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2023 (11) TMI 631 - AT - Income TaxRevision u/s 263 - Addition u/s 69 - taxability of income u/s 115BBE - nature and source of the surrendered income during the course of survey operation - HELD THAT - All the stock was found lying at the business premises and the assessee was confronted with discrepancies in terms of stock so found and valued and he has categorically stated that the investment in stock is made from undisclosed business income of the current year. The stock physically found was valued and then, compared with stock as recorded in the books of accounts, thus, there was clear nexus of stock with the assessee s business. There is no finding on record that the difference in stock so found out by the authorities has any independent identity and the same was thus part and parcel of entire stock of cattle feed. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee s business has been established, thus, it cannot be said that these are unexplained transactions thus, doesn t satisfy the second condition for invoking the deeming provisions of section 69. AO has duly taken cognizance of the findings of the survey team, the documents found during the course of survey, the statement of the assessee, the surrender letter and the return of income and after examination thereof and due application of mind, the income has been rightly assessed under the head business income. The order so passed by the AO cannot be held as erroneous due to lack of inquiry or for that matter requisite inquiry on the part of the AO. As we have held above, there is no findings recorded by the Ld. Pr. CIT as to how the deeming provisions are applicable in the instant case and the order so passed by the AO is erroneous. We therefore find that merely stating that there was survey operation at the business premises of the assessee and provisions of Section 115BBE of the Act are attracted, the same can be a basis for exercise of jurisdiction under section 263 of the Act. In view of the same, order so passed by the Ld. Pr. CIT under section 263 is set aside and that of the AO is restored. Assessee appeal allowed.
Issues Involved:
1. Legality of the order passed by the Ld. PCIT, Patiala. 2. Jurisdiction of the PCIT under Section 263(1) of the Income Tax Act, 1961. 3. Applicability of Section 115BBE of the Income Tax Act on surrendered income. 4. Consideration of the surrendered amount under Sections 69A, 69, or 69B. 5. Relevance of case laws cited by the PCIT, Patiala. 6. Procedural propriety in the revisional order under Section 263(1) of the Act. Summary: 1. Legality of the Order Passed by the Ld. PCIT, Patiala: The Assessee challenged the order passed by the Ld. PCIT, Patiala, arguing that it was "bad in law and against the facts of the case." The Tribunal found that the order lacked specific findings on how the deeming provisions under Sections 69, 69A, or 69B were applicable, and thus, the order was set aside. 2. Jurisdiction of the PCIT under Section 263(1) of the Income Tax Act, 1961: The Assessee contended that the PCIT erred in assuming jurisdiction under Section 263(1) and setting aside the assessment order already framed under Section 143(3). The Tribunal held that the PCIT's invocation of jurisdiction under Section 263 was based on an incorrect application of Section 115BBE and the deeming provisions, thus invalidating the jurisdiction assumed. 3. Applicability of Section 115BBE of the Income Tax Act on Surrendered Income: The PCIT argued that the surrendered income should be taxed under Section 115BBE at a higher rate. The Tribunal found that the surrendered income was disclosed as business income and accepted by the AO after due inquiry. Hence, Section 115BBE was not applicable as the income was not deemed unexplained under Sections 69, 69A, or 69B. 4. Consideration of the Surrendered Amount under Sections 69A, 69, or 69B: The PCIT treated the surrendered amount as unexplained income under Sections 69A, 69, or 69B. The Tribunal noted that the Assessee had provided a reasonable explanation regarding the nature and source of the income during the survey and assessment proceedings, and the AO had accepted it as business income. Therefore, the deeming provisions were not applicable. 5. Relevance of Case Laws Cited by the PCIT, Patiala: The Assessee argued that the case laws cited by the PCIT were not applicable to the facts of the case. The Tribunal supported this view, finding that the PCIT failed to consider the specific facts and explanations provided by the Assessee, which were accepted by the AO. 6. Procedural Propriety in the Revisional Order under Section 263(1) of the Act: The Assessee claimed that the revisional order was passed mainly on the ground that the AO had accepted the surrendered amount without making any queries. The Tribunal found that the AO had conducted a proper inquiry and accepted the surrendered income as business income after due consideration. Therefore, the revisional order under Section 263(1) was set aside. Conclusion: The Tribunal set aside the order of the Ld. PCIT under Section 263, restoring the original assessment order passed by the AO. The appeal of the Assessee was allowed.
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