MUKESH KUMAR SARAOGI,CHURU vs. PRINCIPAL COMMISSIONER OF INCOME TAX-2, JAIPUR

per provision of section 115BBE of the Act to support the argument,

ld. AR of the assessee relied upon the judgment of Hon’ble ITAT

Indore in the case of DCIT vs M/s Punjab Retail Pvt. Ltd.- ITA Nos.

677/Ind/2019.

the proceedings before ld. PCIT. The ld. AO also initiated the

proceedings and passed an order withdrawing the proceedings u/s.

15 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT 154 of the Act. Therefore, there cannot be any separate proceedings

by the ld. PCIT under the provisions of section 263 of the Act not

only that ld. PCIT has not disclosed the fact of the proceedings u/s

154 of the Act is initiated and closed/withdrawn by the AO. The AO

himself has only initially in the assessment order not invoked the

provisions of section 115BBE of the Act and even after that order by

issuing notice u/s 154 of the Act and after considering the

submission of the assessee has also withdrawn section 154

proceedings. Therefore, the action of ld. PCIT to invoke the

provision of section 263 is bad in law as well as on facts. The ld. AR

of the assessee further submitted that anything which is not

comfortable or not done as per will and wishes is not prejudicial to

the interest of the revenue. The ld. PCIT of the order cannot be

revised to substantiate their view. The ld. AR of the assessee

heavily relied upon the decision of Hon’ble Rajasthan High Court in

the case of Ganpat Ram Bishnoi wherein the Hon’ble Rajasthan

High Court has said that the jurisdiction u/s 263 cannot be invoked

for making the short inquiries or to go into the process on

assessment again and merely on the basis that more inquiry ought

to have been conducted to find something.

16 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT 10. Per contra, the ld. DR has justified the action of the ld. PCIT as

the order of the Assessing Officer erroneous and prejudicial to the

interest of the revenue. The ld. DR specifically drawn our attention to

the fact that the assessee themselves have declared income as other

sources u/s 69 of the Act. The extract of the computation of income is

extracted here in below for the sake of brevity of the facts :

17 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT

under the provision of section 69 of the Act which is supported by the

18 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT

statement recorded at the time of survey, the provisions of section

115BBE of the Act are automatic and ld. PCIT has power to review

the orders of the Assessing Officer which are thus prejudicial to the

interest of the revenue. The relevant extract of the statement

recorded is also extracted here in below:

19 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT

20 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT

arising out of undisclosed sources in the firm of stock and cash

found at the time of survey the same is also supported by a

21 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT computation of income wherein the income is offered u/s. 69 of the

Act therefore, the provision of section 115BBE are automatic which

the AO not invoked and there is no discussion also in the

assessment order. This fact is not disputed by the assessee also. In

fact the assessee has submitted that this is a mistake and the

assessee should be guided by the ld. AO. As regards the withdrawal

of 154 notice by an order on 27.02.2022 is on account of 263

proceedings initiated by ld. PCIT vide notice dated 16.02.2022 as

explained by the DR and the ld. AR has not controvert to this fact

argued by the ld. DR, as the parallel proceedings cannot be initiated

against the assessee and therefore, becoming aware, he himself

has dropped that proceeding does not meaning that the Assessing

Officer has accepted that the order is not rectifiable u/s 154 of the

Act. When the higher authority call for the record and issued the

notice u/s. 263 notice given u/s 154 proceedings though by non-

speaking order withdrawn on account of this fact which is a genuine

facts not controverted by the ld. AR. The decision relied upon by the

ld. AR of the assessee in the case of Ganpat Ram Bishnoi given by

Hon’ble Rajasthan High Court is in respect of the fact that the

assessee has disclosed the income as business income whereas in

this case the same is disclosed and accepted as undisclosed

22 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT income for which the ld. DR has pointed out the relevant questions

and answer of the statement and computation of income filed by the

assessee. Thus, the facts of the case relied upon by the ld. AR of

the assessee are differentiated on facts and both the judgement of

the Jurisdictional high court are thus on different set of facts. As

regards the decision of Indore bench also the fact that the assessee

has disclosed the income as business income and there is no

admission of undisclosed income recorded by the assessee

themselves. Therefore, the provisions of section 115BBE of the Act

being automatic, the assessee is supposed to pay tax as per

provisions of the Act. Therefore, the assessee is subjected to tax as

per provision of section 115BBE of the Act decision of the Hon’ble

Rajasthan High Court relied upon AR of the assessee not only

differentiated on facts but it is due to change in law as argued by the

ld. DR. The assessee themselves have agreed that the income is

chargeable u/s 69 of the Act and they have offered the same in

other income as per provision of the fact evident from the record.

Therefore, the assessee cannot take shelter of this decision. As

regards the arguments of the ld. AR of the assessee that the rate as

prescribed u/s. 115BBE cannot be applied retrospectively as the

survey was conducted on 15.09.2016 and the hike of the rate from

23 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT 30 % to 60 % received the president assent on 15.12.2016, the ld.

DR draw our attention to provision of section 4 of the Act being the

charge of the income and has relied provision of thereon which is

extracted hereinbelow:-

“4. Charge of income-tax (1) Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and [subject to the provisions (including provisions for the levy of additional income-tax) of, this Act] in respect of the total income of the previous year [****] of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. (2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act.”

submission and case laws cited by both the parties to drive whom to

their contentions. We have also gone through the orders of the lower

authorities. It is not disputed even by the ld. AR of the assessee that

the assessee themselves accepted the fact that the income that they

have disclosed during the course of survey is supported by the

excess stock cash and loose paper found and also offered as

income chargeable u/s. 69 of the Act. They themselves have

accepted this fact and offered the income under the head other

income in the computation. This fact is not disputed but the ld. AR of

24 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT the assessee argued that it is genuine mistake and department

should assist the assessee and they should not take benefit of the

ignorance or mistake of the assessee. Therefore, ld. AR submitted

that it is also not disputed that the income that the disclosed is

arising out of the business activities of the assessee and therefore,

the contention of the revenue to charge the income at special rate

provided u/s 115BBE of the Act is not correct. The ld. AR of the

assessee further argued that the survey is dated 23.09.2016

whereas the provision of the increase in rate has received the

assent of the President on 12.12.2016 and therefore, relying on the

decision of Indore Bench in the case of DCIT, Central-2, Indore vs.

M/s Punjab Retail Pvt. Ltd., Indore in ITA No. 677/Ind/2019 dated

08.10.2021. As rightly differentiated all the judgment relied upon by

the ld. AR of the assessee are on different set of facts and we agree

with the difference pointed out by the ld. DR. Since all the decisions

cited of wherein the admission is not recorded where in this case the

assessee has admitted in the statement and also considered the

said income u/s. 69 of the Act. Therefore, the ratio decided in those

cases are not directly applicable to the fact of the case. The rate of

tax is to be seen from the provision of the Act. The issues raised

before us are already decided by the Hon’ble High Court of Kerala in

25 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT

the case of Maruthi Babu Rao Jadav vs. ACIT in WA No. 984 of

2019 where in the court has decided the issue of applicability of the

higher rate of tax. The relevant observation is extracted here in

below :

26 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT

that if he were caught he would have to shell out only lesser aunts as tax and surcharge. There is no right accrued on the assessee to commit an offence on the expectation of a lesser penalty. 16. It was also argued that Income Tax at the rate or rates specified, as prescribed in any Central Act to be charged for any assessment year, shall be so charged in respect of the total income of the previous year as per Section 4 of the IT Act. However, there is no such provision to enable a surcharge to be so taxed, on the Finance Act prescribing an enhanced rate at the commencement of an year. The said contention however, cannot be sustained especially looking at the decision on the Hon'ble Supreme Court in CIT Kerala v. K Srinivas [(1972) 4 SCC 526. The facts are not relevant to the issue raised here and we need only look at the declaration as to the nature of a surcharge imposed the Finance Act. The legislative history with respect the concept of surcharge was traced by the Court, which, for the first time was found to have been recommended in the report of the Committee on Indian Constitutional Reforms Volume 1 Part 1. The word surcharge was used compendiously for the special addition to taxes on income imposed in September 1931. It was held so in paragraph 7 and 8: 7. The above legislative history of the Finance Acts, as also the practice, would appear to indicate that the term "Income tax" as employed in Section 2 includes surcharge as also the special and the additional surcharge whenever provided which are also surcharges within the meaning of Article 271 of the Constitution. The phraseology employed in the Finance Acts of 1940 and 1941 showed that only the rates of income tax and super tax were to be increased by a surcharge for the purpose of the Central Government. In the Finance Act of 1958 the language used showed that income tax which was to be charged was to be increased by a surcharge for the purpose of the Union. The word "surcharge" has thus been used to either increase the rates of income tax and super tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term "Income tax" as used in Section 2 includes surcharge. 8. According to Article 271 notwithstanding Anything in Articles 269 and 270 Parliament may at any time increase any of the duties or taxes referred to in those Articles by a surcharge for the purpose of the Union and the whole proceeds of any such surcharge shall form part of the Consolidated Fund of India. Article 270 provides for taxes levied and collected by the Union and distributed between the Union and the States. Clause (1) says that tax on income other than agricultural income shall be levied and collected by the Government of India and distributed between the Union and the States in the manner provided in clause (2) Article 269 deals with taxes levied and collected by the Union but assigned to the States. The provisions of Article 268 which is the first one under the

27 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT heading "distribution of revenue between the Union and the States" relate to duties levied by the Union but collected and appropriated by the States. Thus these Articles deal with the levy, collection and distribution of the proceeds of the taxes and duties mentioned therein between the Union and the States. The legislative power of Parliament to levy taxes and duties is contained in Articles 245 and 246(1) read with the relevant entries in List I of the Seventh Schedule." 17. In the instant case surcharge was imposed by Finance Act, 2016 and the rate stood enhanced by Finance Act, 2017. The Income Tax even as per the Finance Act was to be at the rate specified in Part I of the 1st Schedule which shall be increased by surcharge for purposes of the Union. Surcharge hence partakes the character of Income tax and Article 271 itself empowers the Parliament, at any time to increase any of the duties or taxes by a surcharge for the purpose of the Union and it forms part of the Consolidated fund. So when a surcharge is imposed it is in effect an enhancement of the tax or duty. The provision in the Finance Act also employs the words 'the income tax computed shall be increased by a surcharge': Section 4 of the IT Act squarely applies to the surcharge imposed. The judgment of the learned Single Judge is affirmed for the for the reasoning herein above and the Writ Appeal would stand dismissed without any order as to costs.”

section 263 of the Act to charge the income of the assessee which is

subject matter of section 69 and the same is chargeable at special

rate of provision of section 115BBE of the Act is clear cut error

prejudicial to the interest of the revenue and therefore, we confirm

the action of ld. PCIT invoking the provision of section 263 of the Act

and therefore, the appeal of the assessee is dismissed.

In terms of these observations, the appeal of the assessee is

dismissed.

28 ITA No. 186/JP/2022 Sh. Mukesh Kumar Saraogi vs. PCIT

Order pronounced in the open court on 09/11/2022

Sd/- Sd/- ¼ jkBkSM deys’k t;arHkkbZ ½ ¼ lanhi xkslkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 09/11/2022 *Ganesh Kumar आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Sh. Mukesh Kumar Saraogi, Churu 2. izR;FkhZ@ The Respondent- PCIT-2, Jaipur 3. vk;dj vk;qDr@ The ld CIT vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 186/JP/2022) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत