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TMI Blog2019 (2) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... detail before so concluding. It is considered appropriate to direct the Registry of this Court to forward a copy of this order to the Central Board of Direct Taxes (CBDT) to issue necessary instructions to all the Assessing Officers that in cases of search and seizure or where survey operations have been carried out by the Department and surrender made or concealed income detected, to ensure proper scrutiny of such cases and discuss reasons for rejecting or accepting the books of account of the assessee and not to merely record in slipshod or cursory manner that ‘the books of account produced and test checked’ as done by the AO in the present case. X X X X Extracts X X X X X X X X Extracts X X X X ..... ax, (2000) 243 ITR 83. Hence the present appeal by the revenue. 3. We have heard learned counsel for the parties and perused the record. 4. Examining the scope of Section 263(1) of the Act, it would be expedient to reproduce the said provision which is relevant for our purpose:- "263(1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation.- xxxxxxxxx" 5. A bare perusal of Section 263 of the Act makes it clear that before the CIT passes any order, an opportunity of hearing is required to be provided to the assessee and thereafter, prima facie finding recorded that the order made by the Assessing Officer is erroneous in so far as it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same category falls orders passed without applying the principles of natural justice or without application of mind." 8. Adverting to the factual matrix in the present case, a survey was conducted at the business premises of the assessee on 28.2.2008 and during survey, a surrender of ₹ 2,15,00,000/- was made by the assessee as additional income. The aforesaid surrender was on account of following undisclosed income:- (a) ₹ 70,00,000/- on account of unexplained investment in stock; (b) ₹ 4,00,000/- on account of excess cash found during survey; (c) ₹ 1,31,00,000/- unaccounted investment made in construction of building at 424, I.A.Area, Ludhiana; (d) ₹ 10,00,000/- additional income offered on account of discrepancy on account of any mistake/omission/discrepancy in the books of account. 9. The Assessing Officer vide assessment order dated 08.12.2010 passed under Section 143(3) of the Act after recording that surrender of ₹ 2,15,00,000/- was made during survey under Section 133A of the Act on 28.2.2008 assessed the taxable income at ₹ 1,35,52,050/- after making an addition of only ₹ 15,752/- under Section 40(a)(ia) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,01,795/- ii) GP shown ₹ 3,67,73,331/- iii) Rate of GP shown 11.48% iv) Rate of GP in A.Y. 2007-08 17.23% v) GP worked out adopting GP rate @ 17.23%. ₹ 5,51,53,539/- vi) Difference in GP ₹ 1,83,80,208/- Income to be enhanced by ₹ 1,83,80,208/- Based on the above discussion, I am also satisfied that the assessee has concealed income or furnished inaccurate particulars of income." 11. In such circumstances, it cannot be concluded that the assessment order dated 08.12.2010 passed under Section 143(3) of the Act was not erroneous and prejudicial to the interests of the revenue. Accordingly, it is held that the Tribunal erred in setting aside order dated 28.3.2013 passed by CIT under Section 263 of the Act. 12. At this stage, it was pointed out that in pursuance to the order passed by the CIT dated 28.3.2013, the assessment was completed under Section 143(3) read with Section 263 of the Act on 28.3.2013 recomputing the taxable income enhancing the returned income by ₹ 1,83,80,208/-. The onus was heavily on the assessee to discharge its obligation to satisfy that the books of account were genuine and properly maintained especially when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills was recorded on 28.2.2008. The statement is reproduced as under:- Q.1 During the course of survey inventory of stock of the firm Venus Woollen Mills has been prepared. As per this inventory stock available physically comes to ₹ 6,40,65,390/-. As against this stock as per books have been shown at ₹ 5,74,42,727/-. Thus, there is difference of ₹ 66,22,665/- being excess stock found at your premises. How do you explain the same? Ans. I cannot explain this difference at the moment. However, to buy peace of mind and settle the affair I offer an additional income of ₹ 80 lacs (Seventy lacs) in respect of unexplained investment in stock subject to no penalty under Section 271(1)(c). Q.2. During the course of survey inventory of cash available at your business premises has been prepared as per this inventory cash physically available is ₹ 4,63,570/-. However, cash as per your books of account comes to ₹ 75,802/-. Please explain the source of excess cash found at ₹ 3,87,768/-. Ans. I cannot explain this at moment. However, to buy peace I offer a sum of ₹ 4 lacs being additional income on this account subject to no penalty unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled submissions vide our earlier letter. Further, in continuation of that we are filing herewith the trading account as on date of survey and in that trading account GP comes to 11.13% and its proof our bonafide at page 69. Another reason was that during the year under consideration, our purchase rate is increased as compared to the last year and while sale rates are decreased as compared to the last year, the comparison for the same i.e. purchase and sales are being filed therewith at page 70-98 alongwith bills of sales and purchase that is why our GP rate has gone down as compared to the last year." 12. The AO failed to apply his mind and simply accepted the explanations of the assessee. Once there are discrepancies in the books of account and also surrender is made, the AO did not come to a logical conclusion that the very books of account which are unreliable have been relied upon while accepting the explanations of the assessee. In para of the reply dated 15.3.2013, the assessee has submitted that there is not much difference in the GP rates as returned by the assessee if the previous year's rate is taken out of the picture. The assessee has been earning profits and the as ..... 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