The Income Tax Appellate Tribunal Bangalore (ITAT), has quashed the revisional order of Principal Commissioner of Income Tax (PCIT) as acceptance of returned income was done by Assessing Officer (AO) after proper inquiry.
The assessee, M/s. Karthik Estate is a partnership firm engaged in the business of real and it filed return of income declaring an income of Rs.3,33,08,120. A search and seizure action u/s. 132 of the Income-tax Act, 1961 was carried out in the case of assessee on 8.2.2018. A statement was recorded from Hariyappa Kotian, Managing Partner of the firm, who admitted additional business income of Rs.3 crores to cover the discrepancies found during the course of the search.
The case was selected for scrutiny and notice u/s. 143(2) was served on the assessee. The AO noticed that the assessee in the return of income filed has declared additional income of Rs.3 crores under the head ‘income from business’ and had paid taxes on the same. The AO upon verification of various documents submitted and explanation offered by the assessee, accepted the returned income and passed the order u/s. 143(3) of the Act.
The PCIT noticed the fact that the assessee has admitted Rs.3 crores as business income in the hands of the assessee during the search proceedings and no explanation as regards the source and nature of receipts was submitted. He was of the view that income of the assessee should have been assessed as unexplained cash credit, rather than business income and added back as income u/s. 68 taxed at special rate u/s. 115BBE of the Act. The PCIT observed that the AO had not made any enquiry or verification on this issue and to that extent the order of the AO was erroneous and prejudicial to the interests of the revenue. He therefore issued a show cause notice to the assessee.
The Division Bench consisting of NV Vasudevan, Vice President and Padmavathy S, Accountant Member observed that “On perusal of the above facts, it is evident that the assessee has no other source of income other than business income which fact has been repeatedly submitted by the assessee before the lower authorities. The AO has conducted enquiry and perused the details submitted and has taken a decision to accept the explanation provided by the assessee after proper application of mind.”
“We are of the considered view that the PCIT is not justified in setting aside the order of the AO for examining the source of income of Rs.3,00,00,000 already offered to tax as business income. Accordingly, the impugned order of the PCIT is quashed” the Tribunal added.
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