The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that Section 269T of the Income Tax Act 1961 would apply to undisclosed income which was declared during the survey proceedings.
A survey action under Section 133A of the Income Tax Act was carried out at the business premises of the assessee firm, Shiv Shakti Enterprise. During the course of survey, the assessee admitted an undisclosed income and working partner of the assessee firm.
While filing the return of income for assessment year 2017- 18, the assessee firm had shown the above undisclosed income under the head “any other income” in the return of income filed by the assessee firm for the impugned assessment year.The assessment of the assessee was completed by the AO by making of a disallowance on account of disallowance out of claim of partner’s remuneration.
The Principal Commissioner of Income Tax (PCIT) initiated proceedings under Section 263 of the Act on the ground that the AO computed the tax liability in respect of the aforesaid undisclosed income accepted / acknowledged by the assessee during the course of survey proceedings at normal rate of tax of 30% as against the higher rate as provided under Section 115BBE of the Income Tax Act of 60%.
According to the PCIT(Appeals) the income should have been brought to tax under Section 69A read with Section 115 BBE of the Income Tax Act. Accordingly, the assessment order was held to be erroneous and prejudicial to the interests of the Revenue.
On Behalf of the assessee submitted that once the Department had accepted the aforesaid income as “business income” of the assessee, then there would be no question of invoking the provisions of section 269ST of the Income Tax Act. In support, the counsel for the assessee placed reliance on the decision of Ahmedabad Tribunal in the case of Nilay Kumar Bros v PCIT in ITA.
The two-member Bench of Annapurna Gupta, (Accountant Member) and Siddhartha Nautiyal, (Judicial Member) dismissed the appeal filed by the assessee holding that the AO should have made requisite enquiries with regards to applicability of provisions of Section 269ST read with Section 271DA of the Income Tax Act, while framing the assessment.
The Bench further observed that in the instant case, evidently, no enquiries with regards to applicability of Section 269ST read with Section 271DA of the Income Tax Act, were made by the AO during the course of assessment proceedings, when evidently it was within the knowledge of the AO that the aforesaid amount was received by the assessee firm in cash, outside the books of accounts.
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