2023 (8) TMI 28 - AT - Income Tax

Revision under s.263 upholds reassessment for undisclosed cash; s.69A read with s.115BBE and s.269ST invoked with 60% tax rate

ITAT (Ahmedabad) upheld revision under s.263, finding the AO's s.143(3) assessment erroneous and prejudicial. Diaries and admissions in survey established ... Revision u/s 263 - revise scrutiny assessment u/s 143(3) of the Act holding it as erroneous and prejudicial to interest of revenue - undisclosed income accepted / acknowledged by the assessee during the course of survey proceedings - AO Taxed it at normal rate of tax of 30% as against the higher rate as provided under section 115BBE of the Act of 60% - HELD THAT:- All that is required for invoking provisions of section 69A of the Act is that the assessee is “found” to be the “owner” of money during the course of survey. There is a marked difference between “money/ cash” being “found” at the premises of the assessee and the assessee being “found” to be the “owner” of money /cash”. Section 69A of the Act only contemplates of the latter situation. An assessee can be “found” to be the “owner” of money/cash on the basis of seized documents/ diary/ the statement of the assessee or working partner of an assessee firm made during the course of search. In the instant facts, admittedly certain diary noting was found and further the working partner of the assessee firm admitted to certain undisclosed income in cash outside the books of accounts. Therefore, there is no restriction in invoking the provisions of section 69A read with section 115BBE in the instant facts. Restriction on cash transactions - In the instant facts, admittedly, a sum of 1,01,00,000/-was received by the assessee firm in cash, which was admittedly not reflected in the books of accounts. Therefore, in our considered view, the AO should have made requisite enquiries with regards to applicability of provisions of section 269ST read with section 271DA of the Act, while framing the assessment. In the instant case, evidently, no enquiries with regards to applicability of section 269ST read with section 271DA of the 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. We are unable to accept the argument of assessee that simply if the assessee declared the undisclosed income discovered during the course of survey proceedings, as its “business income” (though in the instant facts, the aforesaid amount was declared as “other income” in the return of income), then, this itself would take the case outside the purview of section 269ST read with section 271DA of the Act. Thus we are of the considered view that Principal CIT has not erred in facts and in law in holding that the order passed by the assessing officer was erroneous and prejudicial to the interests of the Revenue. Decided against assessee. Issues involved:1. Invocation of provisions of Section 263 of the Income Tax Act.2. Applicability of Section 69A read with Section 115BBE of the Income Tax Act.3. Applicability of Section 269ST read with Section 271DA of the Income Tax Act.4. Denial of personal hearing and principles of Natural Justice.Summary:1. Invocation of provisions of Section 263 of the Income Tax Act:The Principal Commissioner of Income Tax (PCIT) Vadodara-1 invoked Section 263 to revise the scrutiny assessment under Section 143(3), holding it as erroneous and prejudicial to the interest of revenue. The assessee contended that the order of the Assessing Officer (AO) was neither erroneous nor prejudicial, as it was passed after proper verification of documents submitted in response to notice under Section 142(1).2. Applicability of Section 69A read with Section 115BBE of the Income Tax Act:The PCIT held that the undisclosed income of Rs. 1,01,00,000/- admitted during the survey should be taxed under Section 69A read with Section 115BBE at a higher rate of 60%, instead of the normal rate of 30%. The assessee argued that Section 69A requires actual discovery of money, bullion, or valuable articles, which was not the case here. However, the Tribunal agreed with the PCIT, stating that Section 69A does not require actual cash to be found but that the assessee was found to be the owner of the money based on diary notings and the partner's admission during the survey.3. Applicability of Section 269ST read with Section 271DA of the Income Tax Act:The PCIT observed that the AO did not examine whether the undisclosed income received in cash violated Section 269ST, which restricts cash transactions above a certain limit. The Tribunal upheld this view, emphasizing that the AO should have made requisite inquiries regarding the applicability of Sections 269ST and 271DA, given that the amount was received in cash outside the books of accounts.4. Denial of personal hearing and principles of Natural Justice:The assessee argued that the PCIT denied a personal hearing despite a specific request, which was against the principles of Natural Justice. The Tribunal did not specifically address this issue but focused on the substantive matters of tax applicability and procedural lapses by the AO.Conclusion:The Tribunal dismissed the appeal of the assessee, agreeing with the PCIT that the AO's order was erroneous and prejudicial to the interests of the Revenue. The Tribunal upheld the applicability of Sections 69A, 115BBE, 269ST, and 271DA in the given circumstances.