2023 (3) TMI 756 - AT - Income Tax

Revision u/s 263 - income surrendered during the survey - As per CIT why u/s 115BBE a higher rate of tax should not be imposed on the surrendered income? - HELD THAT - In the facts of the present case, information from the assessee on the queries raised by the AO have both moved to and fro through the ITBA portal and thus, what enquiries were raised by the AO and what responses were made by the assessee is a fact not open to manipulation and is available. On going through the submissions and the facts on record, we find that these queries raised and replies made were always available to the ld. PCIT also. No case has been built referring to any material how the order can be said to be erroneous on facts. The Revisionary powers in the facts of the present case is clearly an attempt to re-look at the very same information. This action as per settled legal position is barred under the Revisionary powers. The view taken by the AO after carrying out due and relevant enquiries and considering the responses of the assessee is not shown to be an erroneous view. There are many orders of the Co-ordinate Benches supporting the view taken by the AO. At this stage, to argue that this was not the business income of the assessee and was amenable to tax under the deeming head and thus, Section 115BBE de-hors facts cannot be accepted. On facts, a conscious and reasonable possible view has been taken by the AO. Thus, merely because the view is not to the liking of the ld. PCIT by itself cannot make the order passed by the AO as an erroneous order. We find that the reliance placed upon by the ld. CIT-DR on the decision of the jurisdictional High Court in the case of Kim Pharma (P) Ltd. ( 2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT is misplaced. On a consideration of the peculiar facts, circumstances and position of law, we find that the impugned order at best can be said to attempting to make out a case of a debatable view, however, even then the order cannot be upheld. Revenue has failed to point out the error in the order accepting the surrendered income under the stated heads and hence, no prejudice can be said to be caused in the absence of any error in the order pointed out. We may refer here to the decision in the case of PARASHURAM POTTERY WORKS CO. LIMITED 1976 (11) TMI 1 - SUPREME COURT - The Revisionary Authority cannot seek to re-look at the very same information in order to arrive at a different view. The error and the prejudice caused has to be set out in the order. A valid order after due enquiries has been passed. The power cannot be exercised arbitrarily. The argument that the assessee is still free to argue before the AO in case the impugned order is upheld, we find cannot be accepted. Accordingly, we direct that the impugned order be quashed. Appeal of the assessee is allowed.

Issues Involved:
1. Jurisdiction of PCIT to issue notice under Section 263.
2. Validity of the assessment framed by the AO.
3. Treatment of surrendered income during survey.
4. Assumption of jurisdiction by PCIT based on audit objection.
5. Applicability of Section 115BBE and related tax rates.
6. Consideration of judgments by PCIT.

Issue-wise
Detailed Analysis:

1. Jurisdiction of PCIT to Issue Notice under Section 263:
The assessee challenged the jurisdiction of the PCIT to issue a notice under Section 263, arguing that the assessment order dated 28.06.2019 was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal noted that the PCIT had assumed jurisdiction based on a proposal from the AO, which was contested by the assessee as void-ab-initio. The Tribunal found that the PCIT had not adequately justified the assumption of jurisdiction, especially given that the AO had already made necessary inquiries and considered the facts before passing the assessment order.

2. Validity of the Assessment Framed by the AO:
The Tribunal observed that the AO had conducted a thorough examination and made inquiries before accepting the returned income. The AO was aware that the case was selected for compulsory manual selection due to it being a survey case. The Tribunal emphasized that the AO had passed the order after considering the facts and the detailed replies submitted by the assessee, which included the treatment of surrendered income in the books of accounts.

3. Treatment of Surrendered Income During Survey:
The assessee argued that the surrendered income was from business transactions and was included in the profit and loss account. The Tribunal found that the AO had accepted the surrendered income as part of the business income after due inquiries. The PCIT's attempt to impose a higher tax rate under Section 115BBE was deemed improper as the surrendered income was already treated as business income by the AO. The Tribunal noted that the PCIT failed to provide a clear rationale for treating the surrendered income differently.

4. Assumption of Jurisdiction by PCIT Based on Audit Objection:
The Tribunal highlighted that the PCIT had relied on an audit objection to assume jurisdiction, which was contested by the assessee. The Tribunal referred to precedents where jurisdiction based solely on audit objections was considered void-ab-initio. The Tribunal found that the PCIT's action was not justified as the audit objection did not provide a valid basis for revision under Section 263.

5. Applicability of Section 115BBE and Related Tax Rates:
The Tribunal examined the applicability of Section 115BBE, which imposes a higher tax rate on unexplained income. The Tribunal noted that the surrendered income was from business transactions and was properly accounted for in the books. The AO had applied the tax rate prevalent at the time of the survey, which was before the amendment introducing the higher tax rate under Section 115BBE. The Tribunal found that the PCIT's attempt to apply the higher tax rate retrospectively was not justified.

6. Consideration of Judgments by PCIT:
The Tribunal observed that the PCIT had relied on various judgments to justify the revision. However, the Tribunal found that these judgments were not applicable to the facts of the present case. The Tribunal emphasized that the PCIT had ignored the detailed replies and evidence provided by the assessee, which supported the treatment of the surrendered income as business income.

Conclusion:
The Tribunal quashed the order passed by the PCIT under Section 263, holding that the AO had conducted a proper inquiry and the assessment order was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal directed that the impugned order be quashed, allowing the appeals of the assessees.

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