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TMI Blog2025 (3) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of the revenue since the AO after detailed examination and verification correctly treated the disclosure of income declared during survey proceedings on account of cash in hand and stock as business income. Accordingly, the impugned order u/s 263 holding that the AO has not verified the details which were required to be verified is bad in law and deserves to be quashed. 2. That the appellant prays to add or alter any ground of appeal at or before the time of hearing." 3. The present appeal challenges the order of the ld. PCIT passed under section 263 of the Act. The brief facts related to the case are that in this case a survey proceeding was carried out as per provision of section 133A of the Act on 19.02.2018 at the business premises of the assessee firm situated at Bazaza Bazar, Alwar. For the year under consideration the assessee firm e-filed its return of income u/s 139 on 19/10/2018 vide acknowledgement no. 339545431191018 declaring a total income of Rs. 48,700/-. 3.1 After filling of return of income and as per the prevalent guidelines of CBDT on selection of Survey cases for compulsory scrutiny, the case of the assessee was selected for scrutiny and acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, wherein he in response to question no. 20 of his statements admitted that he declared the undisclosed income of Rs. 15,02,652/- for the current financial year and offered it for tax which was exclusive of his regular business income for the year under consideration. Attention was also drawn toward Shri Ankit Khandelwal's statement dated 22.02.2018 recorded on oath u/s 131 wherein vide question no. 3 he was asked to explain the status of the income of Rs. 15,02,652/- offered for tax. He in response to the question stated that he will pay due income tax applicable on such undisclosed income after including this income in regular income of the firm. 3.2 Thus in the light of the statements given by Shri Ankit Khandelwal, partner, it was quite clear that the amount of Rs. 15,02,652/- was admitted as income of the firm other than the regular business income of the firm. The amount was admitted as income not as sales. Thus, the income of Rs. 15,02,652/- was a separate income which should be added to the regular business income of the firm. Whereas as per the reply and perusal of ITR, the amount of Rs. 15,00,000/- was included in the sales figure on which G.P. rate was appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to apply his mind on the material available on record and failed to invoke the applicable provisions of law. This in turn has resulted in passing of an erroneous order by the AO in the case due to non-application of mind to relevant material, an incorrect assumption of facts and an incorrect application of mind to the law which is prejudicial to the interest of the revenue and hence liable for revision under section 263 of the Act. The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR it has held as under- ".... An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind." Further in the case of Commissioner of Income Tax V/s Paville Projects (P) Ltd, the A.O had allowed the cost of Improvement to the assessee which was not as per law, the Hon'ble Apex Court upheld the action of the Commissioner of Income Tax u/s 263 while observing that "the scheme of the Income Tax Act is to levy and collect tax in accordance with the provisions of the Act, and this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 68 of the Act while passing the order. Even the stock and cash cannot be sourced from the other source when the business of the assessee was considered as existing and even the cash and stock is sourced from the same business income only. Therefore, he relied on the order of the assessment order passed and submitted that the order of the assessment was neither erroneous nor prejudicial to the interest of revenue. To support the contention so raised in the written submission reliance was placed on the following evidence / records : S.No. Particulars Page No. 1. Order u/s 263 dated 21.03.2024 passed by the PCIT (Central) Jaipur 01 - 09 2. Assessment Order u/s 143(3) dated 23.08.2021 10 - 20 3. Copy of Statement of Ankit Khandelwal, Partner recorded on the date of survey on 19.02.2018 21 - 26 4. Copy of Statement of Ankit Khandelwal, Partner recorded on 22.02.2018 27 - 30 5. Copy of audited Trading A/c, Profit & Loss A/c and Balance Sheet for FY 2017-18 31 - 33 6. Copy of Cash Book page 174 dated 18.02.2018 and 19.02.2018 34 7. Copy of Sale Account Ledger page 59 dated 01.02.2018 to 22.02.2018 35 6. Per contra, the ld. DR relied upon the order of ld. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which were recorded in the cash book for FY 2017-18 (Exhibit A-2). These sales were recorded after survey on 19-02-2018 in the cash book amounting to Rs. 2,52,652/- and Rs 12,47,348 totalling Rs. 15,00,000/-. These sales as per Audited Trading A/c of Rs. 91,08,834/- including this figure of sales of Rs. 15,00,000. The copy of Cash Book dt. 19-02-2018 and Ledger Copy of Sales A/c dt. 19-02-2018 was placed on record. (Annexure-1). Ld. AO noted that the assessee included the undisclosed sales of Rs. 15,00,000 in the Books of Account which in turn increased their GP and NP. Ld. AO raised a further query drawing assessee's attention toward the partner's statement recorded under oath on 19.02.2018 during survey proceedings u/s 133A of the Act, wherein he in response to question no. 20 of his statements admitted that he declared the undisclosed income of Rs. 15,02,652/- for the current financial year and offered it for tax which was exclusive of his regular business income for the year under consideration. Attention was also drawn toward Shri Ankit Khandelwal's statement dated 22.02.2018 recorded on oath u/s 131 wherein vide question no. 3 he was asked to explain the status ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der being erroneous. The phrase 'prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of Revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the ld. PCIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. We draw strength from the order of the Honble Apex Court in the case of Malabar Industrial Co. Ltd. v/s CIT (2000) 243 ITR 83 (SC). We also refer to the case of CIT v/s Max India Ltd. (2007) 295 ITR 282 (SC) wherein it is held that ; "The phrase "prejudicial to the interests of the Revenue" in S. 263 of the Income Tax Act, 1961, has to be read in conjunction with the expression "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no plurality of opinion can exist on the point and such additional income cannot be treated as business income at all as adjudged by AO. This makes the action of the AO is the league of being plausible. The power of review cannot be exercised to collect more taxes merely owing to the reason that the law now provides for penal and steep rate of taxation by bringing such income within the ambit of S. 68/ 69 etc. 13.1 Significantly, the PCIT, while seeking to set aside the action of AO and remitting the matter back for further enquiries, did not bring any definite material to show any incorrect assumption of such facts on this score. Besides, no observations are found in the impugned revisional order suggesting a course to be adopted towards manner of determining true character of additional income or the nature of enquiries expected from AO. 13.2 In the similar factual circumstances and in the context of section 263, the Hon'ble Andhra Pradesh High Court in the case of PCIT vs. Deccan Jewellera (P) Ltd. ( 2021) 132 taxmann.com 73(AP) held the action of AO cannot be said be marred by any perversity and the revisional order was set aside. 13.2 Taking into account the entire co ..... 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