The Income Tax Appellate Tribunal (ITAT) of Hyderabad bench recently quashed a rectification order filed before it and held that no tax should be levied under Section 115BBE of the Income Tax Act, 1961 on additional income offered by the assessee during survey proceedings.
Assessee is an individual, earning income from salary and other sources.
There was a survey in the business premises of the assessee.After recording statement under Section 131 of the Income Tax Act assessee filed return of income incorporating Rs. 20 lakhs additional income that was offered during the survey. Then AO made scrutiny upon the return filed by the assessee, accepted the return of income and concluded the proceedings under section 143(3) of the Income Tax Act.
Subsequently, AO proposed rectification of the assessment order.Thereafter the AO recorded that the additional income of Rs. 20 lakhs was to be taxed at flat rate at 30% under Section 115BBE instead of slab rates and, therefore, such an unaccounted money had to be brought to tax under Section 115BBE of the Income Tax Act.
Aggrieved assessee filed an appeal before the CIT(A). The CIT(A) held that the action of the AO falls in the category of rectification of mistake apparent from record and accordingly, dismissed the appeal.
Aggrieved by the order of the CIT(A), assessee filed a second appeal before the tribunal.
K.A. Sai Prasad, counsel for the assessee submitted where a similar survey was conducted on 19/02/2015, the CIT(A) had taken a different view in the cases of Shri Lagisetti Viswanatham and Pradeepa Lagisetty.
He submits that on a similarly placed facts and circumstances involving survey on 19/02/2015, the department could not take two stands, one in the case of assessee and other in the case of others.
A.G.V. Prasad, counsel for the revenue submitted that, when once certain income was brought to light in the course of proceedings under Section 133A of the Act, it would necessarily be unexplained income, which falls under Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D of the Income Tax Act.
Moreover, merely because the section was not specifically invoked, it did not change the character of income or the applicability of Section 115BBE of Income Tax Act to such proceedings.
It was observed by the tribunal that AO did not seek any explanation from the assessee and the assessee did not offer any explanation or that the explanation, if any, offered by the assessee is not to his satisfaction.
In such absence, if an order under section 143(3) of the Income Tax Act. is passed accepting the return of income, then it is difficult to presume that such an order was passed in respect of any income determined under section 68, section 69, section 69A, section 69B, section 69C or section 69D of the Act or that the tax has to be levied under section 115BBE of the Income Tax Act.
Hence it was determined that Unless and until such a compliance is there in the assessment order, it cannot be said that there was any mistake apparent from record or that the proceedings are amenable to the jurisdiction of the learned Assessing Officer under Section 154 of the Income Tax Act.
In assessee’s chase AO did not record any such satisfaction as required under law. So he could not be allowed to contend that the provisions of section 115BBE of the Income Tax Act are applicable to the case of the assessee and, therefore, the error in respect of leviable rates has to be rectified under section 154 of the Income Tax Act.
The single-member bench of Narasimha Chary, (Judicial Member) held that the exercise of jurisdiction under Section 154 of the Income Tax Act by the Assessing Officer is bad in law.
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