Navunda Abdulla Badruddin Vs PCIT (ITAT Bangalore)
ITAT Bangalore held that PCIT justified in invoking jurisdiction u/s 263 of the Income Tax Act as AO merely accepted the additional income offered by the assessee without verifying the bogus purchases and amount recorded in books.
Facts-
PCIT during the review of assessment records noticed that AO has taxed the unexplained expenses on regular rates. PCIT stated that the unexplained expenses are not recorded in the books of account and therefore it should not have been brought to tax u/s. 69C of the Act and should be taxed u/s. 115BBE of the Act. To this extent the PCIT considered the order of the AO to be erroneous and prejudicial to the interest of the revenue and in this regard issued show cause notice to the assessee u/s.263.
Conclusion-
In the case under consideration the ld. PCIT has excised the revisionary powers u/s. 263 of the Act since he has noticed that during the survey u/s. 133A of the Act there were evidences that the assessee has shown the purchases at a higher side than actual to meet certain expenses which have not been brought into the books of accounts. The AO without making further enquiry on the extent to which these purchases are hiked and to what is the amount recorded in the books accounts has merely taken the breakup of additional income offered by the assessee and has added it to the income of the assessee during the assessment proceedings under Section 143(3) of the Act. We are therefore, of the considered view that the AO has not conducted the verification that “should have been conducted” during the course of assessment proceedings.
Held that respectfully following the decision of jurisdictional High Court in the case of Infosys Technologies Ltd. and the Hon’ble Delhi High Court in the case of Gee Vee Enterprises we hold that the PCIT was justified in assuming the jurisdiction u/s 263 of the Act by setting aside the assessment order.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This is an appeal filed by the assessee against the order of the Principal Commissioner of Income Tax(PCIT) u/s.263 of the Income Tax Act 1961 (the Act), Bangalore in appeal No. 263/Pr.CIT(C)/2001-02 dated 28.03.2022 for AY 2018-19.
2. The assessee has raised the following grounds of appeal: –
“1. The order of revision passed by the learned Principal Commissioner of Income tax [Central], Bengaluru, under Section 263 of the Act dated 28/03/2022, in so far as it is against the Appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant’s case.
2. The learned Principal Commissioner of Income tax is not justified in law and on facts to set aside the assessment order passed under section 143[3] r.w.s. 153D of the Act dated 19/12/2019 and direct the assessing officer to modify the original assessment passed by the learned assessing officer, on the facts and circumstance of the case
3. The learned Principal Commissioner of Income tax is not justified in passing an order under section 263 of the Act, as the order passed under section 143 [3] r.w.s. 153D of the Act, was pursuant to proper enquiry by the learned assessing officer on the facts and circumstances of the case.
4. The learned Principal Commissioner of Income tax has grossly erred in revising the order passed by the learned Assessing officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the learned PCIT is ultra vires to the scope of Section 263 and requires to be cancelled on the facts and circumstances of the Appellant’s case. The direction to make thorough and detailed enquiry amounts to ordering fishingand roving enquires without any material in support thereof and consequently the impugned order passed is bad in law and is liable to be cancelled.
5. The learned Principal Commissioner of Income tax failed to appreciate that the very addition made by the learned assessing officer in the impugned order of assessment passed under section 143 [3] r.w.s. 153D of the Act amounting to Rs. 98,07,847/- itself is not sustainable since the appellant had recorded all the entries found during the course of search and consequently there is no unaccounted or unrecorded entries in the books of the appellant and no addition could have been made on the facts and circumstances of the case.
6. Without Prejudice, the learned Principal Commissioner of Income tax failed to appreciate that the said alleged declaration made by the appellant of Rs. 98,07,847/- was treated as business income by the learned assessing officer in the original order of assessment, and further failed to appreciate that the business income cannot come under the purview of the provisions of section 69C of the Act and consequently the provisions of section 115BBE of the Act is not attracted, on the facts and circumstances of the case.
7. The learned Principal Commissioner of Income tax failed to appreciate that once an item is considered as business income the same cannot be taxed as per the special rates under section 115BBE of the Act, on the facts and circumstances of the case.
8. The learned Principal Commissioner of Income tax failed to appreciate that the Assessing Officer before completing the assessment order under section 143[3] r.w.s 153D of the Act on 19/12/2019 had made detailed enquiries calling for relevant records and documents and explanation pertaining to the matter at hand, the same being produced by the appellant during various instances during the assessment proceedings and further as per the provisions of section 153D of the Act an approval has been sought for passing the order of assessment and having applied their mind and considering the facts the order of assessment has been passed. Hence on the very same issue no action can be taken under Section 263 of the Act as the actions of the Assessing Officer is pursuant to applying his mind to the matter and in accordance with law.
9. The learned Principal Commissioner of Income tax has passed an unsustainable order which is based purely on assumptions and presumptions. The order is arbitrary and full of surmises, without considering the relevant material and considering irrelevant materials. Consequently, the order passed is a perverse order on the facts and circumstance of the case.
10. Without further Prejudice the learned Principal Commissioner of Income-tax, failed to appreciate the fact that the impugned order of assessment passed by the learned assessing officer under section 143 [3] r.w.s 153D of the Act dated 19/12/2019 is subject matter of appeal before the learned Commissioner of Income-tax [Appeals], thus as per the Explanation [c] to sub-section [1] of section263 of the Act the powers are restricted to exercise the jurisdiction to the matter which was a subject matter of appeal, on the facts and circumstances of the case.”
3. The assessee is an individual and is in the business of retail trade of sea fish and fish products. A search and seizure u/s.132 of the Act was carried out in the case of the assessee on 08.02.2018. A survey under Section 133A of the Act was also carried on in the office and factory premises 08.02.2018. The assessee filed return of income for assessment year 2018-19 on 29.03.2019 declaring total income of Rs.11,94,970/-. The case was selected for scrutiny and the notice Section 143(2) of the Act was issued and served on the assessee. During the survey proceedings statement of the assessee under Section 131 of the Act was recorded where by the assessee offered a sum of Rs.2,09,11,483/- as cash expenses unrecorded in the books of account as additional income as per details below: –
