9911796707
TMI Blog2025 (3) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous in so far as it is prejudicial to the interest of the revenue. 2. That in law and on the facts and circumstances of the case, the ld. Principal Commissioner of Income Tax, (Central), Jaipur grossly erred in directing the Assessing Officer to disallow the so-called excess contribution to the ESI/PF more than as prescribed under rule 87 of the Income Tax Rules. 3. That in law and on the facts and circumstances of the case, the ld. Principal Commissioner of Income Tax, (Central), Jaipur grossly erred in directing the Assessing Officer to take excess stock valued at Rs. 1,50,00,000/- as investment and treat it as unexplained income u/s. 69 r.w.s. 115BBE of the Act. 4. That in law and on the facts and circumstances of the case, the ld. Principal Commissioner of Income Tax, (Central), Jaipur grossly erred in directing the Assessing Officer to disallow interest expenses of Rs. 38,35,156/- u/s. 14A r.w.r. 8D of the Act. 5. That in law and on the facts and circumstances of the case, the ld. Principal Commissioner of Income Tax, (Central), Jaipur grossly erred in directing the Assessing Officer to disallow the claim of deduction u/s. 10AA of the Act. 6. The appellant crav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of goods valuing Rs.2,92,49,216/- had been worked out, assessee's A/R admitted that no working in respect of each invoice readily available and it was a lengthy process. In the light of that situation, the assessee was required to explain as to why the invoice value may not be enhanced and thereby the deduction claimed u/s 10AA by the SEZ Unit may not be reduced by invoking the provisions of Sec. 80IA(8) r.w.s. 10AA of the Act. Thus, ld. AO noted that the issue for consideration before him was to what quantum by which deduction claimed u/s 10 AA by the SEZ Unit be reduced. Ld. AO considering the facts of the case in its entirety, he considered it fair and reasonable and to safeguard the interest of revenue to make a further addition @ 17.74% on the value of inter-unit transfer of Rs. 2,92,49,217/-, being the net profit rate disclosed by Sitapura Unit as profit, this was worked out at Rs. 51,88,811/- over and above the profit of Rs. 38,88,584/- as claimed by the assessee on inter-unit transfers from Mahapura Domestic Unit. Accordingly amount of Rs. 51,88,811/- was reduced from the profit of SEZ Unit and accordingly deduction under section 10AA revised by the ld. AO. Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank. Ld. PCIT noted while hearing fixed for the revisionary proceeding wherein AR was asked to explain how the payment of PF/ESI made not in excess of the limits prescribed as per rule 37 of the Income Tax Rules. In the reply it was submitted that the ld. AO raised a specific query wherein the assessee explained that how payment of ESI/PF was not more than the stipulated percentages as prescribed u/r 87. Ld. PCIT after perusing the reply noted that ld. AO was required to verify what are the component of Rs. 12,24,75,451/- which the AR is showing as part and parcel of the salary & wages that AO failed to do so. Therefore, she considered that ld. AO has erred while passing the assessment order in this and thus has caused prejudice to the interest of revenue. 4.3 As is evident from the record that the assessee made disclosure of Rs. 1.50 crore as additional income during survey on account of excess stock. Ld. PCIT noted that income offered for tax in the ITR was on account of excess stock found during survey and hence such sum should have been brough to tax u/s. 69 r.w.s. 115BBE of the Act. Against that contention assessee replied that to buy the peace of mind the sum of Rs. 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Malabar Industiral Limited Vs. CIT and CIT Vs. Paville Projects P. Ltd., she held that the assessment order passed u/s 153A dated 12/4/2021 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO in a routine and casual manner without applying proper mind on issue discussed in the order. The AO has not verified the details which were required to be verified under the scope of scrutiny. The order of the AO is, therefore, liable to revision under the explanation (2) clause (a) of section 263 of the Act. The assessment order is set aside and restored to the file of Assessing officer to examine the issues in the light of the observation made in this order after allowing reasonable opportunity to the assessee. 5. Feeling dissatisfied with the finding recorded by the ld. PCIT, Central, Jaipur in an order passed u/s. 263 of the Act, the assessee preferred the present appeal challenging the order of the PCIT. Apropos to the ground so taken by the assessee the ld. AR of the assessee submitted the following written submissions: 1. That assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3] which was earlier owned by PinckcityColourstones Pvt. Ltd. during the F.Y. 2011-12 relevant to AY 2012-13 and started its own domestic Operations being Non-deduction claiming Unit situated at Mahapura, Jaipur [PB 204]. That NO part of Building and Plant & Machinery owned by M/s. Pink City Colorstones Pvt. Ltd. was given on lease/sold to M/s. Pinkcity Jewelhouse Pvt. Ltd. (SEZ Unit). 1.7. That during the FY 2012-13 the plant and machinery was purchased by Mahapura, Jaipur (DTA Unit) from PinkcityColourstones Pvt Ltd at WDV for a consideration of Rs. 1.88 Crores [PB 205-206]. That the Mahapura, Jaipur (DTA Unit) apart from the Machinery Purchased from PinkcityColourstones also made substantial investment in Plant and Machinery at domestic Unit of Rs. 57,12,807/- during FY 2011-12 and Rs. 63,03,158/- during FY 2012-3 and thereon till 31.3.2016. The additions to Plant & Machinery in Mahapura, Jaipur (DTA Unit) were to the tune of Rs 6.47 Crore apart from the Machinery purchased from PinkcityColourstones Pvt. Ltd. for domestic Non deduction claiming unit. That no Plant & Machinery was purchased by Sitapura SEZ Unit-I from PinkcityColourstones Pvt. Ltd. 1.8. That till July 2011 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act was initiated for the Assessment Years 2012-2013 to 2015-2016 and scrutiny assessments u/s. 143(3) of the Act for Assessment Years 2016-2017 to 2018-2019 were also initiated. 1.13. That during the course of Survey specific query was made to the Director with regards to transfer of Plant & Machinery by PinkcityColourstones Pvt Ltd to which it was categorically replied that the same was transferred to assessee appellants DTA Unit at Mahapura [PB 816-822]. Subsequent to survey queries were made to the assessee appellant to which replies dated 02.09.2017 [PB 207-213] & 09.09.2017 [PB 214-216] were submitted by the assessee appellant. 1.14. That on the basis of survey, thereafter scrutiny assessment orders u/s. 143(3) r.w.s. 147 of the Act for assessment year 2012-2013 was passed on 17.12.2018 [PB 79-94], for assessment year 2013-2014 was passed on 17.12.2018 [PB 111-127], for assessment year 2014-2015 was passed on 17.12.2018 [PB 143-158], for assessment year 2015-2016 was passed on 17.12.2018 [PB 159-174]. The reasons recorded for initiating reassessment proceedings were provided to the assessee appellant [PB 656-666] & the assessee appellant filed objection letter dated 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time-barring case, no further time is allowed. Sufficient opportunities have already been allowed to the assessee. In such a situation, the assessee was required to explain as to why the invoice value may not be enhanced and thereby the deduction claimed u/s 10AA by the SEZ Unit may not be reduced by invoking the provisions of Sec. 801A(8) r.w.s. 10AA of the Income Tax Act, 1961. The issue for consideration is as to what is the quantum by which deduction claimed u/s 10 AA by the SEZ Unit is to be reduced. The turnover, gross profit/gross profit rate, net profit and net profit rate disclosed by both SEZ Unit and Domestic Unit are as follows :- Unit Turnover Rs GP /GP Rate Rs. NP /NP rate Rs. DomesticUnit 52,68,47,908 67271908 /12.77% 12672574/2.41% SEZ Unit-1 64,83,44,075 155602459/24.00 115008372/17.74 6. The details filed by the assessee and books of accounts have been examined particularly to ascertain as to whether there has been any inter-unit adjustment of expenses to adjust profits with a view to maximize the deduction under section 10AA of the IT Act, 1961. With this point of view, the books of account and vouchers related to both the units were examined to asc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividing the common expenses incurred by Mahapura Domestic Tariff Area Unit &Sitapura SEZ Unit-I proportionately. To the extent benefit of deduction u/s. 10AA was disallowed, the assessee appellant is in appeal before the ld. CIT(A) and the appeal is pending. It may be highlighted that at one end the ld. Assessing Officer proposed the ld. PCIT to take action against the assessee u/s. 263 of the Act vide its letter dated 19.02.2021 for A.Y. 2015-2016 [PB 676-678], however, he himself has while passing the assessment order for A.Y. 2018-2019 subsequently on 12.04.2021 has not disallowed the entire claim of deduction u/s. 10AA of the Act and has disallowed the claim of deduction by dividing the common expenses incurred by Mahapura Domestic Tariff Area Unit &Sitapura SEZ Unit- I proportionately. It is apparent that the Assessing Officer was himself not satisfied with the Audit Memo prepared by the Internal Audit Wing of the department. 1.18. That on the basis of Audit Objection [PB 680-688: w.r.t. deduction u/s. 10AA], [PB 689-691 w.r.t. disallowance u/s. 14A], [PB 692-693 w.r.t. disallowance u/s. 36(1)(va)] & [PB 694-702 w.r.t. applicability of section u/s. 69 r.w.s. 115BBE], the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, has held that the assessment order dated 12.04.2021 passed by ld. Assessing Officer is erroneous & prejudicial to the interest of revenue qua (a) benefit of section 10AA is not available to the assessee appellant, (b) disallowance u/s. 14A ought to have been made, (c) surrendered stock should be subjected to tax u/s. 69 r.w.s. 115BBE of the Act & (d) ESI & PF is deposited in excess as provided under Rule 87 of the Income Tax Rules. Ground No. 1: Order passed by the ld. PCIT u/s. 263 is bad in law. 2. Proceedings initiated on the basis of Audit Objection: That on the basis of Audit Objection [PB 680-710] & letter by the ld. CIT(DR-ITAT) [PB 711], the ld. PCIT has issued notice dated 08.03.2024 u/s. 263 [PB 01-05] for A.Y. 2018- 2019. The reasons for taking the proceeding u/s. 263 is not an independent view of the ld. PCIT but it is borrowed from the audit memo issued by the internal audit party & letter of the ld. CIT (DR-ITAT) wherein the audit party in the audit memo made a base that the ld. Assessing Officer has not looked at the several aspects of the matter and taken a view that (a) benefit of section 10AA is not available to the assessee appellant, (b) disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 is merely based on the audit objection, PCIT is not agreement with the ld. AO and the observation on the stock, in the audit report already filed by the assessee. Thus, there is clear absence of his satisfaction and there is no independent view of the ld. PCIT even on merits thus, the assessee which has been completed there cannot be the second inning to the revenue without justifying the twin condition to the order passed by the ld. AO. We note that on all the four issue the AO has called for the details, examined the issue and the plausible view on the matter is taken. Merely there is an audit objection, adverse remark of the auditor and the ld. PCIT is not in agreement with the view of the AO the order cannot be sustained as liable to quash as the twin condition provided u/s. 263 that the order should be erroneous and prejudicial to the interest of the revenue fails and therefore, we do not agree with the finding of the ld. PCIT wherein he could not point out any mistake / error in order which is prejudicial to the interest of the revenue. The AO while framing the assessment had taken a possible view, and revenue did not demonstrate the error remain on the part of the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, it could not be termed as assessment order to be erroneous and prejudicial to the interest of Revenue. Therefore, we do not subscribe to the view of the Principal CIT in exercising jurisdiction u/s.263 - Decided in favour of assessee. * Hon'ble ITAT Chennai Bench in Refex Industries Ltd. v. DCIT (2014) 11 TMI 653 has held: Rather, CIT without independent application of mind has replicated audit objections in the show cause notice issued u/s.263 - In Shri Jaswinder Singh Versus Commissioner Of Income Tax-II [2012 (6) TMI 543 - ITAT Chandigarh] it has been held that exercise of revisional power on the basis of audit objection is not tenable in law - thus, the CIT without examining the records and proper application of mind has invoked the provisions of section 263 in disallowing the advertisement expenditure claimed by the assessee - There is nothing on record to suggest that the order of AO is not sustainable in law - the order of the CIT is set aside - Decided in favour of assessee. * Hon'ble ITAT Pune Bench in Volkswagen India Pvt. Ltd. v. PCIT (2023) 11 TMI 794 has held: Revision u/s 263 - taxability of Government grants - As per CIT grants received by the assessee in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r challenging the revision through the additional ground, on the basis of the show cause notice issued by the ld. PCIT, which is part of the assessee's paper book. Our decision of quashing the revision on this legal issue is based on such show cause notice - The additional ground raises a pure question of law, for which no fresh investigation of facts is required. That is raison d'etre for our admitting the additional ground and then espousing it for consideration. It is, therefore, ultimately held that the ld. Pr. CIT was not justified in invoking the revision jurisdiction. Decided in favour of asses * Hon'ble ITAT Indore Bench in DBL Betul Sarni Tollways Ltd. v. PCIT (2023) 10 TMI 1187 has held: Validity of Revision u/s 263 - prescription and requirement of revision u/s 263 - objection raised by Ld. AR that the show-cause notice issued on the very same day on which proposal is mooted before PCIT - Revenue submitted that there are multiple communications and in-house working in department before showcause notice is actually issued to assessee and that the draft-notice was prepared by AO at the behest of PCIT - HELD THAT:- PCIT received proposal for revision from AO and the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, even the AO did not admit to the audit objections rather requested to settle the audit objection. Therefore, the revision jurisdiction exercised by the ld. PCIT cannot be held to be justified. The revision order passed u/s 263 of the Act is, therefore, quashed. Appeal of assessee allowed. * Hon'ble ITAT Delhi Bench in Ashish Dham v. PCIT (2021) 10 TMI 1106 has held: Revision u/s 263 by CIT - Case was selected for scrutiny - assessee had claimed rental income and claimed deduction u/s 24B as interest paid for home loan against the property bearing No.C-207, Sarvodaya Enclave, New Delhi-110017 - on the basis of audit objection, the Assessing Officer initiated rectification proceedings u/s 154 however, same was dropped instead the Assessing Officer ("AO") made proposal for revising the assessment u/s 263 of the Act made to the Ld. Pr.CIT - Whether objections of the assessee were not duly considered by the Ld. Pr. CIT before passing the impugned order? - HELD THAT:- From the order of the Ld. Pr. CIT, it is clear that he set-aside the assessment order and directed the Assessing Officer to investigate the issue and pass a speaking order. In our considered view, this approach o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. In case the ld. PCIT had anything in mind, then she was obliged to issue show cause notice or raise query in this regard. However, without seeking any justification from the assessee & without understanding the correct factual backdrop the impugned order has been passed. 3.5. That if the ld. PCIT is permitted to invoke powers conferred u/s. 263 without even confronting the issue to the assessee then such powers would become arbitrary and draconian in nature and the purpose of section 263 itself would be defeated. The said action would also be against the principles of natural justice, fair play, reasonableness, equity and equality. Section 263 itself mandates that, after giving the assessee an opportunity of being heard. This is not an empty formality. Hon'ble Bombay High Court in PCIT v. Universal Music India Pvt. Ltd. (2022) 4 TMI 1081 has held: Validity of Revision u/s 263 by CIT - payments made to persons specified under Section 40A(2)(b) allowed in assessment order - ITAT gave a finding of fact that no such issue was ever raised by CIT in the notice served upon the assessee and the assessee was not even confronted by the CIT before passing the Order - HELD THAT:- It is tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contribution to Provident Fund, Superannuation fund or Gratuity Fund That on perusal of Part A - P and L Profit and Loss Account for the financial year 2017-18 of Income Tax Return form, at Point No 14 the following amounts has been shown which are as under: 14. Compensation to employees I Salaries and Wages 15742627 ii Bonus 3708410 Vii Contribution to recognised Provident Fund 6174439 Ix Contribution to any Other fund 3326094 X Any Other Benefit to employee in respect of which an expenditure has been incurred 122475451 Xi Total Compensation to employees 151427021 16. Workmen and Staff Welfare Expenses 8187038 The Total Expenditure on Employees has been Rs. 15,96,14,059/- That while feeding details in return form the amount which has been shown as Rs. 12,24,75,451/-is also towards salary and allowances for employees both direct and indirect expenses. The working of total contribution to funds vis a vis Salary and Wages is as under: Contribution to PF (both employer and employee) by Company is Rs. 61,74,439/- Contribution to ESI (both employer and employee) by Company is Rs. 33,26,094/- Provision For Leave Encashment by Company is Rs. 12,65,286/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T in the impugned order has opined that the said difference in stock was in the nature of 'Other Income' and thus provisions of section 69 read with section of the Act 115BBE should have been invoked by the ld. Assessing Officer. 4.3. That there was proper application of mind on the part of the ld. Assessing Officer and the matter has been duly examined by the ld. Assessing Officer during the course of assessment proceedings. It is not a case where necessary inquiries have not been carried out by the ld. Assessing Officer. 4.4. That the assessee appellant has no other income other than business income. It is settled law that such income ought to have been taxed as business income and thus section 69 read with section of the Act 115BBE is not invocable. We wish to rely upon: * Hon'ble Jurisdictional Rajasthan High Court in PCIT v. Bajargan Traders (2017) 11 TMI 388 has held: Excess stock surrendered during the course of survey - whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head "business income" or "income from other sources"? - Held that:- ITAT is correct to conclude that in the annual accounts, the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded provision of Section 115BBE that when the assessee surrendered undisclosed income during the search action for the relevant years, higher tax rate is required to be charged. HELD THAT:- In the facts of the case, during the course of assessment proceedings, as the Assessing Officer had made due inquiries and was aware of the fact that the assessee had disclosed the income as business income in his return of income in respect of which it had claimed expenditure in relation to interest and remuneration paid to partners and after making inquiries, Assessing Officer allowed the claim of the assessee by treating undisclosed income found during the survey as assessee's business income and in view such finding of facts arrived at by the Tribunal, we are of the opinion that no substantial question of law arises from the impugned order of the Tribunal. Decided against revenue. * Hon'ble ITAT Jaipur Bench in Gayatri Devi v. PCIT (2023) 10 TMI 23 has held: It is well settled that the prerequisites to exercise of jurisdiction by the ld PCIT under s. 263 of the Act is that to establish order of the AO is to be erroneous insofar as it is prejudicial to the interest of the Revenue, the PCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital introduced during the during the financial year 201819 relevant to assessment year 2019-20, however, in order to buy piece of mind, he voluntarily surrendered the sum - Therefore, during the course of survey, the assessee has failed to offer any explanation regarding the source of such capital introduced in his capital account. Even during the course of assessment and appellate proceeding, we find that no explanation is forthcoming from the assessee. We therefore find that basis material available on record, the credit entry in the capital account of the assessee clearly demonstrate that the receipt of money by the assessee and in absence of any explanation from the assessee explaining the source of such capital introduced, the provisions of section 68 are clearly attracted and we therefore affirm the findings of the ld CIT(A) as far as bringing to tax the amount under section 68 of the Act. Whether the AO has invoked the deeming provisions of section 69 and brought to tax excess stock found during the course of survey which is sustained by the ld CIT(A)? - In the instant case there is no physical distinction between the accounted stock and unaccounted stock. No such physical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee filed surrendered letter and in statement assessee also recorded and income was surrendered. We respectfully relied on the order of Sh. Harish Sharma & M/s. Sham Jewellers [2021 (5) TMI 482 - ITAT CHANDIGARH] and case of Daulatram Rawatmull [1966 (4) TMI 73 - CALCUTTA HIGH COURT]. In considered view, the conversion of business income into other income and application of section 69A is bad and illegal. Accordingly, levy of tax u/s 115BBE on the income amount liable to be quashed. Assessee appeal allowed. * Hon'ble ITAT Chandigarh Bench in Parmod Singla v. ACIT (2023) 8 TMI 525 has held: Characterization of income - income surrendered during the course of survey u/s 133A - deemed income u/s 69 and 69A or business income - HELD THAT:- Foundational requirement before invoking the deeming provisions is not that there were certain survey operations u/s 133A and some undisclosed income has been detected and surrendered by the assessee and thus, the deeming provisions are automatically attracted. Rather the foundational requirement is whether the assessee has made the investment/has been found to be owner of cash and the explanation offered by the assessee explaining the nature an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in response, the assessee offered a sum towards unexplained misc. advances - CIT stated that the assessee in his return of income has disclosed the surrendered income in the profit/loss account and paid taxes at the rates applicable to normal business income which need to be taxed u/s 115BBE making assessment erroneous so far as prejudicial to the interest of the Revenue - HELD THAT:- Assessee has been asked specific questions not just regarding the discrepancy found during the course of survey but the nature and source thereof during the course of survey and it is clearly emerging that nature of such advances is unaccounted business advances and the source of such income so surrendered is assessee's share of diagnostic lab fees received from Shri Sandeep Singh who was running the diagnostic lab from business premises of the assessee and sharing 70% of lab fees with the assessee which remain unaccounted and undisclosed at the time of survey. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be paid, as against the tax at normal rates. The assumption of jurisdiction u/s 263 was contrary to the law and facts on record. Hence, the proceedings initiated u/s 263 of the Act and the impugned order are hereby quashed. Thus, ground of appeal decided in favour of assess and against the revenue. * Hon'ble ITAT Rajkot Bench in Vaidya Realities v. PCIT (2024) 1 TMI 970 has held: Revision u/s 263 - income surrendered during survey operation was not verified in pursuance to the provision of section 69 r.w.s. 115BBE - PCIT held that the assessment has been framed u/s 143(3) of the Act without verification with respect to undisclosed income offered by the assessee in pursuance to the provisions of section 69 r.w.s. 115BBE of the Act which is erroneous and causing prejudice to the interest of revenue - whether there was any inquiry conducted by the AO during the assessment proceeding qua the income offered by the assessee during the survey operation? - HELD THAT:- It is transpired that there was application of mind by the AO during the assessment proceedings. Accordingly, it cannot be said that the assessment has been framed by the AO without conducting inquiries. As such, we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the orders of the authorities below. I have also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by the ld AR during the course of hearing before the ITAT in the context of factual matrix of the case. From the record, I find that during the course of survey, income was surrendered by the assessee on account of stock, excess cash found out of sale of stock and also in respect of incriminating documents. As per judicial pronouncements cited by the ld. AR and also the decision of Hon'ble Rajasthan high court in the case of Bajrang Traders in Income Tax Appeal No. 258/2017 dated 12/09/2017 I observe that the Hon'ble High Court in respect of excess stock found during the course of survey and surrender made thereof was found to be taxable under the head 'business and profession'. Similarly in respect of excess cash found out of sale of goods in which the assessee was dealing was also found to be taxable as business income. Applying the proposition of law laid down in the judicial pronouncements as discussed above, I hold that the lower authorities were not justified in taxing the surrender made on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded in the diary, which were explained to be part of unrecorded sales and the Assessing Officer also did not object to the said explanation. Therefore, addition cannot be made under section 69A of the Act and if the addition cannot be made under section 69A, the provisions of section 115BBE will not be applicable. * Hon'ble ITAT, Chandigarh Bench in the case of Famina Knit Fabs v. ACIT (ITA: 1494/CHD/2017 dated 08.02.2019) has held:Clearly, it is evident from the above that the surrender was on account of debtors/receivables relating to the business of the assessee only. The Revenue has accepted the surrender as such, as being on account of receivables. It follows that the debtors were generated from the sales made by the assessee during the course of carrying on the business of the assessee, which was not recorded in the books of the assessee. Though the said income was not recorded in the books of the assessee but the source of the same stood duly explained by the assessee as being from the business of the assessee. Even otherwise no other source of income of the assessee is there on record either disclosed by the assessee or unearthed by the Revenue. The preponderance of pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom firm has been received. 5.2. That the ld. PCIT has held that actual earning of exempt income is not necessary and has relied upon Circular No. 5/2014 and has further relied upon amendment made by Finance Act, 2022 whereby Explanation has been inserted to justify the disallowance u/s. 14A of the Act. Accordingly it has held that interest expenses of Rs. 38,35,156/- should have been disallowed. 5.3. That for ready reference, section 14A of the Act is reproduced as hereunder: Expenditure incurred in relation to income not includible in total income. 14A.(1) Notwithstanding anything to the contrary contained in this Act, for the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 5 TMI 168: Addition u/s 14A - disallowance in cases where no exempt income has been claimed by the assessee during the year under consideration - ITAT deleted addition - as submitted ITAT ignoring the CBDT Circular No. 05 of 2014 dated 11.02.2014 and amendment to Section 14 of the Act inserted by the Finance Act, 2022. HELD THAT:- From the perusal of the order of the assessing authority, it appears that the assessing authority did not consider the documents submitted by the assessee during the course of the assessment proceeding and this fact came to light from the observation made by the appellate authority that despite availability of documents, additions were made by the assessing authority. Amendment brought in Section 14 (A) of the Act inserted by the Finance Act, 2022, inserting explanation which is clarificatory in nature hence have retrospective effect - It is clear that the contention of appellant in respect of question no.3 (a) is not relevant in this case as the assessment is for the year 2013-14, therefore, the amendment proposed in Section 14 (A) of the Act as discussed hereinabove would not be applicable in the present case and the submission of the appellant in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ications Consultants India Ltd. (2022) 8 TMI 1486: Addition u/s 14A - exempt income earned or not? - direct and proximate nexus between exempted income which the investment shall generate and the expenditure directly or indirectly involved in earning the said income - HELD THAT:- The present case is covered by the judgment of this Court in Cheminvest Ltd. [2015 (9) TMI 238 - Delhi High Court] wherein this Court has held that the expression 'does not form part of the total income' in Section 14A of the Act that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Scope of amendment made by the Finance Act, 2022 to Section 14A - As decided in Era Infrastructure (India) Ltd.[2022 (7) TMI 1093 - DELHI HIGH COURT]Amendment to section 14A of the Act which is for removal of doubts cannot be presumed to be retrospective. * Hon'ble Delhi High Court in the case of PCIT v. Era Infrastructure (India) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 27.03.2015 17.12.2018 NO NO 4 2013-2014 21.03.2016 17.12.2018 NO NO 5 2014-2015 25.11.2016 17.12.2018 NO NO 6 2015-2016 17.12.2018, 22.02.2019 (154 order) YES quashed by hun'ble ITAT vide order dated 07.03.2024 NO 7 2016-2017 19.12.2018 NO YES, but dropped vide order dated 29.03.2024 8 2017-2018 30.12.2019 NO YES, vide order dated 29.04.2024 9 2018-2019 12.04.2021 YES NO 6.2. That for ready reference section 10AA(4) of the Act is reproduced as hereunder: Special provisions in respect of newly established Units in Special Economic Zones (4) This section applies to any undertaking, being the Unit, which fulfils all the following conditions, namely:- (i) it has begun or begins to manufacture or produce articles or things or provide services during the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of any undertaking, being the Unit, which is formed as a result of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhouse Pvt Ltd. The management and shareholders of both the companies were same. It is pertinent to state that the buyers as well as sellers of manufactured/semi-finished/raw material goods of assessee company i.e. M/s Pinkcity Jewelhouse Pvt Ltd remained same as the items were transferred from its Mahapura Unit to the Sitapura SEZ unit. It was found that assessee was transferring semi-finished goods from the Mahapura Unit (Non deduction claiming unit) to Sitapura Unit (SEZ Unit deduction claiming u/s 10AA) for onwards sale/exports from SEZ Unit. During the survey proceedings it was learnt that SEZ Unit did not make any value addition on the same. 6.5. That in response the assessee appellant submitted to the ld. PCIT as hereunder: Firstly as submitted on Para 2 of our reply, PCS had accumulated business loss and depreciation of Rs. 81,58,486/- as on 31.3.2009 relevant to AY 2009-10 and only in the FY 2008-09 i.e. AY 2009-10 PCS earned a meagre profit of Rs. 4,22,686/-. Thus the foundational basis on which notice has been issued is factually incorrect and wrong. Secondly though this fact that the assessee company rented the Machine from PinkcityColourstones P Ltd is correct bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mahapura Unit, the Old plant & machinery was purchased by Mahapura Unit in the financial year 2012-13. That case of the assessee company for FY 2012-13 relevant to AY 2013- 14 was also completed u/s 143(3) and during the scrutiny proceedings, the copy of bills for addition in Fixed Assets in SEZ unit as well as in domestic Unit were also filled and copies of ledger accounts etc are again enclosed. Thirdly it is also not correct that the buyers and sellers of both the DTA unit as well as SEZ Unit were same. That during the assessment proceedings for AY 2010-11 in response to show cause notice this allegation was also made, in response to the same the assessee submitted as under: As regard to the application of provision of section 80 1A (10) of the I.T. Act, we submit that both the companies are independent and are managed and performs by separate set of person. The inference of arrangement is perhaps drawn as the assessee company has made purchases from M/s Pinkcity Color Stones (P) Ltd had the company not purchased goods this inference could not have been drawn in any circumstances. We are submitting reasons for which such inference drawn is based on mis conception of facts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is situated in Special Economic Zone which has been set up by the government to promote export of goods and have given special incentives / beneficial advantages like exemption from VAT, Excise, Custom and other taxes etc and also as there are many units located in that year in cluster than they have added advantage in respect of availability of skilled labour un interrupted power and many other advantages. f) Please provide us the reasons for doubting that the assessee company has earned abnormal profits. The profit margin declared by the assessee company is in the vicinity of profit margin declared by the other 100% Export oriented SEZ Units. g) That the assessee company has kept total transparency in its affairs and there is no window dressing or any arrangement to hide or route through sales and purchases so as to avoid any disclosure. h) That the assessee company has sold its goods to following three parties in AY 2010-11 i) MW Samara LLC Rs 39983024 ii) Jasmin Noir Rs 1043585 iii) The Genuine Gem Stone Company Rs 1085706/- That the PinkcityColorstones P Ltd has not made any sales to all the three companies in AY 2009-10 and have sold goods worth Rs 4897561/- onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch shows the finish goods and the resulting weight thereof vi). Finished Goods Packing List for Export Invoice All these reports are generated from software system are enclosed herewith. If your good self is having observation in respect of any other invoice or desire information in respect of some other invoice, please let us know so that requisite detail may be submitted in respect of other invoices. It is further submitted that all these details can also be verified from the hard disk impounded from the Sitapura Unit. And moreover, during the FY 2017-18 relevant to AY 2018-19 no Semi-Finished goods were transferred from Mahapura Unit to Sitapura Unit and what was transferred was only colourstones which are raw material for Jewellery and this fact was also available at the time of survey also, as during the survey proceedings also only ten instances were identified in which no record of further value addition was available during that time and all these ten instances relate to FY 2011-12 or earlier year only, and no instance was pointed out or was available at the time of surpey or were pointed out during the course of after survey proceedings us 131. Thus the foundational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEZ unit purchased its own casting machine. The said machine was imported from M/s. Cascade Star Inc, USA. * Manufacturing process at Sitapura SEZ unit mainly involves Filling process, Pre Polish, Gem Stone Bagging, Stone Setting, Polishing, Plating, Quality Control and Packaging. * Entire process of making jewellery from metal & stones is done at Sitapura SEZ unit only and after July 2011 no Semi Finished Goods were transferred from DTA Unit (Mahapura) or from PinkcityColorstones Pvt. Ltd. to SEZ Unit (Sitapura). * The Company is maintaining complete records of stock movement at each stage of production process. * The SEZ Unit is not in the business of exporting ofGem Stones but SEZ Unit exports only Jewellery whether Studded or not. * In assessment year 2010-2011, i.e., the first year in which deducation u/s. 10AA was claimed the Assessing Officer had issued show cause notice dated 12.03.2013 proposing disallowing the benefit by referring to section 80IA (10) of the Act. Detailed reply was filed by the assessee vide its letter dated 18.03.2013 and the Assessing Officer was satisfied with the submissions made and thereafter accepted the returned Income vide order dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld plant & machinery (that too by DTA Mahapura Unit) was done in financial year 2012-13, therefore it can't to be said that SEZ Unit was formed by transfer of old plant & machinery. Section 10AA(3)(iii) uses the terminology it is not formed by the transfer to a new business. There is no bar on purchases made subsequent to formation of the Unit. 6.7. That the ld. PCIT in the impugned order has ignored the submission of the assessee appellant and has doubted the veracity of rent agreement entered into by and between the DTA Mahapura Unit &PinkcityColorstones Pvt. Ltd. The ld. PCIT has held that payment by DTA Mahapura Unit to PinkcityColorstones Pvt. Ltd. do not prove ultimate usage. The ld. PCIT has held that Audit Reports for AY 2012-13 & 2013-14 were not submitted by the assessee appellant at the time of filing of ITR, thus, bifurcated final accounts could be an afterthought. The ld. PCIT has held that bank accounts are internal documents of the assessee appellant. No independent documents show that Plant & Machinery was used by DTA Mahapura Unit only. The ld. PCIT has held that Inspection Report of Casting Machine not provided. The ld. PCIT has held that payment details towards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not available in the respective Unit. * The ld. PCIT failed to appreciate that the survey officials did not find any old plant & machinery which was installed at SEZ unit. * The ld. PCIT failed to appreciate that the customs authorities have not passed any order that the assessee has misguided / mis-declared for the plant & machinery installed at the SEZ Unit. * The ld. PCIT appears to have even ignored the survey report & reasons recorded by the Survey Officials of the Income tax department itself subsequent tosurvey carried out by them. * The ld. PCIT failed to appreciate the replies submitted by the assessee appellant subsequent to survey and the statements recorded of the Director at the time of survey on 18.08.2017. * The ld. PCIT failed to appreciate that it is only figment of imagination of the Audit Wing of the department to allege that old plant & machinery was installed at SEZ Unit and was not installed at DTA Unit. * The ld. PCIT failed to spell out the source of information on the basis of which it has come to this conclusion that old plant & machinery was installed at SEZ Unit and was not installed at DTA Unit. * The ld. PCIT failed to appreciate that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officers of the department, just sitting in the cool comforts of her chambers has disbelieved the assessee appellants submission as well as the Assessing Officers. * The ld. PCIT has wrongly invoked Clause (a) of explanation 2 of section 263 in the instant case. Clause (a) of explanation 2 of section 263 can be invoked when the assessment order is passed without making inquiries or verification which should have been made. In the instant case, the ld. Assessing Officer was having the benefit of assessment / reassessment orders passed in assessee appellants own case for A.Y. 2010-11, 2011-12, 2012-13, 2013-14, 2014-15, 2016-17 & 2017-18 as well as the survey records. He has passed assessment order for A.Y. 2018-2019 after due application of mind and verification of records. He has passed assessment order for A.Y. 2018-2019 even after knowing that assessment order for A.Y. 2015-2016 has been set-aside by the ld. PCIT, since, he himself was satisfied with the assessee's explanation and submission with regards to grant of deduction u/s. 10AA of the Act. 6.9. That the ld. PCIT has failed to appreciate that the assessment / reassessment orders passed in assessee appellants case for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notions and suffers from factual infirmities. The impugned order passed by the ld. PCIT is without jurisdiction, is arbitrary, is illegal, is contrary to the principle of Judicial Discipline and Consistency, and, therefore liable to be quashed. It is a settled principle that the decision of a higher forum is binding upon the lower authorities unless the decision has been stayed or overturned and an order passed without following the binding precedents is bad in law. In this regard, reliance is placed on the judgments of the Hon'ble Supreme Court in the cases of Union of India v. Kamlakshi Finance Corporation Limited [1991 (9) TMI 72 (SC)]; Birla Corporation Ltd. v. Commissioner of Central Excise [2005 (186) ELT 266 (SC)]; Jayaswal Neco Ltd. v. Commissioner of Central Excise [2007 (8) STR 305 (SC), Central Board of Dawoodi Bohra Community v. State of Maharashtra [2010 (254) ELT 196 (SC)]. The ld. PCIT has violated the doctrine of binding precedent and has led to uncertainty and inconsistency which is against the settled principles of law. We wish to refer: * Hon'ble Supreme Court in East India Commercial Co. Ltd. v. Collector of Customs [1983 (13) ELT 1342 (SC)] has held that pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the department and is the subject matter of an appeal cannot be a ground for not following it unless its operation has been suspended by a competent Court. See Kamlakshi Finance Corporation Ltd. [1991 (9) TMI 72 - Supreme Court]. It is not respondents' case that the order of ITAT or the operation of the said order has been suspended by any Court. In the circumstances, we set aside the order dated 16th January 2020 impugned in the petition and remand the matter for denovo consideration. Unless there is a stay by a competent Court of the operation of the order of ITAT, respondent no.1 shall give effect to the same and pass an order in accordance with law. * Hon'ble ITAT Mumbai Bench in Jyoti Harshad Mehta v. PCIT (2021) 3 TMI 1163 has held:The entire action of the ld. PCIT goes to prove that the entire issue has been addressed with a pre-conceived notion in order to reach a pre-conceived destination by forgetting the legal tenets, factual verifications, verification of documents carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer unless the decision of the ld. Assessing Officer is found to be erroneous. 6.14. That the language used by the legislature in section 263 is to the effect that the Principal Commissioner of Income-tax may interfere in revision, if he considers that the order passed by the ld. Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. It is quite clear that two conditions must coexist in order to give jurisdiction to the Principal Commissioner of Income-tax to interfere in revision. The order of the Assessing Officer in question must not only be erroneous but also it must be prejudicial to the interest of the revenue. In other words, merely because the assessment order is erroneous, the Principal Commissioner of Income-tax cannot interfere. Again, merely because the order of the ld. Assessing Officer is prejudicial to the interest of the revenue, then that is not enough to confer jurisdiction on the Principal Commissioner of Income-tax to interfere in revision. The Principal Commissioner of Income-tax cannot assume jurisdiction u/s 263, if the two conditions prescribed under the provisions of Act, viz. (i) the order is erroneous; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Assessing Officer while framing the assessment has taken a possible view, and the show cause notice u/s. 263 does not demonstrate the error remained on the part of the ld. Assessing Officer. In fact, when the ld. Assessing Officer has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2 of Section 263 of the Act, the order passed by the ld. Assessing Officer could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue. 6.19. That the instant order passed by the ld. PCIT suffers from change of opinion as that held by the ld. Assessing Officer, which is impermissible while invoking the powers u/s. 263 of the Act. 6.20. That it can be noted that in the instant case, the rules of consistency has been given a complete by-pass by the ld. PCIT which is impermissible. We wish to rely: * Hon'ble Supreme Court in Radha Soami Satsang v. CIT (1991) 11 TMI 2 observed that:We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnerstone of the administration of justice. It is consistency which creates confidence in the system and this consistency can never be achieved without respect to the rule of finality. It is with a view to achieve consistency in judicial pronouncements, the Courts have evolved the rule of precedents, principle of stare decisis etc. These rules and principle are based on public policy... 6.21. That the assessee also wishes to refer and rely upon the Hon'ble Jurisdictional Rajasthan High Court in PCIT v. Manna Trust(2022) 1 TMI 693 has held:We are broadly in agreement with the view of the Tribunal. It is well settled through a series of judgments that power under Section 263 of the Act can be exercised only when twin conditions of the order of assessing officer being erroneous and prejudicial to the interest of revenue are satisfied. The Jurisdiction of the Commissioner under Section 263 of the Act is restricted and cannot be equated with the appellate jurisdiction. The Commissioner does not sit in appeal. Hon'ble Jurisdictional ITAT Jaipur Bench in Gayatri Devi v. PCIT (2023) 10 TMI 23 has held: It is well settled that the prerequisites to exercise of jurisdiction by the ld PCIT u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or A.Y. 2010-11 42 43 * Reply dated 18.03.2013 submitted by the assessee appellant 44 in response to Show Cause Notice for A.Y. 2010-11 44 47 * Assessment Order dated 28.03.2013 passed u/s. 143(3) for A.Y. 2010-11 48 49 * Assessment Order dated 07.03.2014 passed u/s. 143(3) for A.Y. 2011-12 50 51 * Assessment Order dated 18.12.2017 passed u/s. 143(3) r.w.s. 147 for A.Y. 2011-12 52 66 * Assessment Order dated 27.03.2015 passed u/s. 143(3) for A.Y. 2012-13 67 78 * Assessment Order dated 17.12.2018 passed u/s. 143(3) r.w.s. 147 for A.Y. 2012-13 79 94 * Assessment Order dated 21.03.2016 passed u/s. 143(3) for 2013-14 95 110 * Assessment Order dated 17.12.2018 passed u/s. 143(3) r.w.s. 147 for A.Y. 2013-14 111 127 * Assessment Order dated 25.11.2016 passed u/s. 143(3) for A.Y. 2014-15 128 142 * Assessment Order dated 17.12.2018 passed u/s. 143(3) r.w.s. for A.Y. 2014-15 143 158 * Assessment Order dated 17.12.2018 passed u/s. 143(3) r.w.s. 147 for A.Y. 2015-16 159 174 * Assessment Order dated 19.12.2018 passed u/s. 143(3) for A.Y. 2016-17 175 189 * Assessment Order dated 30.12.2019 passed u/s. 143(3) for A.Y. 2017-18 190 199 * Compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achinery Ledger A/c. for F.Y. 2012-13 546 547 8. Copy of email dated 30.03.2024 sent by the assessee appellant alongwith: 548 548 * Reply dated 30.03.2024 549 551 * Airway Bills 552 552 * Customs Attested Invoices 553 553 * Bill Casting Machines 554 554 * Bill of Entry 555 555 9. Copy of replies dated NIL, NIL, 08.03.2021, 16.03.2021 & NIL submitted by the assessee appellant during the course of assessment proceedings for A.Y. 2018-2019 alongwith relevant documents such as: 556 558 560 564 566 557 559 563 565 571 * Audit Report alongwith Final Accounts 572 619 * Income Tax Return 620 620 * Calculation of Deduction u/s. 10AA 621 621 * List of Bank Accounts with reconciliation 622 627 * Investment details 628 628 * PF Chart 629 630 * Trading and Profit & Loss A/c. 631 632 * VAT Returns 633 655 10. Copy of reasons recorded & objection letter dated 29.10.2018 submitted by the assessee appellant for A.Y. 2015-2016 656 667 666 670 11. Copy of Audit Objection dated 17.11.2020 for A.Y. 2015-2016 alongwith Audit Memo 671 672 671 670 11.1 Copy letter dated 19.02.2021 sent by the Id. ACIT to the Id. PCIT. 676 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT (2021) 11 TMI 327 859 861 * Hon'ble ITAT Chandigarh Bench in Ashwani Oberoi v. PCIT (2023) 2 TMI 1109 862 865 * Hon'ble ITAT Delhi Bench in Ashish Dham v. PCIT (2021) 10 TMI 1106 866 870 ISSUE NOT RAISED IN THE 263 NOTICE 18. * Hon'ble Bombay High Court in PCIT v. Universal Music India Pvt. Ltd. (2022) 4 TMI 1081 871 873 APPLICABILITY OF SECTION 69 READ WITH SECTION 115BBE 19. * Hon'ble Rajasthan High Court in PCIT v. Bajargan Traders (2017) 11 TMI 388 874 877 * Hon'ble Gujarat High Court in PCIT v. Dharti Estate (2024) 1 TMI 1197 878 880 * Hon'ble ITAT Jaipur Bench in Rekha Shekhawat v. PCIT (2022) 8 TMI 791 881 896 EXPLANATION INSERTED TO SECTION 14A IS PROSPECTIVE IN NATURE 20. * Hon'ble Calcutta High Court in the case of PCIT v. Avantha Realty Ltd. (2024) 6 TMI 987 897 900 * Hon'ble Madhya Pradesh High Court in the case of PCIT v. Keti Construction Ltd. (2024) 5 TMI 168 901 907 * Hon'ble Delhi High Court in the case of PCIT v. Techno Trexim (India) Ltd. (2023) 11 TMI 346 908 910 JUDICIAL DISCIPLINE / RULE OF CONSISTENCY / SCOPE OF 263 21. * Hon'ble Supreme Court in Union of India v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng issued based on merits, two issues dropped by ld. PCIT therefore, considering that aspect of the matter even though the audit objection was there she considered that the order of AO is not prejudicial to the interest of the revenue. 7.3 So far as the excess stock applying the provisions of section 69 read with section 115BBE of the Act, as is clear that the assessee has surrendered the income based on stock and it emanated from the business income. Merely based on the audit objection, when the ld. AO has taken a plausible view the order cannot be held prejudicial when the ld. AO has already made in detailed scrutiny of the records and examined that issue also and that order cannot be revised. The ld. AR of the assessee also submitted that the reply that aspect has been made before Assessing Officer vide letter dated 08.03.2021 wherein the ld. AO has examined that the issue and accepted the disclosure as business income. Therefore, when AO has taken plausible view, the revision cannot be made. As regards the disallowance the provisions of section 14A read with rule 8D of the Act. The same was not form part of the show cause notice. Not only that disallowance of 14A as amended vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallenging the order of the PCIT on the technical ground. As argued by the ld. AR of the assessee very strongly and straightforward attacking the jurisdictional deficit in the revisionary - action invoked by the ld. PCIT. He submitted that ld. PCIT had not invoked the provisions of section 263 while examining the assessment record. But when the assessment record was examined by the revenue audit party, they raised certain audit objections in the order of the assessment. Against that audit objection ld. AO proposed action u/s. 263 as remedial action to review his own order page 703 to 708. To demonstrate further to this factual aspect of the matter ld. AR referred to the audit memo in the paper book page 680 to 688 which deals issue of 10AA, page 689 to 691 deal the issue of section 14A r.w.r. 8D, page 692 to 693 deals the issue of PF/ESI, page 694 to 702 deal the issue of invoking of the provision of section 69 and 115BBE in respect of excess stock. Thus, read with those objections of the revenue audit party with that of the show cause notice issued by the PCIT the issue raised are same. That fact gains more strengthen from the following finding of the ld. PCIT; I wish to make i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w from the decision so cited by the assessee in the case of Jain Carrying Corporation v. PCIT in ITA No. 134/Jodh/2018 wherein author of the bench are the same and in that case the bench has held as under:- 10. We have heard the rival contentions and perused the material placed on record and gone through the judicial precedent cited by the parties to drive home this contention so raised. The bench noted that in this case survey action u/s 133A of the Act was carried out on 06.02.2019 at the business premises of M/s Laxminath Infrastructure Pvt. Ltd., Churu. In that proceedings, the assessee disclosed a sum of Rs. 40,00,000/- to buy the mental peace and has duly offered that income while filing the return of income. Subsequent to filing the return of income, the case of the assessee was selected for scrutiny wherein the ld. Assessing Officer after raising the queries assessed return of income. In the meantime, as is evident from the record that the internal audit party raised and audit objections to the levy of the tax in the case of the assessee. Therefore, ld. Assessing Officer made a proposal before ld. PCIT to initiate the provisions of section 263 of the Act vide his letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT is trying to justify the claim of the assessee with the net profit rate and the expenses incurred by the assessee and merely based on the contention that the ld. PCIT is not in agreement with the view taken by the AO the assessment cannot be hold liable to be sustained u/s. 263 of the Act. As regards the opening and closing stock we note that the ld.AO has called for the details and has examined the issue. Merely in the audit report the auditor has stated that increase / decrease has not been certified by them the order which is passed after examination of the issue cannot be a base to again given the second inning to the ld. AO and review of the order passed after the examination of the issue is not permitted under the law. As regards the fourth issue there is no observation recorded by the ld. PCIT has simply stated that the issue does not require separate discussion. Thus, we note that on all the four issue the ld. AO has called for the details, examined the issue and the plausible view on the matter is taken. Merely there is an audit objection, adverse remark of the auditor and the ld. PCIT is not in agreement with the view of the AO the order cannot be sustained as liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in lieu of a possible view already taken by the ld AO on the impugned issue on the allowability of LTCL. Reliance in this regard is placed on the decisions of Hon'ble Jurisdictional High Court in the case of Gabriel India Ltd reported in 203 ITR 108 (Bom) and in the case of Nirav Modi reported in 390 ITR 292 (Bom). It is also pertinent to note that the Special Leave Petition (SLP) preferred by the Revenue before the Hon'ble Supreme Court against the judgement of Nirav Modi was dismissed in 77 taxmann.com 15 (SC). 10. We also find that the Explanation 2 to section 263 of the Act, which was heavily relied upon by the ld DR before us, would not apply to the facts of the instant case as full enquiry was already made by the ld AO in the original assessment proceedings itself. Infact the stand of the assessee was accepted by the ld AO in the assessment proceedings and also before the Revenue Audit Party which is evident from the reply to audit objection as reproduced supra. Reliance in this regard is placed on the following decisions, the operative portion are not reproduced for the sake of brevity:- a) Decision of Co-ordinate Bench of this Tribunal in the case of Narayan Tatu Rane vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the proceeding initiated u/s. 263 is merely based on the audit objection, PCIT is not agreement with the ld. AO and the observation on the stock, in the audit reportalready filed by the assessee. Thus, there is clear absence of his satisfaction and there is no independent view of the ld. PCIT even on merits thus, the assessee which has been completed there cannot be the second inning to the revenue without justifying the twin condition to the order passed by the ld. AO. 9. In the light of the discussion so recorded we considered the ground raised by the assessee and quash the order of the PCIT, Bikaner. In the result the appeal of the assessee is allowed. On being consistent with the findings so recorded in the order referred to herein above, we quash the order passed by ld. PCIT u/s 263 of the Act. At the time of hearing the appeal ld. DR did not cite any contrary judgment and therefore, having regard to the findings recorded by this co-ordinate bench in the case of Mahendra Kumar Sharma Vs. PCIT (Supra), there is merit in the ground no. 1 raised by the assessee. 10. Now coming to ground no 2, as per show cause notice dated 08.03.2024 ld. PCIT proposed to disallow ESI/PF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h section of the Act 115BBE should have been invoked by the ld. Assessing Officer. When there was proper application of mind on the part of the ld. Assessing Officer after having examined during the course of assessment proceedings, it is not a case where necessary inquiries have not been carried out by the ld. Assessing Officer. Furthermore, when two views are possible ld. AO after considering the submission accepted the view of the assessee-appellant, and said approach does not automatically hold the assessment order erroneous or prejudicial to the interest of the revenue. Ld. AO accepted the plea that assessee appellant has no other income other than business income. Even our own Hon'ble High Court in PCIT v. Bajargan Traders (2017) 11 TMI 388 has held that 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. This view has also been taken by Hon'ble Gujarat High Court in PCIT v. Dharti Estate (2024) 1 TMI 1197, Co-ordinate bench of Jaipur Bench in Gayatri Devi v. PCIT (2023) 10 TMI 23, Chandigarh Bench in Ravinder Kumar Bansal v. PCIT (2023) 12 TMI 716, ITAT, Rajkot Bench in Vaidya Realiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the survey and also made variation on account of price variation between the SEZ unit and that of the DTA unit. As is evident from the submission subsequent to survey conducted on 17-18.08.2017, reassessment proceedings u/s. 148 of the Act were initiated and orders passed for the Assessment Years 2012-2013 to 2015- 2016 and scrutiny assessments u/s. 143(3) of the Act for Assessment Years 2016-2017 to 2018-2019 were also initiated and passed. The claim of the assessee was verified in that proceeding from A.Y. 2010-11 till A.Y. 2018-2019, prior to survey and post survey and the year under consideration is one of those years. As is evident from the order of the PCIT that he has invoked the explanation (2) clause (a) of section 263 of the Act. On that aspect, it is observed that amendment [i.eExpl. 2(a)] does not confer blind powers. It is held that despite there being an amendment, enlarging the scope of the revisionary power of the ld. PCIT u/s 263 to some extent, it cannot justify the invoking of the Expl. 2(a) in the facts of the present case. Before referring to that Explanation, one has to understand what the true meaning of the Explanation in the context of application of mind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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