The Bengaluru Bench of the Income Tax Appellate Tribunal (ITAT) upheld the revision order on failure of Assessing Officer (AO) to conduct verification during assessment proceedings.
The assessee, Navunda Abdulla Badruddin is an individual and is in the business of retail trade of sea fish and fish products. A search and seizure u/s.132 of the Act was carried out in the case of the assessee. A survey under Section 133A of the Act was also carried on in the office and factory premises. The assessee filed return of income for assessment year 2018-19 declaring total income of Rs.11,94,970.
The case was selected for scrutiny and the notice Section 143(2) of the Act was issued and served on the assessee. During the survey proceedings statement of the assessee under Section 131 of the Act was recorded where by the assessee offered a sum of Rs.2,09,11,483 as cash expenses unrecorded in the books of account as additional income.
However, the assessee agreed for the addition of the said amount during the assessment proceedings and the AO while concluding the assessment u/s.143(3) added the said amount to the income under the head business.
The PCIT during the review of assessment records noticed that the AO has taxed the unexplained expenses on regular rates. The PCIT stated that the unexplained expenses are not recorded in the books of account and therefore it should not have been brought to tax under Section 69C of the Act and should be taxed under Section 115BBE of the Act. To this extent the PCIT considered the order of the AO to be erroneous and prejudicial to the interest of the revenue and in this regard issued show cause notice to the assessee u/s.263.
A Division Bench consisting of N V Vasudevan, Vice President and Padmavathy S, Accountant Member observed that “The PCIT excised the revisionary powers u/s. 263 of the Act since he has noticed that during the survey u/s. 133A of the Act there were evidences that the assessee has shown the purchases at a higher side than actual to meet certain expenses which have not been brought into the books of accounts. We are therefore, of the considered view that the AO has not conducted the verification that “should have been conducted” during the course of assessment proceedings.”
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