2023 (12) TMI 716 - AT - Income Tax

Revision u/s 263 - course of survey proceedings at the assessee s business premises, certain discrepancy were observed and confronted to the assessee and in response, the assessee offered a sum towards unexplained misc. advances - CIT stated that the assessee in his return of income has disclosed the surrendered income in the profit/loss account and paid taxes at the rates applicable to normal business income which need to be taxed u/s 115BBE making assessment erroneous so far as prejudicial to the interest of the Revenue - HELD THAT - Assessee has been asked specific questions not just regarding the discrepancy found during the course of survey but the nature and source thereof during the course of survey and it is clearly emerging that nature of such advances is unaccounted business advances and the source of such income so surrendered is assessee s share of diagnostic lab fees received from Shri Sandeep Singh who was running the diagnostic lab from business premises of the assessee and sharing 70% of lab fees with the assessee which remain unaccounted and undisclosed at the time of survey. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee s business has been established, thus, it cannot be said that these are unexplained transactions thus, doesn t satisfy the second condition for invoking the deeming provisions of section 69-69B - AO has duly taken cognizance of the findings of the survey team, the documents found during the course of survey, the statement of the Shri Sandeep Singh, the surrender letter and the return of income and after examination thereof and due application of mind, the income has been rightly assessed under the head business income. We are of the considered view that the order so passed by the AO cannot be held as erroneous due to lack of inquiry or for that matter requisite inquiry on the part of the AO. As we have held above, there is no findings recorded by the Ld. Pr. CIT as to how the deeming provisions are applicable in the instant case and the order so passed by the AO is erroneous. We therefore find that merely stating that there was survey operation at the business premises of the assessee and provisions of Section 115BBE of the Act are attracted, the same can be a basis for exercise of jurisdiction u/s 263 of the Act. In view of the same, order so passed by the Ld. Pr. CIT under section 263 is set aside and that of the AO is restored. Appeal of assessee allowed.

Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act, 1961.
2. Applicability of Section 115BBE on surrendered income.
3. Evaluation of assessment order's validity and thoroughness.
4. Consideration of replies filed during proceedings.

Summary:

1. Jurisdiction under Section 263 of the Income Tax Act, 1961:
The Assessee challenged the jurisdiction assumed by the Ld. PCIT under Section 263, arguing that the assessment framed by the Assessing Officer (AO) was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal found that the Ld. PCIT had not provided specific findings on how the explanation offered by the Assessee was unsatisfactory or how the deeming provisions were applicable. The Tribunal held that the jurisdiction under Section 263 was invoked without proper inquiry or investigation, making the revision proceedings invalid.

2. Applicability of Section 115BBE on surrendered income:
The Assessee contended that the surrendered amount of Rs. 90,00,000/- was from professional income and should be taxed at normal rates, not under Section 115BBE. The Tribunal noted that the surrendered income was related to the Assessee's medical profession and was part of suppressed professional receipts. The Tribunal emphasized that the deeming provisions of Sections 69-69B require a lack of satisfactory explanation about the nature and source of income, which was not the case here. The Assessee had provided a clear explanation linking the surrendered income to professional receipts, thus Section 115BBE was not applicable.

3. Evaluation of assessment order's validity and thoroughness:
The Tribunal found that the AO had conducted a thorough investigation during the assessment proceedings. The AO had issued detailed questionnaires and received comprehensive replies from the Assessee, addressing all queries related to the surrendered income. The AO's acceptance of the surrendered income as part of business income was based on a conscious decision after due application of mind and verification of facts. Therefore, the assessment order was neither erroneous nor prejudicial to the interest of the Revenue.

4. Consideration of replies filed during proceedings:
The Assessee argued that the replies filed during the proceedings before the AO and Ld. PCIT were not properly considered. The Tribunal observed that the AO had indeed considered the Assessee's replies and had made a conscious decision based on the information provided. The Tribunal also noted that the Ld. PCIT had not provided any new issues that were not already addressed by the AO. The Tribunal concluded that the revision proceedings were based merely on a difference of opinion, which is not a valid ground for invoking Section 263.

Conclusion:
The Tribunal set aside the order passed by the Ld. PCIT under Section 263, restoring the assessment order passed by the AO. The appeal of the Assessee was allowed, and it was held that the surrendered income was rightly taxed at normal rates as business income, not under Section 115BBE.

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