VEERANAN SRINIVASAN,K.K.NAGAR, MADURAI vs. DEPUTY COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE-1, MADURAI, INCOME TAX OFFICE, MADURAI

आयकर अपीलीय अधिकरण, ’सी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI श्री जॉजज जॉजज के, उपाध्यक्ष एवं श्री अमिताभ शुक्ला, लेखा सदस्य के सिक्ष BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENT AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1136/Chny/2025 Assessment Years: 2017-18 Veeranan Srinivasan, Deputy Commissioner of Income No.602, West Second Cross Street, Tax, K.K.Nagar, Madurai, Non-Corporate Circle-1, Tamil Nadu-625 020. Madurai. [PAN: AXVPS5465K] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Shri T.Vasudevan, Advocate प्रत्यर्थी की ओर से /Revenue by : Ms.R.Anitha, Addl.CIT सुनवाई की तारीख/Date of Hearing : 06.08.2025 घोषणा की तारीख /Date of Pronouncement : 26.08.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M :

This appeal is filed by the assessee/Revenue against the order bearing DIN & Order No.ITBA / NFAC / S / 250 / 2024-25 / 1073675845(1) dated 25.02.2025 of the Learned Commissioner of Income Tax [herein after “CIT(A), National Faceless Appeal Center [NFAC], Delhi, for the assessment year 2017-18. The reference to the word “Act” in this order hereinafter shall mean the Income Tax Act, 1961 as amended from time to time. 2.0 The first issue raised by the assessee through its grounds of appeal is regarding the action of the Ld.AO in invoking powers u/s 154 and Page 1 of 15 consequently determining total income of the assessee at Rs.2,57,43,235/- as well as charging of higher tax rate upon addition of Rs. 1,84,19,337/- u/s 69B and the action of Ld.CIT(A) in confirming the same. 3.0 Brief factual matrix of the case is that order u/s 143(3) r.w.s. 153A was passed on 31.12.2018 in the case of the assessee engaged in money lending business. In this case a search and seizure action u/s 132 was conducted on 02.12.2016. As evident from para 6 on page 4 of the Ld.AO’s order, the Ld.AO had queried with the assessee with findings of the search, inter-alia, including the details of unaccounted sundry debtors, sundry creditors etc. After considering submissions of the assessee the Ld.AO proceeded to add an amount of Rs.1,84,19,337/- u/s 69B of the Act. Pertinently the Ld.AO had passed orders u/s 143(3) r.w.s. 153A for AY-2015- 16 and 2016-17 also dated 31.12.2018. Thus, in the orders for AY-2015-16 and 2016-17, addition of Rs.58,23,253/- and Rs.70,92,873/- respectively was made. Notings on para 7 on page 36 and para 7 on page 35 of the respective orders shows that the Ld.AO had made the additions after considering submissions of the assessee. After passing the order u/s 143(3) r.w.s. 153A dated 31.12.2018 for AY-2017-18, the Ld.AO noted that it had apparently done some misreporting of income figures. It was also noted that the addition of Rs.1,84,19,337/- u/s 69B of the Act attracted higher rate of taxation u/s 115BBE and therefore proceeded to suo moto initiate proceedings u/s 154. Consequently, notice was issued to the assessee as to why taxable income Page 2 of 15 be not adopted at Rs.2,57,43,235/- as against that of Rs.2,14,50,536/- adopted by the system and as to why the addition of Rs.1,84,19,337/- u/s 69B of the Act be not be exposed to higher rate of taxation u/s 115BBE. In reply the assessee accepted the mistake albeit with the rider that there is another mistake apparent from records. Thus, it was indicated that through its own petition u/s 154 dated 01.08.2022 the assessee had pointed out that the figure of Rs.2,57,43,235/- adopted by the Ld.AO was incorrect as it had omitted to deduct an amount of Rs.86,67,857/- relevant to AY-2015-16. The assessee had submitted that the correct figure would be Rs.1,70,75,380/- ( Rs.2,57,43,235/ - Rs.86,67,857/- ). The assessee had accordingly submitted that it has no objection to the proposed rectification consideration of adoption of his figures mentioned supra. As regards the issue of higher rate of taxation u/s 115BBE the assessee had argued that the impugned section was effective from 01.04.2017 and hence was relevant to AY 2018-

19. The Ld.AO rejected the objections of the assessee and proceeded to determine total income at Rs.2,57,43,235/- and exposing the same to higher rate of taxation vide his order u/s 154 dated 30.03.2023. The Ld. CIT(A) concurred with the findings of the assessing officer. He concluded that the Ld.AO has rejected the contentions of the assessee after examining the records for AY-2015-16 and that there was no mistake in his decision of not reducing the amount of Rs.86,67,857/-.

Page 3 of 15 4.0 Before us, the Ld. Counsel for the assessee has reiterated his arguments taken before the lower authorities. The Ld. Counsel for the has submitted that the assessee is engaged in money lending business in whose case search u/s.132 was done on 02.12.2016. The seized material, found during search, consisted of list of unaccounted sundry creditors and sundry debtors. Consequent to search assessee filed its return of income for the assessment years 2015-16, 2016-17 and 2017-18. The income offered comprised of the income earned in the money lending business. The assessments for these three years were completed on 31.12.2018 u/s.143(3) r.w.s.153A of the Act. The Ld.AO considered the seized material and made additions in each of the years. In each of the years, the sundry debtors (minus) sundry creditors as per the seized material was taken as the Closing Debtors balance. In the assessment, the income to be considered for addition was arrived at by reducing the 'Opening Balance of debtors' from the 'Closing balance of debtors' and as against this amount, the income returned by the assessee in each of the years was reduced and the net additional income to be assessed was arrived at by the AO. The Ld.Counsel submitted that this method was followed by the Revenue in the assessment years 2015-16 and 2016-17. It was submitted that for the asst. year 2015- 16, the search material did not contain any opening of sundry debtors and therefore the closing balance of Rs.86,67,857 was considered which was taken as the opening balance for A.Y.2016-17. Thereafter, for the A.Y.2016- Page 4 of 15 17, the Sundry Debtors (minus) Sundry Creditors as per seized material arrived at was Rs.2,32,09,173 (closing balance as on 31.3.2016). This figure was reduced from the opening balance of Rs.86,67,857 and the addition to be considered as unexplained investment was computed at Rs. 1,45,41,316. The returned income for A.Y.2016-17 was Rs. 74,48,443 and this was adjusted against the addition computed and the net addition was Rs.70,92,873. The Ld.Counsel submitted that for A.Y.2017-18, the Sundry Debtors (minus) Sundry Creditors as per seized material was arrived at Rs.4,02,84,551. This figure was actually to be reduced from the opening balance of Rs.2,32,09,173 to arrive at the unexplained investment of A.Y.2017-18. It was argued that instead, the Ld.AO erroneously reduced the income of A.y.2016-17 (i.e.. Rs.1,45,41,316) and arrived at the unexplained investment of Rs.2,57,43,235. Thereafter, the AO adjusted the income returned for the A.Y.2017-18, i.e., Rs.73,23,898 and made the addition of Rs. 1,84,19,337 u/s.69B. 5.0 It is the case of the assessee that as per the method of working the unexplained investment adopted in the earlier year, the computation should be that for A.Y.2017-18, the Sundry Debtors (minus) Sundry Creditors as per seized material arrived at was Rs.4,02,84,551 (closing balance as on 31.3.2017). This figure ought to be reduced from the opening balance of Rs.2,32,09,173 and the addition to be considered as unexplained investment would be Rs.1,70,75,378. The returned income for A.Y.2017-18 is Page 5 of 15 Rs.73,23,898 and this is to be adjusted against the unexplained investment computed and the net addition for assessment would be Rs.97,51,480. The Ld. Counsel for the assessee gave a tabular chart as under to explain its case.

Α.Υ.2015-16 Α.Υ.2016-17 Α.Υ.2017-18 (a) Closing debtors Bal. Closing debtors Bal. Closing debtors Bal. Rs.86,67,857 Rs.2,32,09,173 Rs.4,02,84,551 (b) Opng. Bal. of debtors 0 Opng. Bal. of debtors Rs. Opng. Bal. of debtors 86,67,857 Rs.2,32,09,173 (c)(a)(b) Total income to be considered for addition Total income to be considers Total income to be considered for addition Rs.1,45,41,316 for addition Rs. 1,70,75,378 Rs.86,67,857 Returned income Rs. Returned income Rs. (d) Returned income 74,48,443 73,23,898 Rs.28,44,604 Net Income added u/s.69B Net Actual Income To be (e) (c) (d) Net Income added Rs. 70,92,873 added u/s.69B Rs. 97,51,480 u/s.69B Rs.58,23,253 6.0 Per contra the Ld.DR argued in favour of the order of lower authorities.

7.0 We have heard the rival submissions in the light of material available on records. Ground of appeal no.1 is general in nature and hence dismissed. Ground of appeal no.2 including its sub-grounds is regarding violation of natural justice and the assessing officer not giving sufficient opportunity. We have noted from the reply of the assessee dated 01.08.2022 which was filed in response to 154 show cause notice dated 19.07.2022 and which has been extracting on page 2 of the impugned 154 order that the assessee had accepted the show cause notice of the Ld.AO.

Page 6 of 15 No challenge to the jurisdictional insufficiency or lack of authority was made. The ground of appeal no.2 including its sub-grounds is therefore dismissed. 8.0 As regards ground of appeal no.3, it is noted that the main concern of assessee is that the Ld.AO did not consider the figures indicated by it for calculation of its taxable income. It has been argued that for earlier years the Ld.AO had adopted correct figures from the seized records, however, for the year under consideration the Ld.AO had taken wrong figures resulting in determination of higher taxable income. Thus it has been argued that for the year under consideration the Ld.AO erroneously reduced the income for AY-2016-17 of Rs.1,45,41,316/- while arriving at the unexplained investment of Rs.2,57,43,235/-. It was submitted that the adoption of Rs.1.45 Crores supra has led to the entire problem. The issue however is as to whether the Ld.AO has done anything wrong while passing the order u/s 154 particularly by not accepting the alleged mistake pointed out by the assessee. At this stage, we deem it necessary to examine the statutory provisions governing invocation of section 154 of the Act. “…..Rectification of mistake. 86 154. 87[(1) With a view to rectifying any mistake apparent from the record 88 an income-tax authority referred to in section 116 may,- (a) amend any order 88 passed by it under the provisions of this Act ; 89[(b) amend any intimation or deemed intimation under sub-section (1) of section 143;]] 90[(c) amend any intimation under sub-section (1) of section 200A;] 91[(d) amend any intimation under sub-section (1) of section 206CB.] 92[(1A) Where any matter 93 has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend Page 7 of 15 the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.] (2) Subject to the other provisions of this section, the authority concerned- (a) may make an amendment under sub-section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee 94[or by the deductor] 95[or by the collector], and where the authority concerned is 96[the Joint Commissioner (Appeals) or] the 97[***] 98[Commissioner (Appeals)], by the 99[Assessing] Officer also. 1[***] (3) An amendment, which has the effect of enhancing an assessment 2 or reducing a refund or otherwise increasing the liability of the assessee 3[or the deductor] 4[or the collector], shall not be made under this section unless the authority concerned has given notice to the assessee 3[or the deductor] 4[or the collector] of its intention so to do and has allowed the assessee 3[or the deductor] 4[or the collector] a reasonable opportunity of being heard. (4) Where an amendment is made under this section, an order shall be passed in writing by the income-tax authority concerned. 5[(5) Where any such amendment has the effect of reducing the assessment or otherwise reducing the liability of the assessee or the deductor 6[or the collector], the Assessing Officer shall make any refund which may be due to such assessee or the deductor 6[or the collector].] (6) Where any such amendment has the effect of enhancing the assessment 7 or reducing a refund 8[already made or otherwise increasing the liability of the assessee or the deductor 9[or the collector], the Assessing Officer shall serve on the assessee or the deductor 9[or the collector], as the case may be] a notice of demand in the prescribed form specifying the sum payable 10, and such notice of demand shall be deemed to be issued under section 156 and the provisions of this Act shall apply accordingly. (7) Save as otherwise provided in section 155 or sub-section (4) of section 186 11 no amendment under this section shall be made after the expiry of four years 12[from the end of the financial year in which the order 13 sought to be amended was passed.] 14[(8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee 15[or by the deductor] 16[or by the collector] on or after the 1st day of June, 2001 to an income-tax authority referred to in sub- section (1), the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it,- (a) making the amendment; or (b) refusing to allow the claim.]

31. In the light of the facts, as culled out from the typed set filed by the appellant, this Court would like to examine the provisions of Section 154 of the Act as to the powers vested on the authority in relation to rectification of mistakes apparent on record.

32. Section 154 of the Income Tax Act provides for rectification of mistake. In the present case, this Court is concerned with an application filed by the assessee under Section 154 (1A). For better appreciation of the case, at the risk of repetition, Section 154 of the Act is extracted hereinbelow :— "Rectification of mistake. 154. (1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,— (a) amend any order passed by it under the provisions of this Act ; (b) amend any intimation or deemed intimation under sub-section (1) of section 143.

(1A) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided. (2) Subject to the other provisions of this section, the authority concerned— (a) may make an amendment under sub-section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the [Commissioner (Appeals)], by the [Assessing] Officer also." ….” 9.0 Thus, it is seen that section 154 of the Act mainly provides authority to the assessing officer to end to any arithmetical or typographical mistake. It does not authorizes consideration of any matter wherein a decision has to be arrived at by way of a reasoning or analysis. That is to say it does not permit any substantive addition. As regards AO’s own suo moto action u/s 154 is concerned the same has been found to have the authority of law in as much as he had merely proposed to substitute the figure of Rs.2,14,50,536/- adopted by the system with that of Rs.2,57,43,235/- which was determined vide order u/s 143(3) r.w.s. 153A as well as to why the addition of Rs.1,84,19,337/- u/s 69B of the Act be not be exposed to higher rate of taxation u/s 115BBE. Both these mistakes were amenable u/s 154 of the Act. Therefore, no fallacy can be found in the action of the Ld.AO qua rectification of mistakes proposed by him. 10.0 The issue that then deserves to be answered is as to whether the AO was right in not considering the mistake pointed out by the assessee. The orders of lower authorities allude that based upon position on records Page 9 of 15 no mistake was found in the order u/s 143(3) r.w.s. 153A that was amenable to correction u/s 154. The issue that has come up for our consideration is firstly whether there was any mistake in the order of the Ld.AO u/s 143(3) r.w.s. 153A and secondly whether the said mistake was amenable for rectification u/s 154. As far as the first controversy is concerned it is the case of the assessee that a mistake has arisen in the order of the Ld.AO by adoption of wrong figure for determination of taxable income for year under consideration. In response to assessee’s petition u/s. 154 dated 01.08.2022, the Ld.AO in his order dated 30.03.2023 concluded that the amount of Rs.86,67,857/- which was sought to be reduced by the assessee is not acceptable as the same was adjusted in AY-2015-16. Incidentally, we have noted that all the three orders in assessee’s case for AY-2015-16 to 2017-2018 have been passed by the same AO on the same date i.e. 31.12.2018. Thus, as far as mistake is concerned it is not a case of different AOs taking different interpretations. Therefore, there appears to be sufficient credibility in the argument of the assessee qua any mistake in adoption of the impugned figure of Rs.86,67,857/-. The larger question that however comes here is whether this mistake was amenable for rectification u/s 154 or not. The request of the assessee is actually maintainable from the point of view of authority given in section 154. The assessee has in principle attempted to get the income re-determined by requesting for substitution of its figures u/s 154. Page 10 of 15 11.0 It is the case of the assessee that the reduction of figure of Rs 1,45,41,316 so as to arrive at unexplained investment of Rs 2,57,43,235/- is patently wrong. It has been vehemently argued that the figure of Rs 1,45,41,316 is the undisclosed income qua unaccounted sundry Debtors , determined for AY 2016-17. The Ld. Counsel has stated that beginning from AY 2015-16, the figure of opening balance of Debtors minus Creditors is taken as unaccounted Debtors. The same has to be reduced from returned income for respective years so as to arrive at additional income for taxation. This hypothesis was emanating from the AO’s own orders for AY 2015-16 and AY 2016-17. Through its above tabular chart the ld. AR has submitted that in AY 2015-16 there was no opening balance of Debtors and hence Rs 86,67,857 (being the value of closing balance of Debtors) was adopted. The undisclosed income was taken as Rs 86,67,857 minus Rs 28,44,604 at Rs 58,23,253. Similarly in AY 2016-17 the AO reduced closing balance of Debtors of Rs 2,32,09,173, from opening balance of Rs 86,67,857 so as to arrive at Rs 1,45,41,316. After reducing it from returned income of Rs 74,48,443, the revenue taxed it for Rs 70,970,873. The ld counsel has alluded that in present year AY 2017-18, the ld AO has erroneously adopted the figure of Rs 1,45,41,316 as against Rs 2,32,09,173. Thus it was stated that net undisclosed income for the present year would Rs 1,70,75,378 ( being the value of total undisclosed Debtors found during the search of Rs 4,02,84,551 minus Rs 2,32,09,173 e.i, Rs 1,70,75,378) . Consequently the Page 11 of 15 net income for taxation u/s 69B for AY 2017-18 would be Rs 97,51,480 being the value of undisclosed Debtors of Rs 1,70,75,378 reduced by returned income of Rs 73,23,898. we have noted that arguments put forth by the appellant assessee are correct when examined from facts on records. The revenue is not entitled to change its stand haphazardly. The Algorithm adopted by the ld AO for AY 2015-16 and AY 2016-17 has to be applied for AY2017-18 also and can not be changed. The impugned mistake of the Ld.AO is totally rectifiable under section 154 of the Act. Pertinently, the Ld.AO passing order for all the three assessment years is one and same and hence there cannot be any argument of a different application of mind. The rejection of the Ld.AO is therefore not maintainable. Accordingly, we are of the considered opinion that there was no infirmity in the request of the assessee and that the same was ought to have been rectified under section 154 of the Act by the Ld.AO. The order of lower authorities is set aside. Therefore, we direct the Ld.AO to conduct the necessary correction in his order and adopt the figure proposed by the assessee after verifying from the original records at his hand. The matter is therefore remitted to the Ld.AO for limited verification and recalculation. Accordingly, the ground of appeal no.3 is allowed for statistical purposes. 12.0 The ground of appeal no.4 raised by the assessee is contesting the decision of Ld.CIT(A) directing the Ld.AO to verify submissions of appellant and recompute taxes as per law qua invocation of section 115BBE. We are Page 12 of 15 of the considered opinion that provisions of section 115BBE qua imposition of tax rate of 60% would not be applicable in this case. In this regard we draw strength from decision of Hon’ble madras High Court from its judgement dated 19/11/2024 qua W.P (MD) NO. 2078 Of 2020 & W.M.P (MD) NO. 1742 Of 2020 in the case of S.M.I.L.E Microfinance Ltd., holding that:-

“………16. The next contention raised by the Learned Senior Counsel is that the under section 115BBE the rate of tax imposed is increased from 30% to 60% and the same is applicable with effect from 01.04.2017 onwards as per the amendment. Therefore, the same is applicable to any transaction from 01.04.2017 onwards and nor prior to any transactions prior to 01.04.2017. Since in the present case all alleged transactions are for the period from 08.11.2016 to 30.12.2016, hence the erstwhile rate of tax 30% only is applicable. But the contention of the revenue is that the amendment was with effect from 01.04.2017 and hence the same is applicable for the financial year 2016-2017 and the assessment year 2017-2018. Further the amendment to section 115BBE is directly 15 of 26 https://www.mhc.tn.gov.in/judis related to demonetization which would be evident from objects and reasons for such amendment. In order to consider the same, the objects and reasons of Taxation Laws (Second Amendment) Bill 2016 is extracted hereunder: Press Information Bureau Government of India Ministry of Finance 28-November-2016 15:56 IST Taxation Laws (Second Amendment) Bill, 2016 introduced in Lok Sabha; A scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) proposed in the Bill. Evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programmes. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of Rs.500 and Rs. 1000 [Specified Bank Notes(SBN)] have been recently withdrawn the Reserve Bank of India. Concerns have been raised that some of the existing provisions of the Income- tax Act, 1961 (the Act) can possibly be used for concealing black money. The Taxation Laws (Second Amendment) Bill, 2016 (‘the Bill’) has been introduced in the Parliament to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision. Further, in the wake of declaring specified bank notes “as not legal tender”, there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so Page 13 of 15 16 of 26 https://www.mhc.tn.gov.in/judis that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy. In this backdrop, an alternative Scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’@33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilized for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality…………………………………………………………………………………………… ……………………………………………………………………………………………………… .

Page 14 of 15 14.0 In the result, the appeal of the assessee is partly allowed. Order pronounced on 26th , Aug-2025 at Chennai.