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TMI Blog2014 (4) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... a conclusion that the assessee has properly disclosed the receipts in its books of account and concluded that no addition is warranted towards undisclosed receipts and he made the addition of ₹ 1,08,091 towards the discrepancies in bills and vouchers produced by the assessee. The CIT u/s. 263 proceedings not satisfied with the addition made by the AO and he was of the opinion that the income offered by the assessee is to be brought to tax. In our considered opinion, the first requirement viz., that the assessment order passed by the AO is erroneous is absent in this case. In coming to the conclusion of the CIT u/s. 263 proceedings that ₹ 50 lakhs offered by the assessee has to brought to tax is not supported by any positive material and there is retraction by the assessee. Being so, in our opinion, the AO's order is to be upheld. The reason given by the CIT was that the retraction made by the assessee was delayed inordinately. In our opinion, though there is a delay in retraction by the assessee for going back from the offer made by the assessee, there is no material whatsoever to bring the additional income to tax. Thus we are inclined to annul the order passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO, Ward-4(2), Hyderabad had completed the assessment u/s. 143(3) on 19.12.2007 by determining the total income at ₹ 4,41,751. The AO had disallowed a portion of certain expenditure to the tune of ₹ 1,08,091. On examination of records, the CIT came to conclusion that the assessment order is erroneous and prejudicial to the interests of the revenue. Accordingly, he issued notice u/s. 263(1) of the Act on the following reasons: 2.1 During the course of survey conducted u/s. 133A, Sri T. Srinivasa Rao, Managing Partner, had disclosed for the A.Y. 2006-07 an additional income of ₹ 50 lakhs. The reply furnished to Question No. 8 by the Managing Partner, Sri T. Srinivasa Rao, in the statement recorded on 27.03.2006, during the course of survey u/s. 133A, is reproduced hereunder: I do agree that actual receipts received by us, are not totally reflected in the returns of income. It is also true that proper books of account are not maintained by us. Hence, I voluntarily offer additional income of ₹ 20 lakhs for A.Y. 2005-06 and income of ₹ 50 lakhs for A.Y. 2006-07. However, while filing the return of income for A.Y. 2006-07, an income of on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipts. What do you have to say? Ans. I do agree that actual receipts received by us are not totally reflected in the returns of income. It is also true that proper books of account are not maintained by us. Hence, I voluntarily offer additional income of ₹ 20 lakhs for A. Y 2005-06 and income of ₹ 50 lakhs for A. Y 2006-07. Q. 9 Do you want to say anything else? Ans.: No, nothing. The above statement is given by me at my free will. I read out statement and confirm that it has been recorded as per my version. No force, threat was brought upon me while recording statement. Sd/- (Managing Partner) It can be seen that the statement in question had been recorded from the Managing Partner who was well versed with the business affairs of the assessee firm. He had also affirmed a certificate at the end of the statement saying that the statement had been given by him at his free will, that he had read out the statement, that the statement had been recorded as per his version, that no force, no threat was brought upon him while recording the statement. The date of the statement is 27.03.2006. The assessee filed its return of income for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 133A. What the Survey Team found, during the survey, were only two short note books which were impounded from the office premises which were given the numbers A/EC/1 and A/EC/2 (vide question 7 answer quoted above). Since materials impounded were very few, there would be no doubt that the officers I officials would have conducted the procedure as prescribed in the statute. It is a statutory requirement that the survey team I officers are duty-bound to put the marks of identification along with their initials I signatures on the books impounded. Unfortunately, the Assessing Officer has been extremely hasty not only in conducting and completing the assessment proceedings without proper application of mind but also in releasing the impounded material immediately after completing the assessment, thereby leaving the Department in a helpless situation. In the course of present proceeding, the Authorised Representative, at my instance, did produce two short note books which were supposed to have been impounded but unfortunately on examining the two note books, I did not find any authenticating contemporary signature or initial anywhere or on any page of the two books. In the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h pre-meditation after the survey will not have any authentic value as evidence and account books have to be maintained in the course of business, not something to be prepared and cooked up at subsequent date. In view of these facts and surrounding circumstances, I have no doubt in holding that the statement recorded under survey is a reliable statement and truthful statement. The subsequent retraction is calculated to suppress the income which had been admitted during survey. Thus the first issue is disposed of. 5. The second issue is genuineness I authenticity or reliability of the so called two short note books produced by the assessee during the present proceedings alleging them to be the impounded material. In view of the foregoing discussion at length (ie., under para nos. 4(i) to 4(iv), the said two books produced by the Authorized Representative during the present proceedings have no evidentiary value. 6. In view of the aforesaid there can be no doubt that the Assessing Officer had completed the assessment without applying his mind to the substantial variation of income disclosed during survey and income shown in the return and without applying his mind to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act on 31.12.2010. 7. Further, the AR submitted that the reasons advanced by the assessee are bona-fide and reasonable. He submitted that the Tribunal in similar circumstances in the case of M/s. Greenfire Agri. Commodities Ltd. in ITA No. 516/Hyd/2013 for A.Y. 2006-07 vide order dated 27.11.2013 condoned the delay by placing reliance on the order of the Tribunal co-ordinate Bench in the case of Kewalkumar Jain vs. ACIT, Circle-4, Pune (2013) (37 Taxmann. 248) (Pune-Trib) wherein held that Assessment order passed in case of assessee was set aside by Commissioner in exercise of power under section 263. Against said revisional order, assessee filed instant appeal belatedly along with an application seeking condonation of delay. It was noted that assessee misconstrued law by assuming that since matter was remitted back to Assessing Officer, he could agitate consequential order to be passed by Assessing Officer in appeal proceedings before Commissioner (Appeals) only. Thus assessee entertained a belief that as original assessment had been set aside, there was no necessity of challenging revisional order of Commissioner before Tribunal. Whether on facts, misconstruction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requesting the assessee to clarify as to why the income admitted in the sworn statement during survey at ₹ 50 lakhs should not be treated as income. The assessee filed its reply explaining that the admission was intended to be with regard to receipts and that the reference to income was by mistake. It has also based its income on the books of accounts and requested to take the actual receipts of ₹ 46,36,950 to arrive at the taxable income. 11. The AR submitted that the Assessing Officer after examining the explanation offered by the assessee, got satisfied and completed the assessment u/s 143(3) making an addition of ₹ 1,08,091/-. Thereafter, the CIT assuming jurisdiction u/s 263, issued show cause notice stating that the assessment order is erroneous and prejudicial to the interests of the revenue because in the statement at the time of survey, managing partner admitted additional income of ₹ 50 lakhs, whereas the income returned is ₹ 3,36,660 only. According to the CIT the Assessing Officer's order is erroneous. 12. The AR submitted that the assessee filed a detailed reply. It was explained that the reference to 'income' was by mist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sworn statement was also within his knowledge. Hence he submitted that as the Assessing Officer has applied his mind and taken a decision on the available facts. The CIT cannot revisit the same issue unless the order is erroneous. Since it is not erroneous, it cannot be said to be prejudicial to the interest of revenue. The AR submitted that the CIT cannot substitute his opinion, guess work, in place of the Assessing Officer. Even the directions of the CIT are on the assumption that the books produced before him are not genuine. He, therefore, prayed that the Tribunal be pleased to cancel the order of the CIT passed u/s 263 of the Act. The AR relied on the following case-law: (a) Kakade Construction vs DCIT, 115 TTJ 834 (Pune) (b) Jet Electronics vs ACIT, 116 TTJ 225 (Ahd) (c) Hari Om Bansal vs ITO, 51 SOT 118 (Chennai) (d) Manish Kumar vs CIT, 134 ITD 27 (Indore) (e) Sudheer Kumar Agarwal vs CIT (30 taxmann.com 223 Agra) (f) Paul Mathews Sons vs CIT, 263 ITR 101 (Ker) (g) CIT vs Design and Automation Engineers 323 ITR 632 (Bom) (h) CIT vs Gabriel India Ltd. 208 ITR 108 (Bom) 15. On merits, the learned AR submitted that all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for payment of advance tax, considering the date of survey i.e. almost end of the Financial Year. There is no such commitment in the sworn statement. Hence, even on merits, the AR submitted that the whole observations of the CIT are only guess work and doubting the work of revenue officials and there is no concrete evidence brought on record to show that the assessment is erroneous. 16. On the other hand, the learned DR submitted that the statement recorded under oath is an important piece of evidence and cannot be wished away or disregarded as and when it pleases the assessee. Whereas, mere statements without any backing of evidence may not be sufficient to determine income in certain cases, however, the fact that there was any duress or a confused statement of mind has to be inferred from the totality of the circumstance. In the present case, there is no doubt that the assessee firm was undertaking courses for various kinds of coaching and was charging heavy amounts. For an example, for a crash course ₹ 2,000 was charged. The assessee clearly admitted to the fact that there were huge unaccounted receipts. Some documents were impounded during the course of survey in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT vs. Gabrial India Ltd. (supra), it was held by the Bombay High Court that an order could not be termed as erroneous unless it was not in accordance with law, that if the AO acting in accordance with law made certain assessment, the same could not be branded as erroneous by the CIT simply because, according to him, the order should have been written more elaborately, that s. 263 did not visualize a case of substitution of the judgment of the CIT for that of the AO, who passed the order, unless the decision was held to be erroneous, that cases may be visualized where the AO while making an assessment examined the accounts, made enquiries, applied his mind to the facts and circumstances of the case and determined the income either by accepting the accounts or by making some estimates himself, the CIT, on perusal of the records, may be of the opinion that the estimate made by the AO concerned was on the lower side and left to the CIT he would have estimated the income at a higher figure than the one determined by the AO, that would not vest the CIT with power to re-examine the accounts and determine the income himself at a higher figure, that this was because the AO had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interests of the Revenue had to be read in conjunction with an erroneous order passed by the AO, that every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an AO adopted one of the courses permissible in law and it had resulted in loss of revenue; or where two views were possible and the AO had taken one view with which the CIT did not agree, it could not be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the ITO was unsustainable in law. 22. In the light of the above, when we examined facts of the present case, we find that the AO passed the assessment order on 19.12.2007 u/s. 143(3) of the Act. He has gone through the survey report which was conducted at business premises of the assessee on 27.3.2006 and the basis for issuing notice u/s. 143(2) is the survey operation in the case of the assessee u/s. 133A of the Act. The AO categorically mentioned in para 4 of his order that during the course of survey Sri T. Srinivasa Rao, Managing Partner of the assessee stated that the total turnover/receipts for FYs 2004-05 and 2005-06 will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40.00 lakhs which was attracted to the provisions of Sec. 44AB. The books of accounts and related vouchers were in the possession of Income-tax department. Hence, the tax audit u/s, 44AB could not be conducted for want of information. 6. The confirmation letters for the entries shown in the salary sheet are enclosed. Hence, we request you to consider the above information for the purpose of completing the assessment, for which we shall be grateful to you. Thanking you, Yours faithfully, For EVEN'S CLASSES Sd/- (T. Srinivas Rao) (Partner) 24. The AO after considering the entire facts and circumstances of the case came to the conclusion that there are certain discrepancies in the bills and vouchers of the assessee as they are self-made. Hence towards the discrepancies in the vouchers and bills, he made addition of ₹ 1,08,091 to the returned income and he was satisfied about the turnover/receipts declared by the assessee and completed the assessment. The CIT u/s. 263 proceedings was of the opinion that the additional income offered by the assessee in the course of survey u/s. 133A at ₹ 50 lakhs should have been brou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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