2023 (11) TMI 585 - AT - Income Tax

Revision u/s 263 - taxability of cash transactions - as per CIT AO had made addition of GP rate @ 19.40 of the total financial transactions with M/s National Shroff, who is an Angadia, therefore, there was no scope to treat the said transaction as trading turnover but the said transactions were liable to be treated as cash transactions only - PCIT held that the Assessing Officer ought to have considered the total amount as unexplained cash transactions and the aforesaid transactions amount should have been taxed u/s. 115BBEE - HELD THAT - AO had examined this issue in detail during the original assessment proceedings and had made due inquiries and detailed analysis of the material available on record in respect of transactions which was the subject matter of revision in 263 proceedings. AO on the basis of discussion with partner of National Shroff (Angadia), concluded that the amount in question represented cash sales/out of book sales carried out by the assessee during the year under consideration. Accordingly, the AO calculated the GP rate @ 19.40% on the aforesaid cash sales. Thus AO had examined the issue in detail during the course of original assessment proceedings and also had taken a view which was a legally plausible view. We are unable to accept the proposition that the entire explained cash transaction should be brought to tax in the hands of the assessee, since it is a settled principle of law only the real income may be subject to tax in the hands of the assessee and nor the entire receipts. Accordingly, AO not erred in applying the GP rate of 19.40% after holding that the aforesaid sum represented unaccounted cash sales of assessee. AO took one of plausible/possible view looking into the instant facts of the case and the ld. PCIT cannot take recourse to proceedings u/s. 263 of the Act only with a view to supplant/substitute his own view with that of the Assessing Officer on the ground that alternate view should have been taken by the Assessing Officer. As decided in Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue unless the view taken by the Income Tax Officer is unsustainable in law. Assessee appeal allowed.

Summary

Issues involved:
The judgment involves the interpretation of Section 263 of the Income Tax Act, 1961 regarding the correctness of the original assessment order and the application of the GP rate on financial transactions with an Angadia group.

Issue 1: Application of Section 263 of the Income Tax Act
The appeal arose from the order of the Principal Commissioner of Income Tax (PCIT) dated 02-02-2022, invoking Section 263 of the Act. The appellant contested the PCIT's decision, arguing that the Assessing Officer had properly examined the taxing of cash deposits with an Angadia group and allowed deductions. The appellant sought restoration of the original assessment order and the quashing of the Section 263 order.

Issue 2: Examination of Financial Transactions with National Shroff
The Assessing Officer observed financial transactions of Rs. 1,21,81,010 with National Shroff (Angadia Group), leading to the addition of Rs. 23,63,115 @ 19.40% GP rate. The PCIT found fault with the application of the GP rate, considering the transactions as cash transactions only. The PCIT set aside the assessment as erroneous and prejudicial to the revenue's interest, prompting the appellant to challenge this decision.

Issue 3: Legal Validity of Original Assessment
During the appeal, the appellant argued that the Assessing Officer had diligently examined the taxability of cash transactions with National Shroff, applying the GP rate consistently. The Departmental Representative cited legal precedent to support the addition of unexplained credit amounts. The Tribunal noted that the Assessing Officer had thoroughly examined the issue and taken a legally plausible view, finding no error in the application of the GP rate.

Conclusion:
The Tribunal allowed the appeal, emphasizing that the Assessing Officer had appropriately considered the issue during the original assessment. It held that the PCIT could not substitute its opinion for that of the Assessing Officer unless the latter's view was unsustainable in law. Citing legal precedents, the Tribunal concluded that the original assessment order was not erroneous or prejudicial to the revenue's interest, thereby ruling in favor of the appellant.