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2023 (4) TMI 683 - AT - Income TaxRevision u/s 263 by CIT - As per CIT unexplained and unjustified expenditure came within the purview of section 69C and should have been taxed at the special rate provided u/s 115BBE at 60% plus surcharge at 25% but the AO had subjected the same to tax at the normal rate only - HELD THAT - As is evident from bare perusal of the order of the AO disallowance related to expenses incurred by the assessee in relation to subcontractor which were not found to be genuine. Section 69C on the other hand brings to tax expenses incurred source of which remain unexplained. Therefore purview and scope of section 69C is totally different from the disallowance of expenses found to be not genuine. The basic premise with the CIT therefore for finding error in the order of the AO that the disallowance made by him of contractors expense came under the purview of section 69C of the Act is found to be untenable in law. His finding of error as a consequence whereof that the same not being subjected to tax at a special rate provided u/s 115BBE of the Act also as a result does not survive. There is we hold therefore no error in the order of the AO as noted by the CIT in his order passed under section 263 of the Act and the same is accordingly set aside on this count alone. Appeal of the assessee is allowed.
Issues Involved:
The appeal against the order passed by the ld.Pr.Commissioner of Income Tax-I, Rajkot under section 263 of the Income Tax Act, 1961 for the Assessment Year 2017-18. Issue 1: Jurisdiction under Section 263 of the Act The assessee contended that the ld.Pr.CIT erred in assuming jurisdiction under section 263 of the Act, challenging the order passed by the AO. The grounds raised included the failure to properly examine the facts of the case regarding sub-contract expenses and the applicability of provisions of Sec. 115BBE of the Act. The assessing officer had already examined the issues in question during the assessment proceedings under section 143(3) of the Act. The appeal highlighted the pending first appeal against the addition made in the assessment order, arguing that the order under section 263 could not be revised. The appeal was allowed on this ground. Issue 2: Tax Treatment of Unexplained Expenditure The main issue revolved around the tax treatment of an addition made by the AO as unexplained and unjustified expenditure. The ld.Pr.CIT noted an error in the AO's order, stating that the expenditure should have been taxed at the special rate under section 115BBE of the Act. The show cause notice highlighted the discrepancy in the tax treatment applied by the AO. The assessee argued that the disallowance made by the AO was not to be treated as unexplained expenditure under section 69C of the Act but was disallowed as ingenuine under section 37(1) of the Act. The AO's order disallowing the expenditure was found to be justified, and the provisions of section 69C were deemed inapplicable in this case. The Tribunal held that there was no error in the AO's order, and the order under section 263 was set aside based on this finding. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the ld.Pr.CIT erred in assuming jurisdiction under section 263 of the Act and in finding fault with the tax treatment of the disallowed expenditure. The order passed by the ld.Pr.CIT was set aside, and the appeal was allowed in favor of the assessee.
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