2024 (5) TMI 1256 - AT - Income Tax

Revision u/s 263 - as per CIT income surrendered by the assessee during survey need to be taxed u/s 68 r.w.s. 115BBE and not business income - HELD THAT - It is not in dispute that the assessee is a doctor by profession and the additional income of Rs 1 crore offered during survey was only out of business income of the assessee. No evidence was found either during survey or during revision proceedings to dislodge the claim that the additional income of Rs 1 crore represent income of the assessee which was earned other than from her profession. Hence once the additional income is offered as business income by the assessee and assessed as such, the ld. PCIT cannot invoke his revision jurisdiction u/s 263 of the Act by stating that the said income need to be taxed at a higher rate of 60%. AO had examined the survey documents and other evidences found during survey together with the statement of disclosure made by the assessee during survey which was linked with the return of income of the assessee and obviously found nothing adverse thereon as the assessee had duly honoured the disclosure made in the survey by offering it in the return of income. It was not the case of the survey team that the additional income of Rs 1 crore was not derived from the profession of the assessee. Hence there was nothing wrong in assessee offering the additional income of Rs 1 crore as business income and there was nothing wrong in the action of the ld. AO in assessing the same as business income. Once the income is assessed as business income, it does not fall within the ambit of unexplained cash credit u/s 68 of the Act. Accordingly, the provisions of section 115BBE of the Act itself cannot be pressed into operation in the instant case - Assessee appeal allowed.

Summary

Issues Involved:
The judgment involves the issue of whether the Principal Commissioner of Income Tax was justified in invoking revision jurisdiction u/s 263 of the Income-tax Act, 1961 to tax the income surrendered by the assessee during a survey as unexplained cash credit u/s 68 read with section 115BBE of the Act.

Details of the Judgment:
The appeals in ITA No.34/DDN/2022 and ITA No. 33/DDN/2022 for AY 2017-18 were taken up together as they involved an identical issue. The only issue to be decided was whether the income surrendered by the assessee during a survey should be taxed u/s 68 read with section 115BBE of the Act. The assessee, a doctor by profession, disclosed an additional income of Rs 1 crore during a survey and offered it as professional income in the return of income. The Assessing Officer accepted this income as business income u/s 143(3) of the Act. However, the Principal Commissioner sought to revise this assessment, contending that the income should be taxed at a higher rate of 60%.

The Tribunal noted that the surrendered income was earned by the assessee prior to the amendment prescribing the higher tax rate of 60%. It was argued that the income disclosed during the survey cannot be taxed at the increased rate as it was earned before the amendment. The Tribunal referred to a similar case where it was held that income surrendered before the amendment should be taxed at the pre-amended rate of 30%. As the additional income was offered as business income and duly assessed as such, it did not fall under unexplained cash credit u/s 68. The Tribunal also cited a case where the High Court upheld the Tribunal's decision that income disclosed as business income does not attract section 115BBE of the Act.

Based on the above reasoning and judicial precedents, the Tribunal held that the Assessing Officer's order was not erroneous, and the revision jurisdiction u/s 263 was unsustainable. Therefore, the grounds raised by the assessee were allowed, and both appeals were allowed in favor of the assessee.

The decision for one party was held to apply to the other party with identical facts but differing figures. Both appeals were allowed, and the order was pronounced in open court on 09/05/2024.