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TMI Blog2024 (10) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... dicial 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. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the Revenue. AO has issued specific show cause notice to the assessee as to why the excess stock be treated as unexplained investment under Section 69 of the IT Act which the assessee replied stating that the said excess business stock was found during survey proceedings under the IT Act during the year under consideration in the business premises of the assessee Company and duly recorded in the books of accounts of the concerned year and thus, Section 69 would not be attracted to the assessee Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declaring total income of Rs. 2,36,89,620/- as profit and gains from business or profession which includes the impugned excess stock of Rs. 2,25,75,951/-. 3. The assessee filed return of income electronically on 30-11-2018 declaring total income of Rs. 2,36,89,620/- vide acknowledgment No. 369948171200118. On 21-12-2017, a notice under Section 142 (1) of the IT Act was issued by the Assessing Officer, Central Circle to file return of income by 20-1-2018 which the assessee filed and on 18-9-2018, return of income was selected under compulsory scrutiny after due approval of the competent authority and notice under Section 143 (2) of the IT Act was issued and ultimately, the Assessing Officer issued show cause notice to the assessee under Section 263 of the IT Act that the assessee Company has shown very small net profit ratio in comparison to the net profit shown in the previous two years, which the assessee replied, however, the Assessing Officer did not find the explanation satisfactory and added only Rs. 1,42,715/- and the entire income was taxed at the rate of 30% along with surcharge and cess by order dated 21-12-2019. 4. The revisional authority i.e. the Principal Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-9-2021 passed in ITA No. 46/RPR/2021, allowed the appeal and set aside the order of the PCIT holding that there is no reason and justification for exercising the revisional power under Section 263 of the IT Act and restored the order passed by the AO. 6. Being aggrieved against the order of the ITAT setting aside the order of the PCIT and restoring the order of the AO, the Revenue has preferred this appeal in which substantial question of law has been formulated and set-out in the opening paragraph of this order. 7. Mr. Amit Chaudhari, learned counsel appearing for the appellant herein / Revenue, would submit that the ITAT has committed grave legal error in granting the appeal, as the assessee has failed to satisfactorily explain the nature and source of cash transactions adding Rs. 2,25,75,951/- as additional income as excess stock of jewellery of same value was found during the survey proceedings and as such, the impugned order of the ITAT deserves to be set aside. 8. Mr. Ashish Goyal, learned counsel appearing for the respondent / assessee Company, would support the order of the ITAT and submit that the ITAT has clearly recorded a finding holding that both the conditions to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order under section 92CA by the Transfer Pricing Officer; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be, had been the subject-matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of Principal Commissioner or Commissioner under this subsection shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, (a) the order is passed without making inquiries o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r if it is not erroneous but is prejudicial to the Revenue recourse cannot be had to Section 263 (1) of the Act. 7. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. 8. The phrase prejudicial to the interests of the Revenue is not 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 High Court of Calcutta in Dawjee Dadabhoy Co. v. S.P. Jain (1957) 31 ITR 872 (Cal), the High Court of Karnataka in CIT v. T. Narayana Pai (1975) 98 ITR 422 (Kant), the High Court of Bombay in CIT v. Gabriel India Ltd. (1993) 203 ITR 108 (Bom) and the High Court of Gujarat in CIT v. Minalben S. Parikh (1995) 215 ITR 81 (Guj) treated loss of tax as prejudicial to the interests of the Revenue. 10. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two issues which state as under: - 7. In exercise of powers conferred under section 263 of the Act, the PCIT has proposed revision of the assessment order on two counts: i) The excess stock surrendered by the assessee during the survey, returned as business income, is liable to be considered as unexplained investment under section 69 of the Act and consequently tax was required to be enforced in terms of section 115BBE of the Act. ii) The figures of purchase in the in the audited accounts drawn as on 31.03.2017 were not reconciled with the figures in the Trial Balance as on the date of survey i.e. 06.03.2017. 15. The above stated two issues have been considered by the ITAT against the Revenue. With regard to the first issue, the learned ITAT relying upon the decisions of two High Courts namely, the Rajasthan High Court in the matter of Principal Commissioner of Income Tax Central, Jaipur v. Aacharan Enterprises (P.) Ltd. (2020) 273 Taxman 85 (Raj) and the Calcutta High Court in the matter of Principal Commissioner of Income Tax Officer, Burdwan v. Subarna Rice Mill (2018) 257 Taxman 509 (Cal), has reached to the conclusion that surrender of undisclosed business income would not att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as unexplained investment under Section 69 of the IT Act and as Section 69 does not attract in this situation, question of applicability of tax rate of 60% under Section 115BBE of the IT Act does not arise. The AO considered the reply and found substance in the submission raised on behalf of the assessee and only added Rs. 1,42,715/- to the business income of the assessee for the year under consideration. 16. In this regard, decision of the Supreme Court in the matter of Commissioner of Income Tax, (Central) Ludhiana v. Max India Limited (2007) 15 SCC 401 may be noticed herein profitably in which their Lordships have held that every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the Revenue. When the Income Tax Officer adopted one of the courses permissible in law and it has resulted in loos 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 interest of the Revenue, unless the view taken by the Income Tax Officer is unsustainable in law. 17. In this case also, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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