2022 (10) TMI 852 - HC - Income Tax

Assessment proceedings initiated u/s 153C - addition on account of undisclosed investment u/s 69 B - HELD THAT - Upon perusal of entire record and after close scrutiny of the findings recorded by learned authorities, the findings recorded by learned ITAT with regard to disclosure of additional income on account of construction material, which was also shown while filing return of income for AY 2016-17, do not appear to be illegal or perverse. No substantial question of law as proposed by the Revenue arises in this appeal.

Summary

Issues:
1. Appeal by Revenue under Section 260(A) of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Indore.
2. Validity of assessments framed and proceedings initiated under Section 153C of the Income Tax Act.
3. Disallowance of addition on account of undisclosed investment under Section 69B of the Income Tax Act.

Analysis:
1. The appeal before the High Court was initiated by the Revenue challenging the order passed by the Income Tax Appellate Tribunal, Indore. The respondent firm, engaged in real estate business, had its assessment order passed under section 153C r/w section 143(3) of the IT Act for A.Y. 2012-13 to 2015-16 and under section 143(3) for A.Y. 2016-17 post a search and seizure operation under section 132 of the IT Act. The CIT(A) partially allowed the appeal of the assessee, which led to appeals by both the Revenue and the assessee before the ITAT. The ITAT, through its order dated 4.10.2021, set aside the CIT(A)'s findings and quashed the assessments framed for the relevant assessment years under section 153C of the IT Act.

2. The substantial questions of law proposed by the Revenue pertained to the justification of the ITAT in quashing the assessments framed and proceedings initiated under Section 153C and in upholding the CIT(A)'s decision in disallowing the addition on account of undisclosed investment under Section 69B of the IT Act. The ITAT's findings revealed that the AO reclassified the additional income declared by the assessee under the head "income from other sources" based on Section 69B. However, the CIT(A) observed that the reclassification under Section 69B could only be done for income not fully disclosed in the books of account, which was not the case here. The AO's assertion that the explanation offered by the assessee was unsatisfactory was deemed insufficient for reclassification. The ITAT upheld the CIT(A)'s findings, emphasizing that the income disclosed was already part of the regular books of account, and the AO lacked specific findings to justify reclassification under Section 69B.

3. After scrutinizing the entire record, the High Court concurred with the ITAT's findings regarding the disclosure of additional income and the application of Section 69B. The Court held that no substantial question of law, as proposed by the Revenue, arose in the appeal. Consequently, the appeal by the Revenue was dismissed at the admission stage, affirming the ITAT's decision to set aside the assessments framed under Section 153C and the CIT(A)'s decision regarding the undisclosed investment under Section 69B.