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Facts
During a survey, the assessee disclosed additional income of Rs.5,34,060/- which was offered to tax under business income. The assessment was completed without additions, but later the PCIT invoked Section 263, considering the assessment order erroneous and prejudicial to revenue. The PCIT directed the AO to reframe the assessment, treating the additional income under Section 115BBE.
Held
The Tribunal held that the Assessing Officer had applied his mind to the facts of the case and correctly treated the additional income as business income, taxable at the normal rate. The PCIT erred in invoking Section 263 as the order was not erroneous or prejudicial to the revenue. Decisions of coordinate benches were also relied upon.
Key Issues
Whether the PCIT was justified in invoking Section 263 to revise an assessment order where the AO had considered the additional income declared during a survey as business income and taxed it accordingly, rather than under Section 115BBE.
Sections Cited
263, 143(3), 270A, 154, 115BBE, 69C, 133A
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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 19.03.2024 passed by Ld. PCIT, Nashik-1 for the assessment year 2019-20.
The appellant has raised the following grounds of appeal :-
1. The Hon, PCIT, Nashik - 1 has erred in invoking the provisions of Sec. 263 and therefore-the Order passed U/s 263 is bad in law.
2. The Learned AO (ACIT, Central Circle 2, Nashik) before passing the order u/s 143(3) has made all the necessary enquiries, checked the books of accounts and all the supporting documents. This being a Survey case-and on this point only - the Learned AO had done all the checking and then formed his opinion that everything was in order.
3. Learned AO also initiated Penalty Proceedings U/s 270A for Underreporting/Misreporting But the same was also dropped by him vide order dated 28/03/2022. This showed the intention of Learned AO-that he was satisfied with the records produced and hence tax was levied at regular rate and not higher rate.
Further ACIT, Circle 1, Nashik (Regular Assessing Officer of Jurisdiction) initiated proceedings u/s 154 vide notice dated 05/01/2024 regarding same issue that Tax on Rs.5.34 Lacs should have been charged as per provisions of 115BBE (@60%) and not regular rate of 25%. Detailed reply was submitted on 24/01/2024, The ACIT dropped the Sec 154 proceedings vide his order dated 08/02/2024.
The Hon. PCIT has given the reason that the Learned AO has completed the assessment without making due verification and inquiries which were required. It seems that Hon. PCIT has missed out on the questionnaire issued to assessee by Learned AO. All the relevant issues were raised by Learned AO and detailed enquiries were made during assessment. Books of Accounts along with supporting documents were verified by him.
After being satisfied - the Learned AO has completed assessment and charged regular rate of tax-as he found everything in order. This was a Survey Case. It is not that the Learned AO was not aware of provisions of Sec.115BBE.
Appellant craves leave to add, alter, amend, modify and / or delete any of the grounds appeal.”
Facts of the case, in brief, are that the assessee is a private limited company engaged in the business of healthcare services i.e. running a hospital and has furnished its return of income on 31-10-2019 by disclosing total income of Rs.25,81,190/-. A survey action u/s 133A of the IT Act was conducted for 22.02.2019 at the business premises of the assessee company i.e. at Lotus Hospital, Nashik. During the course of survey, the director of the assessee company admitted to disclose Rs.5,34,060/- as an additional income on account of difference in the expenses and the same was disclosed in the return of income and due taxes were paid by the assessee company. The assessment was completed vide order dated 17.06.2021 on the same income as returned by the assessee and no addition was made in the assessment order, however penalty proceedings u/s 270A of the IT Act were initiated. Subsequently, a notice u/s 154 of the IT Act was issued on 05.01.2024 proposing to rectify the mistake of imposing of normal rate of tax i.e. 30% on additional income of Rs.5,34,060/- declared during the survey by the assessee company instead of at the rate of 60% u/s 115BBE r.w.s. 69C of the IT Act. However, after considering the reply of the assessee, the proceedings initiated u/s 154 of the IT Act were dropped. Subsequently, on 07.02.2024 Ld. PCIT, Nashik- 1 initiated proceedings u/s 263 of the IT Act and after considering the reply of the assessee company, Ld. PCIT, Nashik- 1 passed order u/s 263 of the IT Act by observing as under :- “07. In the light of the detailed discussion made hereinabove, I am of the considered opinion that the assessment order passed u/s.143(3) of the Act for Assessment Year 2019-20 on 17.06.2021 by the then AO, is erroneous in so far as it is prejudicial to the interests of Revenue, because the assessment has been made not only without proper verification but also without applying the relevant provisions of the Act properly. Therefore, the provisions of section 263 of the I.T. Act, 1961 are hereby invoked and assessment order passed by the AO on the above issue is hereby set aside as mentioned in para 03 above. The AO is directed that the assessment order be framed afresh as per the provisions of law, after considering proper facts and submissions of the assessee on the issue set-aside herein above, after affording proper opportunity to the assessee within the time allowed under the Income- tax Act, 1961.”
4. It is this order against which the assessee is in appeal before this Tribunal.
5. Ld. AR appearing from the side of the assessee submitted before us that the order u/s 263 passed by Ld. PCIT Nashik-1 is unjustified. Ld. AR submitted before us that the Assessing Officer duly considered the statement recorded during the survey proceedings and the same was also reproduced in the body of assessment order, secondly the issue of additional income was discussed in detail and then only the Assessing Officer came to the conclusion that the additional income disclosed by assessee does not fall in the category of income u/s 69C of the IT Act. Ld. AR further submitted that the expenses were duly recorded in the books of accounts and since there was difference in the expenses equal income was offered to tax as an additional income under the head business income. Accordingly, Ld. AR submitted before us that the finding of Ld. PCIT, Nashik- 1 that the assessment order is erroneous insofar as it is prejudicial to the interest of Revenue is not correct. In support of its contentions, Ld. AR relied on the decision passed by Coordinate Bench of this Tribunal in the case of Ashokkumar Kesherchand Pande vs. ACIT passed in order dated 31-07-2023 wherein it was held that the additional income offered during the survey was derived from business and therefore such income was not liable to be taxed under the provisions of section 115BBE of the IT Act. Ld. AR further relied on the decision passed in the case of Yash Construction Company vs. ACIT, ITA No.676 & 677/PUN/2024 order dated 31.07.2024 wherein identical issue was involved i.e. regarding assessee failed to prove sources of the expenditure which was declared during survey and the Assessing Officer made the addition u/s 69C r.w.s. 115BBE of the IT Act, however Coordinate Bench of this Tribunal decided in favour of assessee and hold that income offered during survey was business income and required to be taxed at normal rate of tax. Accordingly, Ld. AR prayed before the Bench to set-aside the order u/s 263 of the IT Act passed by Ld. PCIT, Nashik-
1. 1.
6. Ld. DR appearing from the side of the Revenue relied on the order passed by Ld. PCIT, Nashik- 1 and requested to confirm the same.
7. We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book and copy of case laws furnished by the assessee. In this regard, we find that the solitary issue before us is that whether Ld. PCIT, Nashik-1 was justified in initiating proceedings u/s 263 of the IT Act and directing the Assessing Officer to treat the additional income declared during survey u/s 69C r.w.s. 115BBE of the IT Act. In this regard, we find that the Assessing Officer dealt with the issue in the assessment order and came to the conclusion that the additional income was declared under the head business income and accordingly taxed the same at normal rate of tax instead of special rate u/s 115BBE of the IT Act. We also find that the proceedings u/s 154 of the IT Act were also initiated on the same ground and after considering the reply of the assessee, the Assessing Officer dropped the 154 proceedings. However, we are not saying that if the proceedings u/s 154 were dropped on the same issue, Ld. PCIT, Nashik-1 cannot initiate proceedings u/s 263 of the IT Act but it is also fact that the Assessing Officer has applied his mind to the facts of the case and taken a decision which may not be correct according to Ld. PCIT, Nashik-1. Accordingly, we find that it is not the case that the Assessing Officer has not applied his mind to the facts of the case, admittedly the Assessing Officer has applied his mind and came to the decision. Therefore, we are of the considered opinion that Ld. PCIT, Nashik- 1 erred in holding that the Assessing Officer has not verified the facts of the case and has not applied his mind to the facts of the case. We further find that Ld. AR relied on the decisions passed by the Coordinate Bench of this Tribunal in the case of Yash Construction Co. (supra) & Ashokkumar Kesherchand Pande (supra) wherein it was held that the additional income disclosed during the survey was business income and was required to be taxed at normal rate instead of special rate as prescribed u/s 115BBE of the IT Act. Considering the totality of the facts of the