2022 (8) TMI 791 - AT - Income Tax

Revision u/s 263 - Addition u/s 68 - income from other source (income declared at the time of survey) - tax is payable u/s 115BBE or not - recovery of cash amount of advances made by the assessee to the other persons for purchase of land / plots and thus comes under the purview of section 68 or not - HELD THAT - Additional income was in the nature of business income and don t fall under Sec. 68 and/or Sec. 69 of the Act and consequently therefore, Sec.115BBE could not have been invoked. In view of the above discussion, therefore, we are of the considered view that the CIT was not at all justified by invoking the provisions of Sec. 263 by wrongly/incorrectly holding that the subjected assessment order u/s 143(3) dated 25.02.2019, was passed without considering that the income declared under the head of other sources being recovery of cash amount of advances paid for purchase, comes under preview of S. 68 and 69 and thus, the tax u/s 115BBE was to be paid, as against the tax at normal rates. The assumption of jurisdiction u/s 263 was contrary to the law and facts on record. Hence, the proceedings initiated u/s 263 of the Act and the impugned order are hereby quashed. Thus, ground of appeal decided in favour of assess and against the revenue. Assumption of jurisdiction u/s 263 for not initiating penalty proceedings u/s 271AAC - CIT held that the additional income was also subjected to penalty u/s 271AAC of the Act and accordingly set aside the subjected assessment order - HELD THAT - After hearing both the parties and perusing the materials available on record as well as judicial pronouncements cited by both the parties, we at the outset have no hesitation to hold that the issue involved is no more res integra in as much as the in the case of CIT vs Keshrimal Parasmal 1985 (5) TMI 34 - RAJASTHAN HIGH COURT - We are of the considered view that the ld. Pr. CIT acted beyond jurisdiction in holding that the additional income was subjected to penalty u/s 271AAC - Ground No. 3 of the assessee is allowed

Issues Involved:
1. Invocation of Section 263 of the Income Tax Act.
2. Assumption of jurisdiction under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT).
3. Classification of income under Sections 68 and 69 of the Income Tax Act.
4. Applicability of tax under Section 115BBE.
5. Initiation of penalty proceedings under Section 271AAC.
6. Adequacy of inquiry by the Assessing Officer (AO).

Detailed Analysis:

1. Invocation of Section 263 of the Income Tax Act
The assessee challenged the invocation of Section 263 by the Pr. CIT, arguing that the assessment order dated 25.02.2019 was neither erroneous nor prejudicial to the interest of the Revenue. The Pr. CIT had observed that the AO did not verify/examine issues related to the income declared under the head "income from other sources" amounting to Rs. 28,95,300/- during the survey. The Pr. CIT contended that this income should have been taxed under Sections 68 and 69A at 60% as per Section 115BBE, which was not done, leading to an undercharge of tax.

2. Assumption of Jurisdiction under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT)
The Pr. CIT issued a notice under Section 263, noting that the AO did not initiate penalty proceedings under Section 271AAC and failed to charge the correct rate of tax on the income declared during the survey. The assessee argued that the AO had duly verified the details and that the Pr. CIT could not assume jurisdiction merely because he disagreed with the AO's conclusions. The Tribunal noted that the AO had made specific inquiries and had verified the details, thus exercising due diligence.

3. Classification of Income under Sections 68 and 69 of the Income Tax Act
The Pr. CIT held that the income declared during the survey should be classified under Sections 68 and 69A (unexplained cash credit and unexplained money). The assessee contended that the income was from the real estate business and should be classified as business income. The Tribunal agreed with the assessee, noting that the income was related to the real estate business and not unexplained cash credit or money.

4. Applicability of Tax under Section 115BBE
The Pr. CIT argued that the income should be taxed at 60% under Section 115BBE. The assessee contended that the income was business income and should be taxed at normal rates. The Tribunal noted that the AO had taken a possible view supported by judicial precedents that the income was business income and not subject to Section 115BBE. The Tribunal cited various judicial pronouncements to support this view, including CIT vs. Bajargan Traders and CIT vs. Max India Ltd.

5. Initiation of Penalty Proceedings under Section 271AAC
The Pr. CIT contended that penalty proceedings under Section 271AAC should have been initiated. The Tribunal referred to judicial precedents, including CIT vs. Keshrimal Parasmal, holding that the Pr. CIT could not direct the AO to initiate penalty proceedings under Section 263. The Tribunal concluded that the Pr. CIT acted beyond his jurisdiction in this regard.

6. Adequacy of Inquiry by the Assessing Officer (AO)
The Pr. CIT claimed that the AO did not make adequate inquiries. The Tribunal found that the AO had issued specific notices and questionnaires, and the assessee had furnished the requisite details, which the AO verified. The Tribunal emphasized that the AO had exercised due diligence and that the Pr. CIT could not invoke Section 263 merely because he believed more inquiries should have been made.

Conclusion
The Tribunal quashed the order of the Pr. CIT, holding that the AO's assessment was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal allowed the appeal of the assessee, concluding that the Pr. CIT had incorrectly invoked Section 263 and overstepped his jurisdiction by directing the initiation of penalty proceedings under Section 271AAC.

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