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TMI Blog2022 (8) TMI 1167X X X X Extracts X X X X X X X X Extracts X X X X ..... r exercising revisionary powers u/s. 263 as the error envisaged by Section 263 of the Act is not one that depends on possibility as a guess work, but it should be actually an error either of fact or of law. Assessee has no other source of income other than business income which fact has been repeatedly submitted by the assessee before the lower authorities. AO has conducted enquiry and perused the details submitted and has taken a decision to accept the explanation provided by the assessee after proper application of mind. It is also to be noted that impugned sum is already offered to tax as business income and when the only source of income is business income, then the provisions of section 115BBE cannot be invoked to tax the income as deemed income . PCIT has stated that the AO ought to have treated the income as unexplained cash credit that should have been added u/s.68. This contention is not tenable since for the purpose of invoking section 68, the cash credit should have been recorded in the books of accounts of the assessee for which he offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income tax has grossly erred in revising the order passed by the learned Assessing officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the learned POT is ultra vires to the scope of Section 263 and requires to be cancelled on the facts and circumstances of the Appellant's case. The direction to make thorough and detailed enquiry amounts to ordering fishing and roving enquires without any material in support thereof and consequently the impugned order passed is bad in law and is liable to be cancelled. 6. The learned Pr.CIT failed to appreciate that the additional income declared by the appellant of Rs. 3,00,00,000/- is only to cover up certain possible omissions / commission that might have crept in and the nature and source of such additional income is from the business of the appellant and the learned assessing officer after considering the submission of the appellant accepted the income returned by the appellant, on the facts and circumstances of the case. 7. The learned Principal Commissioner of Income tax failed to appreciate that the Assessing Officer b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the interests of the revenue. He therefore issued a show cause notice to the assessee in this regard and after considering the submissions of the assessee, he concluded as follows:- 7. I have considered the assessee s submissions and have gone through the assessment records. It is evident from the assessment records that the Assessing Officer did not make any enquiries or verification with regard to source of cash receipt of Rs.3 crore as found during search proceedings. The Assessing officer allowed the claim of assesses regarding additional income as income from business without making any verification which he ought to have done during the assessment proceedings. 8. In view of the above facts, it is held that the Assessment Order passed by the Assessing Officer is erroneous so far as it is pre-judicial to the interest of the Revenue as per the provisions of Clause (a) of Explanation (2) to the Section 263 of the Income Tax Act, 1961. The claims of the assessee made during current proceedings require in depth enquiry and examination by the Assessing Officer. Hence, the assessment order dated 03.12.2019 is hereby set-aside to the file of the Assessing Officer for passing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has rightly offered the same under the head business . Therefore, there is no error in the order of the AO accepting the additional income offered as sourced from business of the asse. 8. The ld. DR submitted that the income offered is not out of normal course of business of the assessee, but offered as additional income. The amount offered is not recorded in the books of account and therefore the AO should have conducted proper enquiry with regard to the source of additional income and to that extent the assessment order is erroneous. He further submitted that since the additional income is not recorded in the books, it should be assessed as undisclosed income u/s. 68 and taxed at a higher rate and to this extent, the order of the AO is also prejudicial to the interests of the revenue. 9. We have considered the rival submissions and perused the material on record. The main source of income as per the return of income filed by the assessee is the income from business and that the adhoc amount of Rs.3,00,00,000 is declared under the head income from business. This supports the claim of the assessee that there is no other source of income other than the income from business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue on account of error in the order of assessment. The Bombay High Court in the case of Gabriel India Ltd. (1993) 203 ITR 108 has explained as to when an order can be termed as erroneous as follows:- From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the Income tax officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of Section 263 of the Act, has held that : - 4 Being aggrieved by the order passed by the PCIT under section 263 of the Act, 1961, the assessee went before the Tribunal. The Tribunal, after considering the submissions made by the assessee and after considering the scope of power to be exercised by the PCIT under section 263 of the Act, 1961 came to be conclusion that the Assessing Officer has made inquiries in detail about two unsecured loans taken by the respondent assessee and observed as under: 13 In the light of the aforesaid judicial precedents in the present case what has to be seen is whether the AO has made enquiries about two loans taken from GTPL and PAFPL. If the answer is affirmative, then second question arises whether the acceptance of the claim by the AO was a plausible view or on the facts of the finding on the facts that the said funding of the AO can be termed as sustainable in law. We find that vide notice issued u/s.142(1) dated 13-10-2015 placed at Page No. 1 of Paper Book shows the AO vide item no.(iii) has asked the information regarding details of unsecured loan outstanding as on 31-3-2013 and the loans were squared up amounts in the format pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances, we are of the considered opinion that the order of the Assessing Officer is not erroneous nor it is prejudicial to the interest of revenue. It was also brought to the notice of the PCIT that entire share capital of GTPL being already tax, all the investment made by the said company recorded in its balance sheet stands explained tax in its hands itself and hence, there is no question of adding the same amount in the hands of the assessee. As regards loans from PAFPL, it was submitted that assessee company has made voluntary disclosure of income of Rs. 1.5 crore under IDS 2016 in September 2016 and the said loan was repaid before making declaration. In view of these facts and circumstances, we find that the AO has made due enquiries. Since we find that the AO had made enquiries regarding unsecured loans and accepted the claim of the assessee after detailed enquiries. 15 The Pr.CIT had observed that Explanation 2 of section 263 of the Act is clearly applicable and it is clear that the Assessing Officer has passed the assessment order after making enquiries for verification which ought to have been made in this case. However, we find that the Pr. CIT has not mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act introduced by Finance Act, 2015 w.e.f. 1-6-2015 for his action. The Explanation 2 inter alia provides that the order passed without making inquiries or verification 'which should have been made' will be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue. It is on this basis, the assessment order passed by the AO under section 143(3) of the Act has been set aside with a direction to the AO to pass a fresh assessment order. It will be therefore imperative to dwell upon the impact of Explanation 2 for the purposes of section 263 of the Act. The aim and object of introduction of aforesaid Explanation by Finance Act, 2015 was explained in CBDT Circular No. 19/2015 [F.NO.142I14/2015T PL], Dated 27-11-2015 which is reproduced hereunder: 53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue. 53.1 The provisions contained in sub-section (1) of section 263 of the Income-tax Act, before amendment by the Act, provided that if the Principal Commissioner or Commissioner considers that any order passed by the Assessing Officer is erroneous in so far as it/s prejudicial to the interests of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. The AO in the present case has not accepted the submissions of the assessee on various issues summarily but has shown appetite for inquiry and verifications. The AO has passed after making due enquiries issues involved impliedly after due application of mind. Therefore, the Explanation 2 to section 263 of the Act do not, in our view, thwart the assessment process in the facts and the context of the case. Consequently, we find that the foundation for exercise of revisional jurisdiction is sorely missing in the present case. 18 In the light of above facts and legal position, we are of the considered view that the AO had made detailed enquiries and after applying his mind and accepted the genuineness of loans received from GTPL and PAFPL, which is also plausible view. Therefore, we find that twin conditions were not satisfied for invoking the jurisdiction under section 263 of the Act. The case laws relied by the ld. CIT(D.R.) are distinguishable on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular income in the hands of my business entities. The details are as follow:- Sl. No. Name of the entities Income offered in Rs. F.Y for which income offered 1. Hariappa Kotian (Prop.) 1,00,00,000/- additional income (unaccounted fish sales) 2016-17 2. Hariappa Kotian (Prop.) 3,00,00,000/- additional income (Unaccounted fish sales) 2017-18 3. Karthik Estate 3,00,00,000/- additional income (unaccounted receipts out of real estate business) 2017-18 Further, I would like submit that my estimated regular income for the F.Y. 2017-18 as an individual capacity and from other firms is Rs.2,50,00,000/-. The same will be offered after the finalization of the books of account. 15. We also notice that in the letter filed before the AO during the course of assessment proceedings the assessee has made a detailed submission with regard to his business income as under :- 1. Assessee firm was constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en repeatedly submitted by the assessee before the lower authorities. The AO has conducted enquiry and perused the details submitted and has taken a decision to accept the explanation provided by the assessee after proper application of mind. It is also to be noted that impugned sum is already offered to tax as business income and when the only source of income is business income, then the provisions of section 115BBE cannot be invoked to tax the income as deemed income . The PCIT has stated that the AO ought to have treated the income as unexplained cash credit that should have been added u/s.68. This contention is not tenable since for the purpose of invoking section 68, the cash credit should have been recorded in the books of accounts of the assessee for which he offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory. In assessee s case Rs.3 crores is not recorded in the books of accounts and directly offered to tax in the statement of computation (page 12 of paper book) as additional income under the head profits and gains of business or profession. 17. In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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