INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Validity - Appeal pending before CIT under section 250 -

Assessee filed its regular return of income. A search action under section 132 was carried out on group of Angadiyas and Shroffs who were found to be indulging in providing bogus billing through their dummy concerns, receiving proceeds of under-invoiced sale in cash in their bank accounts and also indulging in issuing Cheque/DD in lieu of cash to many business parties in and around Rajkot. On basis of alleged incriminating documents found during course of search, beneficiaries of their modus operandi were identified by investigation wing where assessee was also found as one of beneficiaries of scam of bogus billing in receiving proceeds of under-invoiced sales and thus, assessee received Cheque/DD in lieu of cash and got benefit amounting to Rs. 1,00,000. Upon taking prior approval from competent authority, a notice under section 133(6) was issued to assessee requesting him to furnish detail of evidences to prove genuineness of transaction along with documentary evidences, copy of all bank account statements and other relevant documents/details mentioned therein. Since assessee had not made any compliance in response to said notice issued under section 133(6), notice under section 148 was issued upon taking necessary sanction separately from concerned authority as per provision of section 151. AO took into consideration incriminating entry amount of Rs. 1,00,000 treated as unaccounted and unrecorded business transaction of assessee and accordingly, considering average gross profit at 30% of turnover income of assessee from such unaccounted and unrecorded transaction was worked out at Rs. 30,000 which was finally added to total income of assessee. Being aggrieved by and/or dissatisfied with addition made by AO, appeal preferred before CIT(A) by assessee. On other hand, during pendency of appeal before CIT(A), Pr. CIT initiated proceeding under section 263 and a show-cause was issued to assessee on self-same cause of action holding that order passed by AO under section 147 was erroneous and prejudicial to interest of Revenue as said needed to be revised. He was of opinion that as assessee received amount of Rs. 1,00,000 from M/s. National Shroff group during year was unrecorded transactions of assessee and one of beneficiaries of scam of bogus billing, and same had not been added by AO during assessment proceedings. Therefore, 100% of an amount of Rs. 1,00,000 was required to be added as unexplained expenses under section 69A to total income of assessee. Said proceeding was culminated into final Order under section 263 passed by Pr. CIT holding that order passed by AO was erroneous and prejudicial to interest of Revenue observed that AO had not conducted any enquiry in source of transaction made and to the above extent cash transaction remained unexplained. Hence, instant appeal by assessee. Held: AO examined each and every aspect of matter after analyzing entire set of documents submitted by assessee as demanded by Revenue which was reflecting in order passed by AO. In that view of matter remand order did not justify to be sustainable particularly when appeal had been preferred by assessee against said order passed by AO. CIT(A) was yet to decide order either way and therefore, no reason was found to initiate and proceed against said order passed by AO under section 147 taking recourse of provision of law under section 263 by holding that order passed by AO was erroneous and prejudicial to interest of Revenue. No reason/basis of impugned proceeding under section 263 was found when appeal preferred by assessee under section 250 before CIT(A) was pending against order passed by AO under section 147 which had been sought to be revised by Pr. CIT in garb of provision of Clause (c) of Explanation 1 of section 263. Same was, thus, found to be unsustainable and therefore, quashed.

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