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TMI Blog2024 (9) TMI 861X X X X Extracts X X X X X X X X Extracts X X X X ..... ordered to charge that income as per provision of section 115BBE of the Act but the same was not charged. Excess stock found , the bench noted that on this aspect statement of Shri Harsh Gupta was recorded. He was asked to give justification of excess stock found. In response to the question, he stated that he was unable to give justification on the excess stock found and surrendered the amount as income for the year under consideration. In the assessment proceedings, the assessee vide notice u/s 142(1) was asked to give justification as to how the undisclosed income is shown in the ITR filed. The reply of the assessee has been considered and AO noticed that on the same date a survey was also conducted on M/s Mahawar Electric Store related to the family member of the assessee wherein statement of husband of the assessee was recorded stated that at the godown situated at Vikas Colony, Rajgarh the stock of M/s Sahil Paints and M/s Mahawar Electric Store was lying. However, quantum was not differentiated then. Now, assessee submitted that the stock of Rs. 52,76,668/- found during the physical verification includes the stock of Rs. 12,34,965/- related to M/s Mahawar Electric Store. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment record of the above named assessee which was passed by DCIT, Central Circle, Alwar dated 13.04.2021 as per provisions of section 143(3) of the Income Tax Act. 2. The assessee has taken following grounds in this appeal; 1. Under the facts and circumstances of the case, order passed by the Ld. PCIT u/s 263 is illegal bad in law and the same be quashed. 2. The Ld. PCIT has erred on facts and in law in holding that the assessment order dt. 13.04.2021 passed u/s 143(3) is erroneous in so far as it is prejudicial to the interest of revenue as the alleged excess stock of Rs. 1,83,259/- and excess cash of Rs. 3,31,735/- found during the course of survey proceedings has been charged by the AO at normal rates instead of at the rate provided u/s 115BBE of the Act ignoring that (i) the same has arisen from the business income of the year under consideration which is offered to tax u/s 44AD of the Act (ii) this issue has been examined by AO in course of assessment proceedings (iii) there are decisions in favour of assessee on this issue (iv) action u/s 263 cannot be for rectification of mistake and (v) this issue is subject matter of appeal before the Ld. CIT(A). 3. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source of excess cash found during the survey proceedings, thus, the excess cash of Rs. 3,31,735/- is held as unexplained money of the assessee in terms of provisions of section 69A of the Act. In view of the fact, tax on the income of Rs. 3,31,735/- shall be charged as per the provisions of section 115BBE of the Act. 3.3 During survey proceedings, stock of Rs. 52,76,668/- was found on physical verification, whereas as per books the stock position on the date of survey was Rs. 38,58,444/-. In this way excess stock of Rs. 14,18,225/- was found. On this aspect statement of Shri Harsh Gupta was recorded. He was asked vide question no. 20 to give justification of excess stock found. In response to the question, he stated that he was unable to give justification on the excess stock found and surrendered the amount of Rs. 14,18,225/- as income of M/s Sahil Paints for the year under consideration. During the course of assessment proceedings, the assessee vide notice u/s 142(1) was asked to give justification in this regard and to show how the undisclosed income is shown in the ITR. The reply of the assessee has been considered carefully by the ld. AO. It is noticed that on the same d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas a perusal of Computation Sheet revealed that the tax was charged at normal rates. Further, during the survey proceedings, excess stock of Rs. 14,18,225/- was found and the assessee has surrendered the same for taxation. During the assessment proceedings, the assessee explained the stock of Rs. 12,34,965/-, out of the excess stock of Rs. 14,8,225/- thus the excess stock was remained at Rs. 1,83,259/-. Out of excess stock of Rs. 1,83,259/-, the assessee has disclosed Rs. 12,924/- in his return of income and an addition of Rs. 1,70,335/- was made by the then AO. Purchase of excess stock related to unexplained investment. Therefore, the income of Rs. 1,83,259/- relates to unexplained investment, u/s 69 whereon tax was to be charged under the provisions of section 115BBE whereas a perusal of Computation Sheet revealed that the tax was charged at normal rates. 5. Based on this set of facts, the ld. PCIT noted that in this case, the ld. AO has not applied proper provisions of the Act on the income declared and offered in the return of income so filed. Therefore, ld. PCIT noted that the order is erroneous and prejudicial to the interest of revenue and the action was initiated by in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 12.10.2017, in reply to Q. No.20 to 23 (PB 33-35) offered for tax current year income of Rs. 17,49,960/- represented in form of excess cash of Rs. 3,31,735/- and excess stock of Rs. 14,18,225/-. This statement is also confirmed by assessee on 12.10.2017 (PB 35-36). 2. The assessee filed the return on 12.09.2018 declaring total income of Rs. 15,95,820/- (PB 10-13). The assessee declared business income of Rs. 11,68,858/- u/s 44AD of the Act by declaring n.p. rate of 10.33% on the turnover of Rs. 1,13,05,227/- and other income of Rs. 4,38,610/- (cash Rs. 3,31,735/- + renovation of shop Rs. 1,00,000/- - short stock Rs. 76,022/- + profit on short stock Rs. 12,924/- + capital introduced Rs. 70,000/-). 3. During the course of assessment proceedings assessee explained that physical stock found in survey of Rs. 52,76,668/- includes stock of Mahaveer Electrical Store Rs. 12,34,965/- and after recording the purchases of Rs. 2,59,282/-, the book stock is Rs. 41,17,726/- and thus the stock found short is Rs. 76,023/-. The AO, however, did not allow the claim of purchases of Rs. 2,59,282/- and thus worked out the excess stock at Rs. 1,83,259/- but considering that on the short stock of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has examined the applicability of section 69A of the Act as evident from the assessment order and thus on this issue the order passed by AO is not erroneous. Further with reference to the excess stock of Rs. 1,83,259/-, after considering the income of Rs. 12,982/- on account of short stock, the balance amount of Rs. 1,70,335/- is held as the income of assessee for the year under consideration on account of unaccounted purchases. Thus on this issue also the AO has applied his mind and held that it is income of the assessee for the year under consideration. Hence the order passed by AO after due application of mind cannot be held to be erroneous in so far as it is prejudicial to the interest of revenue. 2. The Ld. PCIT has invoked clause (a) clause (b) of Explanation 2 to section 263. Under these clauses the order passed by AO is deemed to be erroneous in so far as prejudicial to the interest of revenue. If the order is passed without making enquiries or verification which should have been made or the order is passed allowing any relief without enquiring into the claim. As explained above, on both the issues for which order u/s 263 is passed has been enquired and examined by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the CIT to pass orders u/s 263 merely because he has a different opinion in the matter. Since the AO has examined the assessee's case and made complete enquiry regarding the issue raised in the revision proceeding, the Principal CIT was not justified in passing the impugned revision order. Satya Narayan Dhoot Vs. PCIT (2023) 222 DTR 177 (Jodhpur) (Trib.) AO having issued notice u/s 142(1) wherein he called for details of exempt income and also justification for various exemptions and deductions claimed in the return of income including the profit on sale of investments and the assessee having filed the break-up details of exempt income including exemption of long-term capital gain claimed u/s 10(38) in reply thereto, the Principal CIT was not justified in initiating revision proceedings on the basis that the AO has allowed the exemption without examining the claim. 3. It is submitted that AO in its order has specifically mentioned that tax on account of excess cash of Rs. 3,31,735/- shall be charged as per provisions of section 115BBE of the Act. However, in the computation the tax was charged at normal rate. To rectify this mistake he issued notice u/s 154. Thus during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 79 CCH 453 (Mad.) (HC) The Hon ble High Court at Para 29 30 of the order held as under:- 29. A reading of the notice under section 154 of the Act and the reassessment notice dated 11th May 2009 shows that there is absolutely no material difference on the issues sought to be considered under these notices, except the fact that while in the proceedings under section 154, the notice is based on the view that there was a mistake apparent on the face of the record warranting a rectification, the proceedings under section 147 alleged that by reason of the untrue and incorrect particulars given by the assessee, there had been an escapement of tax. Given the fact that the area of operation of both these provisions are on totally different fields, the simultaneous assumption of jurisdiction under sections 154 and 147 on the self same issue, plainly shows the contradiction in the reasoning of the second respondent and as without logic or reason. 30. As rightly pointed out by the learned senior counsel appearing for the petitioner placing reliance on the decision reported in [1994] 206 ITR 1 (Bom) (Commissioner of Income Tax v Premier Automobiles Ltd. ), when once the assessment order has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect matter. Unless the earlier proceedings are buried, either by way of an order on merits or by dropping the same, no fresh subsequent proceedings on the same subject matter can be initiated. This manifests that the proceedings u/s 147 cannot stand during the continuation of proceedings u/s 154. Hence, the initiation of re-assessment by means of notice u/s 148 and the proceedings flowing therefrom are hereby set aside. Mahinder Freight Carriers Vs. DCIT (2011) 56 DTR 247 (Mum.) (Trib.) AO reopened the assessment for the reason that the rental income has been wrongly treated as business income and the assessee has claimed wrong deduction in respect of the remuneration paid to the partners under sec. 40(b)(v). Earlier, AO initiated proceeding under sec. 154 for the same reason which has not been given finality either by dropping the same or passing any order in the said proceeding. Besides, except the return and its enclosures, no other material or information was in the possession of the AO. Admittedly, the mandate of sec. 147 is not fulfilled for the reason that the AO himself was not sure whether the issue in controversy could be subject-matter of proceedings under sec. 154 or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted by the AO without raising any doubt regarding the gross receipts/turnover of the assessee, no addition under ss. 68 and 69A could be made on account of unexplained cash deposits in the assessee's bank account. Following these decisions the Ld. PCIT dropped the proceedings u/s 263 in case of Hari Om Gupta vide order dt. 20.03.2024 (PB 42-44) and in case of Jyoti vide order dt. 15.03.2024 (PB 45-49). Thus when in similar other cases proceedings u/s 263 have been dropped, order passed in the case of assessee be quashed. 6. It is a settled law that when the stock cash found in survey is clearly identifiable and related to the regular business assessee, the alleged excess stock and cash can be brought to tax only under the head business income and section 115BBE is otherwise not applicable. In this connection reliance is placed on the decision of Hon ble Rajasthan High Court where the appeal filed by the department against the order of ITAT, Jaipur Bench in case of PCIT Vs. Bajargan Traders DBITA No.258/2017 order dt. 12.09.2017 was dismissed. The Hon ble ITAT in this case at Para 2.10 2.11 of the order held as under:- 2.10. We have heard the rival contentions and perused t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the regular business stock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head business income and not under the head income from other sources . In the result, ground No. 1 of the assessee is allowed. Similar view has been taken by Hon ble ITAT, Jaipur Bench in case of DCIT Vs. Sh. Ram Narayan Birla ITA No.482/JP/2015 order dt. 30.09.2016 and Sanjay Gupta Vs. ACIT ITA No.292/JP/2023 order dt. 17.07.2023 (copy enclosed). Thus when there are favorable decisions on this issue, proceedings u/s 263 is bad in law for which the cases referred at Point No.2 is relied upon. In view of above, order passed u/s 263 be quashed. 7. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions: Sr. No. Particulars Pg. No. 1 Copy of reply dt. 11.03.2024 filed to DCIT (Central) with reference to notice u/s 154 notice u/s 263 1-9 2 Copy of acknowledgement of return along with computation of total income 10-13 3 Copy of notice u/s 154 dt. 16.02.2024 copy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the income as business income of the assessee and ld. AO has already applied mind and applied section 115BBE for cash amount. Thus, so far as the excess cash found in the hands of the assessee based on this set of facts merely invoking the provisions of section 115BBE of the Act is not permissible as the order itself is not erroneous or prejudicial to the interest of the revenue. 9. Per contra, the ld. DR relied upon the order of ld. PCIT which is passed after considering the contention of the assessee and therefore, ld. DR supported the finding recorded in the order of ld. PCIT. 10. We have heard the rival contentions and perused the material placed on record. The facts related to the dispute is duly recorded herein above and the same being not disputed are not repeated. The bench noted that in this case during survey proceedings cash of Rs. 5,66,343/- was found, whereas as per books the cash in hand on the date of survey was Rs. 2,34,608/-. In this regard, statement of Shri Harsh Gupta was recorded in that survey. He was asked vide question no. 21 of his statements to give justification of the difference of Rs. 3,31,735/- found in cash. He in response to the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aints i.e. Rs. 38,35,321/- (5276668 - 1234965)/- and supporting bills vouchers of items mentioned in stock inventory that related to M/s Mahawar Electric Store for Rs. 12,34,965/-. To that extent the submission of the assessee is found acceptable by the ld. AO. It is further stated that also the purchase bills of Rs. 2,59,282/- was not entered on the date of survey and the reply to the effect was given vide letter dated 13.10.2017. The assessee in support of it, has not filed supporting bills and the copy of the said letter. Also, the letter is also not found available on record. Thus, the submission of the assessee for the bills of Rs. 2,59,282/- said to be not entered in the books was not acceptable by the ld. AO. Therefore, the excess stock of Rs. 1,83,259/- is found from the business premises of the assessee for which the assessee fails to offer any proper justification. Since the assessee has already disclosed the amount of Rs. 12,924/- on account of short stock income in the ITR, therefore, the amount of Rs. 1,70,335/- (Rs. 1,83,259 - Rs. 12,924) is held as income of the assessee for the year under consideration on account of unaccounted purchase and added in the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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