Case Law Details
Vaidya Realities Vs PCIT (ITAT Rajkot)
Introduction: The ITAT Rajkot recently deliberated on the Vaidya Realities vs PCIT case, centering around the Section 263 review of the AO’s assessment under the Income Tax Act, 1961. The appellant, a partnership firm engaged in real estate, contested the PCIT’s characterization of the assessment under Section 143(3) as erroneous and prejudicial to revenue.
Detailed Analysis: The crux of the matter lies in the survey operation conducted under Section 133A, where the assessee admitted to receiving on-money in its real estate project. The AO, in the subsequent assessment, accepted the disclosed income of Rs. 1,77,66,000 under business and profession.
However, the PCIT, upon verification, contended that the income should fall under Section 69, taxed at the special rate under Section 115BBE. The PCIT argued that the AO failed to disallow deductions claimed by the assessee on remuneration and interest paid to partners against the on-money received.
The appellant defended the assessment, presenting evidence of the AO’s inquiries during the assessment proceedings. The AR emphasized that the surrendered income did not fall under Section 69, eliminating the need for the special rate under Section 115BBE.
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