2024 (3) TMI 721 - AT - Income Tax

Rectification proceedings u/s. 154 - Unexplained investment addition u/s 69 - amount as surrendered by the appellant on account of unexplained and out of books of investment in land and its subsequent sale - appellant did not establish any connect regarding how its business income has been utilized to invest in the said land or make any expenditure regarding the same, therefore, this investment is clearly unexplained as per section 69 required to be considered for taxation as per the provisions of section 115BBE HELD THAT - As evident that the assessee has disclosed the discrepancies as income and not any asset or income allegedly undisclosed. Therefore, it is the income on account of error or omission on the part of the assessee during the business and the same view is taken by the jurisdictional high court in the case of in case of CIT vs Bajargan Traders 2017 (11) TMI 388 - RAJASTHAN HIGH COURT where in High Court held that when the assessee is dealing in sale of food grains, rice and oil seeds and the excess stock which is found during survey is stock of rice then, it can be said that investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. Therefore, the investment in the excess stock is to be brought to tax under head business income and not under the head income from other sources. Further in the case of Shri Lovish Singhal 2018 (5) TMI 1646 - ITAT JODHPUR the Jodhpur Tribunal applying the proposition of law laid down in the Bajargan Traders (supra), held that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found u/s. 69 of the Act and accordingly held that there is no justification for taxing such income u/s. 115BBE of the Act. Even the similar view taken in case of ACIT vs Shri Sudesh Kumar Gupta 2020 (6) TMI 463 - ITAT JAIPUR issue under consideration was whether rectification proceedings u/s. 154 were permissible when at the first place while passing assessment order u/s. 143(3) provisions of section 69 were not invoked for charging higher rate of tax u/s. 115BBE, wherein the coordinate bench held that the assessing officer has not invoked the provisions of section 69 at the first place while passing assessment order u/s. 143(3) and therefore, the provisions of section 115BBE which are contingent on satisfaction of requirement of section 69 cannot be independently applied by invoking the provisions of section 154 - no merit in the order passed u/s. 154 of the act and the same is quashed. Assessee appeal allowed.

Summary

Issues:
The issues involved in the judgment are the correctness of the order passed by the AO under \u/s\ 154 of the Income Tax Act, the calculation of income under \u/s\ 115BBE of the IT Act, the provision of interest charged \u/s\ 234B and 234C, and the right of the assessee to add, alter, or amend any ground of appeal \u/s\ 250 of the IT Act.

Issue 1: Order passed by AO under \u/s\ 154 of the Income Tax Act and calculation of income under \u/s\ 115BBE of the IT Act:
The appeal filed by the assessee challenged the order passed by the Commissioner of Income Tax (Appeals) confirming the AO's order under \u/s\ 154 of the IT Act and calculating the income under \u/s\ 115BBE of the IT Act. The assessee voluntarily surrendered a sum of Rs. 40,00,000 as undisclosed income during a survey conducted \u/s\ 133A of the Income Tax Act. The AO issued a rectification notice \u/s\ 154 proposing to tax this income as undisclosed income \u/s\ 115BBE. The CIT(A) upheld the AO's decision, stating that the investment was unexplained \u/s\ 69 of the Act and required taxation \u/s\ 115BBE. However, the assessee argued that the income was already offered as business income and there was no mistake apparent on record. The tribunal noted that the investment was related to the regular business stock of the assessee and allowed the appeal.

Issue 2: Interest charged \u/s\ 234B and 234C:
The interest charged \u/s\ 234B and 234C was a point of contention in the appeal. The CIT(A) wrongly confirmed the interest charged, which was disputed by the assessee in the grounds raised. However, the focus of the judgment primarily revolved around the taxation of the surrendered income and the calculation under \u/s\ 115BBE, leading to the allowance of the appeal based on the nature of the income and its treatment as business income.

Issue 3: Right to add, alter, or amend any ground of appeal \u/s\ 250 of the IT Act:
The assessee reserved the right to add, alter, or amend any ground of appeal \u/s\ 250 of the IT Act. This provision allows the assessee the flexibility to modify their grounds of appeal as needed during the proceedings. While this right was mentioned in the grounds raised by the assessee, the judgment primarily focused on the substantive issues of the order passed by the AO and the calculation of income under \u/s\ 115BBE, resulting in the allowance of the appeal based on the interpretation of the nature of the surrendered income as business income.

This summary provides a detailed breakdown of the judgment, addressing each issue involved and the key arguments and decisions made by the authorities and the tribunal.