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2024 (9) TMI 860 - AT - Income TaxRevision u/s 263 - Rate of tax u/s 115BBE for the excess stock and cash found during the survey - assessee has purchased excess stock, out of Books of Accounts, using unexplained funds, therefore, the same is covered under the definition of unexplained expenditure u/s 69C whereon tax would be charged at special rates under the provisions of section 115BBE whereas as per Computation Sheet, tax was charged at Normal Rates - HELD THAT - When the assessment has been completed after conducting all the enquiries and verification and ld. AO has taken the plausible view on the matter the ld. PCIT cannot quashed that assessment order u/s. 263 of the Act. As it is transpired from the record of the proceedings, in the present case, no presumption can be drawn that the AO had not applied his mind to the aspects for verification of income so disclosed by the assessee. Be that as it may, when the issue of applicability is examined by the ld. AO and the assessee has given a detailed reply about the applicability of the provision section 115BBE of the Act, the ld. PCIT cannot impose her view on the view taken by the ld. AO. We get support of our view from the decision of apex court in the case of Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT where in the Court has taken the view that the phrase prejudicial to the interests of the revenue under Section 263 has to be read in conjunction with the expression erroneous order passed by the assessing officer. Every loss of revenue because of an order of the assessing officer cannot be treated as prejudicial to the interests of the revenue and where two views are possible and the Income Tax Officer has taken one view with respect to which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue , unless the view taken by the Income Tax Officer is unsustainable in law. Decided in favour of assessee.
Issues Involved:
1. Legality of the order passed by the PCIT under Section 263 of the Income Tax Act. 2. Applicability of Section 115BBE on excess stock and excess cash found during survey proceedings. 3. Whether the assessment order passed by the AO was erroneous and prejudicial to the interest of the Revenue. 4. Validity of the PCIT's invocation of Explanation 2 to Section 263. Issue-wise Detailed Analysis: 1. Legality of the Order Passed by the PCIT under Section 263: The assessee challenged the order passed by the PCIT under Section 263, arguing that it was illegal and should be quashed. The PCIT had revised the assessment order on the grounds that the AO did not apply the special tax rates under Section 115BBE for the excess stock and cash found during the survey. The assessee contended that the AO had already examined the issue and taken a plausible view, and thus, the PCIT's revision was not justified. 2. Applicability of Section 115BBE on Excess Stock and Excess Cash: During the survey, excess stock of Rs. 18,32,947/- and excess cash of Rs. 5,07,205/- were found. The AO taxed these amounts at normal rates, while the PCIT argued that they should be taxed under Section 115BBE, which applies to unexplained money, investments, etc. The assessee argued that the excess stock and cash were part of the regular business income and should be taxed as such, citing various case laws to support this position. The Tribunal noted that the AO had considered the explanation provided by the assessee and had taken a plausible view. 3. Whether the Assessment Order was Erroneous and Prejudicial to the Interest of the Revenue: The PCIT considered the assessment order to be erroneous and prejudicial to the interest of the Revenue because the AO did not apply Section 115BBE. However, the Tribunal observed that the AO had conducted necessary inquiries and verifications, and had taken a plausible view based on the assessee's explanations and relevant case laws. The Tribunal held that merely because the PCIT had a different opinion, it did not render the AO's order erroneous or prejudicial to the Revenue. 4. Validity of the PCIT's Invocation of Explanation 2 to Section 263: The PCIT invoked Explanation 2 to Section 263, which deems an order to be erroneous and prejudicial if it is passed without making necessary inquiries or verification. The Tribunal found that the AO had made adequate inquiries and had considered the assessee's submissions regarding the applicability of Section 115BBE. The Tribunal referred to the Supreme Court's decision in Malabar Industrial Co. Ltd. v. CIT, which held that where two views are possible, and the AO has taken one view, it cannot be considered erroneous or prejudicial to the Revenue unless it is unsustainable in law. Conclusion: The Tribunal allowed the assessee's appeals, holding that the AO had conducted proper inquiries and taken a plausible view on the applicability of Section 115BBE. The PCIT's revision under Section 263 was not justified as it was based on a different opinion rather than any error or lack of inquiry by the AO. The Tribunal's decision applied to both appeals, ITA No. 664/JP/2024 and ITA No. 663/JP/2024, given the similar facts and issues involved.
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