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TMI Blog2021 (11) TMI 630X X X X Extracts X X X X X X X X Extracts X X X X ..... 42(1) and the questionnaire attached thereto, were issued by the assessing officer. The ld. PCIT in his show cause notice (SCN) under section 263 has accepted that the AO made detailed questionnaire dated 03.12.2018. And on perusal record and details/evidences available on record, the PCIT noted that AO has not made further inquiry. PCIT has not made a case that there was no enquiry or lack of inquiry rather recorded that the AO called detailed inquiry . PCIT has not specified that what kind of further inquiry was required, when the income disclosed in IDS was duly accepted by higher authority. We find that declaration made in IDS-16, was never questioned by Board or other superior authority of the revenue. In our view it is the discretion of the AO, having regards to the facts of the case and the material placed before him in response to the various show cause notices, to take a conscious decision if any further inquiry is required or not. Furthermore, we find that the assessment order was duly approved by the ld. JCIT. There in not finding of ld. PCIT that the approval granted by the JCIT is not proper or non-application of proper procedure and practice of the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as your honours deem it proper. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal. 2. Brief facts of the case are that the assessee is a partnership firm. The assessee is engaged in the construction and development activities. The assessee firm have five partners. The names and shares of partners are as follows; 1 Ashok Narshibhai 18% 2 Dilipbhai Devrajbhai Kathiriya 20% 3 Kamlseh Babubhai Bhesaniya 17% 4 Mukeshbhai Arjanbhai Marodiya 27% 5 Ramesh Kumar Gordhanbai Kathiriya 18% 3. A survey action under section 133A of the Act was carried out on assessee's business premises. A survey action was carried out in SRK Group, Surat on 19.07.2016. The assessee is part of SRK Group. During the course of search and survey proceedings certain incriminating documents were found and seized. During t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. Despite carrying out the survey action, the AO issued notice under section 153C of the Act on 29.11.2018 for 2016-17. The assessee filed its return of income for 2016-17 on 12.12.2018 declaring Nil income. The assessee further stated that before issuing notice under section 153C for AY 2016-17 the assessee have filed declaration under IDS declaring undisclosed income of ₹ 4.00 Crore (₹ 1.50 Crore for AY 2014-15, ₹ 1.50 Crore for AY 2015-16 and ₹ 1.0 Crore for AY 2016-17). The IDS was accepted by Designated Authority i.e. ld. PCIT on 14.10.2017. The certificate of acceptance of disclosure made by assessee was also furnished. The assessee further stated that in the course of assessment proceedings, the assessee filed complete books of accounts of unaccounted transaction based on material impounded during the course of survey. As per the impounded material, profit of ₹ 37,97,085/- for the A.Y. 2016-17 was computed, accordingly, the assessee made a declaration of IDS considering these figures of profit. During the assessment, the AO issued notice under section 142(1) to file requires details on 14.12.2018. The assessee filed detailed explanation v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice the assessee replied that all the transaction in the bank statement are fully accounted in the balance sheet and profit and loss accounted filed with the return of income. There is closing stock of work in progress (WIP) of ₹ 4,07,504/- at the end of the year which is fully reflected in the return of income and thus, ld. PCIT has wrongly stated that there is no stock of WIP. No sale deed was registered during this assessment year nor possession of any unit was hand over, thus, there is no question of earning any income. The assessee has made disclose of ₹ 1.00 Crore in the year under consideration on the basis of books of account prepared from the impounded material in respect of unaccounted cash transactions for which complete details is part of assessment record. On the issue of non-reference of seized material, the assessee submitted that when ld. PCIT himself held that notice as well as order under section 153C is passed/issued without there being any seized documents being illegal, thus there is no question of revision of such order. The proceedings under section 153C can only be initiated when material relating to or pertaining to or belonging to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y annulled the same directing the AO to take necessary action for fresh assessment keeping in view the issue of limitation. Aggrieved, by the order of the ld. PCIT, the assessee has presented this appeal before this Tribunal. 11. We have heard the submissions of the learned authorised Representative (ld. AR) of the assessee and learned Commissioner of income Tax-Departmental representative (CIT-DR) for the revenue and have gone through the revisions order passed by ld. PCIT and the assessment orders passed by AO in all three assessment years. The ld. AR for the assessee submits that assessee is a partnership firm engaged in the business of construction and development of housing project. A search and survey action was carried out by the Revenue on assessee and its group on 19.07.2016. On the business premises of assessee, only survey took place. During the course of search proceedings in assessee group, certain incriminating material in the form of papers and documents were found. The assessee and its group i.e. Radhika Construction, Radhika Corporation, Radhika Infrastructure, Amrut Sarovar and Shyam Textile Park all are engaged in construction and development of various projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016-17. The disclosure made by assessee was accepted by ld. PCIT vide Form No. 4 under Rule 4(5) of IDS, vide receipt No. 243013130141017 dated 14.10.2017. The income declared by assessee under IDS was accepted without any variation or objection. 13. The ld. AR for the assessee submits that the AO issued notice under section 153C of the Act on 29.11.2018 requiring the assessee to file return of income for the A.Y. 2011-12 to 2016-17 within 5 days of service of notice. In response to notice under section 153C of the Act, the assessee filed its return of income for the 2016-17 on declaring Nil income. The AO thereafter issued notice under section 142(1) of the Act. In the notice under section 142(1) dated 03.12.2018, the AO required various details on various issues. The ld. AR submits that copy of notice under section 142(1) is filed on record. The assessee filed its detailed reply. The copy of detailed reply filed by the assessee before AO is also placed on record. The AO after considering the various submissions and evidence furnished by the assessee passed the assessment order and accepted the returned income. The AO passed the assessment order after proper approval of ld. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification of cash in hand of ₹ 75.08 lakhs with reference to cash deposit of ₹ 20.20 lakhs. The ld. AR for the assessee submits that there is no cash deposit of ₹ 20,20,000/- in the said bank account as is clearly verifiable from the bank statement on record. In the year under consideration, the total cash deposited is only ₹ 6,00,000/- on 23.03.2016 and not ₹ 20,20,000/- as stated in the impugned notice under section 263. It was submits that complete cash book and the bank book were verified by the AO during personal hearing and hence, ld. PCIT is not correct in holding that the cash deposit and the cash balance was not verified by the assessing officer. 17. On third issue identified by ld. PCIT, which relates to understatement of income of the project. The ld. AR for the assessee submits that ld. PCIT in the show cause notice observed that the AO has merely accepted submission of disclosure made in IDS without making any efforts to verify the same and making any correlation between the figures with the amount reflecting the incriminating documents as claimed. Assessee in its submission stated that all the transactions in the bank statement are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income disclosed in IDS ₹ 4,00,00,000/- 18. The ld. AR for the assessee further submitted that assessee filed all the important materials as required by the assessing officer vide its detailed submission placed at Page No. 22 to 25 of the Paper Book. Assessee also, through this submission, stated that the net profit as per seized material is much less than the declaration made by the assessee under IDS. The ld. AR for the assessee submits that the jurisdictional Gujarat High court in various decision held that only net profit of suppressed receipts is required to be estimated as income. The rate of 15% is most reasonable in the construction project, particularly when in course of search and survey operation, no unexplained investment or unexplained expenditure were detected. The reliance is places on decision of Gujarat High Court in case of Abhishek Corporation [I.T. Reference No. 15 of 2003] pronounced on 07.11.2014 in which other decision of the Gujarat High Court were cited. It is to be noted that assessee had paid more tax than the normal rate under IDS, so even in normal assessment, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made detailed enquiry, the assessee given detailed explanation in writing, all the questions and answers furnished by the assessee are part on record of the case and claims of assessee are allowed by AO being satisfied with the explanation of assessee. Such order of the AO cannot be held to be erroneous, simply because in his order, the AO did not make elaborate discussion. The ld. PCIT himself even after initiating the proceedings and considering the submission of assessee have not given any finding as to how the claims are not allowable. The ld. PCIT has not given any finding as to what other enquiry was required to be made by the AO. If the assessment order is revised in such an approach, there would no end for such enquiries. The ld. AR of the assessee further submitted that assessee made declaration under IDS which is more than the income that can be accessed on the basis of impounded/seized materials. The assessee was eligible to make declaration under IDS as declaration was filed before issue of notice u/s. 153C. By declaring the income under IDS, the assessee in fact paid more tax than the tax payable as per normal provision. The assessing officer is not competent to disreg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 142(1) for AY 2016-17, along with annexure, Exhibit - Showing calculations under IDS Scheme, Copy of Form - 4 IDS, 2016 for AY 2016-17, Notice issued under section 263 for AY 2016-17 and Copies of reply filed in response to notice under section 263 for AY 2016-17. 24. To buttress his all submissions, the ld. AR of the assessee relied upon the following decisions: CIT vs. Max India Ltd. [295 ITR 0282 (SC)] Malabar Industries Co. Ltd. vs. CIT [243 ITR 0083] (SC) CIT vs. M. Mittai Stainless Steel Pvt. Ltd. [263 ITR 0255] (SC) CIT vs. Amit Corporation [81 CCH 0069] (Guj HC) CIT vs. Arvind Jewellers [259 ITR 05021 (Guj HC) Bilag Industries Pvt. Ltd. vs. CIT(A) [SCA No. 24128 of 2005] (Guj HC) CIT vs. R.K. Construction Co. [313 ITR 0065] (Guj HC) CIT vs. Nirma Chemicals Works. Pvt. Ltd. [309 STR 0067] (Guj HC) Rayon Silk Mills vs. CIT(A) [221 ITR 0155] (Guj HC) PCIT vs. Shreeji Prints Pvt. Ltd. [Tax Appeal No. 828 of 2019] (Guj) CIT vs. Nirav Modi [390 ITR 0292 (Bom. HC)] CIT vs. Gabriel India Ltd. [203 ITR 108(Bom) Moil Ltd. vs. CIT [81 taxmann.com 420 (Bom. HC)] CIT vs. Fine Jewelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from the incriminating material and to verify if it has any co-relation with the disclosure made in the IDS as claimed by assessee. Failure on the part of AO to carry out such enquiries as discussed shown that assessment order passed by AO is erroneous insofar as prejudicial to the interest of the Revenue. The ld. CIT-DR for the revenue submits that the twin condition as enunciated in section 263 are fulfilled in the present case. The ld. CIT-DR for the revenue prayed for upholding the order of ld. PCIT. 26. In rejoinder submission, the ld. AR of the assessee submits that on careful perusal of show cause notice under section 263 of the Act issued by the ld. PCIT, it is clearly discernible that the ld. PCIT identified issues only on the basis notice issued by AO under section 142(1) of the Act. No new issues are identified by ld. PCIT. The ld. PCIT has not made any enquiry of his own before holding that assessment order is erroneous or erroneous and insofar as prejudicial to the interest of the Revenue on any of the issue. The ld. PCIT has not specified as to what kind of information or further details or questionnaire or effort was required to be made by AO. The AO before acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the 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 interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. (*underline by us) 28. The Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have estimated the income at a figure higher than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court has also made it clear that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer and that every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. It was further emphatically stated that when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the ITO has taken one view with 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 ITO is unsustainable in law. 30. The Hon'ble Jurisdictional High Court in Aryan Arcade Ltd., vs. PCIT (2019) 412 ITR 277 (Gujarat) held that merely because Commissioner held a different belief that would not permit him to take the order in revision, it if further held that when Assessing Officer made full enquiry, he made up his mind, the notice of revision is not valid. (emphasis added by us). 31. Further, Hon'ble Madras High Court in CIT Vs. Mepco Industries Ltd., (2007) 207 CT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the AO while passing the assessment order accepted the claims of the assessee in non-speaking order. It is not the case of ld. PCIT that the AO is not allowed to accepted the return of income in non-speaking order. We have seen that the AO while passing the assessment order recorded that the Authorized representative of the assessee vide various order sheet entries have furnished the relevant details and information called for. After affording ample and adequate opportunities of being heard to the assessee, assessment proceedings have been completed on the basis of the submissions and details collected and in consequence upon the conclusion of proceeding and hearing of evidences, assessment is made by this order . A perusal of show cause notice under section 263 dated 10.03.2021, clearly demonstrate that the ld. PCIT identified all the issues which were the subject matter of the notice under section 142(1) and the questionnaire attached thereto, were issued by the assessing officer. The ld. PCIT in his show cause notice (SCN) under section 263 has accepted that the AO made detailed questionnaire dated 03.12.2018. And on perusal record and details/evidences available on record, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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