2023 (3) TMI 854 - AT - Income Tax

Revision u/s 263 - nature and source of income surrendered by the assessee during the course of survey and the explanation so offered by the assessee - deeming provisions on the amount so surrendered by the assessee - Addition invoking Section 115BBE - assessee surrendered income during the course of assessment proceedings - HELD THAT - The nature of surrendered income was difference in stock and unrealized sundry receivables generated out of out of book sales undertaken by the assessee. The factum thereof has been accepted by the Survey team lead by ld DDIT (Investigation) and thereafter by the AO during the course of assessment proceedings after due examination. AO has duly taken cognizance of the findings of the survey team the documents found during the course of survey the statement of the partner/director of the assessee company recorded during the course of survey the surrender letter and the return of income and after examination thereof and due application of mind income has been rightly assessed under the head business income . Order so passed by AO cannot be held as erroneous due to lack of enquiry or for that matter requisite enquiry on the part of the AO. Where AO after due appreciation of facts and circumstances of the case assessed the income under the head business income and didn t invoke the deeming provisions as so suggested by the ld PCIT we do not believe that there is any error on part of the Assessing officer and the order so passed by him cannot be held as erroneous. Deeming provisions are not applicable. Where there are specific questions asked during the course of survey regarding the nature and source of income and which has been adequately responded to by the assessee and thereafter acted upon in terms of disclosing the income in the return of income under the appropriate head of income and where the same is duly examined and taken into consideration by the AO during the course of assessment proceedings the order so passed by the Assessing officer cannot be held as erroneous in nature. Order of the ld PCIT u/s 263 is set-aside - Decided in favour of assessee. Revision u/s 263 - income so surrendered by way of account receivables - HELD THAT - It a case where the surrender which was otherwise to be made in the hands of the partnership firm has been made and accepted in the hands of the assessee where he was a partner and the fact that such surrender was voluntarily declared in the return of income has been accepted by the AO the order so passed by the AO may be held as erroneous in so far as the taxability in the wrong hands is concerned however the same cannot be held as prejudicial to the interest of the Revenue in so far as the nature of surrendered income and non-applicability of the deeming provisions read with provisions of section 115BBE of the Act are concerned and for the purposes the detailed discussion and reasoning given supra in case of assessee equally applies in the instant case and not being repeated for the sake of brevity. In the entirety of facts and circumstances of the case the income so surrendered by way of account receivables cannot be brought to tax under the deeming provisions u/s 69 r/w section 115BBE. In the result the order of the ld PCIT u/s 263 is set-aside and that of the Assessing officer is sustained. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Condonation of delay in filing appeals.
2. Validity of proceedings initiated under Section 263 of the Income Tax Act, 1961.
3. Taxability of surrendered income under Section 115BBE of the Income Tax Act, 1961.

Summary:

1. Condonation of Delay in Filing Appeals:
The appeals were filed with a delay of 198 days. The assessees sought condonation of delay citing the Covid-19 pandemic as the reason. The Tribunal condoned the delay, finding reasonable cause beyond the control of the assessee due to the pandemic.

2. Validity of Proceedings Initiated under Section 263:
The assessees challenged the initiation of proceedings under Section 263 by the Principal Commissioner of Income Tax (Pr. CIT), Ludhiana, arguing that the assessments were not erroneous or prejudicial to the interest of revenue. The Tribunal examined the facts and found that the Assessing Officer (AO) had conducted thorough investigations and applied his mind before completing the assessments. The Tribunal held that the Pr. CIT cannot sit in judgment and take a different view when the AO has already taken a plausible view after due examination. The Tribunal set aside the orders passed by the Pr. CIT under Section 263 and sustained the assessments made by the AO.

3. Taxability of Surrendered Income under Section 115BBE:
The Tribunal examined whether the surrendered income during the survey should be taxed under Section 115BBE, which imposes a higher tax rate on unexplained income. The Tribunal found that the surrendered income was on account of business discrepancies, such as unaccounted stock and receivables, and was declared as business income by the assessees. The Tribunal noted that the AO had duly examined the nature and source of the surrendered income and concluded that it was business income, not unexplained income under Sections 68/69/69A/69B/69C. Therefore, the Tribunal held that the provisions of Section 115BBE were not applicable, and the surrendered income should be taxed at normal rates.

Conclusion:
The Tribunal allowed the appeals of the assessees, setting aside the orders passed by the Pr. CIT under Section 263 and sustaining the assessments made by the AO. The surrendered income was held to be taxable as business income at normal rates, and the provisions of Section 115BBE were not applicable.