was liable to be paid at the rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot reflected in the return of income or determined by the assessing officer and in both the cases it will be covered by the provisions of section 115BBE of the Act and the rate of taxation has been increased from 30% to 60% on such specified income. 20. There is, therefore nothing stated in the pre-amended or post amended provisions of section 115BBE of the Act that where the assessee surrenders undisclosed income during search action for the relevant year, the tax rate has to be charged as per provisions of section 115BBE of the Act. Therefore, the applicability of the amended provisions which prompted the PCIT to assume jurisdiction under section 263 of the Act is highly debatable issue, and therefore, in our understanding of the law, the PCIT has wrongly assumed jurisdiction. 21. In light of the above, reliance placed by the ld. DR/PCIT on the decision of the Hon'ble Punjab Haryana High Court [supra] is misplaced, in as much as in that case, the Hon'ble High Court has considered the following facts: 5. The point for determination in this appeal is, whether Rs. 5,00,000 which was surrendered by the assessee during the course of survey under s. 133A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the assessee is also part of business income. 24. Merely because in the return of income inadvertently an amount has been shown under the head Income from other sources , would not change the colour of income surrendered. 25. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio: A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far 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 erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income- tax Officer to re-examine the matter. That, in our opinion, is not permissible. Hence the provisions of section 263 of the Act were not applicable to the instant case and, therefore, the commissioner was not justified in setting aside the assessment order. 27. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t applied his mind on the issue. There are judgments galore laying down the principle that the AO in the assessing order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263 of the Act, merely because he has different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open . 30. Considering the facts of the case in totality from all possible angles, we failed to persuade ourselves to accept the contention of the ld. DR who had strongly supported the findings of the PCIT. We are of the considered view that the order framed u/s 263 of the Act deserves to be set aside and that of the Assessing Officer deserves to be restored. We order accordingly. 29. Consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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