Case Law Details
Tirath Dass Vs PCIT (ITAT Delhi)
ITAT Delhi held that invocation of revisionary power u/s. 263 of the Income Tax Act unsustainable as Assessing Officer duly carried out all the inquiry before passing assessment order u/s. 143(3) of the Income Tax Act.
Facts- Survey u/s. 133A of the Act was carried out at the premises of the assessee, proprietor of M/s. Fancy Jewellers, Haryana wherein an additional income of Rs. 90,63,000/- was admitted by the assessee on account of unexplained cash and stock. The assessee filed his return declaring income of Rs. 94,60,870/-. The case of the assessee was selected for compulsory scrutiny. AO completed the assessment u/s. 143(3) of the Act on the income returned at Rs. 94,60,870/-.
PCIT, in exercise of jurisdiction conferred u/s. 263, concluded that the surrendered income was in the nature of unexplained cash and unexplained stock and the same was liable to be added as income from other sources and tax was liable to be paid @ 60% u/s. 115BBE of the Act which AO failed to do. Therefore, his order was erroneous and prejudicial to the interest of Revenue which he set aside with direction to the AO to pass a fresh order in accordance with the law.
Being aggrieved, the present appeal is filed.
Conclusion- Held that the AO had issued questionnaire along with statutory notices sent to the assessee in response to which the assessee had filed written reply along with necessary documents and evidence. He perused and considered them. Not only this, AO called for books of account which he verified. In our considered view, it is not a case of no enquiry.
Accordingly held that we vacate the order of the PCIT and restored the assessment order passed by AO u/s. 143(3) of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal filed by the assessee is directed against the order dated 09.03.2022 passed by the Ld. Principal Commissioner of Income Tax, Rohtak (“PCIT”) under section 263 of the Income Tax Act, 1961 (the “Act”) pertaining to Assessment Year (“AY”) 2017-18.
2. The assessee has challenged the impugned order of the Ld. PCIT on the following grounds:-
“1. That the order passed by the Hon’ble Principal Commissioner of Income Tax, Rohtak (hereinafter referred to as “PCIT”) under section 263 of the Income Tax Act, 1961 (“the Act”) dated 09.03.2022 is bad in law and on facts.
2. That the action of the Hon’ble PCIT in assuming jurisdiction under section 263 of the Act and holding that the order passed by the Deputy Commissioner of Income Tax, CIR, Karnal (hereinafter referred to as “the AO”) under section 143(3) dated 06.12.2019 is erroneous in so far as prejudicial to the interest of the revenue, is illegal, bad in law and without jurisdiction.
2.1 The assumption of jurisdiction by the Hon’ble PCIT in the instant case being without satisfaction of pre-requisite twin conditions under section 263 of the Act Le. Assessment order being erroneous as well as prejudicial to the interest of revenue, and therefore the same is bad in law and consequently, the impugned order passed in pursuance thereto is liable to be quashed.
3. That the Hon ‘ble PCIT has grossly erred in law and on facts in passing revisional order under section 263 of the Act, directing the Id. AO to make fresh assessment with respect to the issue that the ld. AO had failed to invoke the provisions of section 68/69/69A/69B/69C/69D on the income of Rs. 90,63,000/- surrendered by the assessee on account of discrepancy in stock and cash found during the course of survey proceedings and he also failed to enquire as to why the assessee had paid taxes at normal tax rate instead of maximum marginal rate as per section 115BBE of the Act in view of the amended provisions of section -115BBE with Taxation Laws (Second Amendment) Act, 2016.
3.1 The Hon ‘ble PCIT has failed to appreciate that section 115BBE can be invoked under two conditions namely if the assesse suo-moto reflects the income under section 68, 69, 69A, 69B, 69C or 69D in his return of income or if the Assessing Officer determines the income under those sections and in case of the assessee, none of the two conditions are satisfied.
3.2 The Hon ‘ble PCIT has grossly erred in law and on facts in stating that the income surrendered by the assessee was in the nature of unexplained stock and unexplained cash without appreciating the settled law that nature of income surrendered in survey proceedings is business income which is not liable to be taxed under sections 68/69/69A/69B/69C/69D of the Act.
3.3 The Hon’ble PCIT has failed to appreciate that the assessee reflected the surrendered income as other income in his return of income and paid the advance tax on it and he never at the time of survey proceedings or thereafter admitted that income surrendered was unexplained stock and unexplained cash.
3.4.1 The Hon ‘ble PCIT has also failed to consider that the Hon ‘ble President of India gave his assent in respect of the amendment made in section 115BBE of the Act on 15.12.2016 whereas the survey took-place on the business premises of the assessee on 16.09.2016 and therefore, on the date of survey this amended provision was not in force. The issue as to whether the new provision would apply to the assessee or not is prima-facie debatable and therefore, the revisionary proceedings on the said issue are not valid and without any jurisdiction.
4. The Hon ‘ble PCIT has grossly erred in law and on facts in holding that the assessment order was passed by the ld. AO in very casual manner without due diligence and without conducting proper enquiries and taking cognizance of the amended Finance Act, 2016.
5. That the Hon ‘ble PCIT has erred in law in invoking Explanation 2 to section 263 of the Act for passing the revisionary order.”
3. It is a case of survey under section 133A of the Act which was carried out on 16.09.20 16 at the premises of the assessee, proprietor of M/s. Fancy Jewellers, Purana Sarafa Bazar, Karnal, Haryana wherein an additional income of Rs. 90,63,000/- was admitted by the assessee on account of unexplained cash and stock. The assessee filed his return for AY 20 17-18 on 09.2017 declaring income of Rs. 94,60,870/-. His case was selected for compulsory scrutiny. During assessment proceedings the Ld. Assessing Officer (“AO”) issued statutory notices along with questionnaire in response to which the assessee filed written reply along with documents and evidence mentioned therein. The Ld. AO perused and considered them. He called for the books of account of the assessee which were produced. He verified the books of account. Thereafter, he completed the assessment on 06.12.2019 under section 143(3) of the Act on the income returned at Rs. 94,60,870/-.
4. The Ld. PCIT, in exercise of jurisdiction conferred on him under section 263 of the Act issued the following show cause notice.
“Sub: Show Cause Notice U/s 263(1) of the Income Tax Act 1961 for the A. Y. 2017- 1 8-reg.
Return declaring income of Rs. 94,60,870/- for the A. Y. 2017-18 was filed by you on 25.09.2017. Subsequently, the assessment for the year under consideration was completed u/s 143(3) of the Income Tax Act, 1961 by accepting the returned income by the Asst. Commissioner of Income Tax, Circle, Karnal vide order dated 06.12.2019.
2. The assessment record for the period under consideration was called upon and examined. On such examination, it has been noticed that survey action u/s 133A was carried out at your business premises on 16.09.2016 in which you have offered an additional income of Rs. 90,63,000/- apart from normal business income which is largely in the nature of unexplained income which is liable to be added u/s 68/69/69A/698/69C of the Act As per your ITR, you have shown the surrender income as income from other sources and have paid taxes as per normal slab rates instead of tax payable at the rate of 60% u/s 115BBE of the Income Tax Act, 1961. However, neither you have furnished any proper explanation for paying tax at low rates, nor the AO has called for any documentary evidences/proper explanation for the same. In absence of any supporting documentary evidence and proper explanations, re-computation of tax is required to be made on surrendered income at the rate of 60% u/s 115BBE of the Act.
Failure on the part of the AO to do so renders the assessment order erroneous in so far as it is prejudicial to the interest of revenue.
3. In view of the above, the assessment completed by the AO is, prima facie erroneous in so far as it is prejudicial to the interest of revenue. The same is, therefore, required to be suitably amended/modified u/s 263 of the Income Tax Act, 1961. You are, therefore, required to show cause as to why an appropriate order u/s 263(1) of the Act setting aside the assessment order passed as on 20.12.2019 should not be passed. In this connection, you may send your written reply along with supporting documentary evidences on the email-id( rohtak [email protected]) or through e-proceedings by 16.02 2022. In case of no reply is received, it shall be assumed that you do not wish to say anything in the matter and the matter would be decided as per material on record without any further notice/intimation to you.”
5. The assessee submitted a detailed reply before the Ld. PCIT which appears at pages 121-127 of the Paper Book challenging the applicability of the provisions of section 263 of the Act to the facts of the assessee’s case.
6. The submissions/contentions of the assessee were not acceptable to the Ld. PCIT being devoid of merits. According to him, the surrendered income was in the nature of unexplained cash and unexplained stock and the same was liable to be added as income from other sources and tax was liable to be paid @ 60% under section 115BBE of the Act which the Ld. AO failed to do. Therefore, his order was erroneous and prejudicial to the interest of Revenue which he set aside with direction to the Ld. AO to pass fresh order in accordance with law.
7. Aggrieved, the assessee is in appeal before the Tribunal and all the grounds relate thereto.
8. At the very outset, the Ld. AR pointed out that it is a covered matter in favour of the assessee by the decision of the ITAT Delhi rendered on 11.2022 in ITA No. 826/Del/2022 for AY 2017-18 in the case of Shri Bharat Malhotra Prop. Shri Nathji Jewels, Karnal, Haryana who is son of the assessee. A copy thereof was placed on record. The Ld. AR submitted that the facts of the assessee’s case are exactly the same as those of his son. He submitted a chart showing therein the facts of the case of the assessee and facts in the case of his son. The Ld. AR therefore urged that the decision (supra) of the Tribunal in the case of the son of the assessee be followed in the case of the assessee before us.
9. The Ld. CIT-DR conceded that the facts of the assessee’s case are exactly the same as those of his son’s case. It was also agreed that applicability of the amended provision of section 115BBE is debatable. It was, however, contended that the Ld. AO had not conducted enquiry in the case.
10. We have considered the submissions of the parties and perused the record. We have gone through the decision (supra) of the Tribunal in the case of Shri Bharat Malhotra and observe that in his case also survey under section 133A was conducted on 15.09.2016 wherein he had admitted additional income of Rs. 9.50 lakh largely on account of unexplained cash. The assessee had e-filed his return on 17.10.2017 declaring income of Rs. 13,52,590/-. The case was selected for scrutiny and assessment under section 143(3) was framed at the returned income of the assessee. The Ld. PCIT set aside the assessment exercising jurisdiction conferred on him under section 263 of the Act. It is thus obvious that facts of the assessee’s case are identical with the facts of the case of Shri Bharat Malhotra. In both the cases the Ld. PCIT was of the view that the surrendered income was in the nature of unexplained cash and the same was liable to be added under section 68 of the Act and tax was liable to be paid at the rate of 60% under section 115BBE of the Act.
11. At this juncture, it is expedient to reproduce the relevant findings recorded by the Tribunal in Shri Bharat Malhotra’s case (supra) herein below:-
“13. We have given thoughtful consideration to the orders of the authorities below. The bone of contention is whether the amount surrendered during the survey operation, which has been shown in the return of income as ‘income’ from other sources’ be taxed as per provisions of section 115BBE of the Act and having not done so, whether the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue.
14. At the very outset, we would like to state that an amendment has been brought in section 115BBE w.e.f. 201 7-1 8, but the same was not there in the statute on the date of survey, which is 15.09.2016.
15. Taking a leaf out of the amended provisions, the PCIT was of the opinion that the tax rate should have been 60% instead of 30%, because of which the assessment order has become prejudicial to the interest of the Revenue.
16. The moot point is as to whether the amendment is prospective or retrospective as on the date of survey he amended provisions were not there in the statute.
17. In our considered opinion, this is clearly a debatable issue which cannot be subject matter of assumption of jurisdiction u/s 263 of the Act.
18. A perusal of section 115BBE of the Act shows that where the total income of the assessee includes any income referred to in sections 68, 69, 69A, 69B, 69C or 69D, the income tax payable shall be @ 30% on income so referred to in the said sections. Further, in terms of amended provisions of section 115BBE of the Act by Taxation Laws, Second Amendment Act 2016, it provides that where the total income of the assessee includes any income referred to in sections 68, 69, 69A, 69B, 69C, and 69D and reflected in the return of income furnished under section 139 or total income of the assessee determined by the assessing officer, any income referred to in sections 68, 69, 69A, 69B, 69C, or 69D if such income is not reflected in the return of income furnished under section 139 of the Act, income tax payable shall be @ 60% on income so referred in the said section.
19. Change which has been brought about in the provisions relates to income so referred to in the afore-stated sections so defined which is either not reflected in the return of income or determined by the assessing officer and in both the cases it will be covered by the provisions of section 115BBE of the Act and the rate of taxation has been increased from 30% to 60% on such specified income.
20. There is, therefore nothing stated in the pre-amended or post amended provisions of section 115BBE of the Act that where the assessee surrenders undisclosed income during search action for the relevant year, the tax rate has to be charged as per provisions of section 115BBE of the Act. Therefore, the applicability of the amended provisions which prompted the PCIT to assume jurisdiction under section 263 of the Act is highly debatable issue, and therefore, in our understanding of the law, the PCIT has wrongly assumed jurisdiction.
22. ……..the declaration made by the assessee before the JCIT, Karnal Range, Karnal, vide letter dated 16.11.2016 clearly and categorically states:
“During the course of this operation, cash has been found in excess at the business premises when compared to cash available in our books of account. The assessee hereby offers to surrender 13 an additional income of Rs. 9,50,000/- on account of above discrepancy in addition to any regular income for the year ending 31.03.2017.”
23. The above offer was clear that the assessee is surrendering the income in addition to his regular income, which is business income and, therefore, the income surrendered by the assessee is also part of business income.
24. Merely because in the return of income inadvertently an amount has been shown under the head “Income from other sources”, would not change the colour of income surrendered.
27. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By ‘erroneous’ is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the decision of Hon’ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 Taxmann.com 272 (Bombay).
29. Considering the facts of the case in hand, in totality, in light of judicial decisions discussed here in above, we set aside the order of the PCIT and restore that of the Assessing Officer dated 12.2019 framed under section 143(3) of the Act.
30. In the result, the appeal of the assessee in ITA No. 826/DEL/2022 is allowed.”
12. We respectfully follow the decision (supra) of the Tribunal in the case of Shri Bharat Malhotra. We do not agree with the contention of the Ld. CIT-DR that the Ld. AO had not made any enquiry. We have observed that the AO had issued questionnaire along with statutory notice(s) sent to the assessee in response to which the assessee had filed written reply along with necessary documents and evidence. He perused and considered them. Not only this, the Ld. AO called for books of account which he verified. In our considered view it is not a case of no enquiry.
13. On the facts and in the circumstances of the assessee’s case and respectfully following the decision (supra) of the Tribunal in the case of Shri Bharat Malhotra, we vacate the order of the Ld. PCIT and restore the assessment order dated 06.12.20 19 passed by the Ld. AO under section 143(3) of the Act.
14. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 11th September, 2023.
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