PENUGONDA VENKATESWARA RAO,TENALI V. INCOME TAX OFFICER, WARD-1, TENALI

ITA 222/VIZ/2024

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The case involves Penugonda Venkateswara Rao, who appealed against the order of the Principal Commissioner of Income Tax (Pr.CIT) invoking revisionary powers under section 263 of the Income Tax Act, 1961. The Pr.CIT found the original assessment order passed by the Assessing Officer (AO) to be erroneous and prejudicial to the interest of the revenue because the assessee had not declared the income as admitted during the survey operations and had not paid taxes as per section 115BBE of the Act. However, the Tribunal found that the AO had conducted a detailed inquiry and accepted the assessee's return after verification, thus setting aside the Pr.CIT's order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46569 (ITAT-VISAKHAPATNAM)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2019-2020
• Other Referred Cases: Pr.CIT v. M/s. Deccan Jewellers P. Ltd., [(2021) 438 ITR 0131 (AP)]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Business income; Opportunity of being heard; Revision of order
• Section: 143(3); 142(1); 143(2); 263; 133A; 20

Judgement Text

"आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM श्री दुव्वुरु आरएल रेड्डी, उपाध्यक्ष एिं श्री एस बालाक ृष्णन, लेखा सदस्य क े समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE VICE-PRESIDENT & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपीलसं./I.T.A.No.222/VIZ/2024 (निर्धारण वर्ा/ Assessment Year: 2019-20) Penugonda Venkateswara Rao D.No. 16-3-137 Sri Shanmuka Jewellery Mall Sharoff Bazar, Tenali – 522201 Andhra Pradesh [PAN: ADKPP6347A] v. Income Tax Officer – Ward -1 Income Tax Office Opp. Sai Baba Temple Bose Road, Tenali – 522201 Andhra Pradesh (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri GVN Hari, AR राजस्व का प्रतततितित्व/ Department Represented by : Dr. Satyasai Rath, CIT(DR) सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 19.12.2024 घोर्णध की तधरीख/Date of Pronouncement : 28.01.2025 आदेश /O R D E R PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. This appeal is filed by the assessee against order passed by Learned Principal Commissioner of Income Tax [hereinafter “Ld.Pr.CIT”] vide DIN & Order No. ITBA/REV/F/REV5/2023-24/1063745349(1) dated 31.03.2024 for the A.Y. 2019-20 arising out of order passed under section 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 26.09.2021. I.T.A.No.222/VIZ/2024 Penugonda Venkateswara Rao Page No. 2 2. Briefly stated the facts of the case are, assessee filed its return of income on 31.10.2019 for the A.Y. 2019-20 declaring a total income of Rs. 94,43,270/- including additional income of Rs. 75,49,261/-. The case was selected for scrutiny, due to the fact that the assessee retracted from his own disclosure made during the survey in the statement recorded from him. Further the assessee also retracted from his admission of payment of taxes under section 115BBE of the Act. Accordingly, statutory notices under section 143(2) and 142(1) of the Act were issued and served on the assessee from time to time. In response, assessee submitted the details. The survey operations under section 133A of the Act was conducted on 25.02.2019 in the business premises at Shanmuka Jewelleries, Tenali. During the survey operation excess gold ornaments weighing 2700 grams was found. While recording statement during survey operations assessee offered to disclose additional income amounting to Rs. 85 Lakhs but whereas while filing the regular return of income additional income was disclosed only to the extent of Rs.75,49,261/- [2395.070 grams @ Rs.3,152/- per gram]. The assessee also submitted that the value of stock difference is taxable under the “Profits / Gains of the business or profession” and hence provisions of section 115BBE of the Act are not applicable. Assessee also submitted reconciliation statements for the difference in stock quantities of gold. Considering all the submissions made by the assessee, Ld. Assessing Officer [hereinafter in short “Ld. AO\"] accepted the return of income filed by the assessee. I.T.A.No.222/VIZ/2024 Penugonda Venkateswara Rao Page No. 3 3. Ld.Pr.CIT by invoking powers vested on him under section 263 of the Act, considered the order of the Ld. AO as erroneous and prejudicial to the interest of the revenue, since the assessee has not declared the income as admitted as per statement recorded during the survey operations and has also not paid taxes as per section 115BBE of the Act. Thereafter, he proceeded to issue a detailed show-cause notice on 12.01.2024 calling for objections from the assessee. In response, assessee filed written submissions. After carefully considering the written submissions with reference to the material available in the assessment records, Ld.Pr.CIT considered the order of the Ld. AO as erroneous and prejudicial to the interest of the revenue as it has been passed without making enquires or verification. Therefore, by invoking the revisionary powers under section 263 of the Act, Ld.Pr.CIT set-aside the assessment order and directed the Ld. AO to redo the assessment in accordance with law after affording a reasonable opportunity of being heard to the assessee. 4. Aggrieved by the order of the Ld.Pr.CIT, assessee is in appeal before us by raising following grounds of appeal: - “1. The order of the learned Principal Commissioner of Income Tax is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Principal Commissioner of Income Tax is not justified in assuming jurisdiction u/s 263 of the Act in as much as the assessment order passed on 26.09.2021 u/s 143(3) r.w. 144B of the Act is neither erroneous nor prejudicial to the interests of revenue. 3. The learned Principal Commissioner of Income Tax erred in observing that the additional income admitted by the appellant is liable to be taxed at higher rate of 60% as per the provisions of S.115BBE of the Act. I.T.A.No.222/VIZ/2024 Penugonda Venkateswara Rao Page No. 4 4. The learned Principal Commissioner of Income Tax ought to have appreciated that the assessing officer verified the above issues and passed the assessment order and as such it is not a case of lack of inquiry' to enable the learned Principal Commissioner of Income Tax to invoke the provisions of S.263 of the Act. 5. Any other ground that may be urged at the time of appeal hearing.” 5. The only issue raised by the assessee is with respect to the validity of exercising the revisionary powers under section 263 of the Act by the Ld.Pr.CIT. On this issue, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that the Ld. AO has in detail conducted enquiries and verified the documents placed before the Ld. AO. He further argued that Ld. AO has considered all the facts and submissions, thereafter accepted the return of income filed by the assessee. Ld.AR placed reliance in the case of Pr.CIT v. M/s. Deccan Jewellers P. Ltd., [(2021) 438 ITR 0131 (AP)] by the Hon’ble High Court of Telangana. He therefore pleaded that the order of the Ld.Pr.CIT be quashed. 6. Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] heavily relied on the order of the Ld.Pr.CIT and submitted that assessee has neither disclosed the income nor paid the taxes as admitted during the survey proceedings and hence Ld.Pr.CIT is right in invoking powers under section 263 of the Act and directing the Ld. AO to redo the assessment. 7. We have heard both the sides and perused the material available on record. It is an admitted fact that around 2700 grams of gold ornaments were found during the survey operations which was valued at Rs. 85 Lakhs. The assessee also I.T.A.No.222/VIZ/2024 Penugonda Venkateswara Rao Page No. 5 provided purchase bills for 304.930 grams and payment made through banking channels before the survey date and submitted that these are already included in the excess stock. The assessee therefore computed the value for the balance quantity 2395.070 grams @ 3152/- per gram while filing the return of income for the impugned assessment year. Ld.AO has also issued show-cause notice calling for explanation from the assessee for considering the excess stock under section 69 of the Act. Detailed reply was also provided by the assessee before Ld. AO substantiating the difference in stock. Considering these, the Ld. AO after verification of the return of income and submissions made by the assessee duly considered and accepted the additional income as business income and taxed as per normal provisions. Since the Ld. AO has applied his mind while framing the assessment it cannot be said there is inadequate enquiry on the part of the Ld. AO. 8. In the case of Pr.CIT v. M/s. Deccan Jewellers P. Ltd., (supra) the Hon’ble High Court of Telangana in Para No. 20 held as under: - “20. No contrary view either of any High Court or the Apex Court has been placed before us to demonstrate that the explanations offered by the assessees in the course of assessment were either perverse or contrary to law. In view of such matter, we are constrained to hold no case of perversity or lack of enquiry on the part of the Assessing Officer is made out so as to render his decision erroneous under Explanation 2 of Section 263 of the Act. Thus, the revisional powers under the said provision were illegally invoked by the Principal Commissioner and his order was rightly set aside by the Tribunal.” 9. In the instant case, no case of perversity or lack of enquiry on the part of the Assessing Officer is made out so as to render his decision erroneous. Therefore, judicially following the Jurisdictional High Court decision, we are of I.T.A.No.222/VIZ/2024 Penugonda Venkateswara Rao Page No. 6 the considered view that the order of the Ld.Pr.CIT cannot be sustained and therefore being set-aside. Accordingly, grounds raised by the assessee are allowed. 10. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 28th January, 2025. Sd/- (दुव्वूरु आर.एल रेड्डी)) (DUVVURU RL REDDY) उपाध्यक्ष /VICE PRESIDENT Sd/- (एस बालाक ृष्णन) (S. BALAKRISHNAN) लेखा सदस्य/ACCOUNTANT MEMBER Dated: 28.01.2025 Giridhar, Sr.PS आदेश की प्रनत नलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee : Penugonda Venkateswara Rao D.No. 16-3-137 Sri Shanmuka Jewellery Mall Sharoff Bazar, Tenali – 522201 Andhra Pradesh 2. रधजस्व/ The Revenue : Income Tax Officer – Ward -1 Income Tax Office Opp. Sai Baba Temple Bose Road, Tenali – 522201 Andhra Pradesh 3. The Principal Commissioner of Income Tax 4. नवभधगीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, नवशधखधपटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax 6. गधर्ा फ़धईल / Guard file //True Copy// आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam "