SHRI JAGTAR SINGH KALSI, FEROZEPUR V. PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL, LUDHIANA

ITA 95/ASR/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4948 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 12-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revision of order
• Section: 68; 69; 263; 143(3); 142(1); 133A; 143(2); 2(A)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 94/Asr/2022 Assessment Year: 2017-18 Shri Avtar Singh Kalsi Through Legal Heir Smt. Kuldeep Kaur, Prop. M/s Avtar Kalsi Agro Works, Moga Talwandi Link Road, Talwandi Bhai Distt. Ferozepur. [PAN:ALLPS2240Q] (Appellant) Vs. Pr. Commissioner of Income Tax, Ludhiana. (Respondent) I.T.A. No. 95/Asr/2022 Assessment Year: 2017-18 Shri Jagtar Singh Kalsi, Prop. M/s Guru Ram Das Corporation, Moga Talwandi Link Road, Vill. Talwandi Bhai Distt. Ferozepur. [PAN:-CEYPS2115C] (Appellant) Vs. Pr. Commissioner of Income Tax, Central, Ludhiana. (Respondent) Appellant by Sh.Ashray Sarna, CA. Respondent by Sh.Anupam Kant Garg, CIT. DR. I.T.A. No. 94 & 95/Asr/2022 2 Date of Hearing 14.09.2022 Date of Pronouncement 21.09.2022 ORDER PerAnikesh Banerjee, J.M.: The two instant appeals of the two assessees filed against the order of ld. Principal Commissioner of Income Tax (Central), Ludhiana, [in brevity the PCIT] are identical fact and having separate orders that were passed u/s 263 of the Income Tax Act 1961, ( in brevity the Act) the date of orders for all orders dated 29.03.2022 by revising their respective assessment years passed by the ld. Assistant Commissioner of Income Tax, Circle, Ferozepur (in brevity the AO), passed u/s 143(3) of the Act, date of orders 21.12.2019. At the outset, both parties stated that the relevant factual backdrop as well as issue involve in all the cases are identical. We, therefore, treat the assessee’s appeal in ITA 94/Asr/2022 for A.Y. 2017-18 as a lead case as per the request of the ld. Counsel. 2. The brief fact of the case is that assessee is individual running business of manufacturing and trading of agriculture implements. Survey operation u/s 133A was conducted on 04.08.2017 on the premises of assessee in which assessee surrendered business income on account undisclosed sales represented by sundry I.T.A. No. 94 & 95/Asr/2022 3 debtor from his business activity, amounting to Rs.80,00,000/-. Thereafter assessee filed return of income declaring income of Rs.92,62,900/- which included surrender income of Rs.80,00,000/- and thereafter the case of assessee was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act were issued. In response to the notice, the assessee filed his submissions and thereafter the assessment was finalized and the surrender income was accepted as business income only. But later proceedings u/s 263 of the Act was initiated by ld. PCIT, Ludhiana. The surrendered income was assessed u/s 68 of the Act. The ld. PCIT was setting aside the order of assessment for attracting special tax rate of 60% as per section 115BBE of the Act instead of normal rate of tax as claimed by the assessee in his return of income and as finalised and accepted as per order u/s 143(3) of the Act passed on 21.12.2019. In response the Order u/s 263 of the Act assessee preferred appeal before us. 3. During the hearing proceedings the ld. Counsel for the assessee filed the brief note and submission which is kept in the record. The ld. Counsel further argued that the assessment was completed u/s 143(3) with observation of the ld. AO in para 2.1 and 2.2 are extracted as follows: “2.1 During assessment proceedings, the assessee was apprised of the fact that in his statement recorded on 14-08-2017 during survey I.T.A. No. 94 & 95/Asr/2022 4 proceedings, it was admitted by him that the total amount of trade debtors noted in the impounded documents was Rs.1.32 crores while the additional income was offered for Rs.1,25,00,000/- by him and his brother Shri Jagtar Singh. Accordingly, the assessee was required to show cause as to why the balance amount of Rs.7 lacs be not added to the income returned. Apart from it, the assessee was also required to explain as to why the income surrendered during survey proceedings may not be charged to tax in view of the provisions of section 115BBE of the Act. 2.2 In this regard, it has been explained by the assessee that the transactions noted in the impounded documents represented sundry debtors and for that matter, the income surrendered cannot be treated as deemed income in view of the provisions of section 68/69 and its allied provisions. In this regard, the assessee has placed reliance on the some judgments, which have been placed on records. Keeping in view the facts of the case and the judgments of Hon’ble courts, it is felt that the provisions of section 115BBE of the Act would not be applicable to the facts of the present case.” 3.1 Against the order of the ld. AO, the notice u/s 263 was issued for treating the order as erroneous and prejudicial to the interest of the revenue. The ld. Counsel further argued and draw our attention in the order of the PCIT in para no. 2.4 for observation related to assessment proceeding during the issuance of notice u/s 263. The relevant para is extracted as below: I.T.A. No. 94 & 95/Asr/2022 5 “2. On perusal of the records, it has been observed that the tax was charged and calculated at normal rates on the income surrendered during the course of survey action and addition made during the assessment proceedings on the basis of trade debtors not recorded in the books of accounts. However, the tax was to be calculated u/s 115BBE of the Act on the said surrendered income and additions made on the basis of impounded documents.” 3.2 The ld. Counsel further argued that the assessee declared the amount during the time of survey. The undisclosed business income and the debtors was declared in return and tax was paid in normal rate. During proceeding of assessment the amount was accepted and the ld. AO had treated this amount in a normal rate of tax. So the inquiry was completed and the AO and ld. PCIT had a difference of opinion. There is no question of the order of the ld. AO is erroneous and prejudicial to the interest of the revenue. 4. Relied on the submission of the ld. Counsel, the relevant para with judgments are extracted as below: “i. Lakhmichand Baijnath v/s CIT, 35 ITR 416(SC), Supreme Court Of India, in which it was held as under: 10. The position may thus be summed up: In the business accounts of the appellant we find certain sums credited. The explanation given by the appellant as to how the I.T.A. No. 94 & 95/Asr/2022 6 amounts came to be received is rejected by all the IT authorities as untenable. The credits are accordingly treated as business receipts which are chargeable to tax. In Govindarajulu Mudaliar vs. CIT (1958) 34 ITR 807 (SC), this Court observed: "There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amounts of cash received during the accounting year, the ITO is entitled to draw the inference that the receipts are of an assessable nature." • Lovish Singhal, ITAT Jodhpur dated 25.05.2018, ITA 143/Jodh/2018 in which it was held as under: 13. 1 have heard the rival contentions and record perused. I have also carefully gone 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 Id 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 Id. AR and also the decision I.T.A. No. 94 & 95/Asr/2022 7 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 woods in which the assessee was decline 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 account of excess stock and excess cash found U/s 69 of the Act. Thus, there is no justification for taxing such income U/s 115BBE of the Act.” 5. The ld. CIT DR vehemently argued and relied on the order of the ld. PCIT. The ld. CIT DR mention the para 5.8 of the order of PCIT which is extracted as below: “5.8 As regards the applicability or otherwise of provision of section 115BBE, submissions of the assessee in para 2 have been gone through and are not acceptable. It is stated that the formation of opinion by the AO that provisions of section 115BBE are not applicable is flawed and incorrect. This is I.T.A. No. 94 & 95/Asr/2022 8 because the surrendered income is in the form of ‘Sundry Debtors’ which are admittedly not recorded in the books of accounts and remain unexplained, therefore, clearly provisions of section 69 are applicable. The issue to be decided by the AO was the real nature of additional income surrendered during the course of survey represented by trade debtors, which was admittedly not recorded in the books of accounts (para 2 of assessment order) and whether the same was to be subjected to tax at special rates of taxes as per section 115BBE. A careful perusal of the all record reveals that there was no explanation in the submissions justifying treating debtors as arising from regular business. The debtors are current assets of the assessee and are admittedly not recorded in the books of accounts, therefore these cannot be treated as regular business income of the assessee. It is also true that the debtors must have been created on account of sale of goods and there is nothing on record as to how investment was made in stock, sales of which resulted in creation of trade debtors. In each of the scenario, it would represent unexplained assets (debtors or stock outside books of accounts) and therefore, provisions of section 69 get attracted. It would be relevant to look at the provisions of section 69, as contained in the act. Section 69 reads as under: “Where in the financial year immediately preceding the assessment year the assessee has made investments which are I.T.A. No. 94 & 95/Asr/2022 9 not recorded in the books of accounts, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.” 6. We heard the rival submissions considered the documents available in the record.We have noticed earlier that the Ld Pr. CIT can revised the order only if it is shown that the assessment order is erroneous in so far as prejudicial to the interests of the revenue. The question as to when an order can be termed as "erroneous" was explained by Hon'ble Bombay High Court in the case of Gabriel India Ltd [1993] 203 ITR 108/71 Taxman 585 (Bom.)as under: — "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 the 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 I.T.A. No. 94 & 95/Asr/2022 10 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 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 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 a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. . . . There must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed." I.T.A. No. 94 & 95/Asr/2022 11 The Hon'ble High Court has considered the definitions given to the words "erroneous", "erroneous assessment" and "erroneous judgment" in Black's Law Dictionary and accordingly held that an order cannot be termed as erroneous unless it is not in accordance with law. An order can be termed as "erroneous" only if it is not in accordance with the law. 6.1. The Hon'ble Delhi High Court has also followed the above said view in the case of Sunbeam Auto Ltd. [2011] 332 ITR 167/[2010] 189 Taxman 436 (Delhi). The Hon'ble Delhi High Court has also extracted following observations made by the Tribunal: — "38. Still further, the Hon'ble Supreme Court in Malabar Industrial Co. (2000) 243 ITR 83 has held that when two views are possible and the Assessing Officer has taken one of the possible view, then the order cannot be held to be prejudicial to the interest of the Revenue. Since the Commissioner of Income tax could not come to a definite finding that the expenditure in question was a capital expenditure in the proceedings under section 263, in our opinion, the order of the assessing officer could not be held to be erroneous." 6.2. In the case of CIT v. Nagesh Knitwears (P.) Ltd. [2012] 345 ITR 135/210 Taxman 145/22 taxmann.com 309 (Delhi), the Hon'ble Delhi High Court has I.T.A. No. 94 & 95/Asr/2022 12 elucidated and explained the scope of the provisions of sec. 263 of the Act and the same has been extracted by the Delhi High court in the case of CIT v. Goetze(India) Ltd. [2014] 361 ITR 505/225 Taxman 133/44 taxmann.com 138 as under: — "Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of Income tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unstainable in law. In some cases possibly though rarely, the Commissioner of Income tax can also show and establish that the facts on record or inferences drawn from facts on record per I.T.A. No. 94 & 95/Asr/2022 13 se justified and mandated further enquiry or investigation but the Assessing officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner of Income tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question...." 6.3. The law interpreted by the Hon’ableHigh Courts make it clear that the Ld. PCIT, before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that the finding given by the assessing officer is erroneous, the Ld. PCIT should have shown that the view taken by the AO is unsustainable in law. In the instant case, the Ld. PCIT has failed to do so and has simply expressed the view that the assessing officer should have conducted enquiry in a particular manner as desired by him. Such a course of action of the Ld. PCIT is not in accordance with the mandate of the provisions of sec. 263 of the I.T.A. No. 94 & 95/Asr/2022 14 Act. The Ld Pr. CIT has taken support of the newly inserted Explanation 2(a) to sec. 263 of the Act. The said explanationwas inserted by Finance Act 2015 w.e.f. 1.4.2015. If that be the case, then the Ld. PCIT can find fault with each and every assessment order, without conducting any enquiry or verification in order to establish that the assessment order is not sustainable in law and order for revision. He can also force the AO to conduct the enquiries in the manner preferred by Ld. PCIT, thus prejudicing the independent application of mind of the AO. Definitely, that could not be the intention of the legislature in inserting Explanation 2 to sec. 263 of the Act, since it would lead to unending litigations and there would not be any point of finality in the legal proceedings. The Hon'ble Supreme Court has held in the case of Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 that there must be a point of finality in all legal proceedings and the stale issues should not be reactivated beyond a particular stage and the lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 6.4. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the I.T.A. No. 94 & 95/Asr/2022 15 order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld. PCIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Ld. PCIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. In our view, it is the responsibility of the Ld. PCIT to show that the enquiries or verification conducted by the AO was not in accordance with the enquiries or verification that would have been carried out by a prudent officer. 6.5. During the notice u/s 142(1) the assessee submitted the relevant documents before the revenue authorities. On basis of these documents the order was passed by the ld. AO. It cannot be said that the issue was untouched and unverified by the assessing authority. Mere change of opinion an order cannot be called as I.T.A. No. 94 & 95/Asr/2022 16 erroneous. We directed that the order passed by the PCIT is unjust for, and the order is setting aside. 7. In the result, appeals of the assessees bearing I.T.A. Nos.94 & 95/Asr/2022 are allowed. Order pronounced in the open court on 21.09.2022 Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By Order