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Facts
A survey operation u/s 133A was conducted at the business premises of the assessee. During the survey, the assessee surrendered an amount of Rs. 1,14,26,474/-. Subsequently, the assessment was completed, and additions were made on account of unaccounted expenses, excess stock, and other cash receipts. The Principal Commissioner of Income Tax (PCIT) invoked Section 263, holding that the assessment was erroneous as it did not consider provisions of Section 69 & 69A read with Section 115BBE of the Income Tax Act.
Held
The Tribunal held that the Assessing Officer (AO) had applied his mind to the facts and conducted necessary inquiries. The PCIT erred in holding the assessment order as erroneous and prejudicial to the revenue. The revisional order passed by the PCIT under Section 263 was quashed.
Key Issues
Whether the PCIT was justified in invoking Section 263 to revise the assessment order passed by the AO when the AO had applied his mind and taken a plausible view, and whether the surrendered income should be taxed under Section 115BBE.
Sections Cited
133A, 143(3), 154, 263, 69, 69A, 115BBE, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 477/JP/2024
assessee and there is no finding in the order of ld. AO that the income so offered by the assessee is undisclosed income chargeable to tax as per provisions of section 68, 69 & 69A of the Act.
To drive home this contention, Ld. AR of the assessee relied upon the decision of Co-ordinate Bench of Delhi ITAT in the case of Hema Raman vs. PCIT in dated 12.05.2023. Besides this, Ld. AR contended that while accepting the income disclosed, surrendered and added in the assessment, Ld AO has not given any finding that the income surrendered or added fell under the provision of section 68, 69 or 69A of the Act.
Once ld. AO did not arrive at the conclusion that income fell within the deeming provision u/s 68, 69 & 69A of the Act, the question of charging the same at the special rate did not arise.
On the other hand, ld. DR representing the revenue submitted that the assessee accepted in the statement recorded that the income offered was undisclosed income, not recorded in the regular books of the assessee [ Q.28 page 27 of the paper book], therefore, the same is in the nature covered as per provisions of section 68, 69 & 69A of the Act, subjecxt to automatic there is an apparent mistake, and the order of ld. AO is erroneous being prejudicial to the interest of the revenue, and that is why, the same is covered under the explanation (ii) clause (b) of section 263 of the Act. In this regard, reliance has been placed on the findings recorded in the order of ld. PCIT.
We have heard the rival contentions of both the parties and perused the materials available on record.
In this case, the assessment was framed u/s 143(3) of the Act on 22.09.2021. It has been held to be erroneous in so far prejudicial to the interest of revenue for the reason that the income surrendered during survey operation and the addition made thereupon in the assessment order was not verified as regards the provisions of section 68, 69 & 69A r.w.s. 115BBE of the Act.
The controversy arises whether there was any inquiry conducted by the ld. AO during the assessment proceeding qua the income offered by the assessee during the survey operation. On this aspect, we find that the Assessing Officer had asked the assessee to give details of the disclosure return filed by the assessee.
The Assessing Officer not only verified the details of that amount disclosed by the assessee, but has also went on examining the correctness of the disclosure. There were three disclosure statements made by the assessee.
One is business receipt, regarding which the ld. AO made addition of Rs. 1,62,000/- in addition to the disclosure of Rs. 15 lac made by the assessee.
The assessee made disclosure of construction expenses which were also enhanced by a sum of Rs. 7 lac by the ld. AO.
So far as the excess stock found to the tune of Rs. 7,87,459/-, ld. AO converted it to Rs. 2,36,628/-.
So, exchange of information by the assessee and verified by the Assessing Officer clearly appear in the body of the assessment order.
Thus, it transpires that there was application of mind by the AO during the assessment proceedings. Accordingly, it cannot be said that the assessment has been framed by the AO without conducting inquiries. inquiries with respect to the income surrendered by the assessee during the survey operation conducted u/s 133A of the Act.
Besides the above, we also note that the assessee in the statement recorded during the survey operation also accepted to have offered additional income for the year under consideration and that he would offer the amount as his income of the year. The survey statement is available at page 11 to 27 of the paper book.
Likewise, ld. AO in the assessment framed u/s 143(3) of the Act, also examined all the aspects of the disclosure, made variations and after examination referred to provisions of section 68, 69 & 69A of the Act, but at the same time, did not levy higher tax as per provision of section 115BBE of the Act.
Since a conjoint reading reveals that there was due application of mind by the AO during the assessment proceedings, the assessment cannot be held as erroneous in so far prejudicial to the interest of revenue on account of levy of higher tax as per provision of section 115BBE of the Act.
263 of the Act, in holding that the necessary inquiries were not carried out by the AO during the assessment proceedings.
However, we find that the Ld. PCIT in the notice issued u/s 263 of the Act [ page 28-30 of paper book ] did not make any reference to the Explanation 2 to section 263 of the Act. Therefore, we hold that the Ld. PCIT erred in holding assessment order as erroneous and prejudicial to the interest of Revenue after referring to Explanation 2 of section 263 of the Act.
15. We further note that the ITAT Chandigarh in the case of Shri Parmod Singla v. ACIT reported in 154 taxmann.com 347 of the Act has observed as under:
In the instant case, for the deeming provisions of section 69 to be attracted, there has to be a finding that the assessee has made investments during the financial year in the stock and by way of advances, such investments are not recorded in the books of account so maintained by the assessee, and the assessee offers no explanation about the nature and source of the investments or the explanation so offered is not found satisfactory in the opinion of the AO. Similarly, for the deeming provisions of section 69A to be attracted, there has to be a finding that the assessee was found to be owner of cash so found at the time survey, such cash has not been recorded in the books of account so maintained by the assessee, and the assessee offers no explanation about the nature and source of the cash or the explanation so offered is not found satisfactory in the opinion of the AO.
expenditure, unaccounted investment at the specific rate r.w.s. 115BBE of the Act, it is necessary to classify the income under the relevant head provision under section 69, 68, 69B etc. as they are penal in nature.
In present case, the income surrendered was to be classified u/s 68, 69 & 69A of the Act. As per the direction of the Ld. PCIT, however, we find that the Ld. PCIT has nowhere pointed out that the income surrendered by the assessee falls within the provision of section 68, 69 & 69A of the Act. As such, the assessee was able to justify the source of income surrendered during survey operation. Therefore we are of the view that the same cannot be treated as deemed income. Once, the income goes out of the preview of the deeming provision, the provision of section 115BBE of the Act cannot be applied.
Thus, we note that the AO has taken one of the plausible view by treating the income offered during survey operation as income under the head of business and profession. The similar view has been taken by the co-ordinate bench of Delhi ITAT in the case of Hema Raman vs. PCIT in dated 12.05.2023. The observation of the bench on the issue, when reproduced, reads as :
26 to 479/JP/2024 Mukesh Kumar Saini vs. PCIT “13. On appraisal of facts, we are persuaded by the first limb of the arguments. The determination of true nature and character of income is highly contextual and law has not devised any straight jacket formula in this regard. The classification of income under a particular head of income may significantly vary having regard to the nuanced facts of each case. When seen contextually, the additional income in instant case was conceded by the assessee in the course of survey operations at her business premises. The income surrendered is sort of lumpsum figures offered in the form of excess stock, unaccounted advance to staff, excess cash generated etc. from business operations. Such additional income confessed in survey at business premises gives a facial impression of business attributes. In the light of assertions made in statement in survey and post survey proceedings placed in the paper book, the assessee appears to have made out an arguable case that such income is concomitant of business activities and thus impressed with the character of business income as correctly disclosed in the ROI. The action of AO is not open to attack as erroneous where a view taken is in the realm of a possible view and not found to be wholly incongruous to facts or law. On the face of available facts, one can not say without any reservation that no plurality of opinion can exist on the point and such additional income cannot be treated as business income at all as adjudged by AO. This makes the action of the AO is the league of being plausible. The power of review cannot be exercised to collect more taxes merely owing to the reason that the law now provides for penal and steep rate of taxation by bringing such income within the ambit of S. 68/ 69 etc. 13.1 Significantly, the PCIT, while seeking to set aside the action of AO and remitting the matter back for further enquiries, did not bring any definite material to show any incorrect assumption of such facts on this score. Besides, no observations are found in the impugned revisional order suggesting a course to be adopted towards manner of determining true character of additional income or the nature of enquiries expected from AO. 13.2 In the similar factual circumstances and in the context of section 263, the Hon’ble Andhra Pradesh High Court in the case of PCIT vs. Deccan Jewellera (P) Ltd. ( 2021) 132 taxmann.com 73(AP) held the action of AO cannot be said be marred by any perversity and the revisional order was set aside. 13.2 Taking into account the entire conspectus of the matter, we thus find merit in this plea. The pre-requisites of S. 263 are clearly not found to be fulfilled.
We shall now also turn to other argument propelled on behalf of the Assessee that substituted enactment of section 115BBE came into force with assent of President of India w.e.f 15.12.2016 by Taxation Laws (second amendment) Act, 2016 [applicable w.e.f 01.04.2017] and thus income arising to assessee prior to its substitution from 15th Dec. 2016 shall be governed by erstwhile provision of S. 115BBE.xxxx xxx xxxx xxx 27 to 479/JP/2024 Mukesh Kumar Saini vs. PCIT 17. In conclusion, in the light of discussion in para 13 supra, the approach adopted by the Assessing Officer being plausible, the action of the Assessing Officer cannot be labeled as ‘erroneous’ although it may be prejudicial to the interest of the revenue. Thus, twin conditions of Section 263 are not simultaneously satisfied in the instant case. The jurisdiction usurped by the Pr.CIT under Section 263 thus fails on this parameter and hence the revisional order cannot be sustained in law. Consequently, the revisional order passed under Section 263 is quashed.
So, we are of the considered view that ld. PCIT could not substitute the view taken by ld. AO as per his understanding of facts of the case. In view of the above, and after considering the facts in totality, we hold that the order passed u/s 263 of the Act is not sustainable. Accordingly, we quash the same. Hence, the solitary ground of appeal of the assessee is hereby allowed.
In the result, the appeal of the assessee is in stands allowed.
The facts of the case in & 479/JP/2024 are similar to the case in ITA No. 477/JP/2024.
We have heard both the parties and perused the materials available on record. The issue raised by the assessee in these appeals No. 478 & 479/JP/2024 is equally similar, on same set of facts and grounds.
Therefore, it is not imperative to repeat the facts and various grounds raised by both the parties. Hence, the Bench feels that the decision taken mutatis mutandis in the cases of Laxmi Narayan Saini & Prakash Chand Saini i.e. & 479/JP/2024 for the Assessment Year 2019-20.
In terms of these observations, three appeals of the assessee are allowed.
Order pronounced in the open court on 01/08/2024.
Sd/- Sd/- ¼ujsUnz dqekj½ ¼jkBkSM+ deys'k t;UrHkkbZ½ (NARINDER KUMAR) (RATHOD KAMLESH JAYANTBHAI) U;kf;d lnL;@Judicial Member ys[kk lnL; @Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 01/08/2024 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Mukesh Kumar Saini, Dausa 2. izR;FkhZ@ The Respondent- PCIT (Central), Jaipur-05 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA Nos. 477 to 479/JP/2024) 6.