2021 (8) TMI 905 - AT - Income Tax

Revision u/s 263 - treating the surrendered amount of income as deemed income u/s 69/69A or from normal business income - No additions made by the AO u/s 115BBE - HELD THAT - As the assessee in rectification proceeding under section 154 had submitted the manner in which the amount of ₹ 1.5 crore was treated in the accounts of the assessee. After considering all the aspect and considering the decision of the Tribunal, the assessing officer has not proceeded against the assessee. In our view the decision of the Tribunal in the matter of Dev Raj Hi Tech Machines Ltd 2015 (11) TMI 1375 - ITAT AMRITSAR was clearly applicable to the facts of the present case. In fact the said case was referred by the Principle CIT , however she had neither distinguished nor discussed while passing the impugned order. PCI had simply relied upon the explanation 2 to section 263 of Act and wrongly held that the assessing officer did not make sufficient inquiries. The order passed by the PCIT cannot be upheld because the assessing officer had made sufficient enquiries and had correctly taken income surrendered by the assessee as business income and after due considerations of reply. Secondly the view taken by the assessing officer was supported by the view of Tribunal in the case of Dev Raj Hi Tech Machines Ltd 2015 (11) TMI 1375 - ITAT AMRITSAR thus it cannot be said that the view taken by the assessing officer was not a plausible view ,hence it was erroneous. Admittedly when two views are possible, then the view taken by the assessing officer cannot be said to be wrong as the same was not to the liking of the opinion of the PCIT, for the above-said purposes, we may rely upon Max India. 2007 (11) TMI 12 - SUPREME COURT . Lastly the finding recorded by the DCIT relying upon explanation 2 to section 263 cannot be sustained, as explanation 2 to section 263, which was inserted w.e.f 1.6.2015 and was held to be prospective - We found that the order passed by PCIT was not in accordance with law and therefore, we quash the same.

Issues Involved:
1. Difference in valuation of cash, stock, and building found during the survey.
2. Treatment of surrendered income as business income or deemed income under Sections 68, 69A, 69B, 69C, or 69D.
3. Applicability of Section 115BBE to the surrendered income.
4. Validity of the Principal CIT's invocation of Section 263 for revision of the assessment order.

Detailed Analysis:

1. Difference in Valuation of Cash, Stock, and Building:
During a survey conducted on 19.02.2014, discrepancies were found in the physical verification of cash and stock compared to the books. The cash was found to be in excess by ?9,71,969, and the stock was in excess by ?49,67,901. Additionally, the building's valuation showed a difference of ?88,76,845.

2. Treatment of Surrendered Income:
The Assessee surrendered ?1,50,00,000 during the survey, categorizing it as excess cash, excess stock, and building construction. The surrendered amount was credited to the Profit & Loss Account over and above the normal profits of the business. The Assessee argued that since the surrendered income was related to business activities, it should be treated as business income.

3. Applicability of Section 115BBE:
The Assessing Officer initially framed the assessment without invoking Section 115BBE, which mandates a 30% tax rate on unexplained income under Sections 68, 69A, 69B, 69C, and 69D. The Principal CIT later issued a notice under Section 263, arguing that the surrendered income should be taxed under Section 115BBE, disallowing any deductions. The Assessee contended that Section 115BBE was not applicable as the surrendered income was business income and not unexplained income under the specified sections.

4. Validity of Principal CIT's Invocation of Section 263:
The Principal CIT invoked Section 263, claiming the assessment order was erroneous and prejudicial to the interests of the revenue due to the non-application of Section 115BBE. The Assessee argued that the Assessing Officer had made sufficient inquiries and had correctly treated the surrendered income as business income. The Tribunal found that the Assessing Officer had indeed made inquiries and had considered the Assessee's explanations and relevant case laws before finalizing the assessment. The Tribunal also noted that the Principal CIT did not provide specific directions or demonstrate how the assessment order was erroneous.

Tribunal's Findings:
1. Difference in Valuation: The Tribunal noted the discrepancies found during the survey and acknowledged the Assessee's surrender of additional income to avoid litigation.
2. Treatment of Surrendered Income: The Tribunal upheld the Assessee's treatment of the surrendered income as business income, citing that it was related to business activities and was credited to the Profit & Loss Account.
3. Applicability of Section 115BBE: The Tribunal found that the Assessing Officer had considered the applicability of Section 115BBE during the original assessment and rectification proceedings. The Tribunal referred to earlier case laws, including Dev Raj Hi-Tech Machines Ltd., which supported the treatment of surrendered income as business income.
4. Invocation of Section 263: The Tribunal quashed the Principal CIT's order under Section 263, stating that the Assessing Officer had made sufficient inquiries and that the Principal CIT's invocation was based on a different opinion rather than an error in law. The Tribunal emphasized that two views were possible and that the Assessing Officer's view was a plausible one supported by judicial precedents.

Conclusion:
The Tribunal concluded that the assessment order was not erroneous or prejudicial to the interests of the revenue. It held that the surrendered income was rightly treated as business income and that Section 115BBE was not applicable. The Tribunal quashed the Principal CIT's order under Section 263, thereby upholding the original assessment order.

← Previous Next →