INCOME TAX OFFICE WARD 52(5), DELHI vs. IMPERIAL EXPORTS, DELHI

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ITA 1490/DEL/2024Status: DisposedITAT Delhi06 August 2025AY 2017-186 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the AO's action in rectifying the order and invoking Section 69C was not in accordance with the law. Furthermore, it was held that Section 115BBE could not be invoked for charging tax at a special rate for Assessment Year 2017-18. This conclusion was based on the judgment of the Hon'ble Madras High Court in S.M.I.L.E. Microfinance Ltd. vs. ACIT, which held that the provisions of Section 115BBE are applicable from Assessment Year 2018-19 onwards, not from Assessment Year 2017-18. Therefore, the Tribunal found no error in the Ld. CIT(A)'s order, which had upheld the assessee's appeal. The Tribunal upheld the order of the Ld. CIT(A) and dismissed the Revenue's appeal. No issue was expressly left undecided.

What were the facts?

The Revenue filed an appeal against the order of the Ld. CIT(A) for Assessment Year 2017-18. The original assessment order, passed under Section 143(3), included additions for unexplained creditors and capital. The Assessing Officer (AO) did not invoke Section 115BBE. Subsequently, based on a Revenue Audit objection, the AO passed a rectification order under Section 154, invoking Sections 69C and 115BBE and charging tax at a special rate on the additions totaling INR 54,51,10,121/-. The Ld. CIT(A) allowed the assessee's appeal, relying on a Co-ordinate Bench decision. The Revenue's appeal challenges the Ld. CIT(A)'s order.

What were the issues?

1. Whether the Ld. CIT(A) erred in ignoring that Section 115BBE, which taxes unexplained income at 60%, can be applied even if not invoked at the time of assessment? 2. Whether the Ld. CIT(A) erred in ignoring that Section 154 allows the AO to rectify apparent mistakes, and the invocation of Section 115BBE was a clerical mistake? 3. Whether the Ld. CIT(A) erred in ignoring that the assessee was given opportunities to appear before the AO but failed to submit any explanation? 4. Whether the Ld. CIT(A) erred in ignoring that the rectification order was passed on a Revenue audit alert regarding the taxation of quantum additions? Assessee's contentions: Not recorded. Revenue's contentions: The Ld. CIT DR argued that Section 115BBE is applicable to unexplained income taxed under Section 69C, and the AO correctly rectified the assessment order as it was an apparent mistake. The AO, after realizing the mistake, invoked Section 69C and 115BBE to charge tax at the special rate. The Revenue relied on the judgment in Sabari Alloys & Metals India (P.) Ltd. vs DCIT. The Revenue also argued that the assessee was given ample opportunity to appear before the AO but failed to do so, and the rectification was based on an audit objection concerning quantum additions.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 115BBE,Section 69C,Section 154,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI “B” BENCH: NEW DELHI

Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL

For Respondent: Shri Dayainder Singh Sidhu, CIT DR
Hearing: 14.05.2025Pronounced: 06.08.2025

ORDER

PER MANISH AGARWAL, AM :

1.

The present appeal is filed by the Revenue against the order dated 13.03.2024 of Ld. Commissioner of Income Tax (A), National Faceless Apeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No.NFAC/2016-17/10170229 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 03.12.2019 passed u/s 143(3) of the Act pertaining to assessment year 2017-18.

2.

At the time of hearing, no one appeared on behalf of the assessee.

3.

Brief facts of the case are that the assessment in the instant case was completed u/s 143(3) dated 03.12.2019 wherein various additions which include addition towards unexplained creditors and on account of addition in capital. AO while making the additions, has not invoked the provision of section 115BBE of the Act and thereafter, in terms of Revenue Audit objection dated NIL of Audit Memo No.DEL/CT/005/2021-22, the additions made by the AO on account of discount to debtors, unexplained creditors and addition in capital account to the tune of INR 54,51,10,121/-, it is proposed that these should have been made u/s 69C r.w.s 115BBE of the Act. As the AO has not invoked these sections which is a mistake apparent on record, therefore, on the basis of such audit objection, rectification order was passed u/s 154 on 23.08.2022 wherein the AO observed that the additions were made as normal income of the assessee however, the same should have been made u/s 69C r.w.s. 115BBE of the Act and accordingly, he invoked the provision of section 69C and 115BBE of the Act and tax was charged special rate instead of normal rate of tax.

4.

Aggrieved by the said order, the assessee preferred appeal before Ld.CIT(A) who vide impugned order dated 13.03.2024 has allowed the appeal of the assessee by placing reliance on the judgement of Co- ordinate Bench of Jaipur, ITAT in the case of ACIT vs Shri Sudesh Kumar Gupta 117 taxmann.com 178 and allowed the appeal of the assessee.

5.

Aggrieved by the said order, the Revenue is in appeal before us wherein following grounds are taken:-

1. “The Ld. CIT(A) has erred in ignoring the facts that the Section 115 BBE clearly mentions that certain incomes which are treated unexplained are ought to be taxed @ 60% of the I.T. Act, 1961 as per section 115 BBE of the I.T. Act, 1961 and therefore, for applying the section 115 BBE, it is not mandatory to invoke the same at the time of assessment.

2. The Ld. CIT(A) has erred in ignoring the facts that Section 154 of the I.T. Act, 1961 clearly gives right to AO to amend any mistake which is apparent from record and the same can be rectified by the AO and therefore, in the instant case, it is just a clerical mistake which is apparent from records and resulted in short calculation of tax.

3. The Ld. CIT(A)has erred in ignoring the fact that before passing the rectification order, the assessee was allowed ample opportunities to appear and submit its facts. However, the assessee failed to submit any explanation. 4. The CIT(A) has erred in ignoring the fact that the rectification order is passed on the alert given by the Revenue audit wherein audit objection was raised and rectification is done on taxation of quantum addition and quantum addition appeal is still pending before the appellate authority. 5. The appellant craves leave of your Honor to add, alter, modify or delete any of the above grounds of appeal.”

6. Before us, Ld.CIT DR vehemently supported the rectification order and submits that the said order deserves to be uphold since in the assessment order passed u/s 143(3), AO though had not specifically stated under which section, the additions were made, however, looking to the nature of additions, it could be seen that they are in the nature where the provisions of section 69C are applicable and in terms of section 115BBE, any addition made u/s 69C of the Act, the tax at special rate as provided in section 115BBE is to be charged. He thus, submits that the AO after realizing the mistake being apparent on record had rectified the same and charged the tax at special rate on the additions made. He thus, prayed for the restoration of the rectification order and requested for quashing the order of Ld.CIT(A).

7.

Reliance is also placed on the judgement of Hon’ble Madras High Court in the case of Sabari Alloys & Metals India (P.) Ltd. vs DCIT [2024] 161 taxmann.com 570 (Madras).

8.

Heard the contention of Ld.CIT DR and perused the material available on record. From the order of the AO passed u/s 143(3), it is seen that the AO has not invoked any section for making the disallowance of INR 2,14,78,865/- out of discount, additions on account of unexplained creditors of INR 51,95,67,942/- by holding the same as unexplained and further addition of INR 40,63,314/- on account of addition in capital in absence of supporting documents held as unexplained. However, nowhere in the assessment order, it is stated by the AO whether the additions were made under section 68, 69, 69A, 69B or 69C of the Act nor he invoked the provision of section 115BBE of the Act. It is only when the Revenue audit had pointed out the same, the AO proceeded to rectify the order and invoked the provision of section 69C of the Act and also invoked the provision of section 115BBE for charging tax special rate. Ld.CIT(A) while setting aside the action of the AO in the appellate order, has observed that once the AO has made the addition as normal income and not invoked the provision of section 69C r.w.s 115BBE, the tax would be charged at normal rate and placed reliance on the judgement of Co-ordinate Bench, Jaipur in the case of Sudesh Kumar Gupta (supra). This error is not the mistake apparent from record which could be rectified u/s 154 of the Act. Moreover, the assessment year under appeal is AY 2017-18 and Hon’ble Madras High Court in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) has held that the provision of section 115BBE are applicable w.e.f. 01.04.2017 i.e. from AY 2018-19 and onwards and not from AY 2017-18.

9.

In view of these facts and by respectfully following the judgement of Hon’ble Madras High Court (supra), in our considered view, in the instant case, though the action of the AO in rectifying the order and invoking the provision of section 69C of the Act is held as not in accordance with law even otherwise, the provision of section 115BBE of the Act could not be invoked for charging the tax at special rate in terms of the judgement of Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Ltd. (supra) for AY 2017-18. Accordingly, we find no error in the order of Ld.CIT(A) which is hereby upheld.

10.

In the result, appeal of the Revenue is dismissed.

Order pronounced in the open Court on 06.08.2025.

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