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2020 (8) TMI 141 - AT - Income TaxRevision u/s 263 - PCIT was of the view that a very low rate of net profit was considered by assessing officer on undisclosed business turnover of the assessee and the undisclosed income so added by the AO to the total income of the assessee, should have been treated and taxed as per provisions of section 115BBE - HELD THAT - Assessing Officer has duly assessed the deposits in the bank account No. 2195697434 of Central Bank of India, to the tune of ₹ 95,33,717/-, treating ₹ 91,48,326/- as undisclosed business receipts/undisclosed turnover. Thereafter the assessing officer computed the margin of profit @4% of undisclosed business receipts at ₹ 3,65,933/- (that is 4%₹ 95,33,717). The AO also made addition on account of interest on saving bank account at ₹ 11,521/-.Therefore, the bank account A/c No. 2195697434 has been verified by the assessing officer One of the grounds on which the ld PCIT had exercised jurisdiction (that the net profit of ₹ 3,65,933/- considered by the Assessing officer on the undisclosed business turnover of ₹ 91,48,326/-was without any verification and proper analysis which needs to be examined properly), has been examined by the assessing officer properly. Therefore, when the order of the Assessing Officer is not erroneous, section 263 cannot be invoked to direct the Assessing Officer to hold another investigation Infosys Technology Ltd. v. JCIT 2005 (6) TMI 211 - ITAT BANGALORE-B . Therefore, so far this first ground is concerned, the ld PCIT was not right in exercising the jurisdiction under section 263 of the Act. AO had failed to tax the undisclosed income as per provisions of section 115BBE - whether business receipts/business turnover is taxable under section 115BBE of the Act? - HELD THAT - As per the intention of legislature, the burden to apply section 115BBE and section 68 to section 69D of the Act rest on revenue shoulder. That burden cannot be discharged on the basis of assumption and presumption made by the assessing officer. Having gone through the section 115BBE, as noted above, we are of the view that business activity related income may not ordinarily get placed u/s 68 to section 69D. We note that assessing officer in his assessment order has also treated the undisclosed amount in bank account as undisclosed business receipts/turnover. Since, the assessing officer has applied his mind and treated the undisclosed amount in bank account as undisclosed business receipt or turnover of the assessee, therefore provisions of section 115BBE does not apply to the assessee. AO while giving appeal effect to the order of ld PCIT under section 263 of the Act, had shown the undisclosed amount of bank account under the head business income, vide order of assessing officer under section 143(3)/263 of the Act dated 28-11-2019. Our view is further fortified by the Judgment of the Coordinate Bench of Mumbai in the case of ACT Central Circle-13 Mumbai v. Rahil Agencies 2017 (2) TMI 30 - ITAT MUMBAI wherein it was held that section 115BBE does not apply to business receipts/business turnover. Since the Department itself accepting the undisclosed amount of assessee in his bank account as undisclosed business receipts/turnover, therefore, section 115BBE does not attract here and hence order passed by the assessing officer, after application of mind, under section 143(3) dated 30-12-2016 is neither erroneous or prejudicial to the interest of revenue. PCIT has used only probability and likelihood to find the error in the assessment order which is not permitted, he ought to find out specific error in the assessment order, and guide the assessing officer, since he has failed to do so in the assessee's case under consideration, therefore order passed by the assessing officer is neither erroneous nor prejudicial to the interest of the revenue. - Decided in favour of assessee.
Issues Involved:
1. Validity of the Principal Commissioner of Income-tax (PCIT) order under section 263 of the Income-tax Act, 1961. 2. Applicability of section 115BBE on undisclosed business income. 3. Adequacy of Assessing Officer's (AO) verification and analysis of undisclosed business turnover. Issue-wise Detailed Analysis: 1. Validity of the PCIT Order under Section 263: The assessees challenged the correctness of the PCIT's order under section 263, claiming it was "bad in law, facts and procedure." The PCIT assumed jurisdiction under section 263 on the basis that the AO had considered a low rate of net profit on the undisclosed business turnover and failed to tax the undisclosed income as per section 115BBE. The Tribunal noted that the AO had duly assessed the deposits in the bank account and treated them as undisclosed business receipts. The AO's approach was found to be a "possible view" and not erroneous. The Tribunal emphasized that the Commissioner should not invoke section 263 merely to direct the AO to hold another investigation if the original assessment was not erroneous. Thus, the Tribunal concluded that the PCIT's order was invalid as it did not meet the twin conditions of being erroneous and prejudicial to the interests of the revenue. 2. Applicability of Section 115BBE on Undisclosed Business Income: The PCIT argued that the AO failed to tax the undisclosed income as per section 115BBE. The Tribunal examined whether section 115BBE, which applies to incomes referred to in sections 68 to 69D, was applicable. It was noted that the AO had treated the undisclosed amount as business receipts/turnover, which typically would not fall under sections 68 to 69D. The Tribunal cited a precedent from the Mumbai Bench, which held that section 115BBE does not apply to business receipts. The Tribunal found that the undisclosed business receipts were correctly treated as business income by the AO, and thus, section 115BBE was not applicable. 3. Adequacy of AO's Verification and Analysis of Undisclosed Business Turnover: The PCIT contended that the AO's estimation of net profit on the undisclosed business turnover was without proper verification and analysis. However, the Tribunal found that the AO had conducted a detailed examination of the bank account transactions, verified original bills and vouchers, and made a reasoned decision to apply a 4% profit margin. The Tribunal noted that the AO had applied his mind and made a thorough investigation, thus fulfilling his duty as an investigator. The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the revenue's interest. Conclusion: The Tribunal quashed the PCIT's order under section 263, declaring it "ab initio void" as it was based on probabilities and lacked specific errors. The AO's original assessment was upheld as it was neither erroneous nor prejudicial to the interest of the revenue. Both appeals of the assessees were allowed.
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