On finding that the facts of the case do not warrant application of section 263 of the Income Tax Act, the Indore ITAT set aside the revision order passed by PCIT and restored the original assessment-order passed by the AO.

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The ITAT explained that revocation of revisionary jurisdiction u/s 263 requires assessment to be erroneous as well as prejudicial to interest of Revenue.

The Bench of the ITAT comprising of Vijay Pal Rao (Judicial Member) and B.M. Biyani (Accountant Member) observed that “in the judicial rulings of ITAT, Indore and Hon’ble Rajasthan High Court referred by Ld. AR, it has been held that the excess-stock explained by assessee as relatable to business cannot attract section 69/69A/115BBE. In the light of those rulings, the AO has rightly assessed the income at normal rates of tax, hence there is no loss of revenue to department and consequently the order passed by AO is not prejudicial to the interest of revenue.” (Para 12)

As per the brief facts of the case, the Assessee’s return was selected for scrutiny. The assessee declared an additional income on account of excess-stock of gold and silver jewellery, surrendered by assessee during a survey u/s 133A conducted by authorities upon assessee during the relevant previous year. The assessee declared this additional income as regular business income and paid normal tax as applicable. While completing assessment, the AO accepted assessee’s declaration without making any change. Subsequently, PCIT examined the record of assessment-proceeding and viewed that the assessment-order passed by AO is erroneous in so far it is prejudicial to the interest of revenue which attracts revisionary-jurisdiction u/s 263. Accordingly, the PCIT issued show-cause notice and finally passed revision-order.

The Bench noted that during assessment-proceeding, there were specific queries raised by AO with regard to the excess-stock/additional income identified during survey and the assessee also filed reply to AO. To this extent, there cannot be any dispute or rebuttal by revenue.

The Bench observed that it is discernible that the AO has made a vehement discussion qua excess-stock and also taken cognizance of the fact that the assessee has offered income under the head ‘Income from business and profession’.

The Bench further observed that the assessee straightway explained the source of jewellery forming part of excess-stock, which is borrowers of money-lending business.

The Bench noticed that the assessee has been regularly declaring the financial transactions, revenue, expenses, net profit and sundry debtors of money-lending business to department year after year.

The Bench further found that the assessee is also holding a money-lending licence and obtained renewal of license from concerned authorities.

The Bench agreed with the contention of assessee that even if there are two possible views and the AO has taken one of them, the order of AO cannot be said to be erroneous.

Therefore, on finding that the revision-order passed by PCIT is not a valid order, the ITAT allowed the assessee’s appeal.

Counsel for Appellant/Taxpayer: Manoj Fadnis

Counsel for Respondent/Department: Ashish Porwal

Case Title: Naresh Chandra Kalwani verses Pr. Commissioner of Income-tax

Case Number: ITA No.212/Ind/2023

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