The Jaipur Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that additional income declared in the survey was considered business income and not charged under Sections 69 and 69A of the Income Tax Act, 1961.
Alok Vijawat (assessee), place was surveyed by the department on 16.01.2019 and identified disclosed income of Rs. 76,00,000. The assessee filed an Income Tax Return ( ITR ) on 31.10.2019 declaring a total income of Rs. 83,70,380. The assessee disclosed the additional income of Rs. 76,00,000 which was found during the survey as business income.
The Assessing officer (AO) selected the case for complete scrutiny and issued notice to the assessee. The assessee submitted the requisite documents before the AO. The AO considered the assessee’s submissions and documents.
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The AO accepted the total income of the assessee and completed the assessment proceedings. Therefore, the AO passed an assessment order on 29.09.2021 on returned income amounting to Rs. 83,70,380.
The PCIT issued notice to the assessee. The assessee filed a detailed reply regarding the income declared under the head of business income. However, the PCIT did not accept the contentions of the assessee.
Therefore, the PCIT invoked section 263 of the Income Tax Act and observed that the Assessment order of the AO was erroneous and prejudicial to the interest of the revenue. The PCIT noted that the AO accepted the submissions of the assessee without verifying the sources.
The PCIT further observed that the AO should have charged the income under Sections 69 and 69A of the Income Tax Act. Thus, the PCIT stated that the income should have been charged with tax under section 115BBE of the Income Tax Act.
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Consequently, the PCIT set aside the assessment order passed by the AO and directed to consider the income as per provisions section 69 and 69A of the Income Tax Act. The PCIT also directed the AO to tax the income under section 115BBE of the Income Tax Act.
Aggrieved by the order of the PCIT, the assessee preferred an appeal before ITAT. The counsel for the assessee argued that the issue raised by the PCIT had already been verified by the AO while passing the assessment order.
The counsel also relied on the order of the AO and argued there was no flaw in the assessment order. The counsel sought to quash the order of the PCIT passed under section 263 of the Income Tax Act.
On the other hand, the counsel for the revenue supported and relied on the order of the PCIT. The counsel also sought to dismiss the appeal, thereby upholding the order of the PCIT.
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The two-member bench comprising Dr. S. Seethalakshmi (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) observed that the appeal challenges the invocation of section 263 of the Income Tax Act.
The tribunal observed that the assessee admitted the additional income under the head business income. The tribunal observed that while issuing the notice the question of why section 115BBE should not be applied was raised by the AO.
The tribunal further observed that the AO had not conducted an inquiry but applied his mind and had taken a plausible view on the matter. Therefore, the tribunal held that the order of AO was neither erroneous nor prejudicial to the revenue. Thus the tribunal quashed the order of the AO. Thereby the appeal was allowed.
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