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2023 (3) TMI 306 - AT - Income TaxRevision u/s 263 - Income surrendered in survey proceedings - taxation during the survey action as additional income apart from the income disclosed which meant that the same was related to the additional business income of the assessee - As per CIT AO had failed to acknowledge the fact that the surrender represented the undisclosed income of the assessee which would have never come to light, had there been no survey u/s 133A - HELD THAT - AO duly made enquiries from the assessee as to the nature and the source of the aforesaid surrendered income and has also show caused the assessee as to why the same should not be charged at a higher rate of tax as per provisions of Section 115BBE of the Act. The ld. AO after considering the submissions and explanations of the assessee accepted the contention of the assessee that the surrendered income was out of the business income of the assessee. The perusal of the impugned order of the ld. PCIT would show that the ld. PCIT has not pointed out as to why the explanation offered by the assessee to the AO was not satisfactory and further what more enquiries are required to be conducted in this case, which the AO had failed to conduct. The ld. PCIT has simply based his opinion and order on the Audit Objections/Report as pointed out even in the Audit Report that since the same was undisclosed income of the assessee which was surrendered by the assessee during the survey action and therefore, the same was to be assessed under the provisions of Section 68 to 69D of the Act. The above reasoning of the survey party is not in accordance with the relevant provisions of the Act. Therefore, we do not find any justification on the part of the ld. PCIT in invoking the Revisionary jurisdiction in this case. See GANDHI RAM PROPRIETOR GANDHI GENERAL STORE, VILL VERSUS THE PRINCIPAL COMMISSIONER OF INCOME TAX PATIALA. 2022 (8) TMI 377 - ITAT CHANDIGARH Thus the revision order passed by the ld. PCIT u/s 263 of the Act, in our view has been passed by wrongfully exercising the jurisdiction u/s 263 of the Act and the same is, therefore, held as bad in law and is accordingly, quashed. - Decided in favour of assessee.
Issues Involved:
1. Exercise of Revision jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Applicability of Section 115BBE to the surrendered income during a survey action. 3. Nature and source of the surrendered income. Issue-wise Detailed Analysis: 1. Exercise of Revision jurisdiction under Section 263 of the Income Tax Act, 1961: The appeals were filed against the orders of the Principal Commissioner of Income Tax (PCIT) who exercised his Revision jurisdiction under Section 263 of the Income Tax Act, 1961. The PCIT believed that the Assessing Officer's (AO) order was erroneous and prejudicial to the interests of the Revenue because the AO did not tax the surrendered income at a higher rate under Section 115BBE. The PCIT's revision order was based on an audit report and a proposal from the AO, which suggested that the surrendered income should be taxed at a higher rate as per Section 115BBE. 2. Applicability of Section 115BBE to the surrendered income during a survey action: During the assessment proceedings, the AO questioned the assessee about the taxability of the surrendered amount of Rs. 97 lakhs, considering whether it should be taxed as income from unexplained sources under Section 115BBE. The assessee argued that the surrendered amount was additional business income and not from unexplained sources. The AO accepted the assessee's explanation and did not apply the higher tax rate under Section 115BBE. However, the PCIT later invoked Section 263, arguing that the surrendered income was undisclosed and should be taxed at a higher rate as per the amended provisions of Section 115BBE applicable from the assessment year 2017-18. 3. Nature and source of the surrendered income: The assessee contended that the surrendered income was part of the business income from the milk trading business and not from unexplained sources. The AO, during the assessment, accepted this explanation. The PCIT, however, argued that the surrendered income was undisclosed and should be taxed under Sections 68 to 69D of the Income Tax Act. The Tribunal noted that for income to be taxed under these sections, it must be unexplained, meaning the assessee failed to disclose the nature and source of such income or the explanation was not satisfactory. The Tribunal found that the AO had indeed made inquiries and was satisfied with the assessee's explanation that the surrendered income was from business operations. Conclusion: The Tribunal concluded that the PCIT had wrongfully exercised jurisdiction under Section 263. It emphasized that the PCIT's reasoning was based on the audit report and the proposal from the AO without independently verifying the facts. The Tribunal noted that the AO had duly considered the assessee's explanation and found it satisfactory, thus not warranting the application of Section 115BBE. The Tribunal quashed the revision order passed by the PCIT under Section 263, thereby allowing the appeals of the assessees.
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