Set On Site Electricals P Ltd, Aurangabad V. Principal Commissioner of Income-Tax, -1, Nashik

ITA 280/PUN/2021

AI Insights

The case involves Set On Site Electricals Pvt Ltd, which appealed against the order of the Principal Commissioner of Income Tax, Nashik-1, under section 263 of the Income Tax Act, 1961. The appeal was directed against the assessment order for the assessment year 2016-17, which was challenged for not properly verifying and applying relevant provisions of the Act during the assessment. The company had declared additional income during a survey, which was not adequately scrutinized by the AO as per the Pr.CIT. The Tribunal examined whether the AO's actions were erroneous and prejudicial to the interests of the Revenue, ultimately agreeing with the Pr.CIT's invocation of section 263.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134310 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-03-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 27-06-2021
• Other Referred Cases: CIT Vs. Amitabh Bachchan, CIT v/s Mepco Industries Ltd., CIT Vs. Future Corporate Resources Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Revision of order; Assessment record
• Section: 68; 69; 263; 69C; 143(3); 133A; 14A; 69B; 69A

Judgement Text

आयकर अपीलीय अिधकरण “बी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.280/PUN/2021 िनधाᭅरण वषᭅ / Assessment Year :2016-17 SET ON SITE ELECTRICALS PVT LTD, Plot No.C 8, MIDC, Waluj, Aurangabad – 431136. PAN: AADCS 2790 K V s The Principal Commissioner of Income Tax, Nashik-1. Appellant/ Assessee Respondent /Revenue Assessee by Smt. Deepa Khare – AR Revenue by Shri Sardar Singh Meena – DR Date of hearing 06/03/2023 Date of pronouncement 28/03/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Assessee is directed against the order of ld.Pr.Commissioner of Income Tax, Nashik-1, dated 04.03.2021 emanating from assessment order dated 25.12.2018 under section 143(3) of the I.T.Act, 1961 for the A.Y.2016-17. The Assessee has raised the following grounds of appeal: “1. Ld CIT erred in law and on facts in invoking jurisdiction under Section 263 and setting aside Assessment Order for fresh assessment on the ground that assessment has been framed without proper verification and without applying relevant provisions of the Act. 2. Ld CIT erred in law and onfacts in nor appreciating that ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 2 during assessment proceedings, the Id AO has applied his mind after proper enquiries and adopted a course permissible in law. 3. The Ld CIT erred in law and on facts in observing that the appellant has claimed expenses of Rs 21,55,500/- against the amounts declared during survey and ought to have been disallowed by AO. 4. Ld CIT erred in law and on facts in disallowing the above expenses of Rs.21,55,500/- which is not claimed at all and levying the tax of Rs 6,46,650/- on the said expenses u/s 115BBE. 5. The Order of the ld CIT being unjustified in law and on facts may kindly be cancelled.” Brief facts of the case : 2. Brief facts as noted from the assessment order, ld.CIT(A)’s order and submission are that the Assessee filed return of Income on 13/10/2016 for A.Y.2016-17 declaring total income at Rs.1,06,90,320/-. The assessee derives income from Manufacturing of Electrical Meters, repairing of power transformers. 3. There was a survey u/s.133A of the Act in the case of the assessee on 26/08/2015. Certain documents were impounded during the survey. Based on the discrepancies noted during the survey the director of the assessee company in his statement declared following additional income : Unexplained Cash Rs.7,50,000/- Unaccounted Advances Rs.10,03,700/- Difference in Stock Rs.72,95,500/- ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 3 4. During the survey the physical stock found was of Rs.2,38,05,130/- whereas stock as per books of account was Rs.1,65,09,630/-. During the survey a diary was found, which showed that assessee had given cash advances to its employees of Rs.10,03,700/-.These cash advances were not recorded in the books by the assessee. During the survey cash of Rs.9,71,600/- was found but the cash as per cash book was Rs.2,21,600/-, thus there was excess cash of Rs.7,50,000/-. 5. The assessee in the return of Income, B/S, P&L A/c has shown the survey declaration as under : 15 : Other Inocme 6512216.00 52963763.00 Declared Income in Survey U/S 133 9049200.00 0.00 Other Non-Operating Income 0.00 3552.00 15561416.00 5299928.00 16 : Cost of Materials Consumed Opening Stock 4398719.00 3251583.00 Add : Declared in Survey U/S 133 4725500.00 0.00 Add : Purchases 45217380.00 51460749.00 54341599.00 54712332.00 Less : Closing Stock 7261811.00 4398719.00 47079788.00 50313613.00 17 : Change in Inventories Work-in-Progress : Opening Stock 4022356.00 3946929.00 Add : Declared in Survey U/S 133 2570000.00 0.00 Less : Closing Stock 39516775.00 4022356.00 6. The case of the assessee was selected for scrutiny. The AO in the assessment proceedings accepted the return of Income. The Ld.Principal Commissioner of Income Tax, invoked provisions of ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 4 section 263. The Ld.Pr.CIT observed in para 3 of the order u/s 263 as under : “03. On perusal of the assessment records for the AY 2016-17, it is seen that the assessment proceedings in your case were completed u/s. 143(3) of the I T Act, without making proper enquiries and verifications which were expected on the facts and in the circumstances of the case. In this regard, the following points are notable: (i) From the assessment record it is observed that in your case, a survey action was carried out on 26/08/2015. During the survey action, various documents stock, etc. were verified. On verification, it was found that excess stock and cash was available at the premises. During survey, statement of Shri Raman G Modani. Director of the Company was recorded and in the statement Shri Raman G Modani, Director of the Company declared an amount of Rs.7,50.000/ on account of excessive Cash, Rs 10.03,700/- on account of unaccounted advances and Rs.72,95.500/. On account of difference in stock totaling to Rs. 90,49,200/-. It is further observedfrom the P & L account and its notes no.15,16,17 an amount of Rs. 90,49,200/-( declared during the survey) is credited to P &L A/c correctly. However, it is noticed that you have claimed net expenses to the tune of Rs. 21,55,500/- (47,25,500 25,70,000) in respect of the income declared during the survey (on account of excess stock) and the AO had allowed this claim while finalizing the assessment. The disclosure made Rs. 90,49,200/-i.e.Rs.7,50.000/ on account of excessive Cash, Rs 10.03,700/- on account of ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 5 unaccounted advances and Rs. 72,95.500/. on account of difference in stock fall within the purview of section 69 (unexplained investments) / 69A (unexplained money) /69 C (unexplained expenditure) as you could not offer any explanation about these amounts either during survey proceedings or during assessment proceeding and hence only offered them as its additional income. These very facts shows that the above 3 amounts were unexplained income of the company. The provisions of Section 115BBE governs the income referred to in Section69, Section69A, Section 69C. Sub-section (2) of Section 115BBE has provided that no deduction of expenditure shall be allowed to the assessee in computing the Income referred to u/s 69/ 69A/ 69C. Difference in stock which has no satisfactory explanation and which is accepted by the assessee, is unexplained investment u/s 69 and hence covered by the provisions of section 115BBE, The net expenses of Rs.21,55,500/- are, therefore, disallowable u/s 115BBE. It is pertinent to note here that survey action u/s 133A was carried out in this case in the relevant to AY 2016-17. Further, the case was also selected for scrutiny under CASS under “Limited 1 type for A Y 2016- 17. AS there was impounding of books u/s 133A(3 Via) in this case of the assessee for A Y 2016-17Js covered under the guidelines of compulsory scrutiny. The issue of disallowance u/s 115BBE IS, thus, well within the purview of compulsory sordin Rs. 6,46,650/-30%.” (emphasis applied) 7. Aggrieved by the order of the Pr.Commissioner of Income Tax, the assessee filed appeal before this Tribunal. Submission of Ld.Authorised Representative (ld.AR) : ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 6 8. The Ld.AR filed paper book. The Ld.AR submitted that the assessee’s case was selected for “Limited Scrutiny” for specified reasons mentioned in the Notice U/s.143(2) of the Act. The AO verified all those issues and passed the assessment order. In the Limited Scrutiny, there was no scope for the AO to verify applicability of Section 115BBE, Section 69,69A and 69C. Therefore, the AO has not erred. The assessee has shown the Income declared during the survey under the head Other Income in the Profit and Loss account, schedule 15 which is at Page 74 of the paper book. The Assessee has rightly shown the Stock of Rs.47,25,500/- under the head “Cost of material Consumed” schedule 16 on page 74 of the paper book. Similarly, Stock of Rs.25,70,000/- under the head “Work in Progress”. The survey was conducted on 26/08/2015, the books of accounts for A.Y.2016-17 were open. Therefore, the Assessee following the accounting standards passed the entry of excess stock found during survey. The Assessee has not reduced any declaration. The Pr.CIT has erred in alleging that assessee has claimed net expenses of Rs.21,55,500/-. Once the Pr.CIT has observed in the notice u/s.263 and the order u/s.263, that the assessee has rightly credited the declaration made during survey of Rs.90,49,200/- to the profit & loss account, there is no question of invoking provisions of Section 69, 69A and 69C. The AO has verified all these facts as ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 7 observed form the Order sheet entry dated 25/12/2018 which is at page 32 of the Department’s Paper book. Therefore, once after verification the AO has accepted the return of income, the ld.Pr.CIT cannot invoke provisions of Section 263 as the assessment order is not erroneous and prejudicial to the interest of Revenue. 9. Ld.AR further submitted that the Pr.CIT has referred in the order u/s.263 that the Assessee’s case falls under Compulsory Scrutiny as there was survey and books of accounts have been impounded, however, the Ld.AO even in the last order sheet entry passed on 25/12/2018, mentioned that the case of the assessee was selected for “Limited Scrutiny”. The AO has not mentioned in the said order sheet entry anything regarding Compulsory Scrutiny. Therefore, once the AO was convinced that the case was selected for “Limited Scrutiny”, accordingly the AO informed the assessee, therefore, the ld.Pr.CIT erred in claiming that the case falls under Compulsory Scrutiny. Hence, the Order u/s.263 is bad in law. Submission of Ld.Departmental Representative(ld.DR) : 10. The Ld.Commissioner of Income Tax(DR) Mr.Sardar Singh Meena filed a paper book. The Ld.DR vehemently supported the order of the Pr.CIT. He referred to Scrutiny Guidelines issued by CBDT vide Instruction no. 08/2015 dated 31/08/2015 (page 33,34 of ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 8 Paper book filed by DR). Clause 1(c) of the said instruction directs the AO to select the case for Manual selection, in which survey was conducted and books of accounts were impounded. Ld.DR filed copy of the order impounding the books. The Ld.DR explained provisions of Section 115BBE. Findings and Analysis : 11. We have heard both the parties and perused the records. The section 115BBE is reproduced here as under for ready reference: [Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D. 115BBE. (1) Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of— (a) the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D , at the rate of thirty per cent; and (b) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance [or set off of any loss] shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1).] ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 9 12. According to the ld.Pr.CIT provisions of section 115BBE were applicable to the case of the assessee and the AO should have assessed the Undisclosed Income declared during the survey u/s.69, 69A and 69C. 13. However, the ld.Pr.CIT has himself observed that the Undisclosed Income of Rs.90,49,200/- have been rightly credited to P & L A/C. Once, the ld.Pr.CIT has observed that the undisclosed income declared during survey of Rs.90,49,200/- has been Correctly credited to P&L A/c, he cannot advocate that the declaration should have been assessed u/s.69, 69A and 69C. The amounts assessed under Section 69, 69A and 69C are never part of P & L A/c. Whereas in the case under consideration, the assessee has included survey declaration in P & L A/c and the ld.Pr.CIT has observed it to be correct entry. In these facts and circumstances of the case, the Assessment Order cannot be said to be erroneous and prejudicial to the interest of the Revenue. 14. Therefore, we hold the order u/s.263 as not sustainable in law. Thus, the ground of appeal number 1 & 5 of the assesseeare allowed. 15. In this case ld.AR claimed that the AO had verified all the facts related to the disclosure made by assessee during the survey and verified that the same has been offered for taxation. On perusal of ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 10 the order sheet entry dated 25.12.2018, it is observed that the Assessing Officer has mentioned following things in the order sheet : “A survey action u/s.133A of the Act was carried out on 26/08/2015 at the business premises of the assessee company. The assessee has declared an amount of Rs.7,50,000/- on account of excess cash, Rs.10,03,700/- on account of unaccounted advances and Rs.72,95,500/- on account of difference in stock totaling to Rs.90,49,200/-. The AR has submitted that the amount disclosed during the survey proceedings has been included in the return of income filed by the assessee firm for the A.Y. 2016-17 dated 13/10/2016. The explanation offered by the AR of the assessee during the course of assessment proceedings is verified and found to be acceptable.The relevant documents are kept on record. Therefore, no addition is made in this case.” 16. Thus, AO had verified during the scrutiny proceedings that assessee has offered the amount disclosed during the survey for taxation. The AO based on the submission has satisfied himself that the amount disclosed during the survey has been properly reflected by the assessee in the return of income. After satisfying himself, the AO passed the order under section 143(3) of the Act. In these facts and circumstances of the case, we are of the opinion that ld.Pr.CIT’s observation that AO has not verified the survey disclosure is not based on facts. Therefore, the order passed by the AO is not erroneous. Once the AO takes a view on a particular issue after considering all facts, the ld.Pr.CIT may or may not agree with the ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 11 view taken by the AO, but that does not mean that the assessment order is erroneous. 16.1 Before we discuss the case further, we will like to mentions the relevant case laws on this issue. 16.2 The Hon’ble Supreme Court in the case of CIT Vs. Amitabh Bachchan, 384 ITR 200(SC) observed as under : “21. There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from.” 16.3 The Hon’ble High Court in the case of CIT v/s Mepco Industries Ltd. 294 ITR 121 (Madras) held as under : Quote, “8. Therefore, on the facts of the case, when two views are possible and it is not the case of the Revenue that the view taken by the Assessing Officer is not permissible in law, the CIT is not justified in invoking the jurisdiction under section 263 of the Act. ” Unquote. 16.4 The Hon’ble Bombay High Court in the case of CIT Vs. Future Corporate Resources Ltd in IT Appeal No.1275 of 2017 vide order dated September 29, 2021 held as under : ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 12 Quote ,“ 7. In the order of PCIT it is stated "in paragraph 4.3 of the assessment order, the Assessing Officer has recorded that from the details submitted by the assessee and the explanation given by him, it was observed that assessee had regular business connection with the company in which investment had been made and also there was business income to the assessee from the same. Therefore, interest expense debited by the assessee has not been considered for the calculation of disallowance under section 14A because the same has been incurred for the purpose of business." The PCIT therefore agrees that the Assessing Officer has recorded from the details submitted by respondent and the explanation given by respondent that the assessee had regular business connection with the company in which investment has been made and also there was a business income to the assessee from the same. He notes that the Assessing Officer, therefore did not consider the calculation of disallowance under section 14A the interest expense debited by the assessee because the same has been incurred for the purpose of business. The PCIT though was unhappy with the view of the Assessing Officer, the PCIT himself does not say why it should have been considered for the calculation of disallowance under section 14A. Even if one assumes that he has, after reading of the order expressed his views, but still the position is two views therefore were possible. Therefore, if one of the two possible views was taken by the Assessing Officer, the PCIT could not have exercised his powers under section 263 of the Act. 8. ” Unquote . 16.5 Thus, the principal of the law emanating from the above decision of the Hon’ble Supreme Court, the Hon’ble Madras High Court, the Hon’ble Bombay High Court is that when two views are legally possible and AO adopts one view the Assessment Order ITA No.280/PUN/2021 SET ON SITE ELECTRICALS PVT. LTD. [A] 13 cannot be said to be erroneous for the ld.Pr.CIT to invoke jurisdiction u/s.263 of the Act. 16.6 Therefore, the order under section 263 is not maintainable. 17. Since, we have held that the order u/s.263 is not maintainable, the other grounds of appeal becomes academic in nature, accordingly same are dismissed. 18. In the result, appeal of the assessee is dismissed. Order pronounced in the open Court on 28 th March, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 28 th Mar, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.