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2024 (8) TMI 1423 - AT - Income TaxRevision u/s 263 - during survey proceedings excess stock was found which is surrendered by the assessee - HELD THAT - AO taking cognizance of the finding of the survey team, document found during course of survey, statement of the assessee the return of income and after examination thereof and due application of mind has accepted that the income surrendered is chargeable to tax as business income of the year under consideration. Thus the view taken by the AO is clearly a plausible view considering the facts circumstances of the present case and nothing has been pointed out as to how the view so taken is unsustainable in the eyes of law. As we are of the considered view that the order so passed by the AO cannot be held as erroneous due to lack of inquiry or for that matter requisite inquiry on the part of the AO more particularly when PCIT(Central) has not recorded any finding as to how considering the decision of Rajasthan High Court and other ITAT decisions placed before him, the order passed by AO is erroneous. Thus, merely stating that there was survey operation at the business premises of the assessee where excess stock is found on which provisions of section 115BBE are attracted, the same cannot be a basis for exercise of jurisdiction u/s 263 of the Act. In view of the same, order so passed by the Ld. PCIT(Central) u/s 263 is set aside by cancelling the order passed by him. Appeal of the assessee is allowed.
Issues Involved:
1. Legality of the order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263. 2. Whether the assessment order dated 23.04.2021 was erroneous and prejudicial to the interest of revenue. 3. Applicability of Section 115BBE for taxation of excess stock found during survey proceedings. Issue-wise Detailed Analysis: 1. Legality of the order passed by the Principal Commissioner of Income Tax (PCIT) under Section 263: The assessee challenged the legality of the order passed by the PCIT under Section 263, arguing that the order was illegal and bad in law. The PCIT had invoked clause (a) and clause (b) of Explanation 2 to Section 263, which deems an order to be erroneous if it is passed without making necessary inquiries or verification. The PCIT issued a show cause notice stating that the assessment order was erroneous as the excess stock found during the survey was not taxed under Section 115BBE. The assessee contended that the excess stock was part of the regular business activity and should be taxed under normal provisions. The Tribunal found that the PCIT did not provide a clear basis for how the AO's view was unsustainable in law and set aside the PCIT's order, concluding that the AO had taken a plausible view. 2. Whether the assessment order dated 23.04.2021 was erroneous and prejudicial to the interest of revenue: The PCIT argued that the assessment order was erroneous and prejudicial to the interest of revenue because the AO did not apply Section 115BBE to the excess stock of Rs. 23,62,332/-. The PCIT noted that the AO accepted the income returned by the assessee without proper verification. The Tribunal observed that the AO had considered the facts, including the survey findings, the assessee's statement, and the return of income, and concluded that the income from excess stock was part of the business income. The Tribunal held that the AO's view was a plausible one and that the PCIT did not demonstrate how the AO's order was unsustainable. Therefore, the Tribunal concluded that the assessment order was not erroneous or prejudicial to the interest of revenue. 3. Applicability of Section 115BBE for taxation of excess stock found during survey proceedings: The PCIT contended that the excess stock found during the survey should be taxed under Section 115BBE as unexplained expenditure under Section 69C. The assessee argued that the excess stock was part of the regular business activity and should be taxed under normal provisions. The Tribunal referred to various case laws, including decisions from the Rajasthan High Court and ITAT Jaipur Bench, which supported the view that excess stock related to regular business activity should be taxed as business income. The Tribunal found that the AO had taken a plausible view by taxing the excess stock at normal rates and that the PCIT did not provide a valid reason to invoke Section 263. Consequently, the Tribunal set aside the PCIT's order and allowed the appeal of the assessee. Conclusion: The Tribunal concluded that the order passed by the PCIT under Section 263 was not justified as the AO had taken a plausible view by taxing the excess stock as business income at normal rates. The Tribunal set aside the PCIT's order and allowed the appeal of the assessee. The assessment order dated 23.04.2021 was upheld, and the excess stock was deemed taxable under normal provisions, not under Section 115BBE.
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