M/S. ABHUSHAN JEWELLERS,RANCHI V. PCIT, RANCHI

ITA 36/RAN/2022

AI Insights

The case involves M/s Abhushan Jewellers, a firm engaged in retail jewelry trading, which faced scrutiny following a survey under section 133A of the Income Tax Act, 1961. The survey revealed substantial cash deposits and undisclosed stock post-demonetization. Initially, the Assessing Officer (AO) added certain amounts as unexplained cash deposits but accepted the disclosure of undisclosed stock as business income. The Principal Commissioner of Income Tax (PCIT) later invoked section 263, claiming the AO's order was erroneous and prejudicial to the interest of the revenue, primarily for not applying the special tax rate under section 115BBE for the disclosed income. The firm appealed against this order, arguing that the AO had already examined these issues and that the application of section 263 was unjustified.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 32759 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 18-05-2022
• Other Referred Cases: CIT V. Max India Ltd., CIT v. DLF Power Ltd., Principal Commissioner of Income-tax vs. Dharti Estate, Principal Commissioner of Income-tax vs. Krishna Kumar Verma, Montu Shallu Knitwears vs. Deputy Commissioner of Income-tax, Shri Krishan Kumar vs. Deputy Commissioner of Income-tax, ACIT vs. Surat Life Care (P.) Ltd., Income-tax Officer vs. Sahana Jewellery Exports (P.) Ltd., Tejpal Singh vs. Assistant/Deputy Commissioner of Income-tax, Rameshlal Kailash vs. Income-tax Officer, Gurinder Makkar vs. Deputy Commissioner of Income-tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Business income; Revised return; Unexplained expenditure; Unexplained investment; Search and seizure; Competent authority; Revision of order
• Section: 143(3); 142(1); 143(2); 263; 68; 69; 69B; 69A; 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL \"RANCHI BENCH\", RANCHI Shri Partha Sarathi Chaudhury, Judicial Member Shri Ratnesh Nandan Sahay, Accountant Member I.T.A. No. 36/RAN/2022 Assessment Year: 2017-18 M/s Abhushan Jewellers, Makhija Tower, Main Road, Ranchi - 834001 [PAN: AACFA6509J] ............…...…………Appellant vs. Principal Commissioner of Income Tax, Ranchi, Office of the Dy. Commissioner of Income Tax, Circle 3, Central Revenue Building, 5A Main Road, Ranchi - 831001 ...........................Respondent Appearances by: Assessee represented by :Shri Devesh Poddar, Advocate Shri M.K. Choudhary, Advocate Department represented by :Shiv Swaroop Singh, CIT(DR) Date of concluding the hearing :19.12.2024 Date of pronouncing the order : 05.12.2024 ORDER Per Ratnesh Nandan Sahay, Accountant Member: This appeal filed by the Assessee is against the order of the Ld. Principal Commissioner of Income Tax, Ranchi [hereinafter referred to as “the Ld. PCIT”] passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2017-18, dated 30.03.2022. 2. The assessee has raised the following grounds of appeal: \"1. For that Ld. PCIT was not justified in invoking the provisions of section 263 for changing the rate of taxation on the disclosure made I.T.A. No.36/RAN/2022 M/s Abhushan Jewellers 2 by the assessee. Ld. AO during the course of assessment had duly looked into the issue and accepted the disclosure made in the return to be taxed at normal rate instead of special rate as per provisions of section115BBE. As such PCIT was not justified in holding the order of Ld. AO to be erroneous & prejudicial to the interest of revenue on this point. 2. For that in an alternate plea to the above ground, it is contended that even if the disclosure made was to be taxed at special rate u/s 115BBE it was a mistake apparent from record for which an order u/s 154 could have been passed. Invoking the provision of section 263 on this count was uncalled for. 3. For that Ld PCIT was not justified in holding that the Ld. AO had failed to verify the outstanding liability of Rs. 23.615/- Complete books of account and audit report was on record before the AO who looked into the same and completed the assessment. Merely not mentioning the same in order of assessment does not mean that no enquiry was done. As such Ld. PCIT was not justified in holding the order passed by AO to be erroneous & Prejudicial to the interest of revenue. 4. For that other grounds in detail will be argued at the time of hearing.\" 3. The facts of the case, in brief, are that the assessee is a firm which is engaged in the business of retail trading of jewellery. The firm is running two jewellery showrooms one at Makhija Tower, Main Road Ranchi and another at GEL Church Complex, Main Road, Ranchi. A survey u/s 133A of the Act was conducted on 22.02.2016by the DDIT (Inv.) Unit-2, Ranchi in the business premises of the assessee firm. It was found by the survey team that the assessee M/s Abhushan Jewellers had deposited substantial amount of cash in its bank account post demonetization period. Later, the case was selected for compulsory scrutiny through CASS. Statutory notices u/s 143(2) and 142(1) were issued from time to time and the necessary I.T.A. No.36/RAN/2022 M/s Abhushan Jewellers 3 compliance was made by the assessee during the assessment proceedings. 4. It is found from the assessment order that the Ld. AO after considering the explanations offered by the assessee and after examination of books of account produced by the assessee, added a sum of Rs.64,31,863/- as unexplained cash deposits made in the bank accounts u/s 69A of the Act. 5. Further, though, the survey party had found an undisclosed stock of Rs.26,08,611/- the Ld. AO, on examination of books of account, found that the same has already been disclosed by the assessee firm in his books of account and therefore, no addition was made by the AO. 6. However, the Ld. PCIT vide or ITBA/REV/F/REV5/2021- 22/1042045927(1) dated 30.03.2022, set aside the order of the AO passed u/s 143(3) dated 27.12.2019 for the assessment year 2017-18 on the ground that when the assessment was made u/s 69A of the Act, the tax rate as prescribed u/s 115BBE of the Act should have been applied which was not done by the AO. He further, pointed out that the AO also failed to verify outstanding liabilities amounting to Rs.23,615/-. I.T.A. No.36/RAN/2022 M/s Abhushan Jewellers 4 7. The present appeal has been filed by the assessee challenging the order passed u/s 263 of the Act by the Ld. PCIT on the ground that the Ld. AO has already examined the issues in detailduring the course of assessment and accepted the disclosure made by the assessee and therefore, cancelling the said order by the Ld. PCIT, Ranchi amounts to revisit which is not permissible u/s 263 of the Act. 8. During the appellate proceedings before us, the Ld. AR submitted a paper book in which it was stated as under: - \"1. That this is an appeal against the order passed U/s 263 dated 30/03/2022. 2. That on perusal of the said order passed U/s 263, it can be seen that the jurisdiction has been invoked for mainly 2 issues:-  Excess Stock of Rs. 26.08.611/- and excess cash of Rs. 1,06,185/- found during the survey proceedings and disclosed thereafter in the ITR should be taxed at the special rate as per section 115BBE.  Outstanding liability of EPF & ESI for Rs. 23,515/- ought to have been disallowed. 3. That with respect to the issue of EPF & ESI which should have been disallowed we would like to submit that the Ld AO had duly enquired on this issue vide notice U/s 142(1) dated 04/11/2019 (copy of which is attached herewith at Page 05-10) against which the reply letter of the assessee dated 25/11/2019 filed electronically on 26/11/2019 is attached herewith at Page 12-14 and its acknowledgment is at Page 11. As such, this shows that this issue was duly looked into by the Ld AO and merely because the Ld AO has adopted to one of the possible views favouring the assessee, provisions U/s 263 is not called for. On the date of passing of the assessment order, this issue of allowably of liability on account of EPF/ESI was debatable i.e. different high courts had given different views, and merely because the AO adopted to the view in favour of the assessee, proceedings U/s 263 is not called for. We would like to rely upon the following case laws on this issue:- I.T.A. No.36/RAN/2022 M/s Abhushan Jewellers 5 CIT V. Max India Ltd. (2007) 295 ITR 282/213 CTR 266/(2008) 166 Taxman 188 /204 Taxman 1 SC Hon'ble Apex Court observed that \"The phrase \"Prejudicial to the interest of revenue\" section 263 has to be read in conjunction with the expression \"erroneous\". When the Assessing Officer takes one of the two views permissible in law and which the Commissioner does not agree with and which results in a loss of revenue, it cannot be treated as erroneous order prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable in law.\" CIT v. DLF Power Ltd. (2009) 31 DTR 93/229 CTR 27/329 ITR 289/185 Taxman 356 (Delhi) (High Court) - Where two views were possible on the issue, and one view is taken by the assessing officer while passing order under section 143(3) of the Act, which was also a plausible view, merely because the view benefited the assessee, the action of the assessing officer cannot be held to be erroneous by the Commissioner for assuming jurisdiction under section 263 of the Act. 4. That with respect to the chargeability of tax on the amounts of excess stock and cash which has been disclosed by the assessee in its ITR (audited P&L A/c attached herewith at page 03-04) we would like to submit that the same has been disclosed as business income which has been duly accepted by the Ld AO after making due enquiry. Notice U/s 142(1) dated 19/11/2019 is attached herewith at Page 15-18 which demonstrates that the Id OA has enquired and accepted these to be the business income of the assessee and thus taxed at the normal rate. 5. That the disclosure made subsequent to the survey proceedings on account of stock and cash is derived out of the business activities of the assessee and as such, has been disclosed in the P&L A/c and taxed at the normal rate. We are attaching herewith the summary of various judicial decisions being relied upon in support of our claim at Page 19-21. 6. That this identical issue has also been argued and case has been heard by this Hon'ble Bench in the matter of Abhishek Distributors in ITA No. 35/Ran/2022 which is pending for disposal. Thus, on basis of the above, it is submitted that the disclosed items by the assessee has been rightly accepted to be taxed at the normal rate by the Ld AO and thus Id PCIT was not justified in invoking powers U/s 263 for this purpose. As such it is submitted that the order passed U/s 263 dated 30/03/2022 is unjustified and fit to be cancelled.\" 9. The AR has also placed reliance on following judicial decisions, given as under, in support of the above contention:- 1. Principal Commissioner of Income-tax vs. Dharti Estate [2024] 163 taxmann.com 179 (Gujarat) [23-01-2024] I.T.A. No.36/RAN/2022 M/s Abhushan Jewellers 6 Where Assessing Officer had made due inquiries and allowed assessee's claim by treating undisclosed income found during survey as assessee's business income, Commissioner erred in initiating revision proceeding on basis that disclosed amount must be taxed under section 115BBE rather than being shown as business income Para 2.3-5.2 end - Therefore, in light of the facts of the case and the judicial precedents on the subject as discussed above, in our view, Ld. PCIT has erred on facts and in law in invoking section 263 provisions in the instant facts, to hold that the order passed by the assessing officer is erroneous and prejudicial to the interests of the revenue. In the result, the appeal of the assessee is allowed. 2. Principal Commissioner of Income-tax vs. Krishna Kumar Verma [2024] 161 taxmann.com 44 (Madhya Pradesh) [19-03-2024] Where undisclosed income surrendered during search and seizure proceedings was derived from regular business activities, it was liable to be taxed at normal rate instead of tax rate stipulated under section 115BBE 3. Montu Shallu Knitwears vs. Deputy Commissioner of Income-tax [2024] 159 taxmann.com 677 (Chandigarh - Trib.) [01-12-2023] Where income surrendered by assessee during survey as excess stock was from business operations, same could not be brought to tax under deeming provisions of section 69B read with section 11BBE. 4. Shri Krishan Kumar vs. Deputy Commissioner of Income-tax [2024] 162 taxmann.com 518 (Chandigarh - Trib.) [04-01-2024] Section 28(1), read with sections 69A, 69 and 115BBE, of the Income- tax Act, 1961 Business income Chargeable as (Amount disclosed at survey) Assessment year 2019-20 During course of survey under section 133A, assessee surrendered excess stock and excess cash found stating that same was to be taxed as business income - Assessing Officer, however, treated said surrendered amount as unexplained investment under sections 69A and 698 and charged same to tax as per provisions of section 115BBE- Whether since during survey proceedings, assessee was confronted not only with discrepancies found but also with nature and source thereof and it had emerged that source of income of assessee was from its business operations, income surrendered by assessee during survey and cash found could not be brought to tax under deeming provisions of sections 69 and 69A and same had been rightly offered to tax by assessee under head 'business income' Held, yes [Paras 30 and 33] I.T.A. No.36/RAN/2022 M/s Abhushan Jewellers 7 5. ACIT vs. Surat Life Care (P.) Ltd. [2024] 160 taxmann.com 239 (Surat-Trib.) [21-12-2023] Where Competent Authority carried out survey under section 133A at hospital of assessee and found certain unaccounted receipts in name of doctors and assessee thereafter filed revised return and disclosed unaccounted receipts as part of profit or gain of business of hospital, as unaccounted receipts were relating to business operations of assessee's hospital, they were taxable as business income under section 28; section 68 was not applicable. 6. Income-tax Officer vs. Sahana Jewellery Exports (P.) Ltd. [2023] 157 taxmann.com 680 (Chennai - Trib.) [20-12-2023] Where assessee during demonetization deposited substantial amount of cash in banks and claimed that source for cash deposits was out of advance received from customers which were subsequently converted into sales of jewellery, since said trade advances were subsequently converted into sales by issuing sale bills, said trade advance could not be examined in light of provisions of section 68 7. Tejpal Singh vs. Assistant/Deputy Commissioner of Income-tax [2024] 158 taxmann.com 679 (Amritsar - Trib.) [06-12-2023] Where assessee claimed that entire amount of excess cash found from business premises was generated from undisclosed sale of medicine, since revenue was unable to show any other sources related to excess cash, excess cash was from business of assessee and, thus, application of section 115BBE on amount of excess cash was bad in law 8. Rameshlal Kailash vs. Income-tax Officer [2024] 163 taxmann.com 379 (Chennai - Trib.) [03-06-2024] Where during course of survey, assessee surrendered receivables of certain amount from debtors and offered same to tax as business income, since source of income of assessee was from its business of money lending, amount surrendered by assessee during survey could not be brought to tax under deeming provisions of sections 69 Mookambika Impex v. DCIT [IT Appeal No.299 (Chny) of 2023, dated 26-07-2023] (para 6) followed. 9. Gurinder Makkar vs. Deputy Commissioner of Income-tax [2024] 162 taxmann.com 731 (Chandigarh - Trib.) [21-02-2024] I.T.A. No.36/RAN/2022 M/s Abhushan Jewellers 8 INCOME TAX: Where income surrendered by assessee during survey as excess stock was from business operations, same could not be brought to tax under deeming provisions of section 69B read with section 11BBE INCOME TAX: Where assessee had surrendered certain amount on account ofcost of building during course of survey, since no bills/vouchers had been found during course of survey, Assessing Officer was not justified in invoking deeming provisions of section 69B read with section 115BBE and normal tax rate should be applied INCOME TAX: Where expenditure had been incurred in cash in violation of section 40A(3), question of unexplained expenditure or unaccounted expenditure did not arise for consideration, and hence, action of Assessing Officer in invoking deeming provisions of section 69B read with section 115BBE in this regard was to be set aside 10. Sobha Devi Dilipkumar vs. Income-tax Officer [2024] 160 taxmann.com 1249 (Visakhapatnam - Trib.) [31-01-2024] Section 69A, read with section 115BBE, of the Income-tax Act, 1961- Unexplained moneys (Cash deposit during Demonetization period) Assessment year 2017-18-Assessee's case was selected for limited scrutiny to verify cash deposits during demonetization period - Assessing Officer noted that assessee had deposited substantial amount in bank account during demonetization period - He further noted that closing cash balance as on 9-11- 2016 as per books of account of assessee was much less than cash deposited by assessee in bank account - Assessing Officer thus treated said cash deposit as unexplained and added same to income of assessee under section 69A - Assessee contended that it was involved in money lending business and it received interest income and principal amount on loans which was disclosed in books of account - It was noted that assessee had disclosed investment in his books of account and also shown same in computation of income which was offered for taxation Whether thus, provisions of section 69A would not be applicable and addition made under section 69A was to be deleted - Held, yes [Para 6] 11. Income-tax Officer vs. Ramachandra Setty & Sons [2024] 163 taxmann.com 666 (Bangalore - Trib.) [10-06-2024] III. Section 28(1), read with sections 69B and 115BBE, of the Income- tax Act, 1961 Business income Chargeable as (Excess stock) - Assessment year 2017-18 Assessee was in jewellery business - During search under section 132(4), it had admitted excess stock found in business and residential premises of assessee as business income and offered same for taxation by bringing same to P&L account of assessee I.T.A. No.36/RAN/2022 M/s Abhushan Jewellers 9 Assessing Officer, however, treated stock of jewellery found as undisclosed investment under section 69B and levied tax under section 115BBE Whether since assessee had explained that source was from business activities and except stock difference no other investment with any other asset was found, this unexplained excess stock surrendered as business income was to be assessed as business income and not as unexplained investment under section 69B read with section 11BBE Held, yes [Para 18.2]\" 10. The Ld. CIT-DR on the other hand defended the impugned order of the Ld. Pr. Commissioner of Income Tax. 11. We have considered the rival submissions and it is found the AO has already applied his mind by examining all the issues in detail during the course of assessment proceedings. The Ld. AO has also noted in the assessment order that the assessee has produced all the details such as quantitative details of sales and purchase, audited accounts, audit report, cash book, computation of income, Balance-sheet, purchase ledger with purchase bills, sales ledger with copy of sales bills, Monthly and annual return of VAT for the year 2016-17 during the course of assessment proceedings. It has been further, been noted in the impugned assessment order as under: - \"D. There was a stock difference, excess stock of Rs. 3,10,55,646/- found during course of survey. E. During the course of survey, a trading account was casted from the comparison of closing stock of the trading account with the physical stock at the premise of Mis Abhushan Jewellers, 20, Gel Church Complex, Main Road, Ranchi Excess in stock was observed amounting to Rs. 3,10,55,646/- Shri Prashant Mehta, partner of the assessee firm was asked to explain the nature and source of the excess stock of Rs. 3,10,55,646/-, He could not offer any explanation at that time and stated I.T.A. No.36/RAN/2022 M/s Abhushan Jewellers 10 that he would explain it later. Further in his reply dated 20.10.2017, the assessee accepted the quantity of the stock arrived at by registered valuer and stated that difference in price is due to valuation made at current market price rather than cost price. The assessee firm vide its written reply dated 20/12/2019 explained detailed working of valuation of stock found during the survey operation. The assessee has already disclosed the difference in stock valued at Rs. 26,08,611/- and credited it to Profit & Loss account for the year separately. Submission of the assessee is reproduced below: Stock as Per Survey 24 22 18 Diamond Silver Church Complex 230.700 29,897.900 10,130.670 1,350.210 52.220 Makhija Tower - 15,421.100 8470.120 932.840 6.440 Total 230.700 45,319.000 18,600.800 2,283.050 58.660 As per Books Church Complex 179.530 29,631.330 9,827.430 1,324.910 22.300 Makhija Tower 6.320 15,391.100 8,183.580 944.020 37.070 Total 185.850 45,022.430 18,011.010 2,268.930 59.370 Excess (short) 44.850 296.570 589.790 14.120 -0.710 Value per unit by valuer 2,950.00 2,714.00 2,200.00 25,000 29,400 Total value of Excess 1,32,308.00 8,04,891.00 12,97,538.00 3,53,000.00 20,874.00 Total value of excess stock The same has been verified with the submissions of the assessee. F. Excess cash amounting to Rs. 1,06,185.51 found during survey proceedings has already been disclosed by the assessee firm in his books.\" Thus, it is incorrect, on the part of the Ld. PCIT, Ranchi to hold that the AO also failed to verify outstanding liabilities and the rate of taxation u/s 115BBE of the Act. It emanates from the order of the Ld. AO that he has verified all the aspects involved in this case and has taken a conscious decision to apply a normal I.T.A. No.36/RAN/2022 M/s Abhushan Jewellers 11 rate of taxation. The ratio of judicial decisions quoted by the Ld. AR also supports his contention. 12. Thus, respectfully following the judicial decisions cited as above, we hold that this is not a fit case where revisionary jurisdiction u/s 263 of the Act has been assumed by the Ld. PCIT, Ranchi. We hold it accordingly. 13. In the result, the appeal filed by the assessee is allowed. Order pronounced on 05.12.2024. Sd/- Sd/- [Partha Sarathi Chaudhury] [Ratnesh Nandan Sahay] Judicial Member Accountant Member Dated: 05.12.2024. AK, PS (on tour) Copy of the order forwarded to: 1.M/s Abhushan Jewellers 2.Principal Commissioner of Income Tax, Ranchi 3. CIT(A) 4. Pr.CIT 5. CIT(DR) 6. Guard File //True copy// BY ORDER, (Senior Private Secretary) (On Tour), ITAT, Ranchi "