2021 (8) TMI 1164 - AT - Income Tax

Revision u/s 263 by CIT - proof of lack of enquiry - unaccounted income disclosed during the course of survey proceedings is taxable u/s68/69/69C being unaccounted income - no deduction in respect of any expenditure or allowance or set off any loss is allowable against such income in accordance with the provisions of section 115BBE - HELD THAT - Assessee has no explanation to offer on this point and agrees that the claim of set off of brought forward loss against business income is a wrong claim, is required to be disallowed. PCIT was of the opinion that AO was required to treat the entire income disclosed during the survey as income taxable u/s 68/69/69C and not allow any standard deduction u/s 24 of the Act. The unaccounted income admitted during the survey but not disclosed in the return of income was also required to be added by the AO - as per provision of section 115BBE, the wrong set-off of brought forward loss against unaccounted business income should have been disallowed by the AO. Since no such disallowance and addition have been made by the AO in the assessment order u/s 143(3) dated 14/03/2016, therefore ld PCIT held that assessment order is erroneous and prejudicial to the interest of the revenue. We uphold the above findings of ld PCIT for assessment year 2013-14. Unaccounted income relating to the land at Katargam, Surat disclosed in the statement recorded during the survey proceedings - If test of human probabilities is applied to the facts of the case becomes evident that transaction reflecting in the above mentioned impounded document pertain to the assessee and have taken place otherwise no reason can be there to keep the record of any financial transaction. Shri Manjibhai Patel had admitted that these papers were found from his office which lends to credibility that the document impounded assumes much greater value than what it would have been otherwise - entries reflecting in the impounded document(s) cannot be washed away lightly. - impounded documents itself and more so because of the nature of entries contained therein do not make those papers as a dumb document - AO concerned ought to carry out enquiries in this aspect which was not done at all by him during the course of scrutiny proceedings - there are proof in form of receipts, who has received this payment, but the AO concerned failed to analyse the same and pass on the information to the jurisdictional AOs concerned. On the pages as discovered it is mentioned that Karan is having share of 53% rest 47% is of Gopalji. However, the AO concerned has accepted the fact that Shri Karankumar M Dungrant is having only 53% share in the land and he did not enquired about the ownership of remaining 47% in the impugned land whether the ownership of the remaining 47% is in just a dummy name or in name of some real person, has not been investigated. All these facts narrated above have been accepted without proper verification which has resulted in the assessment order being erroneous and prejudicial to revenue - we hold that assessment order passed by the AO is erroneous in so far it is prejudicial to the interest of revenue. Therefore, we do not find any infirmity, so far the above findings of ld PCIT is concerned for assessment year, 2014-15. We note that issues raised by the ld PCIT were not responded by the assessee during the assessment stage. The assessing officer also did not raised the queries by issuing notice under section 142(1) of the Act, therefore, it is a case of complete lack of inquiry. - Decided against assessee.

Issues Involved:
1. Invocation of section 263 of the Income Tax Act by Principal Commissioner of Income Tax (Pr.CIT).
2. Treatment of income disclosed during survey under sections 68/69/69C.
3. Allowance of standard deduction under section 24.
4. Addition of unaccounted income not disclosed in the return.
5. Set-off of brought forward loss against unaccounted business income.
6. Direction to frame assessment afresh.

Detailed Analysis:

1. Invocation of Section 263 of the Income Tax Act by Pr.CIT:
The assessee challenged the correctness of the orders passed by the Pr.CIT under section 263 for the assessment years 2013-14 and 2014-15. The Pr.CIT exercised jurisdiction under section 263, observing that the Assessing Officer (AO) had not properly scrutinized the income disclosed during the survey and had allowed deductions and set-offs incorrectly, thus making the assessment order erroneous and prejudicial to the interests of the revenue.

2. Treatment of Income Disclosed During Survey Under Sections 68/69/69C:
The Pr.CIT noted that the income of ?1,30,00,000 disclosed during the survey was not supported by any impounded documents or statements establishing it as rental income. Consequently, this amount should have been taxed under sections 68/69/69C at the maximum marginal rate without allowing any standard deduction. The Pr.CIT observed that the AO failed to question or verify the nature of this income during the assessment proceedings.

3. Allowance of Standard Deduction Under Section 24:
The Pr.CIT held that the AO erroneously allowed a standard deduction of ?39,00,000 under section 24 on the disclosed income of ?1,30,00,000, which was not established as rental income. The Pr.CIT directed that this deduction should not have been allowed since the income was taxable under sections 68/69/69C.

4. Addition of Unaccounted Income Not Disclosed in the Return:
During the survey, the partner of the assessee firm admitted to unaccounted income of ?1,00,00,000 for AY 2013-14, which was not disclosed in the return. The Pr.CIT noted that the AO failed to add this unaccounted income to the assessee's income during the assessment, making the assessment order erroneous and prejudicial to the revenue.

5. Set-off of Brought Forward Loss Against Unaccounted Business Income:
The Pr.CIT observed that the AO allowed a set-off of ?18.05 lakhs against regular business income, which was not permissible under section 115BBE when the income is taxed under sections 68/69/69C. The Pr.CIT directed that such set-off should be disallowed.

6. Direction to Frame Assessment Afresh:
The Pr.CIT directed the AO to frame the assessment afresh, considering the discussions and directions provided in the order under section 263. The Pr.CIT emphasized that the AO should treat the entire disclosed income as taxable under sections 68/69/69C, disallow the standard deduction under section 24, and add the unaccounted income not disclosed in the return.

Conclusion:
The ITAT upheld the Pr.CIT's order, agreeing that the AO's assessment was erroneous and prejudicial to the revenue. The ITAT noted that the AO failed to make necessary inquiries and allowed incorrect deductions and set-offs. The appeals filed by the assessee for both assessment years 2013-14 and 2014-15 were dismissed, and the Pr.CIT's directions to frame the assessment afresh were upheld. The ITAT emphasized the importance of the AO's duty to investigate and ascertain the truth of the facts stated in the return, especially when circumstances provoke an inquiry.

← Previous Next →