2024 (11) TMI 1217 - HC - Income Tax

Revision u/s 263 - failure to tax unaccounted income disclosed during a survey u/s 115BBE - as per CIT AO had not made any inquiry nor considered the record of survey before accepting the surrender as pertaining to the professional receipt, as the income surrendered ought to have been taxed at the rate of 60% plus surcharge at the rate of 25% of such tax u/s 115BBE - ITAT allowed assessee appeal - HELD THAT - Tribunal after considering the settled legal position has arrived at the findings that the PCIT has ignored the facts of the case on record as well as the legal proposition to the effect that the finding of non-inquiry vis-a-vis the documents, statements recorded during the course of survey, is not based on any hard facts but the facts on record clearly reveals that the AO had conducted due inquiry on the issue of disclosure made by the respondent assessee and considering the statement of the assessee during the survey making voluntary surrender of professional unaccounted receipts, the same was taxed as such as business income, is in accordance with law. Tribunal has therefore rightly held that only because no inquiry was conducted by the Assessing Officer on record of the survey before him, cannot be the basis for assumption of jurisdiction u/s 263 more particularly, when it is not pointed out as to how and what basis such finding was arrived at by the AO and non examination of the records cannot be the basis for coming to the conclusion that the assessment order is erroneous and pre-judicial to the interest of revenue. Principal CIT could not have assumed the jurisdiction on mere change of opinion on his part, when the Assessing Officer while during the course of regular assessment has made inquiry regarding the issue which is the subject matter of the revision. Principal CIT would have arrived at a valid finding of error on the basis of his own examination of record including the documents and statement recorded of the assessee during the survey action undertaken u/s 133A but there is nothing on record to point out that how the documents pertaining to survey could not have lead to a reasonable belief as entertained by the Assessing Officer that the income surrender pertained to the professional receipt which is one of the plausible view on the matter. Decided in favour of assessee.

Summary

Issues:
1. Whether the Appellate Tribunal was justified in quashing the order under Section 263 of the Income Tax Act when Explanation 2 of Section 263 was invoked?
2. Whether the Appellate Tribunal was justified in quashing the order under Section 263 despite the failure to tax unaccounted income disclosed during a survey under Section 115BBE?

Analysis:
Issue 1:
The case involved a Tax Appeal under Section 260A of the Income Tax Act, arising from an order passed by the Income Tax Appellate Tribunal. The respondent-assessee, a MD Doctor, disclosed Rs. 15,00,000 as unaccounted receipt during a survey. The Assessing Officer accepted this disclosure as professional income at the normal tax rate. The Principal CIT invoked revisional jurisdiction under Section 263, arguing that the income should have been taxed at a higher rate under Section 115BBE. The Tribunal quashed the order under Section 263, stating that the AO had conducted due inquiry and the acceptance of the disclosure as professional income was justified based on judicial pronouncements. The Tribunal found no basis for the finding of error by the Principal CIT and held the order under Section 263 to be without valid jurisdiction and not sustainable in law.

Issue 2:
The appellant contended that the Principal CIT rightly invoked Section 263 as the AO failed to consider the disclosure under Section 69A, which refers to unexplained money found during a survey. It was argued that the disclosure should have been taxed under Sections 68 & 69A. The appellant claimed that the Tribunal erred in reversing the order under Section 263, as per Explanation 2 of Section 263. However, the Tribunal held that the PCIT had ignored the facts and legal propositions, emphasizing that the finding of non-inquiry during the survey was not based on hard facts. The Tribunal concluded that the assessment order was not erroneous and prejudicial to the interest of revenue, dismissing the appeal for lack of merit.

In conclusion, the Tribunal's decision to quash the order under Section 263 was based on the lack of valid jurisdiction and the justification of the AO's acceptance of the disclosure as professional income. The appellant's arguments regarding the applicability of Sections 68 & 69A were not upheld, and the appeal was dismissed for lacking any substantial question of law.