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2025 (3) TMI 356 - HC - Income TaxRevision u/s 263 - addition on applying the G.P. rate of 19.40% on unexplained cash transaction - ITAT set aside revision order - HELD THAT - As correctly decided by ITAT 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 of matter of revision in 263 proceedings. Secondly on the basis of discussion with partner of National Shroff (Angadia) the Assessing Officer was of the view that the aforesaid amount represented cash sales/out of book sales carried out by the assessee during the year under consideration. Accordingly the Assessing Officer calculated the GP rate @ 19.40% on the aforesaid cash sales. Accordingly we are of the considered view that the Assessing Officer 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 hands of the asssessee and nor the entire receipts. Accordingly the ld. Assessing Officer not erred in applying the GP rate of 19.40% after holding that the aforesaid sum represented unaccounted cash sales of assessee. Therefore we are of the view that the Assessing Officer 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 AO. ITAT has rightly held that the Principal CIT has erred in invoking the provisions of Section 263 - Decided in favour of assessee.
The case involves a Tax Appeal filed under section 260A of the Income Tax Act, 1961, arising from an order passed by the Income Tax Appellate Tribunal (ITAT) in relation to the Assessment Year 2012-2013. The primary issues raised in the appeal revolve around the quashing of the order under Section 263 of the Income Tax Act by the Appellate Tribunal and the justification for such actions. The key questions of law proposed in the appeal are as follows:A) Whether the Appellate Tribunal was justified in quashing the order under Section 263 of the Income Tax Act when Explanation 2 of Section 263 was invoked by the Principal Commissioner of Income Tax (PCIT) to deem the order prejudicial and erroneous to the interest of revenue.B) Whether the Appellate Tribunal was justified in quashing the order under Section 263 of the Income Tax Act when the Assessment Order passed by the Assessing Officer was deemed unsustainable in law.C) Whether the Appellate Tribunal was justified in quashing the order under Section 263 when the Assessing Officer's application of the GP rate of 19.40% on total cash transactions was considered appropriate.D) Whether the Appellate Tribunal was justified in quashing the order under Section 263 when the order passed by the Assessing Officer was deemed erroneous and prejudicial to the interest of revenue.E) Whether the Appellate Tribunal was justified in allowing the appeal against the order under Section 263 when there was gross inadequacy in the inquiry conducted.The facts of the case involve a partnership firm that had filed its return of income for the Assessment Year 2012-13, which was later reopened based on information found during a search at the premises of M/s. National Shroff. The Assessing Officer made an addition of Rs. 23,63,115 on applying a GP rate of 19.40% on unexplained cash transactions with National Shroff. The PCIT subsequently canceled the assessment under Section 263, directing a fresh assessment due to lack of verification by the Assessing Officer.The Appellate Tribunal quashed the PCIT's order under Section 263, stating that the issue had been examined during the original assessment proceedings. The Senior Standing Counsel argued that the ITAT's decision was erroneous, emphasizing the need for proper examination of the cash transactions and the inadequacy of the inquiry conducted by the Assessing Officer.The ITAT's analysis highlighted that the Assessing Officer had examined the issue in detail during the original assessment, making due inquiries and analysis of the material available. The ITAT disagreed with the PCIT's view that the entire amount should be added as taxable income, stating that only the real "income" should be subject to tax. Citing legal precedents, the ITAT concluded that the Assessing Officer had taken a plausible view, and the PCIT cannot substitute his opinion unless the view taken is unsustainable in law.In conclusion, the Court upheld the ITAT's decision, stating that the PCIT erred in invoking Section 263 and dismissed the appeal, finding no substantial question of law for determination.The significant holdings include the Court's emphasis on the importance of a legally plausible view taken by the Assessing Officer, the requirement for only real "income" to be subject to tax, and the limitations on the PCIT's authority to substitute his opinion for that of the Assessing Officer. The Court's decision reaffirms the principle that not every error in an assessment invites the exercise of powers under Section 263, but only orders that are both erroneous and prejudicial to the interest of revenue warrant such intervention.
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