The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that the revisionary jurisdiction under Section 263 of the Income Tax Act,1961 cannot be invoked solely based on the Principal Commissioner of Income Tax’s ( PCIT ) differing view.
Aadhya Infrastructure,the appellant-assessee,engaged in real estate development, filed its return of income for the assessment year(AY) 2017-18. A survey action under Section 133A of the Act was conducted on August 30, 2016, at its business premises, during which the assessee admitted undisclosed income of ₹1,00,20,000 from unrecorded receipts.
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This amount was included in the firm’s return, and the assessing officer (AO) accepted the returned income of ₹1,02,52,730 without modifications during the scrutiny assessment.
The PCIT concluded that the assessing officer (AO) failed to verify the nature and source of the admitted undisclosed income. The PCIT noted that the AO incorrectly treated this income as regular business receipts without investigating its status as unexplained cash receipts under Section 69A.
Furthermore, the undisclosed income was taxed at the standard rate of 30% rather than the higher 60% under Section 115BBE. This oversight led the PCIT to exercise revisionary jurisdiction under Section 263.
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The PCIT also pointed out the AO’s insufficient inquiries into the cash receipts and their sources, which raised concerns about potential violations of Section 269ST related to cash transactions exceeding ₹2 lakh. As a result, the PCIT set aside the assessment order and instructed the AO to carry out fresh assessments with appropriate inquiries.
The assessee appealed against the PCIT’s order, arguing that the assessment was neither erroneous nor prejudicial to revenue interests.
The tribunal heard the arguments from both the assessee’s representative and the Departmental Representative(DR). After reviewing the assessment orders and the revisionary orders from the PCIT under Section 263, it focused on the validity of the PCIT’s revision of the assessment orders for AY 2017-18.
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The bench found that the AO had conducted sufficient inquiries during the original assessment. The undisclosed income admitted during the survey was included in the profit and loss accounts and related to legitimate business activities. Each cash transaction did not exceed ₹2 lakh, complying with Section 269ST. The PCIT did not provide evidence to dispute the assessee’s explanations, making the invocation of Section 263 unfounded.
The tribunal also supported the assessee representative’s reference to the Gujarat High Court ruling in Dharti Estate, affirming that if the AO made adequate inquiries, the PCIT could not revise the order solely based on differing opinions.
The two member bench comprising Suchitra Kamble (Judicial Member) and Makarand V.Mahdeokar(Accountant Member) concluded that the AO correctly treated the undisclosed income as business receipts and assessed it at the normal rate of tax, not the higher rate under Section 115BBE.
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Ultimately, it ruled that the assessment order was neither erroneous nor prejudicial to the Revenue, allowing the appeal and quashing the revision order under Section 263 of the Act.
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