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TMI Blog2023 (3) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the assessee to the AO was not satisfactory and further what more enquiries are required to be conducted in this case, which the AO had failed to conduct. The ld. PCIT has simply based his opinion and order on the Audit Objections/Report as pointed out even in the Audit Report that since the same was undisclosed income of the assessee which was surrendered by the assessee during the survey action and therefore, the same was to be assessed under the provisions of Section 68 to 69D of the Act. The above reasoning of the survey party is not in accordance with the relevant provisions of the Act. Therefore, we do not find any justification on the part of the ld. PCIT in invoking the Revisionary jurisdiction in this case. See GANDHI RAM PROPRIETOR GANDHI GENERAL STORE, VILL VERSUS THE PRINCIPAL COMMISSIONER OF INCOME TAX PATIALA. [ 2022 (8) TMI 377 - ITAT CHANDIGARH] Thus the revision order passed by the ld. PCIT u/s 263 of the Act, in our view has been passed by wrongfully exercising the jurisdiction u/s 263 of the Act and the same is, therefore, held as bad in law and is accordingly, quashed. - Decided in favour of assessee. - ITA No 398/CHD/2022 And ITA No 399/CHD/2022 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional income apart from the income disclosed which meant that the same was related to the additional business income of the assessee. That even the survey party during the survey action did not doubt the above contention of the assessee and had assured the assessee that the additional income declared by the assessee would be taxed as additional income of the assessee. After considering the aforesaid explanation of the assessee, the AO accepted the returned income of the assessee and completed the assessment u/s 143(3) of the Act. 5. Thereafter, the ld. PCIT invoking his revisionary jurisdiction u/s 263 of the Act show caused the assessee vide notice dated 10.03.2022 as to why the additional income disclosed by the assessee be not subjected to higher rate of tax i.e. @ 60% as per provisions of Section 115BBE of the Act. The ld. PCIT observed that the AO had failed to acknowledge the fact that the surrender represented the undisclosed income of the assessee which would have never come to light, had there been no survey u/s 133A of the Act. Therefore, this undisclosed income could not be treated as normal business income as contended by the assessee. The ld. PCIT therefore, was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and was also generated in the course of business. It has also been mentioned that even during the survey action, the survey party did not doubt the business operations of the assessee and even did not doubt about any other source of income of the assessee. The ld. counsel, therefore, has submitted that during the assessment proceedings, the AO had duly considered the issue of application of Section 115BBE to the surrendered income of the assessee and the AO was duly satisfied with the reply given by the assessee and thereby duly accepted the surrendered income as additional business income of the assessee. 8. The ld. counsel has further invited our attention to Paper Book page 29 to 34 which is the copy of Audit Memo dated 22.02.2022 of the Income Tax Officer (Audit) Karnal to submit that the ld. PCIT has invoked his jurisdiction on the basis of the audit report dated 22.02.2022. The ld. counsel has further invited our attention to page 35 to 37 of the Paper Book which is copy of the proposal report dated 02.03.2022 regarding the audit objection sent by the ITO to ld. PCIT requesting him to invoke his Revisionary Jurisdiction u/s 263 of the Income Tax Act in the light of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed u/s 68 wherein any sum is found credited in the books, of which the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not found satisfactory by the AO. Section 69 is attracted to the unexplained investments of which the assessee offers no explanation about the nature and source thereof or the explanation is not found satisfactory. Similarly, Section 69A is attracted in case of money, bullion, jewellery or other valuable articles, Section 69B refers to the investments, Section 69C refers to the expenditure and Section 69D refers to the amount borrowed or repaid on hundi. The provisions of these Sections are attracted and the income is assessed under these Sections, if, the assessee fails to give the explanation about the nature and source of such undisclosed income. The ld. PCIT in our view, in this case has confused himself between the undisclosed income and the word unexplained income . As per provisions of Section 68 to 69D are attracted in respect of the undisclosed income but the condition for assessing such income under the said provisions is that the assessee has either failed to disclose the nature and source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, you were asked why the surrendered amount may not be taxed as per Section-115BBE having tax rate @ 60% levied proceedings for the A.Y. 2017-18. In response to the same, you have contended that the surrendered income was from business and Section-115BBE was applicable on Income from other sources only. You had also contended that Section-115BBE was not applicable for assessment year 2017-18. However, the AO failed to acknowledge the fact that the surrender represented the undisclosed income of the assessee which would never come to light had there been no survey u/s 133A of the Act. Therefore, undisclosed income cannot be treated as normal business income as contended by the assessee. Thus, in view of amendment in Section-115BBE(applicable w.e.f A.Y. 2017-18) retrospectively, tax was to be calculated @60% on this additional income as per provisions of section 68/69/69A/69B/69C of the act for the A.Y. 2017-18 and the AO has tailed to do so. 15. The perusal of the above relevant part of the Audit Report proposal of the AO and Show Cause Notice issued by the ld. PCIT u/s 263 of the Act, would show that all the aforesaid authorities have been swayed by the notion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the Revenue. As per ld PCIT, the discrepancies found, confronted and accepted by the assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B 69C and the income referred therein is chargeable to tax at rate prescribed under section 115BBE Act. As per ld PCIT, the Assessing officer has failed to enquire about the source of income in order to assess the income under the appropriate head of income or the relevant deeming provisions and accordingly, the order so passed has been held as erroneous and prejudicial to the interest of Revenue. Thereafter, the ld PCIT has gone ahead and held that income of the assessee is income referred in the aforesaid deeming provisions and chargeable to tax under section 115BBE of the Act. 8. Firstly, how the ld PCIT has arrived at a conclusive finding that the discrepancies found, confronted and accepted by the assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B 69C is not apparent from the impugned order. Merely stating that excess cash is clearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction of Shed/Godown is covered u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fers over and above his normal business income. Thereafter, in respect of difference in stock of Rs 25,50,000/-, he has submitted that the difference is on account of higher gross margins in the earlier period and which he surrenders in addition to his normal business income. Similar questions have been raised regarding nature and source of cost of construction of building amounting to Rs 25,00,000/- and advances given to various persons. We therefore find that the assessee has been asked specific questions regarding not just the discrepancy but the nature and source thereof during the course of survey and it is clearly emerging that the source of such income is his business income. Further, the said fact is corroborated by the surrender letter dated 21.10.2016. Apparently, the ld PCIT has failed to take into consideration these documents which are very much part of the records. Following the surrender so made, the assessee has offered the additional income as business income in his return of income and paid due taxes thereon. During the course of assessment proceedings, the Assessing officer has specifically taken cognizance of these facts, as apparent on the face of the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the Assessing officer during the course of assessment proceedings, the order so passed by the Assessing officer cannot be held as erroneous in nature. 10. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, the order so passed by the ld PCIT u/s 263 cannot be sustained in the eyes of law and is hereby set-aside and that of the Assessing officer is sustained. In the result, the appeal of the assessee is allowed. 16. In view of the discussion made above, the revision order passed by the ld. PCIT u/s 263 of the Act, in our view has been passed by wrongfully exercising the jurisdiction u/s 263 of the Act and the same is, therefore, held as bad in law and is accordingly, quashed. ITA No. 399/CHD/2022 ITA No. 400/CHD/2022 : 17. The facts and issues involved in ITA 399/CHD/2022 and ITA 400/CHD/2022 are also identical to ITA 398/CHD/2022, therefore, our discussion in ITA 398/CHD/2022 would apply mutatis-mutandis to 399/CHD/2022 and ITA 400/CHD/also. The impugned orders of PCIT u/s 263 in the said appeals are also hereby quashed. 18. In the result, all appeals of the assessees are hereby allowed. Order pronounc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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