2020 (11) TMI 934 - AT - Income Tax

Revision u/s 263 - scrutiny assessment - as per CIT undisclosed income, the excess stock and excess cash required to be brought to tax @60% as per section 69 r.w.s. 115BBE, however AO taxed the same at normal rates - HELD THAT - On going through the assessment order, we find that though the AO made the addition of as undisclosed income, no addition was made u/s 69 - AO did not invoke section 68/69 separately in the assessment order. The income required to be taxed @60% in case the undisclosed income representing section 68 to section 69C of the Act. In this case, the AO has not invoked any such section. AO called for the information regarding excess stock and excess cash and also called for explanation of the assessee as to why both the items should not be taxed u/s 69 applying the tax rate @60%. The assessee furnished explanation and explained that both the items constitute business income but not unexplained income within the meaning of section 69 of the Act, hence submitted that the same to be taxed at normal rates. AO completed the assessment after considering the explanation offered by the assessee. In the explanation, the assessee has explained as to why the same should be treated as business income and the provisions of section 69 and section 115BBE are not applicable. The assessee also relied on various case laws supporting his argument as to why the excess stock/cash should be treated as business income. Therefore, it is apparently clear from the records that though the AO did not mention specifically with regard to verification of the issues, the AO examined the issues in detail, considering the facts and the case laws relied upon by the assessee, taken a conscious decision to assess the excess stock/cash as business income instead of unexplained investment u/s 69 of the Act. Therefore revisiting the same issue which was already considered by the AO constitutes difference of opinion and on difference of opinion revision u/s 263 is not permissible. See SPECTRA SHARES SCRIPS PVT. LTD. 2013 (6) TMI 173 - ANDHRA PRADESH HIGH COURT and G.V.R. ASSOCIATES 2017 (4) TMI 393 - ITAT VISAKHAPATNAM - Decided in favour of assessee.

Summary

Issues:
Assessment order challenged under section 263 for undisclosed income taxation rate discrepancy.

Analysis:
The appeal was filed against the Principal Commissioner's order under section 263 of the Income Tax Act for the Assessment Year 2017-18. The case involved a search under section 132 in group cases, leading to the assessee initially declaring a total loss. Subsequently, the Assessing Officer (AO) assessed the total income and brought undisclosed income to tax. The Principal Commissioner found discrepancies in the taxation rate applied to part of the undisclosed income, directing the AO to tax it at 60% under section 115BBE. The assessee challenged this revision under section 263, arguing that the excess stock and cash were part of business income, not falling under section 69. The AO did not invoke section 68/69 separately and considered the explanation provided by the assessee. The assessee supported its position with case laws and detailed explanations, leading to the AO's conscious decision to assess the excess stock/cash as business income. The Tribunal held that revisiting this issue, which was already considered by the AO, constituted a difference of opinion, making revision under section 263 impermissible. Citing precedents, including a High Court decision, the Tribunal emphasized that the AO's conscious decision, supported by case laws and explanations, precluded the revision. Consequently, the Tribunal set aside the Principal Commissioner's order under section 263 and allowed the appeal of the assessee.

This detailed analysis showcases the Tribunal's thorough examination of the issues raised, including the application of tax rates to undisclosed income and the AO's decision-making process regarding the nature of the excess stock and cash. The Tribunal's reliance on legal precedents and the AO's reasoned approach in assessing the income as business income rather than under section 69 highlights the importance of factual considerations and legal interpretations in tax assessments.