Section 115BBE Not Applicable to Income Business Income: ITAT Jaipur

Sadhwani Wood Products Private Limited Vs PCIT (ITAT Jaipur)

The Income Tax Appellate Tribunal (ITAT) in Jaipur recently heard the case involving Sadhwani Wood Products Private Limited and the Principal Commissioner of Income Tax (PCIT). The core issue in dispute was the application of Section 115BBE of the Income Tax Act, which relates to the taxation of undisclosed income, specifically unaccounted cash sales.

Case Background

Sadhwani Wood Products Private Limited operates in the retail and wholesale sale of wood, timber, laminates, adhesives, and related activities. On August 1, 2019, a search and seizure operation was conducted under Section 132(1) of the Income Tax Act at various premises of the Sadhwani & Rohada Group, which includes the assessee.

During the search, several documents, cash, and jewelry were seized, including WhatsApp chats on a mobile phone belonging to Shri Jitendra Sadhwani. These chats revealed details of transactions involving sales of plywood, some of which were conducted through cheques, and others in cash. The Income Tax Department used this data to assess unaccounted cash sales and alleged that a significant portion of the transactions was not reflected in the company’s books of accounts.

The Assessee Company filed its income tax returns for the relevant years, with no discrepancies between the returns filed before and after the search. However, based on the WhatsApp chats and further investigations, the Assessing Officer (AO) concluded that the company was engaged in out-of-book sales involving unaccounted cash transactions.

Key Findings

During the course of assessment proceedings, the AO found that while the sales conducted through cheques were duly recorded in the company’s books, the cash components were not. This discrepancy led to an addition of ₹141.80 crores, representing unaccounted sales between FY 2012-13 and 2019. For the year under consideration, ₹22.40 crores were added to the total income of the company as unaccounted cash sales. Additionally, a disallowance of ₹9.41 lakhs was made under Section 40A(3) of the Income Tax Act, which limits cash transactions.

The AO determined the ratio of unaccounted cash sales to total sales based on a weighted average method, using the evidence gathered from the WhatsApp chats. Despite opportunities provided to the assessee to substantiate these transactions with relevant documents, the company failed to produce supporting evidence. The AO concluded that the company was involved in generating unaccounted cash through cash sales that were not entered into the books.

PCIT’s Proceedings

The PCIT initiated proceedings under Section 263 of the Income Tax Act, which empowers the Commissioner to revise an assessment order if it is deemed erroneous or prejudicial to the interests of the Revenue. The PCIT took issue with the fact that the AO had taxed the unaccounted sales at regular tax rates rather than under Section 115BBE, which prescribes a higher tax rate for undisclosed income.

A show cause notice was issued to the assessee on March 12, 2024, regarding the applicability of Section 115BBE for taxing the undisclosed income. However, the assessee did not respond to the notice or attend the hearing. The PCIT reviewed the proceedings from the prior year and concluded that the AO had erred by taxing the undisclosed income at regular rates instead of invoking Section 69A read with Section 115BBE.

Assessee’s Argument

The assessee challenged the PCIT’s findings before the ITAT, arguing that the issue at hand was not the quantum of the addition, but the rate of tax to be applied. The assessee contended that the AO had properly assessed the income as business income, not as unexplained money under Section 69A. It was further argued that the AO had consciously made the addition under normal business income provisions, and that merely changing the tax rate would amount to a change of opinion, which is not permitted under the law.

The assessee also cited the decision of the Rajasthan High Court in the case of PCIT Vs Manna Trust, which held that a change in the head of income cannot be made merely to revise the tax rate unless there is a clear error in the original assessment.

ITAT’s Ruling

The ITAT considered the submissions from both sides and reviewed the facts of the case. The Tribunal noted that the AO had made the addition based on an extrapolation of unaccounted cash sales, but there was no clear evidence of unexplained money, bullion, or other valuable items. The Tribunal also observed that the entire dispute revolved around the tax rate to be applied on the undisclosed income.

The Tribunal ruled that the addition was rightly made as business income, and since the AO had applied a plausible view, there was no error in the original assessment. The ITAT held that invoking Section 263 by the PCIT was unwarranted, as the AO had made a conscious decision regarding the taxability of the income. The Tribunal further clarified that the provisions of Section 115BBE could not be invoked in this case, as the income was rightly classified as business income and not unexplained money under Section 69A.

Conclusion

The ITAT ruled in favor of Sadhwani Wood Products Private Limited, setting aside the PCIT’s order under Section 263. The Tribunal affirmed that the AO’s decision to assess the income as business income was valid, and there was no need to revise the tax rate under Section 115BBE.

Assessee was represented by Sh. Sidharth Ranka, Adv.

FULL TEXT OF THE ORDER OF ITAT JAIPUR

These two appeals are filed by the assessee aggrieved from the order of Principal Commissioner of Income Tax (Central), Jaipur [ for short PCIT] for the assessment years 2018-19 & 2019-20 dated 22.03.2024. The ld. PCIT passed that the order under challenges in this appeal as per provisions of section 263 of the Income Tax Act (for short “Act’) while examining the assessment record of the above-named assessee which was passed by ACIT, Central Circle, Kota dated 29.09.2021 as per provisions of section 143(3) r.w.s 153A of the Income Tax Act.

2. Since the issues involved in these appeals are almost identical on facts and are almost common, except the difference in figure disputed in each year, therefore, these appeals were heard together with the agreement of both the parties and are being disposed off by this consolidated order.

3. At the outset, the ld. AR has submitted that the matter in ITA No. 922/JP/2024 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount in dispute other cases. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 922/JP/2024 is taken as a lead case.

4. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal in ITA No. 922/JP/2024 on the following grounds;

“1. That in law and in the facts and circumstances of the case, the ld. Principal Commissioner of Income-tax grossly erred in initiating & passing an order u/s 263 of the Act and in holding that the assessment order passed by the ld. Assessing Officer u/s 143(3) r.w.s 153A of the Act is found to be erroneous in so far as it is prejudicial to the interest of the revenue.

2. That the ld. Principal Commissioner of Income-tax grossly erred holding that the addition made by the ld. Assessing Officer towards the undisclosed cash sales should be taxed as unexplained money u/s 69A read with section 115BBE of the Act.

3. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing.”

5. At the outset of hearing, the Bench observed that there is delay of 41 days in filing of the appeal by the assessee for which the ld. AR of the assessee filed an application for condonation of delay with following prayers:

Application for condonation of delay u/s 253(5) of the I.T. Act, 1961 read with  section 5 of Limitation Act in filing of appeal

Hon’ble Sir(s),

The humble assessee appellant applicant respectfully prays for the condonation of delay of 39 days in the filling of Appeal for the following reason:

1. That the ld. PCIT issued two notices u/s. 263 of the Act dated 12.03.2024 for the assessment year 2018-2019 & 2019-2020 which was served upon the email id [email protected] which is belongs to the assessee’s Chartered Accountant Mr. Mustafa Ali.

2. That both the emails received from the department got merged in a single email and the computer operator of the assessee’s Chartered Accountant due to oversight could not understand that there are two different emails and took the printout of the subsequent notice received for assessment year 2019-2020 only and handed over to the assessee’s Chartered Accountant for further action. Copy of screen shots are as under:

3. That the assessee’s Chartered Accountant got in touch with Shri Siddharth Ranka, Advocate to file the response to invoice received and thereafter he prepared a reply dated 16.03.2024 for assessment year 2019 –2020 on behalf of the assessee which was thereafter uploaded by the computer operator of the assessee’s Chartered Accountant. He did not realize that there are 2 notices for 2 different years.

4. That the ld. PCIT passed impugned orders dated 22.03.2024 for the assessment years 2018-2019 & 2019 -2020. She in the order passed for A.Y. 2018 -2019 has also noted that assessee has not filed reply for assessment year 2018 -2019 but has filed reply for A.Y. 2019- That both the emails received from the department carrying the orders passed u/s. 263 got merged in a single email and the computer operator of the assessee’s Chartered Accountant due to oversight could not understand that there are two different emails and took the printout of the subsequent order received for assessment year 2019 –2020 only and handed over to the assesse e’s Chartered Accountant for further action. Copy of screen shots are as under:

5. That thereafter assuming that order dated 22.03.2024 has been passed by the ld. PCIT for the assessment years 2019 -2020, the assessee asked Shri Siddharth Ranka to file appeal before the Hon’ble ITAT, Jaipur Bench, Jaipur. Accordingly appeal for A.Y. 2019-2020 was filed and the same was heard by the Hon’ble Bench and the order is reserved.

6. That recently the assessee received notices u/s. 142(1) r.w.s. 263 dated 25.06.2024 from the ld. ACIT, Central Circle, Kota for A.Y. 2018-2019 & 2019-2020 in reference to orders passed by the ld. PCIT. At that time the assessee applicant closely checked the email & income-tax portal and got to know that 2 notices dated 12.03.2024 were issued by the ld. PCIT for A.Y. 2018-2019 & 2019-2020 and 2 orders dated 22.03.2024 were passed by the ld. PCIT.

7. That the assessee appellant had filed online appeal against the order passed u/s 263 of the Act for the A.Y. 2019-2020 on 30.03.2024 within the limitation before the Hon’ble Income Tax Appellate Tribunal.

8. That due to oversight & technical issue as narrated hereinabove, the Chartered Accountant of the assessee applicant did not notice the email wherein the notice & order for the A.Y. 2018-2019 were sent.

9. That the assessee on knowing about the order passed by the ld. PCIT without any further delay is filing the appeal before the Hon’ble Income tax Appellate Tribunal with delay of 39 days.

10. That the delay in filing of the instant appeal is not intentional.

11. That a separate Affidavit of the Chartered Accountant of the assessee applicant duly sworn is also enclosed herewith.

With this background, we request your honour to take stock of the situation in totality, take a lenient and human approach towards the humble assessee applicant as the delay was not intentional and was due to technical reasons & unavoidable circumstances. That in these circumstances we request your honor’s to kindly condone the delay and oblige.”

6. During the course of hearing, the ld. DR not objected to assessee’s application for condonation of delay and prayed that Court may decide the issue as deem fit in the interest of justice as delay is of 41 days only.

7. We have heard the contention of the parties and perused the materials available on record. The prayer by the assessee for condonation of delay of 41 days has merit and we concur with the submission of the assessee supported with the affidavit and circumstantial evidence. Thus the delay of 41 days in filing the appeal by the assessee is condoned in view of the decision of Hon’ble Supreme Court in the case of Collector, land Acquisition vs. Mst. Katiji and Others, 167 ITR 471 (SC) as the assessee was prevented by sufficient cause in bringing the present appeal with delay and the same is condoned.

8. The brief facts as culled out from the records are that asessee is a company and derives income from retail and wholesale sale of woods, timber, laminates and adhesives and allied activities. A search & seizure operation under section 132(1) of the Income Tax Act, 1961 was carried out on 01.08.2019 at the various premises of “Sadhwani & Rohada Group, Kota” to which the assessee belongs. A number of persons / premises were covered u/s 132 of the Act. Cash, Jewellery and other documents were found and seized from some person’s residence and business premises. The case of the assessee was also covered under search proceedings.

The assessee filed return of income u/s 139 on 12.09.2018. The assessee also filed return in response to notice u/s. 153A dated 22.01.2021 declaring total income at Rs. 68,18,660/-. There is no difference between ITR filed u/s. 153A and 139 of the Act. Consequently, the case was taken up for scrutiny for A.Ys 2018-19. In the assessment proceeding ld. AO noted that during search operation mobile [iphone] phone was taken in custody and some business related charts were identified in the mobile phone of Shri Jitendra Sadhwani. Print out of total 28 pages of WhatsApp chats of plywood products to various parties by M/s. Sadhwani Wood Products Private Limited. Some payments are in cheque, some partly in cash and cheque and some payments were received in cash only.

These transactions were asked to be verified to Shri Jitendra Sadhwani with supporting documents. In reply there to he confirmed that all screenshots of charts impounded as exhibit-2 were belongs to his personal mobile data and all transaction reflecting in charts were related to his company M/s. Sadhwani Wood Products Private Limited. Further some of these transactions were done in both cash and banking channel. It was noticed by the ld. AO that the part transaction / sales was entered into the books of accounts & remaining part where cash components involved is not entered in the books of accounts. Hence it was observed that assessee is generating unaccounted cash by selling its products in cash. In his statement recorded he denied to have unaccounted cash sales and replied that he will confirm all transactions to company’s books of accounts.

Ld. AO on verification of chats and nature of transactions reflected in the books of accounts noted that where cash and cheque details were given in the transaction but only cheque entries were recorded as receipts in the books of account by the assessee. No cash amount is recorded in the receipts part in the company’s books. Also no bill was issued by the company to the customer for cash amount. Bills were issued only for cheque amount in the transaction. Based on that set of facts ratio of unaccounted cash sales with total amount received in the particular transaction was determined by the search team during the search action and a ratio of suppression of sales was established by using weighted average method and thereby unaccounted sale of current year and last 6 financial year was calculated for an amount of Rs. 141,80,82,030/- for Financial year 2012-13 to 31.07.2019 on the basis of the evidence gathered as per table at page 6 of the statement of Shri Jitendra Sadhwani.

In the assessment proceeding ld. AO given the assessee go get verified cash sales in these transactions and asked to produce the relevant bills! vouchers in this regard in the presence of his accountant. But the assessee failed to produce any documentary evidence in this regard. Thus, after considering the various explanation and based on the statement read with the evidences found ld. AO noted that assessee company is regularly engaged in out of books cash sale of plywood items. Most of the plywood items are being purchased in out of books in cash from local companies and no accounting of these transactions were made by the company. Ld. AO noted that the modus of out of books of cash purchase and sale by the assessee company is very clear by the material placed on record.

During post search investigation, various other transactions of similar type are also found not recorded in the books of accounts. On the ground of the analysis of incriminating document ! material seized ! impunded at the time of search ! survey proceeding conducted on 01.08.2019 the assessee has also accepted about cash component involved in these transactions as unaccounted in this regard.

In the light of the evidences, gathered at the time of search ! survey proceedings as well as during the post search investigation it has established that the assessee concern is engaged in making unaccounted cash sales which come to Rs. 141,80,82,030/- the year wise bifurcation determined by the ld. AO is as under

Sr. No.	F.Y	Unaccounted cash receipts  on account of unaccounted
1	2012-13	12,79,50,140
2	2013-14	14,32,00,134
3	2014-15	17,22,13,989
4	2015-16	21,95,85,706
5	2016-17	21,24,51,359
6	2017-18	22,40,32,276
7	2018-19	23,38,84,911
8	2019-20 (Till 31.07.2019)	8,47,63,515
		1,41,80,82,030/-

Considering the above working addition of Rs. 22,40,32,276/- was added in the total income of the assessee as unaccounted cash sales. Ld. AO also made an disallowance of Rs. 9,41,075/- u/s. 40A(3) of the Act.

9. On culmination of the assessment proceedings, the ld. PCIT called for the assessment records for examination as per provision of section 263 of the Act. Ld. PCIT upon examination noted that as per concluding remark in para 5 of assessment order on page 163 to184, the assessee has accepted out of books sales to the tune of Rs. 22,40,32,276/- based on the seized material. Since, the same was not declared in the return of income, the then AO has made an addition of Rs. 22,40,32,276/- on account of out of books sales. This out of books sales generated cash, the source of which had not been explained properly by the assessee Hence such unexplained money was to be taxed u/s 69A r.w.s 115BBE of the Income Tax Act 1961. whereas as per Computation Sheet, tax was charged at Normal Rates. In this connection a Show Cause Notice, vide letter dated 12.03.2024 was issued and hearing has been provided to the assessee on 20.03.2024. In response thereto the show cause notice issued to the assessee, neither the assessee firm/AR attended for hearing nor any reply/ submission/adjournment was made till date. So, in the absence of any reply/appearance to the above show cause notices issued, it is crystal clear that assessee company has nothing to say in his defence and material on record is being considered for deciding the proceedings u/s 263 of the I.T. Act. Ld. PCIT noted that the assessee has filed submission for the A.Y 2019-20 through e-proceedings portal. The issues involved in the both the years is same. Hence in the interest of justice, the reply submitted in A.Y 2019-20 is also being considered

In the Submission for the A.Y 2019-20 the assessee has stated

i) that the assessee is engaged only in the business of retail and wholesale sale of woods, timber, laminates and adhesives and allied activities. It has no other income.

ii) Further the assessee stated that the stock difference found during the course of search was very nominal The huge addition of Rs 22,10,32,276 /­was made by the Assessing officer consciously as business income. The unexplained cash has been brought to tax u/s 69A by the assessing officer.

iii) During the search proceeding unaccounted cash sales was found and on the basis of which the huge addition of Rs 22,10,32,276/- had been made treating as business income

iv) That when a decision has been taken by the Assessing Officer consciously and which is legally correct, the assessment order cannot be said to be erroneous but the action now initiated is just a change of opinion.

v) The Reliance has also been placed by the assessee on the following decision

• PCIT v/s Manna Trust 2022 Rajasthan High Court
• PCIT v/s Dharti Estate 2024 Gujarat high court
• And many other orders of the ITAT

The ld. PCIT considered all the facts and circumstances as detailed in the reply filed by the assessee but not found the reply convincing and thereby ld. PCIT thus held as under:-

“7. I have examined the facts on record and have considered the position of law. The submission of the assessee has been perused carefully & it is observed that the AR of the assessee has in the submission tried to establish that the Assessment order passed by the Assessing Officer is not erroneous but the action now initiated is just a change of opinion hence cannot be subject to the revision u/s 263 of the Income Tax Act, 1961. In this respect, the intent of the legislature behind the section has to be understood.

Section 263 of the Income Tax Act, 1961, stands as a custodian, guarding the integrity of the tax assessment process in India. Its origin can be traced back to the imperative need for a mechanism that could rectify orders perceived as both erroneous and prejudicial to the interests of the revenue. Its genesis lies in recognition of subjectivity of tax assessments which is coupled with intricacies of tax laws, can lead to decisions with adverse implications for revenue collection. An order is deemed “erroneous” if it violates the provisions of the Income Tax Act or if any relevant legal provisions are not correctly applied. Hence in this case it is seen that the A.O has not applied the proper provisions of the act, as discussed above therefore the order is erroneous and prejudicial to the interest of revenue, and the action initiated u/s 263 is for the rectification of the mistake done by the Assessing officer and cannot be termed as the change of opinion

The Hon’ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR it has held as under-

“……………. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind.”

Further in the case of Commissioner of Income Tax V/s Paville Projects (P)Ltd, the A.O had allowed the cost of Improvement to the assessee which was not as per law, the Honourable Apex Court upheld the action of the Commissioner of Income Tax u/s 263 while observing that

“the scheme of the Income Tax Act is to levy and collect tax in accordance with the provisions of the Act, and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be erroneous and prejudicial to the interests of the Revenue”

Thus the revisionary proceedings now initiated are not change of opinion , but these proceedings are to correct the legal lacuna made by the Assessing officer while completing the Assessment proceedings for the A.Y under consideration.

Further the assessee has also stated that his only source of Income is the business in the name & style of M/s Sadhwani Wood Pvt Ltd hence the source of unexplained money is the business only. In this regard Reliance is being placed on the decision of the Jurisdiction high court in case of M/s Bajargan Traders, Alwar v/s CIT where in the Honourable jurisdiction High Court decided on the issue of Surrender made on account of excess stock.

The Honourable bench of the Rajasathan High Court had upheld the decision of the ITAT. Some of the important facts and observations arising from the judgement of Hon’ble ITAT as reproduced in the judgement Principal Commissioner of Income-tax v. Bajargan Traders [2017] 86 taxmann.com 295 (Rajasthan) are as under:-

(i) The first attempt of the assessing authority, give opportunity to the assessee to establish nexus between unexplained investment & the regular source of income and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head.

(ii) In a cases where source of investment/expenditure is clearly identifiable AND

Alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure both above conditions should be met simultaneously together

ON failure it should be considered to be taxed u/s 69 on the premises that such excess investment is not recorded in the books of account.

Further reliance is placed on the decision of Hon’ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) [01-08-1968. Wherein the similar underlying legal principle as discussed in the judgement referred by the appellant has been discussed and decided in favour of the revenue. As per the judgement of Hon’ble Supreme Court, unexplained credit (or stock) cannot be presumed to be business income. Onus to identify the source cannot be shifted on the assessing authority. If the assesse claims so, the assesse is required to prove the same.

In the case of Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax (Madhya Pradesh)/[2022] 446 ITR 539 dated [18-02-2022] the honourable bench has upheld the action of A. Oin taking a view that excess stock represented income of assessee from undisclosed sources SLP filed by assessee against the said judgement Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax was dismissed by Hon’ble Supreme Court. Reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC) [25-07-2022

Similar Analogy is applicable for the unexplained money generated through unrecorded sales. Here in the case of the assessee, the assessee has not given an iota of evidence that the unexplained money has arisen from the business. Further more the assessee needs to explain the year wise undisclosed income and respective undisclosed sales When such a relation is established only then the unexplained money can be said to have been arisen from the business income. Since the assessee has failed to prove such nexus of the unexplained money with sale, procurement of the stock out of books, profit generated there from, the unexplained Money cannot be treated to be from the business. Furthermore in the case of the assessee, it is evident from the concluding remarks of the Assessing officer in regard to addition of Rs 22,10,32,276/- that the assessee itself has accepted the generation of unexplained money

On examination of order of the Assessing Officer it is clear to me that the assessing officer has worked out the unexplained money generated through -out of books sales, and the assessee could not give the proper explanation how the unexplained money had been generated, hence the sum of Rs 22,10,32,276/-detected by the Assessing officer is liable to be taxed under the provisions of section 69 A r.w.s 115BBE and cannot be treated as business income. In order to treat such unexplained money as business income the assessee should have explained the complete chain of events, for generation of the unexplained money. Such nexus has not been given by the assessee.

Thus it is clear that the assessing officer erred &did not take a conscious decision while taxing the unexplained money generated through cash sales made out of books as business income.

Clearly, this error has caused prejudice to Revenue. Being a search/seizure case, it was essential that clarification/explanation of the addition made on account of unexplained money of Rs. 22,10,32,276/- u/s 69A of the Act should have been examined by the Assessing Officer. The tax implication of the same has also not been examined or considered while making the assessment by the AO.

8. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 29.09.2021 for A.Y. 2018-19 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO in a routine and casual manner without applying the applicable sections of the Act. The AO has not verified the details which were required to be verified under the scope of scrutiny. The order of the AO is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Act. The assessment order is set aside to be made afresh in the light of the observation made in this order. The AO is required to make necessary verification in respect of the observations made in this order after allowing reasonable opportunity to the assessee.

I wish to make it clear that I am not disturbing the assessment that has already been made. I am only passing an order for initiation to tax the unexplained money of Rs. 22,10,32,276/- generated by assessee at special tax rate under section 115BBE of the Act as detailed above based upon independent satisfaction of the assessing officer, who will duly consider the replies of the taxpayer.”

10. Assessee challenges the finding so recorded by the ld. PCIT by way of the present appeal on the grounds as stated herein above. Apropos to the ground so raised by the assessee, the ld. AR appearing on behalf of the assessee has placed on record their written which reads as follows;

1. “The assessee appellant is a Private Limited Company and is engaged in retail and wholesale sale of woods, timber, laminates and adhesives and allied activities. It has no other income.

2. A search and survey action was undertaken by the officials of the Income-tax department on 01.08.2019 at the business and residential premises of the assessee appellant and its group concerns, entities and persons.

3. Notices u/s. 153A / 143 (2) of the Act were issued to the assessee appellant for A.Y. 2010-2011 to 2020-2021. For A.Y. 2018-2019 notice u/s. 153A of the Act was issued to the assessee appellant, in response to which the assessee appellant filed its return of income disclosing therein Total Income of Rs. 68,18,660/- under the head ‘Income from Business’.

4. During the course of post search & assessment proceedings carried out for A.Y. 2010-2011 to 2020-2021, several queries, notices, etc. were issued to the assessee by the ld. Assessing Officer. The assessee appellant always co­operated and submitted detailed replies. The assessee appellant in response to show cause notices issued by the ld. Assessing Officer submitted replies dated 17.09.2021.

5. The ld. Assessing Officer vide its assessment order dated 29.09.2021 passed for A.Y. 2018-2019 has made an addition of Rs. 22,40,32,276/- towards unaccounted cash sales as business income of the assessee appellant. The said assessment order has been passed after seeking approval of ld. Additional Commissioner of Income-tax, Central Range, Udaipur u/s. 153D of the Act. The assessee appellant has filed an appeal before the Hon’ble CIT(A) for the illegal addition made by the ld. Assessing Officer and the said appeal is currently pending.

5.1. The ld. Assessing Officer vide its assessment order dated 29.09.2021 passed for A.Y. 2019-2020 has made an addition of Rs. 23,38,84,911/- towards unaccounted cash sales as business income of the assessee appellant. The said assessment order has been passed after seeking approval of ld. Additional Commissioner of Income-tax, Central Range, Udaipur u/s. 153D of the Act. The assessee appellant has filed an appeal before the Hon’ble CIT(A) for the illegal addition made by the ld. Assessing Officer and the said appeal is currently pending.

5.2. The ld. Assessing Officer vide its assessment order dated 29.09.2021 passed for A.Y. 2020-2021 has made an addition of Rs. 8,47,63,515/- towards unaccounted cash sales as business income of the assessee appellant. The said assessment order has been passed after seeking approval of ld. Additional Commissioner of Income-tax, Central Range, Udaipur u/s. 153D of the Act. The assessee appellant has filed an appeal before the Hon’ble CIT(A) for the illegal addition made by the ld. Assessing Officer and the said appeal is currently pending.

6. In the assessment order dated 29.09.2021 passed by the ld. Assessing Officer for A.Y. 2018-2019 [Internal Page 140 & 166 of AO], 2019-2020 [Internal Page 160 & 187 of AO], 2020-2021 [Internal Page 143 & 170 of AO] has justified the addition as business income of the assessee appellant with the following observations:

7. Huge additions of Rs. 22,40,32,276/ -, Rs. 23,38,84,- 911/ & Rs. 8,47,63,515/- was made by the ld. Assessing Officer for A.Y. 2018 -2019, 2019­2020 & 2020-2021 respectively towards unaccounted cash sales as business income of the assessee appellant when:

> if the so-called unaccounted profit earned by the assessee appellant, as has been alleged by the ld. Assessing Officer were to be anywhere near to be true then the department would have at-least found some fraction of undisclosed profits as undisclosed assets in the nature of Jewellery, Ornaments, Loans & Advances to Persons, Stock-mismatch, Investment in Immovable Properties, etc. BUT no such unaccounted investment / asset was found, nor was any addition made on that account.

> during the course of search, which comprises of total 16 individual members, i.e., 4 male adult members, 4 female adult members (married), 2 female adult members (divorcee), 4 female minor members and 2 male minor members the total jewellery including silver articles was found to the tune of 3,319 grams only which’s market value at that time was equivalent to Rs. 1,11,46,377/- and out of which jewellery worth Rs. NIL was seized by the income tax department. Further during the course of assessment proceedings, the said jewellery & ornaments found was duly explained in the hands of various persons and no addition was made by the ld. Assessing Officer.

> during the course of search total stock-in-hand as found recorded in the books of accounts of the assessee was of Rs. 8,63,80,961/ – whereas the value of stock-in-hand found by the search officials from all the premises of the assessee 8,61,62,273/-, which is a nominal variation of Rs. 2,18,688/-, which is equivalent to 0.25% of stock recorded. Furthermore during the course of assessment proceedings, the ld. Assessing Officer was satisfied and no addition was made by the ld. Assessing Officer.

> during the course of assessment proceedings and also during the course of search, the details of immovable properties owned by the various group entities including the individuals, partnership firms and companies were submitted to the ld. Assessing Officer. Most of the immovable properties were purchased long back, i.e., prior to the relevant period under consideration of search. Construction of only 1 property took place during the period under consideration. No agreement or document reflecting investment, either in purchase or construction was found to be incurred in cash. Furthermore during the course of assessment proceedings, the ld. Assessing Officer was satisfied and no addition was made by the ld. Assessing Officer.

> during the course of assessment proceedings, details of Loans & Advances given and interest income earned thereon by the group entities including various individuals, partnership firms and companies have been submitted. The ld. Assessing Officer appreciated that most of the Loans & Advances are within the group entities only. Interest income is received from family members, banks and no Loans & Advances have been given to any non-related entities.

> further during the course of assessment proceedings, it was submitted to the ld. Assessing Officer that the supplier companies from whom goods were purchased, are listed companies and that entire purchase/ business is through systems established by law, i.e., payment by account payee cheque/NEFT, supported by Invoice, E-way bills, VAT-47, VAT-49, etc. There is no allegation raised by the department that the purchases made by the assessee are inflated/deflated. There is no allegation raised by the department that the purchases made by the assessee are in cash. The purchases made by the assessee are found to be genuine and no addition was made by the ld. Assessing Officer.

> during the course of search total cash found from the assessee group including individuals, firms, assessee, was to the tune of mere Rs. 40,35,740/- and out of which cash of Rs. 30,00,000/- was seized by the income tax department. Furthermore during the course of assessment proceedings, the assessee vide letter dated 17.09.2021 voluntarily offered a sum of Rs. 2,10,600/- [3869500 – 3658900] for tax in A.Y. 2020-2021 towards unexplained cash-in-hand found at the time of search. However, the ld. Assessing Officer made an addition of Rs. 4,17,627/- and taxed the same u/s. 69A r.w.s. 115BBE of the Act.

> Relevant extracts of letter dated 17.09.2021 filed by the assessee is also reproduced as hereunder:

12. That thus out of Rs. 38,69,500/- found by the search officials a sum of (Rs. 7,15,128/-, Rs. 1,54,372/- & Rs. 35,187/- + Rs. 1257/- + Rs. 1,32,821/-) totalling Rs. 10,38,765/- and (Rs. 23,19,935/- & Rs. 3,00,200/-) totalling Rs. 26,20,135/-gross totalling (1038765 + 2620135 = 36,58,900/-) should be deemed to be fully explained and no adverse view should be adopted towards the same.

13. That the cash-in-hand which was found excessive should be subjected to normal business profit and not u/s. 115BBE of the Act and we wish to rely upon the following authorities:

• Hon’ble ITAT, Jodhpur Bench in case of Lovish Singhal v. ITO in ITA No. 142-146/Jodh/2018 dated 23.05.2018 has held: I 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 ld 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 ld. AR and also the decision 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 goods in which the assessee was dealing 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.
• Hon’ble ITAT, Jodhpur Bench in case of Pawan Kumar (HUF) v. ITO in ITA No. 371-375/Jodh/2018 dated 10.05.2019 has held: I have considered the submissions of both the par ties and perused the material available on the record. In the present case, it is an admitted fact that the Assessing Officer invoked the provisions of section 154 of the Act and held that the surrendered amount of the assessee was subjected to tax @ 30% as per the provisions of section 115BBE of the Act. However, on the said issue the ITAT Jodhpur (SMC) Bench vide its aforesaid referred to order dated 25.5.2018 held that the provisions of sect ion 115BBE of the Act were not applicable if the surrender was made on account of excess stock found during the course of survey. So, the issue was a debatable, therefore, the Ld. CIT(A) was not justified in confirming the action of the Assessing Officer for making the rectification u/s 154 of the Act. Accordingly, the impugned order is set aside and it is held that the provisions of sect ion 154 of the Act were not applicable in the present case and the Assessing Officer was not justified in making the rectifications u/s 154 of the Act.
• Hon’ble ITAT, Lucknow Bench in the case of Kanpur Organics Pvt. Ltd. v. DCIT (2020) 3 TMI 279 has held: Taxation of income – whether the surrendered amount can be taxable under section 115BBE read with section 69A of the Act or it was to be taxed as a regular business receipt – HELD THAT:- To decide this issue, it is important first to visit the statement of the director of the assessee which was recorded during the course of survey. We have particularly gone through the answer to question No. 35 wherein the director of the assessee has clearly stated that the figures noted in the diary represented sales unrecorded in the books of account and these figures related to the period April 2015 to August 2015. In the present case, the addition under section 69A could have been made only if no explanation, regarding source of such income, was offered or the explanation offered by the assessee was not satisfactory in the opinion of the Assessing Officer. In the present case, as we have already noted that the assessee had given complete explanation regarding the source of entries recorded in the diary, which were explained to be part of unrecorded sales and the Assessing Officer also did not object to the said explanation. Therefore, addition cannot be made under section 69A of the Act and if the addition cannot be made under section 69A, the provisions of section 115BBE will not be applicable.
• Hon’ble ITAT, Chandigarh Bench in the case of Famina Knit Fabs v. ACIT (ITA: 1494/CHD/2017 dated 08.02.2019) has held: Clearly, it is evident from the above that the surrender was on account of debtors/receivables relating to the business of the assessee only. The Revenue has accepted the surrender as such, as being on account of receivables. It follows that the debtors were generated from the sales made by the assessee during the course of carrying on the business of the assessee, which was not recorded in the books of the assessee. Though the said income was not recorded in the books of the assessee but the source of the same stood duly explained by the assessee as being from the business of the assessee. Even otherwise no other source of income of the assessee is there on record either disclosed by the assessee or unearthed by the Revenue. The preponderance of probability therefore is that the debtors were sourced from the business of the assessee. Therefore, there is no question of treating it as deemed income from undisclosed sources u/s 69, 69A, 69B and 69C of the Act and the same is held to be in the nature of Business Income of the assessee. Having held so, the same was assessable under the head ‘business and profession’ and as stated above, the benefit of set off of losses both current and brought forward was allowable to the assessee in accordance with law.

The contention of the Revenue therefore that the income be treated as deemed income u/s 69,69A/B/C of the Act is accordingly rejected and as a consequence thereto the plea that no set off of losses be allowed against the same u/s 115BBE of the Act also is rejected.

14. That we hereby voluntarily offer the sum of Rs. 2,10,600/- [38,69,500 – 3658900] for tax and applicable interest. You are kindly requested to grant credit from the cash-in-hand seized by the income tax department and refund the balance amount.

8. Thus where the assessee appellant was found to be the owner of undisclosed money the ld. Assessing Officer has consciously treated the same as taxable u/s. 69A of the Act and where the addition made by him did not correlate with the undisclosed money the same is consciously treated by as income from business income and thus the same was taxable @ normal rates as has been done by him in other assessment years. The ld. Assessing Officer has specifically held that the income being added by him towards unaccounted cash sales is being added as business income. If the income has been consciously added as business income, then there is no scope for invoking the same as income from other source and in turn invoke provisions of section 115BBE of the Act.

15. The ld. Assessing Officer was undertaking assessment proceedings of the assessee appellant and also of its group entities and not only for the year under consideration but for all the relevant assessments as referred hereinabove. The nature of addition made by the ld. Assessing Officer against the assessee on account of unaccounted cash sales which is in the nature of business income and not in the nature of income from other sources. However, the amount of addition made by the ld. Assessing Officer is itself highly debatable and is unlike to be confirmed and the assessee is hopeful of complete deletion in the appellate proceedings as the said addition is completely based on pure guess-work, conjectures & surmises and without finding any underlying undisclosed asset against the assessee. Where the assessee was found to be the owner of undisclosed money the ld. Assessing Officer has consciously treated the same as taxable u/s. 69A of the Act and where the addition made by him did not correlate with the undisclosed money the same is consciously treated by as income from business income and thus the same was taxable @ normal rates as has been done by him in other assessment years. The ld. Assessing Officer has specifically held that the income being added by him towards unaccounted cash sales is being added as business income. If the income has been consciously added as business income, then there is no scope for invoking the same as income from other source and in turn invoke provisions of section 115BBE of the Act.

16. The ld. PCIT (Central) issued notice dated 12.03.2024 u/s. 263 of the Act observing that addition towards unexplained cash sales made by the Assessing Officer is unexplained money and hence, the addition ought to be made under section 69A of the Act.

17. The assessee appellant for the detailed reasons given in the condonation application was not aware of the notice issued u/s. 263 hence, could not file reply to the same. However, the ld. PCIT considering the reply filed by the assessee appellant for A.Y. 2019-2020 has passed the impugned order dated 22.03.2024.

18. The additions were was made by the ld. Assessing Officer for A.Y. 2018­2019, 2019-2020 & 2020-2021 towards unaccounted cash sales as business income of the assessee appellant after seeking approval of ld. Additional Commissioner of Income-tax, Central Range, Udaipur u/s. 153D of the Act. The ld. PCIT in its impugned SCN dated 12.03.2024 & order dated 22.03.2024 has not found the said approval as erroneous. In absence of same, entire proceedings u/s. 263 are bad in law and deserves to be quashed on this ground alone. We wish to rely upon:

• Hon’ble Madhya Pradesh High Court in PCIT v. Prakhar Developers Pvt. Ltd. (2024) 4 TMI 498 has held:

07. Learned counsel for the appellant failed to answer the query made by this Court whether order passed by the Pune Bench in the case of Ramamoorthy Vasudevan (supra) was challenged before the High Court or Supreme Court on the issue of jurisdiction under Section 263 of the Act. Learned counsel submits that she could not lay her hands any order / judgment passed by the High Court as well as by the Supreme Court on this issue. In the case of Ramamoorthy Vasudevan (supra), in a similar facts and circumstances, reliance has been placed on judgments delivered by the Pune Bench of Tribunal in the case of Dhariwal Industries Limited v/s CIT (ITA No.1108 to 1113/PUN/2014), Lucknow Bench in the case of Mehtab Alam v/s ACIT (ITA Nos.288 to 294/Lkw/2014), Hyderabad Bench of the Tribunal in the case of CH. Krishna Murthy v/s ACIT (ITA No.766/Hyd/2012) and one of the judgment passed by the High Court of Judicature at Allahabad in the case of CIT v/s Dr. Ashok Kumar (ITA No.192 of 2000) and Hyderabad Bench of Tribunal in the case of M/s Trinity Infra Ventures Limited v/s DCIT (ITA No.584/H/2015) and consistently held that once the order under Section 143(3) r/w section 153A of the Act has been passed after taking prior approval of the ACIT under Section 153D of the Act, then the jurisdiction under Section 263 of the Act cannot be invoked. Therefore, the view taken by the Co-ordinate Bench of the Appellate Tribunal had attained finality. Hence, the ITAT, Indore has not committed any error of law by following the same view.

8. Even otherwise, as per Section 263 of the Act, the Principal Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Assessing Officer, is erroneous in so far as it is prejudical to the interests of the Revenue, he may make enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. For passing any order under Sections 143(3) & 153A of the Act, prior approval of Joint Commissioner is required under Section 153A of the Act, or Principal Commissioner or Commissioner as the case may be. Therefore, once prior approval had already been taken by the Assessing Officer and accepted the return submitted by the assessee, then the same authority cannot exercise the power under Section 263 of the Act to reverse the order of Assessing Officer.

• Hon’ble ITAT Patna Bench in Gyan Infrabuild Pvt. Ltd. v. PCIT (2024) 5 TMI 732 has held:

18. In the light of the above, we would like to examine the fact of the instant case. Before us, the first contention made by the ld. Counsel for the assessee is that the impugned revisionary proceedings are not valid in the eyes of law because only the order framed u/s 153A of the Act has been held to be erroneous and prejudicial to the interest of the revenue but the same cannot be held to be justified until and unless the approval given u/s 153D of the Act has also been held to be erroneous and prejudicial to the interest of the revenue. Now, under Chapter 14 of the procedure for assessment, so far as the assessments relating to search cases are concerned, separate procedures have been laid down. Starting from Section 153A for assessments in the case of search or acquisition, Section 153B for time limit for completion of assessment u/s 153A, Section 153C for assessment of income of any other person and Section 153D i.e., prior approval necessary for assessment in case of search or acquisition. So far as Section 153D of the Act is concerned, the same reads as follows:-

“153D. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of [sub-section (1) of] section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner:]

18.1. Now, on perusal of the above Section which states that a prior approval is necessary for assessment in case of assessment search or acquisition, it is specifically mentioned that no order of assessment or re-assessment shall be passed by an Assessing Officer below the rank of JCIT except with the prior approval of the Joint Commissioner. Before us, the ld. Counsel for the assessee stated that for the search assessment cases whatever seized material are found belonging/pertaining to the assessee, a copy of complete set is also kept with the authority who has to provide the approval of the assessment or re-assessment. He also stated that during the course of assessment proceedings, the ld. Assessing Officer has to update about the proceedings to his senior who has to finally grant the approval u/s 153D of the Act. Even after preparation of the draft assessment order, the same is sent to the ld. Joint Commissioner and he/she after thorough examination of the seized material vis-à-vis the draft assessment order prepared by the ld. Assessing Officer and after being satisfied with the correctness of such draft assessment order or in case required can suggest certain changes in the said assessment order finally grants approval. Only after receiving such approval u/s 153D of the Act, the ld. Assessing Officer passes the final assessment order u/s 153A r.w.s. 143(3) of the Act. In short, the assessment order u/s 153A of the Act is incomplete without the approval u/s 153D of the Act. Now, whether action of the ld. Pr. CIT of assuming jurisdiction u/s 263 of the Act holding only the order u/s 153A of the Act is erroneous so far as prejudicial to the interest of the revenue and not the order u/s 153D of the Act, as erroneous insofar as prejudicial to the interest of the revenue, can be held to be justified.

19. Before us, the ld. Counsel for the assessee, has referred to plethora of decisions whether the revisionary order u/s. 263 of the Act has been quashed, where only the order u/s 153A of the Act is revised without revising order u/s 153D of the Act.

20. Reliance is placed on the following judicial pronouncements:

i. Smt. Abha Bansal v. Principal Commissioner of Income-tax [2021] 132 taxmann.com 231 (Delhi – Trib.) –

“9.4 It is evident from the plain reading of the *— aforesaid Explanation that an Order passed on or before or after 1 st Day of June, 1988 by the A.O. shall include (/) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (if) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or ‘ Commissioner authorised by the Board in this behalf under section 120. It may be noted that Order of assessment passed with the approval of JOT under section 153D of the I.T. Act, 1961 could not be revised under section 263 of the I.T. Act, 1961. The Ld. D.R. has, however, relied upon the Order of ITAT, Panaji Bench, but, has not explained whether the Judgment of Hon’ble Allahabad High Court in the case of Dr. Ashok Kumar (supra) or different Benches of the Tribunal have been considered in this case by the Panaji Bench. It is not decided in this case that assessment order cannot be revised without revising the approval under section 153D of the I.T. Act and Explanation 1 to section 263 of the I.T. Act has also not been considered. Therefore, this decision relied upon by the Ld. D.R. would not apply to this case. Further the Judgment in the case of Param Transport (P.) Ltd. (supra), of Hon’ble Chhattisgarh High Court (supra) is not with regard to approval obtained under section 153D of the I.T. Act because in this case it was held that revisional power under section 263 of the I.T. Act is applicable to assessments under search and seizure. However, it is not explained by the Ld. D.R. whether in this case the approval under section 153D have been revised by the Learned PCIT. It may also be noted that it is well settled Law that if two views are possible, then the view which is in favour of the assessee should be made applicable. We rely upon Judgment of Hon’ble Supreme Court in the case of CITv. Vegetable Products Ltd. R9731 88 ITR 192. It may also be noted here that the Hon’ble Allahabad High Court is one of the jurisdictional High Court of Delhi Bench, therefore, preference shall have to be given to the Judgment of the Hon’ble Allahabad High Court as reproduced above. In the totality of the facts and circumstances of the case and following the decisions referred to above, we are of the view that the Learned PCIT was not having jurisdiction to proceed under section 263 of the I.T. Act, 1961 in the matter in issue and as such the Order passed by the Learned PCIT is nullity and void ab initio. We therefore, decide this issue in favour of the assessee.

ii) Surendra L. Heera Nandani v. Pr.CIT [IT Appeal No.3226/Mum./2017 etc., date. 14-2-2018]

28. Since in the instant case also the Assessing Officer has passed the order after obtaining necessary approval from Addl. CIT u/s.l53D of the I.T. Act, therefore respectfully following the above-mentioned decisions of the Coordinate Benches o the Tribunal we are of the considered opinion that the CIT has no power to revise the order u/s.263 of the I.T. Act in the instant case since the same has been passed with the approval of the Addl. CIT U/S.153D of the I.T. Act. We respectfully following the decision of ACIT Vs. Dr. Ashok Kumar, ITA 192 of 2000. We find that in the instant case the original approval 25 ITA No3226- 3232.M.17 A.Y.2008 09 to 2014-15 was granted by Addl. CIT and this assessment order is cannot b< revise without approval of Add. CIT.

iii.) Dhariwal Industries Ltd. v. CIT [IT Appeal Nos. 1108 to 1113 (Pune) of 2014 dated 23-12-2016]

9. Referring to the decision of the Hyderabad Bench of the Tribunal in the case of M/s. Trinity Infra Ventures Ltd. Vs. DCIT vide ITA Nos. 584 to 589/H/2015 order dated 04-12- 2015 for A. Yrs. 2005- 06 to 2010-11 he submitted that the Tribunal in the said decision, following various decisions including the decision of Hon’ble Allahabad High Court in the case of CIT Vs. Dr. Ashok Kumar vide Income Tax Appeal No. 192/2000 order dated 06-08-2012, has held that assessment order approved by the Addl. CIT U/S.153D cannot be subjected to revise u/s.263 of the I.T. Act.

12. We have considered the rival arguments made by both the sides, perused the orders of the AO and the Ld.CIT and the paper book filed on behalf of the assessee.

14. We find merit in the above submission of the Ld. Counsel for the assessee. We find the Lucknow Bench of the Tribunal in the case of MehtabAlam Vs. ACIT vide ITA Nos.288 to 294/Lkw/2014 order dated 18-11-2014 while deciding an identical issue has observed as under.

14.1 We find the Hyderabad Bench of the Tribunal in the case of CH. Krishna Murthy Vs. ACIT vide ITA No.766/Hyd/2012 order dated 13-02- 2015 following the decision of the Lucknow Bench of the Tribunal in the case of MehtabAlam (Supra) held that CIT is not justified in assuming jurisdiction u/s.263 when the order has been passed in terms of section 153D of the Act.

14.2 We find the Hyderabad Bench of the Tribunal in the case of M/s. Trinity Infra Ventures Ltd. (Supra) had an occasion to decide an identical issue and it held that the assessment order approved by the Addl. CIT U/S.153D cannot be subject to revision u/s.263 of the I.T. Act.

iv. Trinity Infraventures Ltd. v. Dy. CIT [IT Appeal Nos. 584-589 (Hyd.) of 2015, dated 4-12-2015]

5.4. The Ld. Counsel for the assessee has further submitted that the assessment under section 143(3) read with section 153C was passed after getting approval of Addl. CIT under section 153D of the I.T. Act and therefore such an assessment cannot be revised without revising the directions of the Addl. CIT under section 153D of the I.T. Act. The Ld. Counsel for the assessee, has relied upon the decisions of this Tribunal in the case of Ch. Krishna Murthy vs. ACIT, C.C. 3, Hyderabad in ITA No. 766/Hyd/2012 dated 13.02.2015 and also the decision of Lucknow Bench of ITAT in the case of MehtabAlam 288/Luck/2014 dated 18.11.2014 in support of this contention. He has also placed reliance upon the decision of Hon’ble Allahabad High Court in the case of CIT vs. Dr. Ashok Kumar in I.T. Appeal No. 192 of 2000 wherein it has been held that the assessment order approved by the Addl. CIT under section 153D, cannot be subjected to revision under section 263 of the I.T. Act. In view of the above decision also, we hold that the revision order under section 263 of the I.T. Act is not sustainable.

21. From going through the above decisions, wherein it has been consistently held that without revising the approval u/s 153D of the Act, the ld. Pr. CIT cannot revise the assessment order u/s 153A of the Act. Even in case of Surendra L. Heera Nandani (supra) it was held that ld. Pr. CIT has no power to revise the order u/s 263 of the Act since the same has been passed with the approval of the Addl. CIT u/s 153D of the Act.

22. Therefore, in the light of the above decisions, so far as the first limb of legal argument of the ld. Sr. Counsel for the assessee is concerned, we find merit that ld. Pr. CIT erred in assuming jurisdiction u/s 263 of the Act by revising order u/s 153A r.w.s. 143(3) of the Act without considering that prior approval already accorded to ld. Assessing Officer u/s 153D of the Act and secondly when orders u/s 153A of the Act has been passed after receiving approval u/s 153D of the Act, Ld. PCIT erred in revising order u/s 153A of the Act without first revising the order u/s 153D of the Act as which means that no defect has been observed by ld. Pr. CIT in approval u/s 153D of the Act. Thus the action of the ld. Pr. CIT assuming jurisdiction u/s 263 of the Act cannot be held to be tenable, the impugned proceedings deserves to be quashed on this grounds itself.

19. The additions of Rs. 22,40,32,276/-, Rs. 23,38,84,911/- & Rs. 8,47,63,515/- was made by the ld. Assessing Officer for A.Y. 2018-2019, 2019­2020 & 2020-2021 towards unaccounted cash sales as business income of the assessee appellant viz-a-viz 263 invoked by PCIT is as follows:

Assessment Year	Assessment Order	263 Invoked
2018-2019	29.09.2021	YES
2019-2020	29.09.2021	YES
2020-2021	29.09.2021	NO

19.1. If the assessment order for A.Y. 2018-2019 has been found to erroneous & prejudicial to the interest of revenue, how come, assessment orders for A.Y. 2020-2021 where similar nature of additions were made by the ld. Assessing Officer were not found to be erroneous & prejudicial to the interest of revenue. Thus while invoking provisions of section 263 in the instant case, the rules of consistency has been given a complete bypass which is impermissible. Reliance is placed upon:

• Hon’ble Supreme Court in Radha Soami Satsang v. CIT (1991) 11 TMI 2 has observed:

We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.

On these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter and, if there was no change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961.

20. For ready reference section 69A is quoted as hereunder:

Unexplained money, etc.

69A. 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 Assessing Officer, 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.

21. In fact in the impugned assessment order dated 29.09.2021, huge addition has been made by the ld. Assessing Officer however, the assessee appellant is not found to be consequential owner of any money, bullion, jewellery or other valuable article. Hence, invocation of section 69A r.w.s. 115BBE as sought by the ld. PCIT is itself bad and erroneous.

22. It is reiterated that the nature of addition made by the ld. Assessing Officer against the assessee on account of unaccounted cash sales which is in the nature of business income and not in the nature of income from other sources. However, the amount of addition made by the ld. Assessing Officer is itself highly debatable and is unlike to be confirmed and the assessee is hopeful of complete deletion in the appellate proceedings as the said addition is completely based on pure guess­work, conjectures & surmises and without finding any underlying undisclosed asset against the assessee. Where the assessee was found to be the owner of undisclosed money the ld. Assessing Officer has consciously treated the same as taxable u/s. 69A of the Act and where the addition made by him did not correlate with the undisclosed money the same is consciously treated by as income from business income and thus the same was taxable @ normal rates as has been done by him in other assessment years. The ld. Assessing Officer has specifically held that the income being added by him towards unaccounted cash sales is being added as business income. If the income has been consciously added as business income, then there is no scope for invoking the same as income from other source and in turn invoke provisions of section 115BBE of the Act.

23. That it is trite that the exercise of power u/s. 263 of the Act is ousted in case of a debatable issue. An assessment order can be termed as erroneous and prejudicial to the interest of the Revenue, if the Assessing Officer has taken a view which is not legally tenable. Per contra, if two views are available on a particular issue and the ld. Assessing Officer adopts one of such views, the case goes outside the purview of revisional power exercisable by the ld. Principal Commissioner of Income-tax u/s. 263 of the Act. Proceedings u/s. 263 cannot be sustained where the ld. Principal Commissioner of Income-tax holds a view which was different from that of the ld. Assessing Officer. Section 263 of the Act does not visualize a case of substitution of the judgment of the Revisional Commissioner for that of ld. Assessing Officer unless the decision of the ld. Assessing Officer is found to be erroneous.

24. The language used by the legislature in section 263 is to the effect that the Principal Commissioner of Income-tax may interfere in revision, if he considers that the order passed by the ld. Assessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue. It is quite clear that two conditions must coexist in order to give jurisdiction to the Principal Commissioner of Income-tax to interfere in revision. The order of the Assessing Officer in question must not only be erroneous but also it must be prejudicial to the interest of the revenue. In other words, merely because the assessment order is erroneous, the Principal Commissioner of Income-tax cannot interfere. Again, merely because the order of the ld. Assessing Officer is prejudicial to the interest of the revenue, then that is not enough to confer jurisdiction on the Principal Commissioner of Income-tax to interfere in revision. The Principal Commissioner of Income-tax cannot assume jurisdiction u/s 263, if the two conditions prescribed under the provisions of Act, viz. (i) the order is erroneous; and (ii) the same is also prejudicial to the interest of the revenue is not satisfied. Each and every erroneous order cannot be the subject matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that 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.

25. The phrase “prejudicial to the interest of the revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue has a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when an Assessing Officer adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the Assessing Officer has taken one view with which the CIT did not agree with, it cannot be treated as an erroneous order prejudicial to the interest of the revenue because the view taken by the Assessing Officer is unsustainable in law.

26. The ld. Assessing Officer has examined that issue as it is evident from the queries posed and replies filed by the assessee appellant. Since, in this case ld. Assessing Officer has clearly conducted the enquiry and revenue did not pin point the error on the part of the ld. Assessing Officer to that extent, the assessment order passed after due application of mind cannot be subjected to proceeding u/s. 263 of the Act.

27. The ld. Assessing Officer while framing the assessment has taken a possible view and the show cause notice u/s. 263 does not demonstrate the error remained on the part of the ld. Assessing Officer. In fact, when the ld. Assessing Officer has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2 of Section 263 of the Act, the order passed by the ld. Assessing Officer could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue. It is important to highlight that prior to passing of the assessment order the ld. Assessing Officer had taken approval of the ld. Additional Commissioner of Income-tax, Central Range, Udaipur.

28. The assessee also wishes to refer and rely upon the following authorities:

• Hon’ble Jurisdictional Rajasthan High Court in PCIT v. Manna Trust (2022) 1 TMI 693 has held: We are broadly in agreement with the view of the Tribunal. It is well settled through a series of judgments that power under Section 263 of the Act can be exercised only when twin conditions of the order of assessing officer being erroneous and prejudicial to the interest of revenue are satisfied. The Jurisdiction of the Commissioner under Section 263 of the Act is restricted and cannot be equated with the appellate jurisdiction. The Commissioner does not sit in appeal.
• Hon’ble Gujarat High Court in PCIT v. Dharti Estate (2024) 1 TMI 1197 has held: Revision u/s 263 – Taxability of income disclosed in survey proceedings u/s 133A at Higher Rate of tax u/s 115BBE – While deleting the addition, ITAT found that there was nothing stated in either pre-amended or post-amended provision of Section 115BBE that when the assessee surrendered undisclosed income during the search action for the relevant years, higher tax rate is required to be charged. HELD THAT:- In the facts of the case, during the course of assessment proceedings, as the Assessing Officer had made due inquiries and was aware of the fact that the assessee had disclosed the income as business income in his return of income in respect of which it had claimed expenditure in relation to interest and remuneration paid to partners and after making inquiries, Assessing Officer allowed the claim of the assessee by treating undisclosed income found during the survey as assessee’s business income and in view such finding of facts arrived at by the Tribunal, we are of the opinion that no substantial question of law arises from the impugned order of the Tribunal. Decided against revenue.
• Hon’ble Madhya Pradesh High Court in PCIT v. Krishna Kumar Verma (2024) 3 TMI 1018 has held: Undisclosed income surrendered during the Search and Seizure action – to be taxed at normal rate or tax rate stipulated u/s 115BBE of the Income Tax Act – ITAT confirming the Order of CIT(A) that the undisclosed income surrendered during the Search and Seizure action, is liable to be taxed at normal rate instead of the tax rate stipulated under Section 115BBE of the Income Tax Act? – HELD THAT:- From a bare reading of the Section, it is apparent that an appeal to the High Court from a decision of the Tribunal lies only when a substantial question of law is involved, and where the High Court comes to the conclusion that a substantial question of law arises from the said order, it is mandatory that such question(s) must be formulated. The expression “substantial question of law” is not defined in the Act. Nevertheless, it has acquired a definite connotation through various judicial pronouncements.

A finding of fact may give rise to a substantial question of law, inter alia, in the event the findings are based on no evidence and/or while arriving at the said finding, relevant admissible evidence has not been taken into consideration or inadmissible evidence has been taken into consideration or legal principles have not been applied in appreciating the evidence, or when the evidence has been misread. See MADAN LAL VERSUS GOPI (MST.) & ANR [1980 (8) TMI 204 – SUPREME COURT], WB. ELECTRICITY REGULATORY COMMISSION [2002 (10) TMI 772 – SUPREME COURT] and METROARK LTD. [2004 (1) TMI 397 – SUPREME COURT]

Thus in the instant case no substantial question of law arises from the order of the Tribunal as the appellant has raised all the question of facts and have disputed the fact findings of the ITAT in the garb of substantial questions of law which is not permitted by the statute itself.

This Court refrains from entertaining this appeal as there is no perversity in the order passed by the ITAT since the ITAT has dealt with all the grounds raised by the appellant in the order impugned and has passed a well reasoned and speaking order taking into consideration all the material available on record.

• Hon’ble Jurisdictional ITAT Jaipur Bench in Gayatri Devi v. PCIT (2023) 10 TMI 23 has held: It is well settled that the prerequisites to exercise of jurisdiction by the ld PCIT under s. 263 of the Act is that to establish order of the AO is to be erroneous insofar as it is prejudicial to the interest of the Revenue, the PCIT has to satisfy of twin conditions simultaneously, namely (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent, s. 263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue’s interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase ‘prejudicial to the interest of the Revenue’ has to be read in conjunction with an erroneous order passed by the AO. However, every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. We draw strength from case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) and also from the case of CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC).
• Hon’ble ITAT Chandigarh Bench in Tarlochan Singh v. DCIT (2024) 1 TMI 795 has held: Nature of Income as surrendered during survey proceedings – surrendered amount as “business income” OR “deemed income” i.e income from undisclosed sources – CIT (Appeals) sustained the surrendered amount u/s 68 of credit entry and u/s 69 of excess stock – appellant contended that surrendered amount represents the “business income” as the appellant has no other source of income. Whether deeming provisions of Section 68 can be invoked in respect of amount introduced in the capital account of the assessee and found credited during the course of survey in the books of accounts of the assessee? – HELD THAT:- The Survey team had asked a specific question to the assessee during the course of survey to explain the source of capital introduced during the financial year 2018-19 relevant to assessment year 2019-20 and in response, the assessee had stated that he was unable to explain the source of capital introduced during the during the financial year 201819 relevant to assessment year 2019-20, however, in order to buy piece of mind, he voluntarily surrendered the sum – Therefore, during the course of survey, the assessee has failed to offer any explanation regarding the source of such capital introduced in his capital account. Even during the course of assessment and appellate proceeding, we find that no explanation is forthcoming from the assessee. We therefore find that basis material available on record, the credit entry in the capital account of the assessee clearly demonstrate that the receipt of money by the assessee and in absence of any explanation from the assessee explaining the source of such capital introduced, the provisions of section 68 are clearly attracted and we therefore affirm the findings of the ld CIT(A) as far as bringing to tax the amount under section 68 of the Act. Whether the AO has invoked the deeming provisions of section 69 and brought to tax excess stock found during the course of survey which is sustained by the ld CIT(A)? – In the instant case there is no physical distinction between the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. We therefore find that the difference in stock so found out by the authorities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as business income. Thus the income surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69 of the Act and the same has to be assessed to tax under the head “business income”. In absence of deeming provisions, the question of application of section 115BBE doesn’t arise and normal tax rate shall apply. The AO is thus directed to assess the income under the head “Income from Business/profession” and apply the normal rate of tax.

• Hon’ble ITAT Amritsar Bench in Deepak Setia v. DCIT (2023) 9 TMI 942 has held: Addition of income u/s 69A or Business income – surrender of income during survey proceedings – Charge tax as per provisions of Section 115BBE – HELD THAT:- During survey proceeding the assessee surrendered total income of Rs. 29 lacs out of which amount was related to other discrepancies/miscellaneous business income which was treated as income u/s 69A and calculated tax under special rate during assessment. There entire addition is certainly without forming proper basis for conversion into business income to non-business income. The revenue was not able to submit any evidence during assessment and appeal proceeding that the said income is not connected with the business income of the assessee or accumulated from non-recognising source. Hence, when all the incomes earned by the assessee are only from the business income of the assessee, there do not arise any question as to application of provisions of section 69A and hence taxing such income at special rate as per section 115BBE is improper. It is a settled principle in law that when there is no other/separate source of income identified during the course of survey or during the course of assessment proceedings, any income arising to the assessee shall be treated to be out of the normal business of the assessee only. During survey proceeding the assessee filed surrendered letter and in statement assessee also recorded and income was surrendered. We respectfully relied on the order of Sh. Harish Sharma & M/s. Sham Jewellers [2021 (5) TMI 482 – ITAT CHANDIGARH] and case of Daulatram Rawatmull [1966 (4) TMI 73 – CALCUTTA HIGH COURT]. In considered view, the conversion of business income into other income and application of section 69A is bad and illegal. Accordingly, levy of tax u/s 115BBE on the income amount liable to be quashed. Assessee appeal allowed.

• Hon’ble ITAT Chandigarh Bench in Parmod Singla v. ACIT (2023) 8 TMI 525 has held: Characterization of income – income surrendered during the course of survey u/s 133A – deemed income u/s 69 and 69A or business income – HELD THAT:-Foundational requirement before invoking the deeming provisions is not that there were certain survey operations u/s 133A and some undisclosed income has been detected and surrendered by the assessee and thus, the deeming provisions are automatically attracted. Rather the foundational requirement is whether the assessee has made the investment/has been found to be owner of cash and the explanation offered by the assessee explaining the nature and source of such undisclosed income and the reasonability of the explanation so offered by the assessee keeping into account the facts and circumstances of the relevant case. The mere fact that survey/search proceedings have been initiated at the business premises of the assessee doesn’t mandate the Assessing officer to automatically invoke the deeming provisions and before invoking the deeming provisions, he has to call for the explanation of the assessee and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provisions. In the instant case as well, we find that the difference in stock so found out by the authorities has no independent identity and is part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as undeclared business income. Following the said decision of DCIT Vs . Shri Ram Narayan Birla [2016 (9) TMI 1354 – ITAT JAIPUR] has taken a similar view holding that the excess stock so found during the course of survey was part of the stock and the Revenue has not pointed out the excess stock has any nexus with any other receipts other than the business being carried on by the assessee. The surrender on account of advances were relating to the business being carried on by the assessee. The ld CIT(A) has also returned a finding that the advances were admitted as being related to business activity of the assessee. Where the same has been found unrecorded in the books of accounts, the same has to be brought to tax under the head “business income”. Thus the income surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69 and 69A of the Act and the same has been rightly offered to tax under the head “business income”. In absence of deeming provisions, the question of application of section 115BBE doesn’t arise for consideration. Decided in favour of assessee.

• Hon’ble ITAT Chandigarh Bench in Ravinder Kumar Bansal v. PCIT (2023) 12 TMI 716 has held: Revision u/s 263 – course of survey proceedings at the assessee’s business premises, certain discrepancy were observed and confronted to the assessee and in response, the assessee offered a sum towards unexplained misc. advances – CIT stated that the assessee in his return of income has disclosed the surrendered income in the profit/loss account and paid taxes at the rates applicable to normal business income which need to be taxed u/s 115BBE making assessment erroneous so far as prejudicial to the interest of the Revenue – HELD THAT:- Assessee has been asked specific questions not just regarding the discrepancy found during the course of survey but the nature and source thereof during the course of survey and it is clearly emerging that nature of such advances is unaccounted business advances and the source of such income so surrendered is assessee’s share of diagnostic lab fees received from Shri Sandeep Singh who was running the diagnostic lab from business premises of the assessee and sharing 70% of lab fees with the assessee which remain unaccounted and undisclosed at the time of survey. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee’s business has been established, thus, it cannot be said that these are unexplained transactions thus, doesn’t satisfy the second condition for invoking the deeming provisions of section 69-69B – AO has duly taken cognizance of the findings of the survey team, the documents found during the course of survey, the statement of the Shri Sandeep Singh, the surrender letter and the return of income and after examination thereof and due application of mind, the income has been rightly assessed under the head business income. We are of the considered view that the order so passed by the AO cannot be held as erroneous due to lack of inquiry or for that matter requisite inquiry on the part of the AO. As we have held above, there is no findings recorded by the Ld. Pr. CIT as to how the deeming provisions are applicable in the instant case and the order so passed by the AO is erroneous. We therefore find that merely stating that there was survey operation at the business premises of the assessee and provisions of Section 115BBE of the Act are attracted, the same can be a basis for exercise of jurisdiction u/s 263 of the Act. In view of the same, order so passed by the Ld. Pr. CIT under section 263 is set aside and that of the AO is restored. Appeal of assessee allowed.
• Hon’ble Jurisdictional ITAT Jaipur Bench in Rekha Shekhawat v. PCIT (2022) 8 TMI 791 has held: Revision u/s 263 – Addition u/s 68 – income from other source (income declared at the time of survey) – tax is payable u/s 115BBE or not – recovery of cash amount of advances made by the assessee to the other persons for purchase of land / plots and thus comes under the purview of section 68 or not – HELD THAT:- Additional income was in the nature of business income and don’t fall under Sec. 68 and/or Sec. 69 of the Act and consequently therefore, Sec.115BBE could not have been invoked. In view of the above discussion, therefore, we are of the considered view that the CIT was not at all justified by invoking the provisions of Sec. 263 by wrongly/incorrectly holding that the subjected assessment order u/s 143(3) dated 25.02.2019, was passed without considering that the income declared under the head of other sources being recovery of cash amount of advances paid for purchase, comes under preview of S. 68 and 69 and thus, the tax u/s 115BBE was to be paid, as against the tax at normal rates. The assumption of jurisdiction u/s 263 was contrary to the law and facts on record. Hence, the proceedings initiated u/s 263 of the Act and the impugned order are hereby quashed. Thus, ground of appeal decided in favour of assess and against the revenue.

• Hon’ble ITAT Rajkot Bench in Vaidya Realities v. PCIT (2024) 1 TMI 970 has held: Revision u/s 263 – income surrendered during survey operation was not verified in pursuance to the provision of section 69 r.w.s. 115BBE – PCIT held that the assessment has been framed u/s 143(3) of the Act without verification with respect to undisclosed income offered by the assessee in pursuance to the provisions of section 69 r.w.s. 115BBE of the Act which is erroneous and causing prejudice to the interest of revenue – whether there was any inquiry conducted by the AO during the assessment proceeding qua the income offered by the assessee during the survey operation? – HELD THAT:- It is transpired that there was application of mind by the AO during the assessment proceedings. Accordingly, it cannot be said that the assessment has been framed by the AO without conducting inquiries. As such, we hold that the AO framed the assessment after necessary inquiries with respect to the income surrendered by the assessee during the survey operation conducted u/s 133A of the Act. The assessee in the statement recorded during the survey operation has also accepted that it has received onmoney for its real estate project – Due application of mind by the AO during the assessment proceedings and therefore assessment cannot be held as erroneous in so far prejudicial to the interest of revenue on account of non-verification. PCIT in his order has referred the explanation 2 to section 263 of the Act, in holding that the necessary inquiries were not carried out by the AO during the assessment proceedings. However, we find that the Ld. PCIT in the notice issued u/s 263 of the Act has nowhere made any reference to the explanation 2 to section 263 of the Act, and therefore we hold that the Ld. PCIT erred in holding assessment order as erroneous and prejudicial to the interest of Revenue after referring to the explanation 2 of section 263 of the Act. To tax any item of income/ expenditure, unaccounted investment at the specific rate r.w.s. 115BBE of the Act, it is necessary to classify the income under the head deeming provision under section 69, 68, 69B etc. In the present case, the income surrendered was to be classified u/s 69 – As per the direction of the Ld. PCIT, however, we find that the Ld. PCIT has nowhere pointed out any contravention that the income surrendered by the assessee falls within the provision of section 69 of the Act. As such, the assessee in the present case was able to justify the source of income surrendered during survey operation and therefore we are of the view that the same cannot be treated as deemed income u/s 69 of the Act. Once the income goes out of the preview of the deeming provision, the provision of section 115BBE of the Act, cannot be applied. We note that the AO has taken one of the impossible view by treating the income offered during survey operation as income under the head business and profession. The Ld. PCIT cannot substitute the view taken by the AO as per his understanding of facts of the case – Decided in favour of assessee.

We thus humbly submits that the impugned order dated 22.03.2024 passed by the ld. PCIT is completely illegal, devoid of any merits, passed with predetermined motive, on the basis of assumption and presumption, ignoring the correct factual position, on wrong understanding of statutory provision, is bad in law and therefore the same is deserves to be quashed & set-aside.”

11. To support the contention so raised in the written submission reliance was placed on the following evidence / records :

Index

S no.	Particulars	Pages
1	Copy of Show Cause Notice dated 12.03.2024 issued by the Principal Commissioner of Income-tax u/s. 263 of the Act	01-02
2	Copy of Reply dated 16.03.2024 submitted by the assessee in response to notice issued u/s. 263 of the Act	03-23
3	Copy of assessment order dated 29.09.2021 passed by the Assessing Officer for A.Y. 2018-2019	24-207
4	Copy of assessment order dated 29.09.2021 passed by the Assessing Officer for A.Y. 2020-2021	208-401
5	Copy of  letter dated 17.09.2021 submitted by  the assessee    during the course of search assessment proceedings before the Assessing Officer	402-433
6	Copy of letter dated 17.09.2021 submitted by the assessee    during the course of search assessment proceedings before the Assessing Officer	434-444
7	Copy of letter dated 17.09.2021 submitted by the assessee during the course of search assessment proceedings before the Assessing Officer	445-459
8	Copy of letter dated 17.09.2021 submitted by the assessee during the course of search assessment proceedings before the Assessing Officer	460-466
9	Hon’ble Supreme Court in Radha Soami Satsang v. CIT (1991) 11 TMI 2	467-473
10	Hon’ble Jurisdictional Rajasthan High Court in PCIT v. Manna Trust (2022) 1 TMI 693	474-476
11	Hon’ble Gujarat High Court in PCIT v. Dharti Estate (2024) 1 TMI 1197	477-481
12	Hon’ble Madhya Pradesh High Court in PCIT v. Krishna Kumar Verma (2024) 3 TMI 1018	482-486
13	Hon’ble Jurisdictional ITAT Jaipur Bench in Gayatri Devi v. PCIT (2023) 10 TMI 23	487-520
14	Hon’ble ITAT Chandigarh Bench in Tarlochan Singh v. DCIT (2024) 1 TMI 795	521-537
15	Hon’ble ITAT Amritsar Bench in Deepak Setia v. DCIT (2023) 9 TMI 942	538-541
16	Hon’ble ITAT Chandigarh Bench in Parmod Singla v. ACIT (2023) 8 TMI 525	542-559
17	Hon’ble ITAT Chandigarh Bench in Ravinder Kumar Bansal v. PCIT (2023) 12 TMI 716	560-582
18	Hon’ble Jurisdictional ITAT Jaipur Bench in Rekha Shekhawat v. PCIT (2022) 8 TMI 791	583-599
19	Hon’ble ITAT Rajkot Bench in Vaidya Realities v. PCIT (2024) 1 TMI 970	600-609

Index

S no.	Particulars	Pages
1	Written Submissions before Hon’ble ITAT	01-29
2	Copy of Show Cause Notice dated 12.03.2024 issued by the ld. Principal Commissioner of Income-tax u/s. 263 of the Act	30-31

Index- II

S no.	Particulars	Pages
20	Written submissions before Hon’ble ITAT	610-639
21	Hon’ble Madhya Pradesh High Court in PCIT v. Prakhar Developers Pvt. Ltd. (2024) 4 TMI 498	640-642
22	Hon’ble ITAT Patna Bench in Gyan Infrabuild Pvt. Ltd. vs. PCIT (2024) 5 TMI 732	643-658

12. Ld. AR appearing on behalf of the assessee in addition to the written submission so filed vehemently argued that the only issue in the present appeal is the chargeability of rate of tax on the addition so made. Ld. PCIT did not find error or prejudiced with the quantum and the manner the assessment proceeding is carried out by the ld. AO and thereby ld. PCIT initiated the proceeding just to amend the rate of tax to be charged. The ld. AR of the assessee submit that when the order passed by the ld. AO is perfectly dealing with the issue and there is no error or prejudice as such ld. PCIT cannot invoke the provision of section 263 just to say different rate of levy of the tax when ld. AO was already aware about the matter. Ld. AR of the assessee vehemently argued that in the present case the fact is similar to the fact of the case that has been decided by our High Court in the case of PCIT Vs. Manna Trust (2022) [ 1 TMI 693 ] in that case the High Court has held that “We are broadly in agreement with the view of the Tribunal. It is well settled through a series of judgments that power under section 263 of the Act can be exercised only when twin conditions of the order of assessing officer being erroneous and prejudicial to the interest of revenue are satisfied. The Jurisdiction of Commissioner under section 263 of the Act is restricted and cannot be equated with the appellate jurisdiction. The Commissioner does not sit in appeal”. Ld. AO made the addition after giving a specific showcause notice to the assessee wherein the ld. AO based on the seized material extrapolated the income on weighted average and considered the cash sales and it was not the case of revenue for undisclosed income categorically found. The assessee contended that addition before the ld. CIT(A) and therefore, the matter is under dispute. On that disputed addition ld. CIT(A) intend to levy the rate of addition for section 68, 69, 69A,B, C&D of the Act. When the addition is under disputed and while making that addition ld. AO did not invoke those provision consequent thereupon, ld. PCIT cannot impose upon her view on the ld. AO. Not only that the amount of addition made was disputed before the ld. PCIT. In this case ld. AO with open eyes considered as unrecorded cash sales and considered as business income of the assessee at page 140 and page 163 wherein ld. AO intend to tax cash sales which was in part cheque and part in cash so one transaction cannot be considered for separate two treatment under the Act. Based on the whatsapp slip addition were considered for cash sales making weighted average. In the search carried out by the revenue no variation in stock was found, no variation in the investment in the assets were found, no loan taken or given out of books were found and no proof of unaccounted purchase were found. Thus, merely on sum slip found in the whatsapp addition were made and that cannot be considered as unexplained credit in the hands of the assessee company. It is not a cash of revenue that ld. AO was not aware about the provision of section 115BBE, AO was conscious about the provision of section 115BBE of the Act, because while dealing with the addition of unaccounted cash found for an amount of Rs. 4,17,627/- was added and while doing so he invoked the provision of section 115BBE of the Act. Here also while invoking the provision of section 263 there is no variation was proposed in the computation of income of the assessee, but only for rate of tax and that with the facts already on record being disputed and not crystallized the order is neither erroneous nor prejudicial to the interest of the revenue. To drive home to the contention ld. AR of the assessee relied upon the decision of M. P. High Court in the case of PCIT Vs. Prakhar Developers P. Ltd., [ 4 TMI 498 ] wherein the Hon’ble High Court has held that once order has been passed taking prior approval then again invoking the provision of section 263 was not correct. Similar view was taken by Patna High Court in Gyan Infrabuild P. Ltd. Vs. PCIT [ 5 TMI 732 ]. Ld. PCIT on the same very issue out of other year selected only for two year and other order on the same very could not found the order erroneous and has not proposed any action when the nature of addition being same. AO has already invoked the provision of section 11BBE for A. Y. 2020-21 while dealing with the addition and while making cash sales addition he has taken a conscious decision not to invoke that provision. Even the view and the addition being debatable and the matter was under dispute before ld. CIT(A) and therefore, ld. PCIT should not considered merely on the charge of rate of tax order as prejudicial and that too without proving that it was in fact erroneous or prejudicial to the interest of the revenue. In the search no corresponding assets was found and the addition was made merely on slip found to be recorded in the iphone and the working of sales is made based on the weighted average based on that some slips found from iphone. Even the addition is made not as other income but as cash sales and therefore, it is not covered as per provision of section 115BBE of the Act.

13. On the other hand ld. DR representing the revenue heavily relied upon the finding recorded in the order of the ld. PCIT. The ld. DR relied upon the fact that director of the company has already accepted that that the slips found were connected to the out of sales made by the assessee company and that money itself is unexplained money of the assessee and based on that fact the addition was made as unexplained cash sales and the same is not chargeable as normal rate but is subjected to tax as per provision of section 115BBE of the Act.

14. We have considered the submissions advanced by learned counsel for the parties, orders of lower authority, judicial precedent cited and have also perused material placed on record in the paper book. Ground no. 1 to 3 raised by the assessee challenges the order of the PCIT proposing to invoke the provision of section 115BBE of the Act on the addition made by the assessing officer pursuant to the search conducted in the group concerns. Brief facts related to the dispute are that Assessee Company derives income from retail and wholesale sale of woods, timber, laminates and adhesives and allied activities. A search & seizure operation under section 132(1) of the Income Tax Act, 1961 was carried out on 01.08.2019 at the various premises of “Sadhwani & Rohada Group, Kota” to which the assessee belongs. A number of persons / premises were covered u/s 132 of the Act. Cash, Jewellery and other documents were found and seized from some person’s residence and business premises. The case of the assessee was also covered under search proceedings. Assessee filed return of income u/s 139 on 12.09.2018. Pursuant to search notice u/s. 153A of the Act was issued on 22.01.2021 and in response assessee filed return on 06.02.2021 declaring income of Rs. 68,18,660/-. There is no difference between the ITR filed u/s. 153A and 139 of the Act. Based on the documents found, assessment proceeding were initiated and required notices were issued to the assessee and were complied. The assessment order was passed on 29.09.2021 as per provision of section 143(3) r.w.s. 153A of the Act. While proceeding for assessment as we note from the order of the assessment that ld. AO noted that during search operation mobile [iphone] phone was taken in custody and some business related charts were identified in the mobile phone of Shri Jitendra Sadhwani. Print out of total 28 pages of WhatsApp chats of plywood products to various parties by M/s. Sadhwani Wood Products Private Limited. Some payments were in cheque, some partly in cash and parlty in cheque and some payments were received in cash only. These transactions were asked to be verified to Shri Jitendra Sadhwani with supporting documents. In reply there to he confirmed that all screenshots of charts impounded as exhibit-2 was belongs to his personal mobile data and all transaction reflecting in charts were related to his company M/s. Sadhwani Wood Products Private Limited. Further some of these transactions were done in both cash and banking channel. It was noticed by the ld. AO that the part transaction / sales was entered into the books of accounts & remaining part where cash components involved is not entered in the books of accounts. Hence it was observed that assessee is generating unaccounted cash by selling its products in cash. In his statement recorded he denied to have unaccounted cash sales and replied that he will confirm all transactions to company’s books of accounts. Ld. AO on verification of chats and nature of transactions reflected in the books of accounts noted that where cash and cheque details were given in the transaction but only cheque entries were recorded as receipts in the books of account by the assessee. No cash amount as reflected were recorded in the receipts part in the company’s books. As also no bill was issued by the company to the customer for cash amount and bills were issued only for cheque amount in the transaction. Based on that set of facts ratio of unaccounted cash sales with total amount received in the particular transaction was determined by the search team during the search action and a ratio of suppression of sales was established by using weighted average method and thereby unaccounted sale of current year and last 6 financial year was calculated for an amount of Rs. 141,80,82,030/- for Financial year 2012-13 to 31.07.2019 on the basis of the evidence gathered as per table at page 6 of the statement of Shri Jitendra Sadhwani. In the assessment proceeding ld. AO gave an opportunity to the assessee get verified cash sales in these transactions and asked to produce the relevant bills / vouchers. But the assessee failed to produce any documentary evidence in this regard. Thus, after considering the various explanation and based on the statement read with the evidences found ld. AO noted that assessee company is regularly engaged in out of books cash sale of plywood items. Most of the plywood items purchased in out of books in cash from local companies and no accounting of these transactions were made by the company. Ld. AO noted that the modus of out of books of cash purchase and sale by the assessee company were happening which was very much clear by the seized material placed on record.

15. During post search investigation, various other transactions of similar type are also found not recorded in the books of accounts. On the ground of the analysis of incriminating document / material seized / impounded at the time of search / survey proceeding conducted on 01.08.2019 the assessee has also accepted about cash component involved in these transactions as unaccounted in this regard. In the light of the evidences, gathered at the time of search / survey proceedings as well as during the post search investigation it has established that the assessee concern is engaged in making unaccounted cash sales which come to Rs. 141,80,82,030/- the year wise bifurcation determined by the ld. AO and the related unaccounted cash sales considered for the year under consideration was at Rs. 22,40,32,276/-, which was added in the total income of the assessee as unaccounted cash sales. Ld. AO also made an disallowance of Rs. 9,41,075/- u/s. 40A(3) of the Act. Both these additions were disputed by the assessee in the first appeal and the same is pending as per the statement made at Bar.

16. In the meanwhile, ld. PCIT while examining the assessment recorded in the proceeding u/s. 263 of the Act noted that as per concluding remark in para 5 of assessment order on page 163 to 184 the assessee accepted out of books sales to the tune of Rs. 22,40,32,276/- which was added based on the seized material. As the said sales was not disclosed in the regular return of income, the then AO has made an addition of Rs. 22,40,32,276/-on account of out of book sales. This out of books sales generated cash, the source of which had not been explained properly by the assessee. Hench such unexplained money was to be taxed u/s. 69A r.w.s. 115BBE of the Act. Whereas in the computation of tax sheet, tax was charged at Normal Rates. Therefore, a show cause notice was issued on 12.03.2024 and the hearing was provided for 20.03.2024.

17. In response thereto the assessee did not attend the hearing and not filed any response. However, the ld. PCIT noted that similar notice was issued for A. Y. 2019-20 also and the issue in that year was same the reply made by the assessee in that proceedings were considered while deciding the proceeding for the present assessment year. In that reply the assessee contended that the income is assessed as business income and not as other income. The difference in stock found was very nominal as compared to the huge addition made by the ld. AO and even the ld. AO consciously added the same as business income and not under the provision of section 69A of the Act. When the decision has been made by the ld. AO consciously and there is no dispute about the computation of the same merely the head of income cannot be changed considering it as erroneous and the change of opinion is not permitted. The assessee for that cited decision of our High Court in the case of PCIT Vs. Manna Trust (Supra). The submissions made by the assessee did not find any favour to the assessee and ld. PCIT taken a view that the assessing officer erred and did not take a conscious decision while taxing the unexplained money generated though cash sales made out of books as business income. Clearly this error has caused prejudice to revenue and accordingly she hold that the order of the AO is therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Act. The ld. PCIT also hold a view that she is passing an order for initiation to tax unexplained money of Rs. 22,10,32,276/- generated by assessee at special tax rate u/s. 115BBE of the Act.

18. Assessee challenges that finding of ld. PCIT before us contending that the only issue in the present appeal is the chargeability of rate of tax on the addition so made. Ld. PCIT did not find error or prejudiced with the quantum and the manner the assessment proceeding is carried out by the ld. AO. Ld. PCIT merely initiated proceeding just to amend the rate of tax to be charged on the disputed addition. As we note that the addition has been made by making the extrapolation and no clear finding on facts of undisclosed amount. As there is no clear material which is to be charged at special rate merely the inference about the sales based on the those seized record taking weighted average will not suggest that the amount as unexplained money. To decide on that view of the ld. PCIT let us examine the provision of section 69A of the Act which reads as under;

Unexplained money, etc.

69A. 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 Assessing Officer, 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.

19. Here we note it is not the case of the revenue that the assessee is found in possession 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 Assessing Officer, satisfactory. As is not disputed about the source of money wherein the revenue contended that the same whatsapp chat suggest part of the money reflected in the books and part not. Thus, the source of addition made is explained by the assessee and ld. AO has taken a plausible view on the matter. Not only that the amount of addition is disputed and as supported by the seized material it is merely mathematical calculation which is disputed by the assessee and therefore, the case of the assessee is squarely covered by the decision of our High Court in the case of Manna Trust (Supra). Not only that as regard the chargeability of disclosed income the Gujarat High Court in the case of PCIT Vs. Dharti Estate has held that when the assessing officer has made sufficient inquiry and as such during the course of assessment included. The Hon’ble Gujarat High Court also held that there was nothing stated in either pre-amended or post amended provisions of section 115BBE that when the assessee surrendered undisclosed income during the search action for the relevant years, higher tax rate is required to be charged.

20. Thus, when the order passed by the ld. AO is perfectly dealing with the issue and there is no error or prejudice as such ld. PCIT cannot invoke the provision of section 263 just to say different rate of levy of the tax when ld. AO was already aware about the issue on hand of cash sales.

21. Now coming to the provisions of explanation 2 of section 263 of the Act, ld. PCIT should have at list satisfied herself before invoking the provisions, that in fact the assessee is found to be the owner of any money, bullion, jewellery or other valuable article the answer is no even the quantification of cash sales is on extrapolation of taking weighted average of sales based on the instances found at the time of search and the assessee challenged the finding of the ld. AO. Thus, the addition made by the ld. AO being under disputed and while making the addition the ld. AO has not discussed or referred the section 69A of the Act the ld. PCIT cannot hold here view when that of the view of the ld. AO when the ld. AO has consciously added the said sum as business income. Thus, Explanation 2 cannot be used for such a manner that if the view taken which is otherwise a plausible view, law does not permit to invoke the provisions of section 263 of the Act without proving that order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue, as we note that there is no dispute about the quantum of addition made by PCIT. We also note that ld. AO made the addition after giving a specific showcause notice to the assessee wherein the ld. AO based on the seized material extrapolated the income on weighted average and considered the cash sales. Thus, it was not the case of revenue for undisclosed income apparen and evident. The assessee challenged that addition before the ld. CIT(A) and therefore, the matter is under dispute. On that disputed addition ld. CIT(A) intend to levy the rate of addition for section 68, 69, 69A,B, C&D of the Act. When the addition is under dispute and while making that addition ld. AO did not invoke those provisions consequent thereupon, ld. PCIT cannot impose upon her view on the ld. AO when the ld. AO with his open eyes considered the addition as unrecorded cash sales as business income of the assessee at page 140 and page 163. On that pages it is apparent that he intend to tax cash sales which was in part cheque and part in cash so one transaction cannot be considered for separate two treatment under the Act. We also note that it was not the case of the revenue on the variation in stock was found, variation in the investment in the assets, no loan taken or given out of books were found and no proof of unaccounted purchase were found. Thus, merely on sum slip found in the whatsapp, addition were made and that cannot be considered as unexplained credit in the hands of the assessee company. It is not a cash of revenue that ld. AO was not aware about the provision of section 115BBE, AO was conscious about the provision of section 115BBE of the Act, because while dealing with the addition of unaccounted cash found for an amount of Rs. 4,17,627/- was added and while doing so he invoked the provision of section 115BBE of the Act while dealing with the subsequent year case. Here also while invoking the provision of section 263 there is no variation was proposed in the computation of income of the assessee, but only for rate of tax and that with the facts already on record being disputed and not crystallized the order is neither erroneous nor prejudicial to the interest of the revenue. Not only that as argued by the ld. AR of the assessee their case is also covered with the decision of M. P. High Court in the case of PCIT Vs. Prakhar Developers P. Ltd., [ 4 TMI 498 ] wherein the Hon’ble High Court has held that once order has been passed taking prior approval then again invoking the provision of section 263 was not correct. Similar view was taken by Patna High Court in Gyan Infrabuild P. Ltd. Vs. PCIT [ 5 TMI 732 ]. Ld. PCIT on the same very issue out of other year selected only for two year and other order on the same very issue could not found the order erroneous and has not proposed any action when the nature of addition being same. AO has already invoked the provision of section 11BBE for A. Y. 2020-21 while dealing with the addition and while making cash sales addition he has taken a conscious decision not to invoke that provision. Even the view and the addition being debatable and the matter was under dispute before ld. CIT(A) ld. PCIT should not considered merely on the charge of rate of tax order as prejudicial and that too without proving that it was in fact erroneous or prejudicial to the interest of the revenue. In the search no corresponding assets was found and the addition was made merely on slip found to be recorded in the iphone and the working of sales made based on the weighted average. Ld. AO consciously not invoked the deemed provision and not charged the income under the other income head and has added cash sales. Thus, considering the discussion so recorded herein above we do not agree with the view advanced and discussed in the order of the ld. PCIT as the order has been passed without proving that order of the ld. AO is erroneous and prejudicial to the interest of revenue and therefore we see not reasons to sustain the same. Based on these observations ground no. 1 to 3 raised by the assessee are allowed.

22. Ground no. 4 raised by the assessee being general in nature and does not require our adjudication.

Ergo, we quash the order passed by the PCIT, Central Jaipur.

In terms of these observations, the appeal of the assessee in ITA no. 922/JP/2024 is allowed.

23. The fact of the case in ITA No. 398/JP/2024 is similar to the case in ITA No. 922/JP/2024 and we have heard both the parties and persuaded the materials available on record. The bench has noticed that the issue raised by the assessee in this appeal No. 398/JP/2024 is equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties in ITA no. 398/JP/2024. Hence, the bench feels that the decision taken by us in ITA No. 922/JP/2024 for the Assessment Year 2018-19 shall apply mutatis mutandis in the case of Sadhwani Wood Product Private Ltd. in ITA No. 398/JP/2024 for the Assessment Year 2019-2020.

In terms of these observations, the appeal of the assessee in ITA no. 398/JP/2024 is allowed.

In the result, both the appeal of the assessee are allowed.

Order pronounced in the open court on 16/10/2024.