MANMANDIR CLOTH CENTRE,KANNAD V. PCIT, NASHIK

ITA 1012/PUN/2024

AI Insights

The case involves Manmandir Cloth Centre, a partnership firm, which during a survey under section 133A of the Income Tax Act, 1961, declared additional income due to excess stock and cash amounting to Rs.19,44,000. The Assessing Officer initially accepted the declared income but did not apply the provisions of section 115BBE for taxing unexplained investments and money. The PCIT later found this assessment to be erroneous and set it aside, directing a re-assessment. The assessee appealed against this order, arguing that the income should be considered as business income and not subjected to the provisions of sections 69 and 69A. However, the Tribunal upheld the PCIT's decision, agreeing that the original assessment lacked proper scrutiny and application of the law.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471203 (ITAT-PUNE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2019-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMOL KHAIRNAR
• Keywords: Set aside; Business income; Opportunity of being heard; Unexplained investment; Revision of order
• Section: 143(3); 143(2); 263; 69; 69A; 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER ITA No.1012/PUN/2024 Assessment year : 2019-20 Manmandir Cloth Centre C/o Manmandir Cloth Centre Bazaar Peth, Tal Kannad, Aurangabad – 431103 Vs. PCIT, Nashik PAN: AAJFM6647G (Appellant) (Respondent) Assessee by : None Department by : Shri Amol Khairnar, CIT-DR Date of hearing : 13-02-2025 Date of pronouncement : 18-02-2025 O R D E R PER R. K. PANDA, VP : This appeal filed by the assessee is directed against the order dated 22.03.2024 of the Ld. PCIT, Nashik-1 relating to assessment year 2019-20. 2. None appeared on behalf of the assessee at the time of hearing and no application seeking adjournment of the case has also been filed. A perusal of the order sheet entries shows that the case was first fixed for hearing on 11.09.2024 and since none appeared at the time of hearing, the case was adjourned to 30.10.2024. Since none appeared on 30.10.2024 also the case was adjourned to 03.12.2024. Again none appeared on 03.12.2024, for which a fresh notice was 2 ITA No.1012/PUN/2024 issued fixing the matter on 29.01.2025. Finally, since no one appeared on behalf of the assessee on 29.01.2025 also, a notice through DR was issued fixing the case for hearing on 13.02.2025. However, today also i.e. on 13.02.2025, none appeared. Under these circumstances, we deem it proper to decide the appeal on the basis of material available on record and after hearing the Ld. DR. 3. Facts of the case, in brief, are that the assessee is a partnership firm and filed its return of income on 09.10.2019 declaring total income of Rs.9,78,800/-. In this case, a survey action u/s 133A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was conducted on 06.03.2019. Statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee, in response to which the assessee filed the requisite details from time to time. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 144B of the Act determining the total income of the assessee at Rs.9,79,800/- wherein he made addition of Rs.7,81,127/- u/s 69A of the Act being the additional income declared during the course of survey on account of excess stock. 4. Subsequently, the Ld. PCIT examined the record and noted that the Assessing Officer has completed the assessment without making due verification and enquiries which were warranted in the facts and circumstances of the case. He noted that during the course of survey proceedings, excess cash and stock of 3 ITA No.1012/PUN/2024 Rs.19,44,000/- was found unrecorded in the books of account of the firm. The Assessing Officer failed to assess the income by adding / considering excess stock as unexplained investment of Rs.11,62,879/- u/s 69 of the Act and Rs.7,81,127/- as unexplained money u/s 69A of the Act, totaling to Rs.19,44,000/- and failed to bring to tax the same by applying the provisions of section 115BBE of the Act. He, therefore, issued a show cause notice asking the assessee to explain as to why the order should not be set aside as per the provisions of section 263 of the Act. Rejecting the explanation given by the assessee, the Ld. PCIT set aside the order with a direction to the Assessing Officer to re-frame the assessment after affording proper opportunity of being heard to the assessee by observing as under: “06. The submission of the assessee has been considered. 6.1 The present revision proceedings u/s 263 of the Act have been initiated on the ground that the assessment order passed u/s 143(3) r.w.s 144B of the Act by the NFAC AO for A.Y 2019-20 is erroneous and prejudicial to the interests of the revenue, as during the assessment proceedings, the AO has assessed the income at Rs.9,79,800/- accepting the returned income by considering the additional income declared of Rs.7,81,127/- on account of excess cash by taxing it u/s 69A applying the provisions of section 115BBE of the Act. Whereas, the whole declaration amounting to Rs.19,44,000/- (i.e. Rs. 11,62,873/- on account of excess stock and Rs.7,81,127/- on account of excess cash) must have been added to the total income of the assessee u/s 69 and 69A applying the provisions of section 115BBE of the Income Tax Act, 1961. 6.2 On perusal of assessee's submission filed during the revisionary proceedings, it is seen that the assessee has declared an amount of Rs.11,62,879/- on account of excess stock and Rs.7,81,127/- on account of excess cash totaling to Rs.19,44,000/- as unexplained investment and unexplained money over and above regular income during the survey proceedings. It is pertinent to mention here that, if the survey might not have been conducted, this income could not have been unearthed. It is therefore, not a voluntary disclosure of the assessee, but had disclosed this income (i.e. unexplained investment and unexplained money) only after survey action. Therefore, section 69 and 69A is squarely applicable and 4 ITA No.1012/PUN/2024 required to taxed under provisions of section 115BBE of the Income Tax Act. The relevant portion of the section 69 is read as under: 69. Unexplained investments Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, 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] [Substituted by Act 4 of 1988, Section 2. for Income-tax Officer\" (w.e.f. 1.4.1988).), satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year 69A. [Unexplained money, etc. [Inserted by Act 5 of 1964, Section 16 (w.e.f. 1.4.1964).] Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the / Substituted by Act 18 of 1992, Section 35, for Explanation 3 (w.e.f. 1.4 1993) [Assessing Officer] [ Substituted by Act 4 of 1988, Section 2, for\" Income-tax Officer\" (w.e.f. 1.4.1988) ], satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.] [Inserted by Act 5 of 1964, Section 16 (w.e.f. 1.4.1964)] During the assessment proceedings, the AO has failed to consider the same by adding the whole amount of declaration of Rs.19,44,000/- by applying the provisions u/s 115BBE of the Act. Considering the overall facts of the case, it is clearly established that all these details have escaped proper scrutiny in the hands of A.O. Therefore, it can be inferred safely that AO has failed to cause proper Inquiries and consequential verifications which rendered assessment order erroneous and prejudicial to the interest of revenue. 07 In the light of the detailed discussion made hereinabove, I am of the considered opinion that the assessment order passed u/s 143(3) read with section 144B of the Act for Assessment Year 2019-20 on 10.09.2021 by the then AO, is erroneous in so far as it is prejudicial to the interests of Revenue, because the assessment has been made not only without proper verification but also without applying the relevant provisions of the Act properly. Therefore, the provisions of section 263 of the IT. Act, 1961 are hereby invoked and assessment order passed by the AO on the above issue is hereby set aside as mentioned in para 3.1 above. 5 ITA No.1012/PUN/2024 The AO is directed that the assessment order be framed afresh as per the provisions of law, after considering proper facts and submissions of the assessee on the issue set-aside herein above, after affording proper opportunity to the assessee within the time allowed under the Income-tax Act, 1961.” 5. Aggrieved with such order of the Ld. PCIT, the assessee is in appeal before the Tribunal by raising the following grounds: 1. That the Hon'ble CIT(A) has erred in passing the appellate order against the appellant without appreciating the fact that the instructions given by the Hon'ble CBDT were not followed in the Appellants case hence the assessment proceedings & resultant assessment order is required to be treated as bad in law, void & is liable to be quashed. 2. With reference to declaration in Cash- That the Hon Assessing officer and Hon PCIT has erred in considering the declaration of Cash as additional Income u/s 69A instead of normal Business Income That being Partnership Firm, there is no other source of Income except the Business activity being run by the Firm. Further it was clearly explained during the proceedings that the same is generated from Business only despite the same added and consider as Income u/s69A. That the cash disclosure is clearly mentioned in Financials and source thereof being business is very aptly clear from the constitution of the Firm which is partnership and has no other activity and also there is no evidence on the record during Survey nor 263 proceedings that the source is not explained and not disclosed. So considering the same request to set aside the addition made. 3. With reference to declaration in Stock- That the Hon'ble PCIT has erred in confirming the assessment order without following decision given by the Hon'ble Jurisdictional ITAТ given in another case. 4. With reference to Setting aside the Assessment order - 6 ITA No.1012/PUN/2024 The Hon'ble PCIT has erred in Setting aside the order of the Learned Assessing Officer (Lrd. AO) holding the order passed by the AO as erroneous and prejudicial to the interest of the revenue. 5. With reference to declaration in- That the Hon'ble PCIT has erred in Setting aside the Assessment without verifying the submission made, though the declaration taken by the Authority was for Business related Stock arise on account of Various years variation and not on actual differences which clearly indicated about the source and nature of Income which is also duly accepted by the confirming order of the Learned Assessing Officer (Lrd. AO) without applying Section 69. That setting aside the order is not proper and as per legal interpretation when there are no other documents on record to establish other source of Income except the Business Income since inception by the Assessee. 6. The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing. 6. We have heard the Ld. DR and perused the record. It is an admitted fact that the assessee, during the course of survey u/s 133A of the Act, had declared an amount of Rs.11,62,879/- on account of excess stock and Rs.7,81,127/- on account of excess cash both totaling to Rs.19,44,000/- as unexplained investment and unexplained money respectively over and above the regular income. It is also an admitted fact that had there been no survey, the assessee would not have declared such income. Further, the Assessing Officer during the original assessment proceedings, instead of adding the whole amount of declaration of Rs.19,44,000/- and by not applying the provisions of section 115BBE of the Act has failed to cause proper enquiries and consequential verification for which the order has become erroneous and prejudicial to the interest of Revenue. Under these circumstances of the case and in view of the detailed reasoning given by the Ld. 7 ITA No.1012/PUN/2024 PCIT, we do not find any infirmity in his order and therefore, the same is upheld. The grounds raised by the assessee are accordingly dismissed. 7. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open Court on 18th February, 2025. Sd/- Sd/- (VINAY BHAMORE) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; दिन ांक Dated : 18th February, 2025 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune 8 ITA No.1012/PUN/2024 S.No. Details Date Initials Designation 1 Draft dictated on 13.02.2025 Sr. PS/PS 2 Draft placed before author 17.02.2025 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order "