2024 (8) TMI 932 - HC - Income Tax

Revision u/s 263 - petitioner had surrendered during search operation an additional income on account of excess stock, construction of residential house and renovation of business premises - AO assessed the income from professional usage before depreciation and interest apart from income u/s 44AD HELD THAT - Surrendered Income was to be assessed under the head income from other sources at special rate u/s 115BBE, Further, taxability of professional receipts were required to be assessed in accordance with provisions of section 44ADA of the Act @ 50%. Thus, we find that the assessment under the head income from other sources was to be done under Section 115 BBE, We find that the assessment in accordance with provisions of Section 44ADA of the Act of 1961 has to be @ 50 % and thus, the AO has erred in making its assessments and consequently, the order is prejudicial to the interest of the revenue. Therefor, the order u/s 263 of the Act of 1961, has rightly been passed and same has been upheld by the Income Tax Appellate Tribunal.

Summary

Issues:
1. Application for replacing illegible annexures.
2. Appeal against ITAT order confirming AO's decision.
3. Interpretation of Section 263 of the Income Tax Act, 1961.
4. Assessment under Section 44 ADA of the Act of 1961.
5. Correctness of AO's assessment and order under Section 263 upheld by ITAT.

Analysis:
1. The judgment begins with an application under Section 151 C.P.C. to replace illegible annexures A-7 and A-13. The court allows the application, replacing the illegible documents with legible copies.

2. The appeal was filed against the ITAT order confirming the Principal Commissioner's decision under Section 263 of the Income Tax Act, 1961. The petitioner had surrendered additional income during a search operation, leading to an overall income assessment for a specific year. The court noted that the AO's order was not erroneous or prejudicial to revenue, as the income was assessed properly.

3. The court discussed the scope of Section 263 of the Act, emphasizing that it can be invoked only if the AO's order is erroneous and prejudicial to revenue. It was highlighted that having two opinions related to assessment does not warrant interference under this section.

4. The judgment delves into the assessment under Section 44 ADA of the Act of 1961. The court analyzed the professional receipts and expenses, noting that the income was to be assessed under a specific section, and the AO's assessment was found to be incorrect, leading to the order under Section 263.

5. Ultimately, the court upheld the ITAT's decision, stating that the AO's assessment was erroneous and prejudicial to revenue due to incorrect application of Section 44 ADA. The appeal was dismissed, affirming the correctness of the order under Section 263. The judgment concludes that there is no interference warranted in this matter.