2022 (8) TMI 1301 - AT - Income Tax

Revision u/s 263 by CIT - Scope of amendment brought in section 115BBE - whether the amendment is prospective or retrospective, as on the date of survey, the amended provisions were not there in the statute? - PCIT was of the firm belief that the assessment order passed by the Assessing Officer is not only erroneous but prejudicial to the interest of the revenue, in as much as, the income has been assessed at normal slab rates instead of tax payable @ 60% under section 115BBE - HELD THAT - Facts on record show that pursuant to the survey operation, statement of the assessee was recorded on 17.08.2016 in which the assessee surrendered an income of Rs.1.50 crores, which included cash Rs.9.50 lakhs, stock Rs.22.50 lakhs, renovation of building Rs.20 lakhs and undisclosed sales Rs.98 lakhs. The assessee honored the surrendered amount in his return of income and paid taxes there on. An amendment has been brought in section 115BBE w.e.f 2017 18 but the same was not there in the statute on the date of survey. Taking a leaf out of the amended provisions, the PCIT was of the opinion that the tax rate should have been 60% instead of 30% because of which the assessment order has become prejudicial to the interest of the revenue. In our considered opinion, this is a highly debatable issue, which cannot be subject matter of assumption of jurisdiction under section 263 of the Act. Moreover, a perusal of the assessment order clearly shows that the assessing officer has nowhere invoked the provisions of sections 68/69 of the Act to impute the tax rate of section 115BBE of the Act. Change which has been brought about in the provisions relates to income so referred to in the afore-stated sections so defined which is either not reflected in the return of income or determined by the assessing officer and in both the cases it will be covered by the provisions of section 115BBE of the Act and the rate of taxation has been increased from 30% to 60% on such specified income. There is, therefore nothing stated in the pre-amended or post amended provisions of section 115BBE of the Act that where the assessee surrenders undisclosed income during search action for the relevant year, the tax rate has to be charged as per provisions of section 115BBE of the Act. Therefore, the applicability of the amended provisions which prompted the PCIT to assume jurisdiction under section 263 of the Act is highly debatable issue, and therefore, in our understanding of the law, the PCIT has wrongly assumed jurisdiction. Where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the decision of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi 2016 (6) TMI 1004 - BOMBAY HIGH COURT - Decided against revenue.

Summary

Issues Involved:
1. Jurisdiction under Section 263 of the Income-tax Act, 1961.
2. Applicability of amended provisions of Section 115BBE.
3. Determination of whether the assessment order was erroneous and prejudicial to the interest of the revenue.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 263 of the Income-tax Act, 1961:

The primary grievance of the assessee was that the Principal Commissioner of Income Tax (PCIT) erred in assuming jurisdiction under Section 263 of the Act, holding that the assessment order dated 03.10.2019 was erroneous and prejudicial to the interest of the revenue. The PCIT's show cause notice dated 09.02.2022 indicated a belief that the assessment order was erroneous because the income was assessed at normal slab rates instead of the 60% tax rate under Section 115BBE. The tribunal noted that the moot point was whether the amendment to Section 115BBE was prospective or retrospective, and concluded that this was a highly debatable issue, which could not be the subject matter of assumption of jurisdiction under Section 263.

2. Applicability of amended provisions of Section 115BBE:

The PCIT believed that the tax rate should have been 60% instead of 30% due to the amendment in Section 115BBE, which was not present at the time of the survey. The tribunal emphasized that the amendment was not in force on the date of the survey. Section 115BBE applies to income referred to in Sections 68, 69, 69A, 69B, 69C, or 69D, with a tax rate of 30% pre-amendment and 60% post-amendment. The tribunal found no indication in the pre-amended or post-amended provisions that the tax rate for surrendered undisclosed income during a search should be as per Section 115BBE. Hence, the applicability of the amended provisions was highly debatable, and the PCIT wrongly assumed jurisdiction.

3. Determination of whether the assessment order was erroneous and prejudicial to the interest of the revenue:

The tribunal referred to the Supreme Court's decision in Malabar Industrial Co. Ltd., which stated that for the Commissioner to exercise jurisdiction under Section 263, the order must be both erroneous and prejudicial to the interests of the revenue. The Bombay High Court in Gabriel India Ltd. further clarified that an order cannot be termed erroneous unless it is not in accordance with the law. The tribunal noted that the Assessing Officer (AO) had applied his mind to the facts and circumstances of the case, and the PCIT's disagreement with the AO's conclusion did not make the order erroneous. The tribunal also cited the High Court of Gujarat's decision in Nirma Chemical Works Ltd., which held that an assessment order need not incorporate detailed reasons for every claim upheld. The tribunal concluded that the PCIT did not have the authority to initiate revision proceedings under Section 263, as the twin conditions of the order being erroneous and prejudicial to the revenue were not satisfied.

Conclusion:

The tribunal set aside the order of the PCIT and restored the assessment order dated 02.10.2019 framed under Section 143(3) of the Act. The appeal of the assessee was allowed, and the order was pronounced in the open court.