MAHAVIR KUMAR, KAITHAL V. Pr. CIT, ROHTAK

ITA 391/CHANDI/2022

AI Insights

The case involves two appeals filed by Shri Satbir Kumar and Shri Mahavir Kumar against the orders of the PCIT, Rohtak, which were passed under section 263 of the Income Tax Act, 1961 for the assessment year 2017-18. The appeals were consolidated due to common issues involved. The main contention was regarding the application of section 115BBE of the Act, which pertains to the taxation of unexplained income at a higher rate. The PCIT had set aside the original assessment orders, which had accepted the returned income, directing the AO to reassess the income at a higher tax rate under section 115BBE. The Tribunal, after examining the submissions and evidence, concluded that the AO had conducted a thorough inquiry and the income was rightly assessed under the normal provisions, not invoking section 115BBE.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127797 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-10-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 26-04-2022
• Other Referred Cases: Malabar Industrial Co. Ltd. Vs. CIT, Karimtharuvi Tea Estate Ltd. Vs. State of Kerala, CIT vs. Vatika Township (P) Ltd., CIT vs. Walfort Shares & Stock Brokers (P) Ltd, CIT vs. Gold Coin Health Food (P) Ltd., Sedco Forex International Drill Inc. vs. CIT, CIT vs. Hindustan Electro Graphites Ltd., P.Ram Gopal Varma vs. DCIT, Modern Fibotex India Ltd. vs. DCIT, CIT vs. Nirma Chemical Works Ltd., CIT vs. Sunbeam Auto
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ROHIT JAIN
• Keywords: Unexplained expenditure; Gift; Business income; Revision of order; Principle of natural justice; Maximum Marginal Rate; Revenue expenditure; Set aside
• Section: 69; 263; 69C; 143(3); 133A; 69B; 143(2); 48; 13

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी संजय गग , या यक सद य एवं ी "व#म %संह यादव, लेखा सद य BEFORE: SHRI. SANJAY GARG, JM & SHRI. VIKRAM SINGH YADAV, AM ITA NO. 390/Chd/ 2022 Assessment Year : 2017-18 Shri Satbir Kumar Prop. M/s Krishan Misthan Bhandar, Main Bazar Kaithal-136027 The Pr. CIT Rohtak PAN NO: ACZPK4607N Appellant Respondent ITA NO. 391/Chd/ 2022 Assessment Year : 2017-18 Shri Mahavir Kumar Prop. M/s Shree Krishan Misthan Bhandar Opposite Canal Colony Karnal Road Kaithal-136027 The Pr. CIT Rohtak PAN NO: AKMPK8862G Appellant Respondent ! " Assessee by : Shri Rohit Jain, Advocate # ! " Revenue by : Shri Rohit Sharma, CIT, DR $ % ! & Date of Hearing : 18/10/2022 '()* ! & Date of Pronouncement : 12 /01/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : These two appeals are filed against the respective orders of Learned Principal Commissioner of Income Tax, Rohtak [in short the ‘Ld. PCIT] 2 passed u/s 263 of the Income Tax Act, 1961 (in short ‘the Act’) each dated 17/03/2022 for assessment years 2017-18. 2. Since common issues are involved in both these appeals, these were heard together and are being disposed off by this consolidated order. For the purpose of present discussion, with the consent of both the parties, the case of the assessee in ITA No. 390/Chd/2022 was taken as a lead case wherein the assessee has taken the following grounds of appeal: “1. That the Ld. Principal Commissioner has erred in invoking the provisions of Section 263 in arbitrary and illogical manner. 2. That the Ld. Principal Commissioner has erred in applying amended provisions of Section 115BBE with Taxation Laws(Second Amendment) Act, 2016 retrospectively. 3. That the order passed by the Ld. Principal Commissioner u/s 263 is irrational and illogical since the Assessing Officer had passed the original assessment order after due application of mind and that order cannot be termed in any way as erroneous and prejudicial to the interest of the revenue. 4. That the order is illegal, arbitrary and capricious lacking probity in using powers as well as is negation of fair play and natural justice. 5. That facts, circumstances and grounds need further elaboration which appellant seeks permission to take up at the time of hearing.” 3. Briefly the facts of the case are that a survey under section 133A of the Act was carried out at the premises of the assessee on 17/08/2016. During the course of survey certain discrepancies were noticed which could not be explained by the assessee and as a result, he voluntarily offered to disclosed additional income of Rs. 30,00,000/- apart from his normal business income. Subsequently, the assessee filed his return of income disclosing total income of Rs. 34,76,320/- on 04/08/2017. The case of the assessee was selected for compulsory scrutiny under CASS and notices under section 143(2) & 142(1)of the Act were issued and after taking into consideration the reply submitted by the 3 assessee, nothing adverse was found by the AO and returned income was accepted. 3.1 Subsequently, the assessee records were called for and examined by the Ld. Pr. CIT, Rohtak and a show-cause was issued stating that a survey action under section 133A was carried out at the assessee’s business premises on 17/08/2016 wherein he had offered an additional income of Rs. 30,00,000/-, apart from normal business income, which is largely in the nature of unexplained cash, unexplained expenditure and excess stock found as on the date of survey which is liable to be added under section 68/69/69A/69B/69C of the Act. It was stated by the Ld. Pr. CIT that the assessee in his Income Tax Return has shown the surrender income as business income and have paid taxes as per normal slab rates instead of tax payable @ 60% under section 115BBE of the Act. Further referring to the submissions filed by the assessee during the course of assessment proceedings, it was noted by the Ld. Pr. CIT that the assessee has stated in its submission that amended Section 115BBE having tax rate @ 60% is not applicable for the A.Y. 2017-18. As per the Ld. Pr. CIT, in view of the amendment in section 115BBE applicable w.e.f A.Y. 2017-18 retrospectively, tax was to be calculated @ 60% on this additional income. In absence of supporting documentary evidence and proper explanation, re-computation of tax is required to be made on surrendered income @ 60% under section 115BBE of the Act and failure on the part of the AO renders the assessment order erroneous in so far as is prejudicial to the interest of the revenue. 3.2 In response to the show-cause, the assessee filed his submissions which were considered but not found acceptable by the Ld. Pr. CIT. It was held by him that the AO has passed the order in a very casual manner without due diligence and without conducting property enquiries and taking cognizance of amended Finance Act, 2016 in respect of surrendered income and therefore 4 the assessment completed under section 143(3) of the Act was held as erroneous in so far as prejudicial to the interest of the Revenue in terms of section 263 read with Explanation 2 and the assessment order was set aside with a direction to pass an order afresh in accordance with law keeping in view the observations made in the impugned order and after providing reasonable opportunity to the assessee. 4. Against the said order and the findings of the Ld. Pr. CIT, the assessee is in appeal before us. 5. Firstly regarding the observations of the Ld. Pr. CIT that the AO has completed assessment without carrying out necessary and proper enquiry in respect of surrendered amount, it was submitted by the ld AR that the AO had issued detailed questionnaire from time to time during the course of assessment proceedings and all details regarding sales, purchases, stock, bank statements were elaborately submitted and thoroughly examined by the AO. It was accordingly submitted that the AO has passed the order under section 143(3) after going through all the relevant details and making each and every enquiry regarding the surrendered amount and therefore the AO has passed the order after making proper enquiry and the order so passed cannot be held as erroneous on account of not making proper enquiry as so held by the Ld. Pr. CIT. 5.1 Regarding the findings of the Ld. Pr. CIT that the AO has not taken cognizance of the amended provision of Section 115BBE of the Act, it was submitted that the AO raised a specific query regarding levying of tax in view of the amended provision of Section 115BBE and in response, the assessee filed its submissions along with judicial precedents and the AO duly considered and accepted the assessee’s explanation and proceeded to frame assessment under section 143(3) of the Act. It was submitted that the assessee has 5 surrendered the amount of Rs. 30,00,000/- as additional business income during the course of survey operations and the AO has taken a view that the provisions of Section 115BBE are not applicable on the surrendered business income. Therefore where two views are possible as can been seen from the findings of the AO as well as of the Ld. Pr. CIT, provision of Section 263 cannot be invoked and in support, reliance was placed on the decision of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83 . 5.2 Regarding the findings of the Ld. Pr. CIT that the amended provision of Section 115BBE as amended by Taxation Laws (Second Amendment) Act, 2016 are applicable retrospectively, it was submitted that according to statement of objects and reasons, the Taxation Laws (Second Amendment) Act, 2016 was brought in to plug the loop holes in the existing Income Tax provisions with the aim to tax the black money holders in the series of denomination of the value of five hundred rupees or one thousand rupees which have been ceased to be legal tender with effect from 09/11/2016. It was submitted that the Taxation laws (Second Amendment) Act, 2016 received the assent of the President on 15/12/2016. Accordingly the changes brought in Section 115BBE for imposing higher rate 60% plus surcharge 25% with applicable cess should be applicable prospectively to cover those transactions which happened from 15/12/2016 onwards and the said provision cannot be applied retrospectively to cover transactions from 01/04/2016 to 14/12/2016. It was submitted that it is a settled position that the amended provision which modify accrued rights or which impose obligations or create new liabilities or attach new disability have to be treated as prospective unless the language of the statute is clear that it has retrospective operation and in support reliance was placed on the following decisions which read as under: • CIT vs. Vatika Township (P) Ltd. [2014] 367 ITR 466 (SC) • CIT vs. Walfort Shares & Stock Brokers (P) Ltd [2010] 326 ITR 1 (SC) 6 • CIT vs. Gold Coin Health Food (P) Ltd. [2008] 304 ITR 308 (SC) • Sedco Forex International Drill Inc. vs. CIT [2005] 279 ITR 310 (SC) • CIT vs. Hindustan Electro Graphites Ltd. [2000] 243 ITR 48 (SC) • P.Ram Gopal Varma vs. DCIT [2013] 357 ITR 493 (AP) • Modern Fibotex India Ltd. vs. DCIT [1995] 212 ITR 496 (SC). 5.3 It was submitted that the principles which emerges from the aforesaid decisions are that the statute is prima facie prospective in operation but it may be given retrospective operation expressly or by necessary implication. Where statute affects a vested right or creates a new obligation, it is prospective in nature. Where a statute changes the existing legal position and creates new obligation or liability then it is not retrospective unless it is declared to be so. An intention to enact a retrospective statute must be clearly expressed. The mere use of words conveying such an intention is not by itself sufficient to held operation retrospectively. It was accordingly submitted that in the facts of the present case, it is quite clear that the Taxation Laws (Second Amendment) Act, 2016 wherein the amendment have been brought in Section 115BBE with effect from 01/04/2017 had creates a new tax liability @ 60% or at least impair an existing right of tax rate @ 30% that the assessee had prior to its insertion in the statute. It was submitted that the assessee had surrendered the amount during the course of survey operation on 17/08/2016 keeping in view the existing rate of tax prevalent at that time whereas the amendment was brought into existence and received the assent of the President on 15/12/2016 much after the date of surrender by the assessee. It was submitted that the existing rate of tax @ 30% has been taken away by the Taxation Laws (Second Amendment) Act, 2016 and has made the assessee suffer a greater liability of tax @ 60%, accordingly the amended provision of Section 115BBE does not have retrospective operation with effect from 01/04/2016 in as much as it changes the existing legal position and creates a new obligation on the assessee. It was further submitted 7 that there is nothing in the language of the statute that compels the amended provision of section 115BBE to give it retrospective effect. It was further submitted that the Section 115BBE being a machinery provision has to be interpreted liberally, having regard to the intention of the Legislation the amended provision of Section 115BBE should be operated prospectively i.e from 15/12/2016 when the Taxation Laws (Second Amendment) Act, 2016 received assent of the President and not retrospectively with effect from 01/04/2016. In the light of the above submissions, it was submitted that the order so passed by the Ld. Pr. CIT under section 263 be set aside and the appeal of the assessee be allowed. 6. Per contra, the Ld. CIT DR drawn our reference to the declaration dt. 18/08/2016 filed by the assessee at the time of survey before the JCIT, Range Kurukshetra and it was submitted that it is apparent from the said declaration that the assessee has surrendered an amount of Rs. 30,00,000/- as additional income in addition to his normal income, voluntarily. It was submitted that the assessee has nowhere stated in his declaration that he has surrender additional business income and therefore it is quite clear that the income has been surrendered on account of unexplained cash, unexplained advance and unexplained stock covered under section 68/69/69A/69B/69C of the Act, which is liable to be taxed @ 60% under section 115BBE of the Act. 6.1 It was further submitted that the AO has failed to take cognizance of the amended provision of Section 115BBE of the Act as per the Taxation Laws (Second Amendment) Act, 2016. It was submitted that through insertions of Section 115BBE by Finance Act, 2012, the Government had clear its intentions to tax all the unexplained income under section 68/69/69A/69B/69C/69D separately with maximum marginal rate. By finance Act, 2016, the Government has also disallowed set off losses from the unexplained income to keep the tax 8 at maximum marginal rate of whole unexplained income. It was submitted that Section 115BBE having tax rate of 30% is already on the statute as on 01/04/2016. And since the assessee had unexplained income, the same is liable to be taxed under section 115BBE. It was further submitted that the Government has amendment the tax rate from 30% to 60% with effect from 01/04/2017 before the commencement of the assessment year 2017-18 vide Taxation Laws (Second Amendment) Act, 2016 and therefore the two decisions relied on by the assessee namely Karimtharuvi Tea Estate Ltd. Vs. State of Kerala as well as CIT Vs. Scindia Steam Navigation Co. Ltd. are distinguishable as can be seen from para 2.2 and 2.3 of the impugned order which read as under: 2.2 Karimtharuvi Tea Estate Ltd. Vs State of Kerala: In the said case, the Surcharge Act came into force on 1 st September, 1957. The Hon'ble Supreme Court in its judgment concluded that the said Act not being retrospective in operation, it could not be regarded as law in force at the commencement of the year of assessment 1957-58(Accounting year 1956-1957). However, in the present case, the date of the commencement of the assessment year 2017-18 is 1 st April, 2017 and the amendment brought in Finance Act, 2016 by the government was 15 th December, 2016 i.e. prior to the date of commencement of A.Y. 2017-18. Accordingly, the Taxation Laws (Second Amendment) Act, 2016 is clearly in force at the commencement of A.Y. 2017-18. Therefore, in my humble opinion, the ratio of this decision is not applicable. 2.3 C.l.T vs Scindia Steam Navigation Co. Ltd.: In the said case, proviso to section 10(2)(vii) was introduced by the Income-tax (Amendment) Act, 1946 (VII of 1946), which came into force on May 4, 1946 and the relevant assessment year was 1946-1947. In the said case, the Hon'ble Supreme Court held that as the liability to pay tax is computed according to the law in force at the beginning of the assessment year, i.e., the first day of April, any change in law affecting tax liability after that date though made during the currency of the assessment year, unless specifically made retrospective, does not apply to the assessment for that year. However, in the present case, the date of the commencement of the assessment year 2017-18 is 1 st April, 2017 and the amendment brought in Finance Act, 2016 by the government was 15 th December, 2016 i.e. prior to the date of commencement of A.Y. 2017-18. Therefore, in my humble opinion, the ratio of this decision may not be applicable. 6.2 It was further submitted from plain reading of the amended Section 115BBE, it is quite clear that the same is having effect from 01/04/2017 i.e. commencing date from A.Y. 2017-18 and as the amendment in Finance Act 2016 was brought in before 01/04/2017, the same is applicable for A.Y. 2017-18 9 in full spirit. It was submitted that the Government has again cleared its intentions by bringing all the income surrendered during survey under the purview of Section 115BBE vide Finance Act, 2022 only to mitigate litigations. 6.3 It was submitted that in the instant case the assessee failed to submit any proper reasons / explanations for showing the surrender income as income from other source and paying taxes at normal slab rates. The AO should have invoked the provision of Section 68/69/69A/69B/69C as the same was clearly unexplained in nature and cannot be treated as normal business income, however, the AO failed to do so. 6.4 It was further submitted that there is no alternate possible view of applying amended section 115BBE of the Act wherein the tax @ 60% has been specified and as submitted earlier, the case laws relied by the assessee are distinguishable and therefore the AO has erred in not applying the amended law as applicable in the findings of the present case and in view of the decision of the Hon’ble Supreme Court in case of Malabar Industrial Co. Ltd. Vs. CIT 243 ITR 83, the order so passed by the AO has rightly been held as erroneous in so far as prejudicial to the interest of the Revenue. It was accordingly submitted that the appeal so filed by the assessee be dismissed and the order of the Ld. Pr. CIT be sustained. 7. We have heard the rival contentions and purused the material available on record. Recently, in case of M/s Surya Hatchery vs Pr.CIT, Rohtak and M/s Surya Hatchery vs Pr.CIT, Rohtak (ITA No. 317 & 318/CHD/2022 dated 7.12.2022), the Coordinate Chandigarh Benches (one of us being party to the said decision) has decided an identical matter and we find that the findings therein equally applies in the instant and it would be useful to refer to the said findings which read as under: 10 “6. We have heard the ri val submi ssions and perused the material available on record. On a careful consideration of the same we are of the view that in the peculiar facts of the present case in order to address the gri evance of the assessee posed against the impugned order wh at primarily needs to be seen is whether the order passed by the AO can be said to be erroneous and prejudi cial to the interests of the Revenue. For considering the same, it need be evidenced from the record whether the order has been passed without considering the relevant facts and provi sions. It need be seen from the record of the AO whether any queries have been rai sed by the AO on the i ssues and whether on facts considering the replies of the assessee, the view formed by the AO can be said to be a plausi ble view or n ot. It is only after considering the same, the Revi si onary Authority can come to the conclusi on whether the order passed was a carelessly passed order by the AO thus constituting an error by sheer lack of enquiry or absence of relevant enquiry by the AO which causes not only an error but also a prejudice to the interests of the Revenue. It is only after such an enquiry is made that the Revisi onary Authority can be held to be justified in setting aside the order. On a consideration of the entire factual matrix of the present case, we find ourselves unable to subscribe to the view taken by the Revi si onary Authority. We have taken i nto consideration the arguments advanced on behalf of the assessee that the amount surrendered i n the course of the survey on 04.08.2016 was honored by the assessee which i s not an issue in the present proceedings. However, we find that on the levy of hi gher rate of tax in term s of amendment of Section 115 BBE whi ch received the Hon'ble President’s assent on 15.12.2016, the AO in the course of the assessment proceedings considering the queri es raised and the replies received on the ITBA Portal itself, it i s evident that before the passing of the order dated 21.12.2019 the AO was very much conscious of the nature and counts on which the surrender stood made in the Survey. It is evident from the record that he was very much conscious of the fact that the case was selected for compulsory scrutiny for this specific purpose. We have seen that he has also enquired into the nature of income of the assessee. The surrender letter of the assessee placed before the AO is available before us as it has also been relied upon before the Revisionary Authority. On perusal of the same it is evident that notwithstanding possi bly the confused response of the assessee as noticed in the impugned order on the applicability of Section 115BBE provi sions, the fact remains that even after the survey having been conducted, the record has been seen by the Tax Authorities wherein we find that despite thi s there i s not even a whi sper of any allegati on on record of any other source of income of the assessee. It i s for the Revenue to prove that there were some other sources noticed. We cannot expect the assessee to prove the negative. In the peculiar facts of the 11 present case as available on record we find that the surrender was from the normal business income of the assessee. In the facts of the present case, the ledger entries and the treatment of the surrender made in the books of account of the assessee has not only been considered by the AO it has also been made available to the Revi si onary Authority and has also been placed before us. On a consi deration thereof, we find that in the facts of the present case the acti on of the Revisionary Authority in re-looking at the very same facts and positi on of law solely to bring a higher rate of tax to the kitty of the Revenue cannot be countenanced in the Revisi onary proceedings. It would tantamount to being legally unsustainable. The powers cannot be exercised merely because on the same set of facts, the vi ew found by the ld. PCIT i s at variance with the AO. Unless and until the vi ew taken by the AO is shown to be an incorrect vi ew, the said acti on cannot be supported. In the facts of the present case, we find ourselves unable to hold that the assessment order has been passed without a proper enquiry. We have seen that the AO was duly consci ous of the i ssues whi ch he was required to consider. Replies have been taken on record. They are seen to be having a legal support. Though various decisions have been cited for our consideration, we deem it necessary to refer to a recent decision of Co-ordinate Delhi Bench of the ITAT wherei n in order dated 24.08.2022 in ITA 570/Del/2022 in the case of Shri Balvinder Singh V PCIT wherein considering a near similar issue, the following view was held: 13. There is, therefore nothing stated in the pre-amended or post amended provisions of section 115BBE of the Act that where the assessee surrenders undisclosed income during search action for the relevant year, the tax rate has to be charged as per provisions of section 115BBE of the Act. Therefore, the applicability of the amended provisions which prompted the PCIT to assume jurisdiction under section 263 of the Act is highly debatable issue, and therefore, in our understanding of the law, the PCIT has wrongly assumed jurisdiction. 14. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio: "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or 8 error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An 12 incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous ". 15. The Hon'ble Bombay High Court in the case of Gabriel India Ltd 203 ITR 108 has held as under: “The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black's Law Dictionary. According to the definition, "erroneous" means "involving error; deviating from the law". "Erroneous assessment" refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment" means "one rendered according to course and practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles". 12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re- examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is 10 erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an 13 incorrect or incomplete interpretation a lesser tax than what was just has been imposed. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for and examined by such authority. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Incometax Officer cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Incometax Officer to re- examine the matter. That, in our opinion, is not permissible. Hence the provisions of section 263 of the Act were not applicable to the instant case and, therefore, the commissioner was not justified in setting aside the assessment order.” 16. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the decision of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 Taxmann.com 272 (Bombay). 14 17. The Hon'ble High Court of Gujarat in the case of CIT vs. Nirma Chemical Works Ltd. 309 ITR 67 has observed as under: “if assessment order were to incorporate the reasons for upholding the claim made by an assessee, the result would be an epitome and not an assessment order. In this case, during the assessment 13 proceedings for both the Assessment Years, the Assessing . A.Y. 2009-10 Officer issued a query memo to the assessee, calling upon him to justify the genuineness of the gifts. The RespondentAssessee responded to the same by giving evidence of the communications received from his father and his sister i.e. the donors of the gifts along with the statement of their Bank accounts. On perusal, the Assessing Officer was satisfied about the creditworthiness/capacity of the donors, the source from where these funds have come and also the creditworthiness/ capacity of the donor. Once the Assessing Officer was satisfied with regard to the same, there was no further requirement on the part of the Assessing Officer to disclose his satisfaction in the Assessment Order passed thereon. Thus, this objection on the part of the Revenue cannot be accepted.” 29. We find that the Hon'ble Delhi High Court in the case of CIT Vs Sunbeam Auto reported in 332 ITR 167 has held as held as under: “ 12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the CIT under s. 263 of the IT Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the AO did not consider this aspect specifically whether the expenditure in question was revenue or 14 capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the AO had not applied his mind on the issue. There are judgments galore laying down the principle that the AO in the assessing order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open”. 30. Considering the facts of the case in totality from all possible angles, we failed to persuade ourselves to accept the contention of the ld. DR who had strongly supported the findings of the PCIT. We are of the considered view that the order framed u/s 263 of the Act deserves to be set aside and that of the Assessing Officer deserves to be restored. We order accordingly.” 18. Considering the facts of the case in hand, in totality, in light of judicial decisions discussed here in above, we set aside the order of the PCIT and restore that of the Assessing Officer dated 02.10.2019 framed under section 143C of the Act. 15 19. In the result, the appeal of the assessee in ITA No. 570/DEL/2022 is allowed. 6.1 Accordingly, on a consideration of the peculiar facts and ci rcum stances of the present case and the position of law as considered by the AO whi ch we find has a stamp of approval by the order of the Co-ordinate Bench cited above, we find that the appeals of the assessee have to be allowed. We further support our conclusi on relying upon the deci sion of the Apex Court i n the case of Parshuram Potteries 106 ITR 1 (S.C.). Accordingly, the respective orders passed by the ld. PCIT are quashed and appeals of the assessee are allowed.” 8. In the instant case as well, we find that the matter relating to surrender of income during the course of survey in terms of nature and source thereof and the taxability thereof under section 115BBE has been duly enquired by the Assessing officer during the course of assessment proceedings as evident from the notice dated 20.08.2019 where details of income of Rs 30,00,000/- shown by the assessee in the return of income has been enquired by the AO, notice dated 4.10.2019 where the AO has enquired about the documents impounded during the course of survey u/s 133A and related amount surrendered by the assessee and notice dated 14.11.2019 wherein the AO has specifically asked the assessee to show-cause why the income of Rs 30,00,000/- surrendered during the course of survey shouldn’t be brought to tax under section 115BBE of the Act. Thereafter, after taking into consideration the submissions filed by the assessee and duly examination thereof, the Assessing officer has accepted the nature and source of surrendered as normal business income and no adverse view has been taken. We therefore find that the matter has been duly enquired into during the course of assessment proceedings and there is duly application of mind by the Assessing officer whereby the deeming provisions have not been invoked by the AO and income has been brought to tax under normal provisions as against rate of tax prescribed under section 115BBE of the Act. We therefore donot concur with the findings of the ld PCIT that the AO has completed the assessment without carrying out necessary and proper enquiries 16 and without examining the applicability of provisions of section 115BBE of the Act. 9. As per ld PCIT, the income surrendered during the course of survey are liable to be taxed @ 60% as per the deeming provisions of section 68/69/ 69A/69B/69C. However, no specific finding has been recorded in this regard and even the explanation of the assessee, that the source of income was duly explained at the time of survey conducted at his business premises as the income from business of halwai goods, sale of sweets and the survey team was also satisfied and therefore, the deeming provisions and rate of tax as prescribed under Section 115BBE are not applicable and thereafter, during the course of assessment proceedings, has not been considered at all by the ld PCIT. In this regard, we refer to the decision of the Coordinate Chandigarh Benches in case of Gandhi Ram vs PCIT The Principal Commissioner of Income Tax, Patiala (ITA no. 121/CHD/2021), where, speaking through one of us, we have held as under: “8. Firstly, how the ld PCIT has arrived at a conclusive finding that the discrepancies found, confronted and accepted by the assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B & 69C is not apparent from the impugned order. Merely stating that excess cash is clearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction of Shed/Godown is covered u/s 69B or 69C and advances made to Sundry Parties is covered u/s 69, 69B or 69D is like an open ended hypothesis which is not supported by any specific finding that the matter shall fall under which of the specific sections and how the conditions stated therein are satisfied before the said provisions are invoked. It is like laying a general rule, which to our mind is beyond the mandate of law, that wherever there is a survey and some income is detected or surrendered by the assessee, the deeming provisions are attracted by default and by virtue of the same, provisions of section 115BBE are attracted. The ld PCIT has to record his specific findings as to the applicability of the relevant provisions and how the explanation called for and offered by the assessee is not acceptable in the facts of the present case which is clearly absent in the instant case. Therefore, where the ld PCIT himself is not clear about the applicability of relevant provisions and in the same breath holding the Assessing officer to task by not 17 invoking the said provisions is clearly shooting in the dark which cannot be sustained in the eyes of law and the order so passed therefore cannot be held as erroneous in the eyes of law. 9. Now, coming to the findings of ld PCIT that the Assessing officer has failed to enquire about the source of income in order to assess the income under the appropriate head of income or the relevant deeming provisions of the Act. In this regard, we find that there are documents in form of statement of the assessee recorded u/s 133A during the course of survey and the surrender letter dated 21.10.2016 submitted by the assessee at the time of survey and these documents are very much part of the records which is available at the time of assessment as well as at the time of examination by the ld PCIT. In the statement so recorded at the time of survey, the assessee was specifically asked about the source of his income and in response, he has submitted that he is getting income from Gandhi General Store and share of profit from partnership firm, M/s Gandhi Soap and Detergent Industries. Thereafter, in respect of excess cash found at the time of survey, the assessee was asked a specific question to explain the difference and in response, he has submitted that the difference or the excess cash is on account of sales realization during the previous days which he offers over and above his normal business income. Thereafter, in respect of difference in stock of Rs 25,50,000/-, he has submitted that the difference is on account of higher gross margins in the earlier period and which he surrenders in addition to his normal business income. Similar questions have been raised regarding nature and source of cost of construction of building amounting to Rs 25,00,000/- and advances given to various persons. We therefore find that the assessee has been asked specific questions regarding not just the discrepancy but the nature and source thereof during the course of survey and it is clearly emerging that the source of such income is his business income. Further, the said fact is corroborated by the surrender letter dated 21.10.2016. Apparently, the ld PCIT has failed to take into consideration these documents which are very much part of the records. Following the surrender so made, the assessee has offered the additional income as business income in his return of income and paid due taxes thereon. During the course of assessment proceedings, the Assessing officer has specifically taken cognizance of these facts, as apparent on the face of the assessment order, that assessee has voluntarily surrendered Rs 1,02,00,000/- over and above the normal business income in his return of income and has accordingly not drawn any adverse inference. We therefore find that the Assessing officer has duly taken cognizance of statement of the assessee recorded during the course of survey, the surrender letter and the return of income, and after examination thereof and due application of mind has not drawn any adverse inference and income has been rightly assessed under the head “business income”. In light of the same, we are of the considered view that the order so passed by the Assessing 18 officer cannot be held as erroneous due to lack of enquiry or for that matter, requisite enquiry on the part of the Assessing officer. Where the Assessing officer after due appreciation of facts and circumstances of the case, assessed the income under the head “business income” and didn’t invoke the deeming provisions as so suggested by the ld PCIT, we donot believe that there is any error on part of the Assessing officer and the order so passed by him cannot be held as erronenous. As we have stated above, the ld PCIT without recording any specific findings as to the applicability of deeming provisions has gone ahead and held that the deeming provisions are applicable in the instant case. Even for sake of argument, where such a view is taken on face value, it would be a case where a different view has been expressed by the ld PCIT, however, the same doesn’t lead to the conclusion that the view taken by the Assessing officer as erroneous as the AO has taken into consideration the entirety of facts and circumstances of the case, the explanation offered by the assessee during the course of survey regarding the source of such income and thereafter, has assessed the income under the head “business income”. The view so taken by the Assessing officer is after due application of mind and therefore cannot be held as unsustainable in the eyes of law. In the facts and circumstances of the present case, where there are specific questions asked during the course of survey regarding the nature and source of income and which has been adequately responded to by the assessee and thereafter acted upon in terms of disclosing the income in the return of income under the appropriate head of income and where the same is duly examined and taken into consideration by the Assessing officer during the course of assessment proceedings, the order so passed by the Assessing officer cannot be held as erroneous in nature.” 10. In light of the aforesaid discussions and in the entirety of facts and circumstances of the case, we are of the considered opinion that there is no justifiable basis to invoke the provisions of section 263 as the order passed by the AO cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue and the order so passed by the ld PCIT is hereby set-aside and that of the AO is sustained. 11. In the result, the appeal of the assessee is allowed. 19 12. In ITA No. 391/Chd/2022, both the parties fairly submitted that the facts and circumstances of the case are exactly identical except for the difference in the amount involved. Therefore, our findings and directions contained in ITA No. 390/Chd/2022 shall apply mutatis mutandis to this appeal and the same is decided in favour of the assessee. 13. In the result, both the appeals filed by the respective assessees are allowed and disposed off in light of aforesaid directions. Order pronounced in the open Court on 12/01/2023. Sd/- Sd/- संजय गग "व#म %संह यादव (SANJAY GARG) ( VIKRAM SINGH YADAV) या यक सद य / JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER AG Date: 12 / 01/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar