133A, 263-Revision of orders prejudicial to revenue, 69A-Unexplained money, Revision of orders prejudicial to revenue-Section 263, Unexplained Money-Sec 69A
सर्वे के दौरान अगर आप ने कोई आय सरेंडर करते समय यह लिखा कि यह आय इनकम फ्रॉम बिजनेस एंड प्रोफेशन से है तो यह आय इनकम फ्रॉम बिजनेस एंड प्रोफेशन स्की मानी जाएगी एवं प्रॉफिट एंड लॉस अकाउंट में इनकम सरेंडर के रूप में दर्शाई जाएगी और पूरा प्रॉफिट एंड लॉस अकाउंट निकाला जाएगा लेकिन यहीं आय आपने इनकम फ्रॉम अदर सोर्सेज बताइ तो यह आय इनकम फ्रॉम अदर सोर्सेस मानी जाएगी। कृपया ध्यान रखें इसका बहुत फर्क पड़ता है अगर आपने स्टॉक का 1 करोड रुपए सरेंडर किया है और उसके बाद में प्रॉफिट एंड लॉस अकाउंट निकालने के बाद 45 लाख का घाटा आता है तो आप ही आय करंट इनकम एक करोड़ का प्रॉफिट एंड लॉस अकाउंट में क्रेडिट करने के कारण 55 लाख रुपए मानी जाएगी। लेकिन यहीं आय आपने इनकम फ्रॉम अदर सोर्सेज मानी तो पूरी की पूरी एक करोड रुपए की आय इनकम फ्रॉम अदर सोर्सेज में मानी जाएगी
From the above surrender letter it is apparent that assessee had made a surrender as additional income over and above the normal profits of the concern and since the income has been declared as business income, the same has to be assessed under the head business income and not as deemed income under the provisions of section 69A. Para 7
The Hon’ble Bombay High Court in the case of CIT vs. Gabriel India Ltd.(supra) has held that where the Assessing Officer had made enquiries in regard to nature of expenditure incurred by assessee and assessee had given detailed explanation in that regard and Assessing Officer had accepted the explanation of the assessee, the decision of Assessing Officer could not be held to be erroneous simply because in his order he did not make an elaborate discussion in this regard. Para 7
the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Deepak Mittal 324 ITR 411, has held that change of opinion by reappraising the evidence is not within the parameters of revisional jurisdiction of the Commissioner under section 263 of the Income tax Act, 1961. Para 8
DEV RAJ HI-TECH MECHINES LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX AMRITSAR TRIBUNAL
A.D. JAIN, JM & T.S. KAPOOR, AM.
ITA No. 326(Asr)/2014 Oct 7, 2015
(2015) 45 CCH 0106 AsrTrib
(2015) 174 TTJ 0009 (Asr) ((UO))
Legislation Referred to Section 69A, 263
Case pertains to Asst. Year 2010-11
Decision in favour of: Assessee
From the above surrender letter it is apparent that assessee had made a surrender as additional income over and above the normal profits of the concern and since the income has been declared as business income, the same has to be assessed under the head business income and not as deemed income under the provisions of section 69A.
In the present case the AO had made enquiries and assessee had explained the taxable income viz-a-viz surrendered income and AO found the explanation as satisfactory. Therefore, the assessee had submitted all details and the AO had examined all factors leading to decrease in normal profits as compared to earlier year. As regards surrendered income, the assessee has clearly credited the same to the Profit & Loss account over and above the normal profits of the concern. Therefore, in our opinion the AO has taken a plausible view as the assessee had surrendered the income as business income which was separately credited to Profit and Loss account.
The case law of Kim Pharma Ltd. vs. CIT as relied upon by the learned DR is not applicable to the facts and circumstances of the present case as in that case the Court had reproduced the findings of Tribunal that assessee during the course of survey had surrendered the income as income from other sources. Whereas in the present case the assessee had surrendered income over and above the normal profits of the concern and not as income from other sources. (Para 10)
From the above findings of Punjab & Haryana High Court, it was found that surrender in this case was made in two years i.e., 2005-06 and 2006-07. The Tribunal had recorded that in Asst. Year 2005-06, the income surrendered related to business carried on by the assessee and therefore, was included as income from business whereas in Asst. Year 2006-07, the assessee could not prove that income was related to business and assessee himself had surrendered the income as income from the other sources and therefore, for Asst. Year 2006-07 the Court had held that additional income was rightly treated as deemed income u/s 69A. In the same case laws for Asst. Year 2005-06, the Tribunal had noted that since the surrendered additional income related to sundry creditors, repairs to building and advances and stock which related to business carried on by assessee and therefore, was included in income from business. In the present case also, the income surrendered was due to renovation of building, stock and advance and imprest account with Directors and due to cash in hand which clearly related to the business of assessee and moreover, the assessee had declared such surrender over and above, the normal profits of the concern, therefore, the case laws relied upon by the learned DR is also in favour of the assessee. (Para 11)
Revision—Revision by commissioner of orders prejudicial to revenue—During the assessment proceedings, the assessee was asked to justify the low returned income as compared to the surrendered income—CIT was not satisfied with the assessee reply and therefore, passed order u/s 263 and directed the AO to pass necessary assessment order after giving effect to the order u/s 263—Held, only none mentioning of certain enquiries and explanations thereof in the assessment order in itself does not give a right to Commissioner to pass order u/s 263—In the present case, the AO raised an enquiry and assessee filed detailed reply and thereafter, AO accepted the explanation and did not make any addition on that account—Order of AO cannot be said to be erroneous as he has taken a plausible view—If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders u/s 263 merely because he has a different opinion in the matter—Change of opinion by reappraising the evidence was not within the parameters of revisional jurisdiction of the Commissioner u/s 263—Order of CIT was set aside—Assesees appeal allowed
Held
The AO had taken a plausible view while accepting the contention of the assessee. The AO after considering this explanation had passed the assessment order, however, he did not mention the fact of considering this explanation in the assessment order. The only none mentioning of certain enquiries and explanations thereof. In the assessment order in itself does not give a right to Commissioner to pass order u/s 263. The Bombay High Court in the case of CIT vs. Gabriel India Ltd. had held that where the AO had made enquiries in regard to nature of expenditure incurred by assessee and assessee had given detailed explanation in that regard and AO had accepted the explanation of the assessee, the decision of AO could not be held to be erroneous simply because in his order he did not make an elaborate discussion in this regard. In the present case, the Assessing Officer raised an enquiry and assessee filed detailed reply and thereafter, Assessing Officer accepted the explanation and did not make any addition on that account. The order of Assessing Officer cannot be said to be erroneous as he has taken a plausible view.
The Delhi High Court in the case of CIT vs. Anil Kumar Sharma had held that there was a distinction between “lack of inquiry” and ‘inadequate inquiry.” If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 merely because he has a different opinion in the matter. Where complete details were filed before the AO and that he applied his mind to the relevant material and facts, although such application of mind was not discernible from the assessment order. The Tribunal held that the Commissioner in proceedings under section 263 also had all these details and material available before him, but had not been able to point out defects conclusively in the material, for arriving at a conclusion that particular income had escaped assessment on account of non-application of mind by the AO. The order of revision was not valid. (Para 7)
Similarly, the Punjab & Haryana High Court in the case of CIT vs. Deepak Mittal 324 ITR 411, has held that change of opinion by reappraising the evidence was not within the parameters of revisional jurisdiction of the Commissioner under section 263. (Para 8)
It was opinioned that AO had taken a plausible view and the power exercised by CIT was not as per settled law. In view of the above, de allow the appeal of the assessee and set aside the order of Commissioner of Income Tax and upheld the order of Assessing Officer. In the result, the appeal filed by the assessee is allowed. (Para 12,13)
Cases Referred to
Mohd. Haji Hasan [120 Taxman 11] and in 247 ITR 290 (2002)
CIT vs. S.K. Srigiri and Bros., 298 ITR 13 (Kar)
CIT vs. Gabriel India Ltd. 203 ITR 108 (Bom)
CIT vs. Anil Kumar Sharma 335 ITR 83 (P&H)
CIT vs. Deepak Mittal 324 ITR 411 (P&H)
Khushi Ram & Sons Foods Pvt. Ltd. vs. CIT 40 ITR (Trib) 92 (Chd.)
Counsel appeared:
Ashwani Kumar (C.A) for the Appellant.: Tarsem Lal (DR) for the Respondent
T. S. KAPOOR, AM.
1. This is assessee’s appeal for Asst. Year 2010-11, against the order dated 20.03.2014, passed by the learned CIT, Bathinda under section 263 of the Act. The assessee has taken two grounds of appeal; however, the crux of grounds of appeal is the grievance of the assessee against the order passed by CIT, Bathinda under section 263 of the Act. The case was earlier heard on 2.2.2015, but it was re-fixed for certain clarifications and thereafter after few adjournments had come up for hearing before the present Bench.
2. The brief facts of the case are that the assessee is a Manufacturer of Rice Sheller Machineries and its parts. A survey was carried out on the premises of the assessee on 14.09.2009 u/s 133A of the I.T. Act, 1961. During the course of survey, the assessee surrendered an additional income of Rs.1,25,00,700/- over and above the normal income for the year under consideration. The assessee filed its return of income on 26.07.2010 and declared income of Rs.63,02,570/-. The case of the assessee was selected for scrutiny. During the assessment proceedings, the assessee was asked to justify the low returned income as compared to the surrendered income. The assessee was asked to file with the documentary evidences in the farm of breakup of various expenses before and after the survey, as well as a comparison chart showing the breakup and comparison with reasons. The Assessing Officer after examination of the reply of assessee completed the assessment and made disallowances of Rs.2,02,690/- and Rs.7,68,019/- on account of expenses and Gross Profit rate respectfully. The learned CIT after examination of assessment records of the assessee observed that during the survey u/s 133 A of the Act, the Assessee had surrendered an income of Rs.1,25,00,700/- and such surrendered income was to be taxed under the provisions of Section 69A of the Act and whereas, the assessee had credited the surrendered income to the Profit and Loss account and had debited various expenses against the surrendered income. He observed that Assessing Officer had completely ignored this factor while completing the assessment and therefore, a notice under section 263 was issued to the assessee. In reply the assessee filed detailed reply to the show cause notice, however, the learned CIT was not satisfied with the reply, therefore, he passed order under section 263 and directed the Assessing Officer to pass necessary assessment order after giving effect to the order under section 263. The relevant findings of learned CIT are reproduced below.
“4. I have carefully examined the facts of the case, considered various submission made by the learned Counsel of the assessee and perused the relevant records of the case. Various issues involved in this case are discussed as under:-
“4.1 The main issue involved in this case is whether the income surrendered by the assessee during the course of survey is business income or not. The assessee has contended that the entire surrender of income made by them during survey was nothing but the business income only. Perusal of the surrendered letter submitted by the assessee during survey reveals that the assessee had made disclosures of additional income of Rs.1.25 cores under the following heads-
i) Excess cash found Rs. 9,50,700/-
ii) Stock found excess Rs.15,90,000/-
iii) Directors ‘imprest account Rs.85,60,000/-
iv) Labour advance Rs. 5,60,000/-
v) Office renovation Rs. 8,40,000/-
4.2 During the course of hearing, I had specifically requested the learned Counsel of assessee to submit as to the nature and sources of Rs.85.60 lacs items shown under the head ‘Directors’ imprest account”. He was also requested to submit as to how this amount can be treated as business income. Similarly he was asked to explain the source and business connection of other items of surrender of income mentioned above. However, the assessee has not been able to give any satisfactory reply and explanations in this regard. The assessee had merely repeated that these items are business income without supporting the claim with any cogent reasons or verifiable evidence.
4.3 I had also asked the assessee to explain the nature of these entires from their books of accounts. The assessee has submitted relevant photocopies of ledger account. However, the said entry in the ledger account are nothing but the repetition of the entries mentioned in para 4.3 above and the corresponding transfer of these items in the credit side of the Profit and Loss Account of the current year. The learned Counsel of the assessee could not explain from the books of accounts as to how the said entries are intricately connected with his business transactions.
4.4 The assessee has contended that the decision of Hon’ble Pubjab and Haryana High Court in the case of M/s Kim Pharma Pvt. Ltd. vs. CIT in ITA No.106 of 2011 (O & M) dated 27.04.2011 is not applicable in their case because the facts of the assessee are entirely different. The learned Counsel has highlighted these difference in his submission dated 05.03.2014, as under.
“The point for determination in this appeal is, whether Rs.5,00,000/- which was surrendered by the assessee during the course of survey under section 133A of the Act would form part of business income or was assessable under section 69A of the Act. The Assessing Officer, the CIT(A) and the Tribunal after considering the factual aspect noticed that the amount surrendered during the survey was not reflected in the books of account and no source from where it was derived was declared by the assessee and, therefore, it was deemed income of the assessee under section 69A of the Act.
The findings recorded by the Tribunal in this regard are as under”.
The basic issue considered by the Hon’ble High Court above is that “no source from where the surrendered income was derived by the assessee” had been explained by the assessee in the said case of Kim Pharma mentioned above. In the present case of the assessee, the assessee has made the said entries in the books of accounts admittedly as consequence of survey but the source for the generation of income surrendered by assessee has never been explained by the assessee at any stage. In fact, on my repeated query on this issue, the learned Counsel merely repeated that the above items are out of business income only without submitting any corroborative evidences or explanations.
4.5 The application of section 69A of the I.T Act, 1961 is only consequential in nature because the assessee has not been able to prove that any of the above mentioned items of surrender of income is business in nature. The assessee has not been able to explain the source of earning or deriving the above incomes. Therefore, such incomes, for which the assessee offers no explanations about the nature and source of acquisitions, or the explanations offered by the assessee is not satisfactory, are hit by the deeming provision of section 69A of the I.T. Act, 1961. The fact of the case of the assessee squarely fall under the said provisions.
4.6 Since the income surrendered by the assessee falls under the section 69 of the I.T. Act, 1961, the same has to be taxed separately without the adjustment of any losses or deductions available to the assessee under the normal computation of income under the head “income from business and profession”. The Law on this issue was laid down by the Hon’ble Gujrat High Court in the case of Fakir Mohd. Haji Hasan [120 Taxman 11] and in 247 ITR 290 (2002) that section 69,69A, 69B and 69C are deeming provisions and this income can not be set off under any other head of income. In view of the legal position on this issue clearly laid down by the jurisdictional High Court, various other case laws relied upon by the assessee do not help the case of the assessee in any manner since this issue is directly and squarely covered by the jurisdictional High Court in the case of Kim Pharma (supra). To give an example, the assessee has relied heavily on the judgment of Hon’ble Karnatka High Court in the case of CIT vs. S.K. Srigiri and Bros., 298 ITR 13 (Kar). In this case, there was a clear finding of facts by lower appellate authorities that additional income received by the assessee was from business and from no other sources and therefore the salary paid to the partners was required to be deducted while considering profit and loss. However, in the case of the present assessee, neither the assessee nor the Assessing Officer have brought any cogent evidence or a reasonable explanation to prove that any of the items of additional income surrendered during survey was derived from the business activities of the assessee. In any event, the assessee could not prove the source of the stated items of income surrendered during survey. Therefore, the ratio of the said case is not applicable on the facts of this assessee. As result, all other contentions of the assessee w.r.t. reliance placed on various others case laws stand discussed and disposed off against the assessee.
4.7 From the above facts and discussion, it is apparent that the Assessing Officer had not correctly examined the facts of the case and he had accepted the books of accounts of the assessee without due examination of the relevant entries and also he had totally ignored the ratio of the jurisdictional High Court on this issue. Therefore, I am of the considered view that the assessment order under consideration passed by the Assessing Officer in this case is erroneous and prejudicial to the interest of the Revenue. In view of the above, I hereby modify the assessment order u/s 143(3) of the I.T. Act, 1961 dated 05.03.2013 for assessment year 2010-11 under consideration, so far as taxability of surrendered income of Rs.1,25,00,700/- is concerned. In other words, I modify the assessment for enhancing the taxable income of the assessee and direct the Assessing Officer to recomputed the taxable income of the assessee by considering the income of Rs.1,25,00,700/- separately u/s 69A of the I.T. Act, 1961 without allowing any adjustment of business losses/depreciation etc computed under the head ‘income from business and profession”. The A.O is directed to pass the necessary assessment order giving effect to this order u/s 263 after giving a fresh opportunity to the assessee for the purpose of re- computation and enhancement of taxable income.”
3. Aggrieved the assessee is in appeal before us.
4. At the out set the learned AR invited our attention to copy of balance sheet and Profit and Loss account placed at paper book page 12 to 32 and our specific attention was invited to the Profit and Loss account placed at paper books page 29 and it was submitted that the surrendered income was duly credited to the Profit and Loss account as the surrendered income was made over and above the normal profits of the concern of the assessee. He further took us to page 35 where a copy of letter written by Assessing Officer on 15.07.2011 was placed. Our specific attention was invited to Para-11 of the said letter where Assessing Officer had specifically required the assessee to explain net income disclosed in the return of income viz-a viz surrendered income. Therefore, the learned AR submitted that during the course of assessment proceedings, the Assessing Officer has specifically raised this issue and assessee had filed a detailed reply vide its letter dated 18.1.2013 placed at paper book page 37 to 40 and he further, took us to paper book page 44 where a further explanation submitted by the assessee vide letter dated 01.03.2013 was placed. The learned AR submitted that the assessee during the assessment proceedings had explained each and every item of expenditure and specific attention was invited to reply in response to query raised by Assessing Officer vide para-11 of his letter dated 15.07.2011. It was submitted that again Assessing Officer vide latter dated 22.2.2013 raised this issue and assessee again reiterated its reply which was placed at paper book page-44. In view of the above examination by Assessing Officer and explanation by assessee the Assessing Officer was satisfied with the reply and therefore, had passed reasoned order and therefore, it cannot be said that Assessing Officer had not applied his mind and therefore, CIT was not justified in passing the order under section 263. Reliance in this respect was placed on the case laws of CIT vs. Gabriel India Ltd. 203 ITR 108 (Bom). The learned AR submitted that in this case, the assessee had claimed certain expenses as revenue expenditure. The Assessing Officer had sought details of the same and the assessee provided details and explained the nature of the expenditure. The Assessing Officer considered the explanation and allowed the same but did not include the discussion in this respect in the assessment order. The Commissioner had passed order under section 263 on the ground that such expenditure was capital expenditure and as such the order of ITO was erroneous and prejudicial to the interest of revenue. The Hon’ble Tribunal ruled in favour of the assessee and on appeal by revenue, the Hon’ble High Court observed that it was clear that I.T.O had raised a query about nature of the expenditure and the assessee had offered an explanation to the said query and after explanation of the assessee the Assessing Officer had allowed the expenditure as revenue expenditure. The Hon’ble Court further held that order of Assessing Officer cannot be branded as erroneous only because of the reason that according to Commissioner the order should have been written more elaborately. The learned AR further placed his reliance on the following judicial pronouncements.
(i) CIT vs. Anil Kumar Sharma 335 ITR 83 (P&H),
(ii) CIT vs. Deepak Mittal 324 ITR 411 (P&H)
(iii) Khushi Ram & Sons Foods Pvt. Ltd. vs. CIT 40 ITR (Trib) 92 (Chd.)
Explaining the facts of the case law of Anil Kumar Shamra, the learned AR submitted that the Hon’ble Delhi High Court had held that there was distinction between lack of enquiry and inadequate enquiry and if there was any enquiry even inadequate that would not by itself give action to the Commissioner to pass order under section 263 of the Income tax Act, merely because he had a different opinion in the matter. The learned AR submitted that in the present case the Assessing Officer had raised the query and assessee had duly explained the same and after considering the explanation of assessee the Assessing Officer had passed the assessment order. Therefore, it was submitted that in this case the Assessing Officer had made full enquiries and as per the judgment of Hon’ble Court even inadequate enquiries were sufficient to debar the Commissioner to pass order under section 263. It was further submitted that in the case law of CIT vs. Deepak Mittal (supra) the Hon’ble Court held that change of opinion by reappraising the evidence by Commissioner is not within parameters of revisional jurisdiction to Commissioner under section 263 of the Act. The learned AR further submitted that the case law decided by Chandigarh Tribunal is squarely applicable to the facts and circumstances of the case as in this case similar surrender was made by assessee and the same was credited to the Profit and Loss account and the Hon’ble Chandigarh Tribunal had quashed the order of Commissioner passed under section 263 of the Act. Without prejudice to the above the learned AR further argued that section 69A as imposed by learned CIT was not applicable in this case and in this respect provisions of section 69A were read. The learned AR submitted that these provisions were applicable in a case where the source of money or an asset found during the survey was not explained. He submitted that in the present case, the source of surrendered was duly explained in the letter of surrender itself wherein the assessee mentioned that the surrender was over and above the normal profits of the concern and in this respect the learned AR took us to paper book page 38 and invited our attention to the contents of surrender letter wherein the assessee had stated that the surrendered income was over and above normal profits of the concern. It was argued that in accordance with surrender letter the assessee had rightly credited the amount to the Profits and Loss account and therefore, on merits also the Assessing Officer had taken a correct view.
5. The learned DR, on the other hand submitted that that Assessing Officer had escaped making of addition on account of surrendered income and therefore, the Assessing Officer had taken erroneous view which was prejudicial to the interest of revenue and therefore, the learned Commissioner has rightly passed the order under section 263. The learned DR submitted that it was mandatory as per CBDT guidelines that in the case of an assessee who had surrendered income during survey the taxable income cannot fall below the surrendered income and in this respect, learned DR read para 2 of assessment order and argued that Assessing Officer himself had held that assessee had violated the provisions by understating its return of income. It was submitted that after recording this fact the Assessing Officer escaped making additions on account of surrendered income and therefore, learned CIT was fully empowered to pass order under section 263. As regards the case laws relied upon by the learned AR, he submitted that none of the cases relied upon by the learned AR are applicable to the facts and circumstances of the case as in the case of Gabriel India Ltd. (supra), the Hon’ble Court had held that learned CIT is not empowered to make fishing enquires whereas in the present case the Commissioner had just observed that Assessing Officer had skipped the additions on account of surrendered income and has not made any fishing enquiries. Similarly, he argued that the facts of the case laws of CIT vs. Deepak Mittal 324 ITR 411 are not para material. As regards the Tribunal Order in the case of Khushi Ram & Sons (Pvt.). Ltd. vs. CIT (supra). The learned DR submitted that such order has no precedential value in view of judgment of Punjab & Haryana High Court in the case of Kim Pharma (Pvt.) Ltd.(supra), wherein the Hon’ble Court has decided the issue of allowance of expenses against the surrendered income in favour of revenue. In this respect, he invited our attention to question-B framed by the Hon’ble Court. The learned DR submitted that as per answer to this question the assessee was not eligible for set off of losses and expenses against the surrendered income and therefore, he argued that the case law of Kim Pharma (supra) was squarely applicable in the present case, which the Assessing Officer had ignored. In view of the above arguments the learned DR submitted that order of Commissioner needs to be upheld.
6. The learned AR in his rejoinder submitted that the observations made by Assessing Officer vide para 2 of his order are for guidelines for selection of scrutiny cases and in this respect he read the entire para 2 of assessment order and argued that since returned income was lower than the surrendered income, therefore, as per CBDT guidelines the assessee’s case was selected for scrutiny. He further reiterated that surrender was made as business income and in the case of Kim Pharma Pvt. Ltd. (supra), the surrender was not made as business income and assessee had not credited the surrendered income in the Profit and Loss account whereas in the present case, the income was credited to the Profit and Loss account and therefore, the Assessing Officer had passed a reasoned order and therefore, he prayed that order under section 263 be quashed and that of AO be restored.
7. We have heard the rival parties and have gone through the material placed on record. The only question to be answered by us in the present appeal is as to whether the surrender made by assessee can be considered as business income or can be taxed as deemed income under section 69A of the Act. In this respect, let us examine the surrender letter which is placed at paper book page 46. From the above surrender letter it is apparent that assessee had made a surrender as additional income over and above the normal profits of the concern and since the income has been declared as business income, the same has to be assessed under the head business income and not as deemed income under the provisions of section 69A. The Assessing Officer had taken a plausible view while accepting the contention of the assessee. As regards the enquiries during the assessment proceedings, we find that Assessing Officer vide letter dated 15.07.2011 placed at paper book page 35 raised this issue vide para-11. The assessee filed a detailed reply under the heading justification of taxable income wherein it explained as to why the taxable income had decreased as compared to surrendered income. As per paper book page-39, the main reason for decrease in taxable profits was due to increase in depreciation and increase in bank interest. The Assessing Officer after considering this explanation had passed the assessment order, however, he did not mention the fact of considering this explanation in the assessment order. The only none mentioning of certain enquiries and explanations thereof. in the assessment order in itself does not give a right to Commissioner to pass order under section 263. The Hon’ble Bombay High Court in the case of CIT vs. Gabriel India Ltd.(supra) has held that where the Assessing Officer had made enquiries in regard to nature of expenditure incurred by assessee and assessee had given detailed explanation in that regard and Assessing Officer had accepted the explanation of the assessee, the decision of Assessing Officer could not be held to be erroneous simply because in his order he did not make an elaborate discussion in this regard. In the present case, the Assessing Officer raised an enquiry and assessee filed detailed reply and thereafter, Assessing Officer accepted the explanation and did not make any addition on that account. The order of Assessing Officer cannot be said to be erroneous as he has taken a plausible view, keeping in view the facts and circumstances of the case. The Hon’ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma 335 ITR 83 has held as under:
“There is a distinction between “lack of inquiry” and ‘inadequate inquiry” If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act,1961, merely because he has a different opinion in the matter:
Held, dismissing the appeal, that the present case would not be one of “lack of inquiry” even if the inquiry was termed inadequate. The Tribunal found that complete details were filed before the Assessing Officer and that he applied his mind to the relevant material and facts, although such application of mind was not discernible from the assessment order. The Tribunal held that the Commissioner in proceedings under section 263 also had all these details and material available before him, but had not been able to point out defects conclusively in the material, for arriving at a conclusion that particular income had escaped assessment on account of non-application of mind by the Assessing Officer. The Tribunal was right and the order of revision was not valid.”
8. Similarly, the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Deepak Mittal 324 ITR 411, has held that change of opinion by reappraising the evidence is not within the parameters of revisional jurisdiction of the Commissioner under section 263 of the Income tax Act, 1961. The relevant findings of Hon’ble Punjab & Haryana High Court are reproduced as under:
“Held, dismissing the appeal, that the Tribunal had found that the Assessing Officer had given a categorical finding that the assessee was engaged in the process of manufacturing of products and accordingly he had granted concession under section 80-IB. The claim of the assessee had been found to be genuine. The Assessing Officer had also examined the various workers of the assessee and then recorded the finding. The Assessing Officer, was justified in granting the special deduction under section 80-IB. The order of revision disallowing the special deduction was not valid.”
9. The Hon,ble Chandigarh Tribunal in the case of Khushi Ram & Sons Pvt. Ltd. (supra) has decided similar issue wherein the assessee had surrendered an amount of Rs. 80 lacs during the course of survey on account of building renovation, office equipment and sundry receivables and claimed set off of unabsorbed losses for the assessment years 2007-08 and 2006-07 and Assessing Officer allowed the same. The learned Commissioner invoked jurisdiction under section 263 of the Act, on the ground that the Assessing Officer had failed to make enquiries in respect of claim of set off on unabsorbed losses, fall in gross profit rate and depreciation and wrongly allowed the claim against the surrendered income which was erroneous and prejudicial to the interest of the Revenue. The Hon’ble Tribunal has held as under:
“Held, allowing the appeal, that the Assessing Officer had made detailed enquiry at the assessment stage with regard to the fall in gross profit rate, set off the brought forward losses and depreciation. The Assessing Officer called for complete details with regard to manufacturing process, month-wise production, consumption, quantitative sales and justification of major expenses. The assessee furnished complete details and replies before the Assessing Officer and there was no infirmity in the replies of the assessee. The nature of business of the assessee revealed that it might not be possible to give the exact details of manufacturing large number of sweets of different quantities or of the closing stock. Hence, the assessee submitted complete details before the Assessing Officer at the assessment stage regarding all the issues which had been raised by the Commissioner in the order under section 263 of the Act. The Assessing Officer was satisfied with all the items and allowed the claim of the assessee after conducting proper enquiry into the matter. The Commissioner had not given any elaborate reasons as to how the assessment order was erroneous and prejudicial to the interests of the Revenue. Hence, the opinion of the Assessing Officer could not be substituted by the Commissioner and as such the assessment order could not be treated as erroneous and prejudicial to the interest of the Revenue and could not be set aside in the proceedings under section 263 of the Act.”
In the present case the Assessing Officer had made enquiries and assessee had explained the taxable income viz-a-viz surrendered income and Assessing Officer found the explanation as satisfactory. We find that assessee vide letter dated 18.01.2013 placed at paper book 37 to 40 vide Para “Justification of Taxable Income” has demonstrated the reasons for lower returned income as compared to surrendered income which was primarily for excess claim of depreciation to the extent of Rs.50.44 lacs as compared to earlier year. The increase in depreciation has occurred because the assessee had installed and put to use new machinery worth Rs.143.29 lacs and this machinery was imported from Germany and was installed in the month of July, 2009, much before the date of survey which was on 14.09.2009. This fact of purchase of additional machinery was conveyed to Assessing Officer vide letter dated 01.03.2013, which is placed at Paper Book page-44. In the same letter the assessee had conveyed that for purchase of machinery the assessee had increased its bank borrowings and therefore there was an increase in interest costs and further the reasons for increase in the electricity charges was also explained in the same letter. Therefore, the assessee had submitted all details and the Assessing Officer had examined all factors leading to decrease in normal profits as compared to earlier year. As regards surrendered income, the assessee has clearly credited the same to the Profit & Loss account over and above the normal profits of the concern. Therefore, in our opinion the Assessing Officer has taken a plausible view as the assessee had surrendered the income as business income which was separately credited to Profit and Loss account.
10. The case law of Kim Pharma Ltd. vs. CIT (supra) as relied upon by the learned DR is not applicable to the facts and circumstances of the present case as in that case the Hon’ble Court had reproduced the findings of Tribunal that assessee during the course of survey had surrendered the income as income from other sources. Whereas in the present case the assessee had surrendered income over and above the normal profits of the concern and not as income from other sources. The findings of Tribunal as recorded by Hon’ble Punjab & Haryana High Court are reproduced as under:
“In the facts of the present case, we find that assessee during the course of survey had surrendered the income as income from other sources though a plea has been raised by the assessee that the income was surrendered as income from job work but no evidence to prove that stand of the assessee has been brought on record. The assessee had also surrendered additional income of Rs.10 lacs in assessment year 2005-06 on account of sundry credits, repairs to building and advances to staff, which being relatable to business carried on by assessee was included as income from business. However, in respect of cash found during survey, which was not reflected in the books of account, no source was declared by the assessee and in the absence of nature of source of cash being proved; the same is not assessable as income from business. In the circumstances, we uphold the order of the CIT(A) in including the additional income as deemed income u/s 69A of the Act and not allowing the benefit of the business losses determined against the said deemed income. The grounds of appeal raised by the assessee are dismissed.”
11. From the above findings of Ho’ble Punjab & Haryana High Court, we find that surrender in this case was made in two years i.e., 2005-06 and 2006-07. The Hon’ble Tribunal had recorded that in Asst. Year 2005-06, the income surrendered related to business carried on by the assessee and therefore, was included as income from business whereas in Asst. Year 2006-07, the assessee could not prove that income was related to business and assessee himself had surrendered the income as income from the other sources and therefore, for Asst. Year 2006-07 the Hon’ble Court had held that additional income was rightly treated as deemed income under section 69A of the Act. In the same case laws for Asst. Year 2005-06, the Hon’ble Tribunal had noted that since the surrendered additional income related to sundry creditors, repairs to building and advances and stock which related to business carried on by assessee and therefore, was included in income from business. In the present case also, the income surrendered was due to renovation of building, stock and advance and imprest account with Directors and due to cash in hand which clearly related to the business of assessee and moreover, the assessee had declared such surrender over and above, the normal profits of the concern, therefore, the case laws relied upon by the learned DR is also in favour of the assessee.
12. In view of the above facts and circumstances, and in view of judicial pronouncements as noted above, we are of the considered opinion that Assessing Officer had taken a plausible view and the power exercised by learned Commissioner of Income Tax is not as per settled law. In view of the above, we allow the appeal of the assessee and set aside the order of Commissioner of Income Tax and upheld the order of Assessing Officer.
13. In the result, the appeal filed by the assessee is allowed.