An assessment order cannot be revised under section 263 if the Assessing Officer has conducted necessary inquiries and adopted a plausible, legally accepted view regarding the classification of surrendered survey income as business earnings, regardless of whether a different tax treatment could hypothetically be applied.

O R D E R

PER BENCH:

The above two appeals filed by the respective assessees are directed against the separate orders dated 22.03.2024 passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Ld. PCIT, Nashik relating to assessment year 2019-20. Since identical grounds have been raised by the respective assessees in these appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order.

ITA No.959/PUN/2024

2. Although a number of grounds have been raised by the assessee, however, these all relate to the order of the Ld. PCIT invoking the provisions of section 263 of the Act.

3. Facts of the case, in brief, are that the assesse is a partnership firm engaged in the business of trading in cloths. It filed its return of income on 09.10.2019 declaring total income of Rs.43,62,190/-. In this case a survey action 133A of the Act was conducted on 06.03.2019 during which the assessee had made total declaration of Rs.75,25,200/- as additional income out of which Rs.2,04,120/- was on account of excess cash found and Rs.73,21,080/- on account of excess stock. The assessee disclosed the above amount of Rs.75,25,200/- in ITR for assessment year 2019-20. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 144B of the Act on 26.08.2021 accepting the returned income of Rs.43,62,190/-.

4. Subsequently the Ld. PCIT on examination of records observed that the Assessing Officer has completed the assessment without making due verification and enquiries which were warranted in the facts and circumstances of the case. He noticed that the assessee has declared total income of Rs.43,62,190/-. During the course of survey proceedings excess cash and excess stock of Rs.75,25,200/- was found unrecorded in the books of account of the firm and the source of the same was not explained and the assessee has not submitted any supporting documentary evidence with regard to such unaccounted excess cash and stock found. Accordingly the same was declared as additional income for assessment year 2019-20 over and above his regular income. Therefore, the provisions of section 69B r.w.s. 115BBE of the Act are clearly attracted. However, the Assessing Officer has accepted the returned income filed by the assessee as per normal tax rates. Since the amount declared by the assessee of Rs.75,25,200/ in respect of excess cash and excess stock was over and above, the normal income which should have been taxed u/s 69 of the Act applying the provisions of section 115BBE of the Act and the Assessing Officer has failed to do so and has accepted the returned income filed by the assessee, therefore, the order has become erroneous in so far as it is prejudicial to the interest of Revenue. He, therefore, issued a show cause notice to the assessee asking to explain as to why the order passed by the Assessing Officer should not be set aside. Rejecting the various explanations given by the assessee and relying on various decisions, the Ld. PCIT held the order passed by the Assessing Officer as erroneous in so far as it is prejudicial to the interest of Revenue. He, therefore, set aside the order to the file of the Assessing Off