2023 (11) TMI 631 - AT - Income Tax

Stock discrepancies from survey properly assessed as business income, not unexplained investment under section 69

Shri Sahil Garg Versus The Pr. CIT, Patiala

Shri Sahil Garg Versus The Pr. CIT, Patiala - TMI Issues Involved:1. Legality of the order passed by the Ld. PCIT, Patiala.2. Jurisdiction of the PCIT under Section 263(1) of the Income Tax Act, 1961.3. Applicability of Section 115BBE of the Income Tax Act on surrendered income.4. Consideration of the surrendered amount under Sections 69A, 69, or 69B.5. Relevance of case laws cited by the PCIT, Patiala.6. Procedural propriety in the revisional order under Section 263(1) of the Act.Summary:1. Legality of the Order Passed by the Ld. PCIT, Patiala:The Assessee challenged the order passed by the Ld. PCIT, Patiala, arguing that it was 'bad in law and against the facts of the case.' The Tribunal found that the order lacked specific findings on how the deeming provisions under Sections 69, 69A, or 69B were applicable, and thus, the order was set aside.2. Jurisdiction of the PCIT under Section 263(1) of the Income Tax Act, 1961:The Assessee contended that the PCIT erred in assuming jurisdiction under Section 263(1) and setting aside the assessment order already framed under Section 143(3). The Tribunal held that the PCIT's invocation of jurisdiction under Section 263 was based on an incorrect application of Section 115BBE and the deeming provisions, thus invalidating the jurisdiction assumed.3. Applicability of Section 115BBE of the Income Tax Act on Surrendered Income:The PCIT argued that the surrendered income should be taxed under Section 115BBE at a higher rate. The Tribunal found that the surrendered income was disclosed as business income and accepted by the AO after due inquiry. Hence, Section 115BBE was not applicable as the income was not deemed unexplained under Sections 69, 69A, or 69B.4. Consideration of the Surrendered Amount under Sections 69A, 69, or 69B:The PCIT treated the surrendered amount as unexplained income under Sections 69A, 69, or 69B. The Tribunal noted that the Assessee had provided a reasonable explanation regarding the nature and source of the income during the survey and assessment proceedings, and the AO had accepted it as business income. Therefore, the deeming provisions were not applicable.5. Relevance of Case Laws Cited by the PCIT, Patiala:The Assessee argued that the case laws cited by the PCIT were not applicable to the facts of the case. The Tribunal supported this view, finding that the PCIT failed to consider the specific facts and explanations provided by the Assessee, which were accepted by the AO.6. Procedural Propriety in the Revisional Order under Section 263(1) of the Act:The Assessee claimed that the revisional order was passed mainly on the ground that the AO had accepted the surrendered amount without making any queries. The Tribunal found that the AO had conducted a proper inquiry and accepted the surrendered income as business income after due consideration. Therefore, the revisional order under Section 263(1) was set aside.Conclusion:The Tribunal set aside the order of the Ld. PCIT under Section 263, restoring the original assessment order passed by the AO. The appeal of the Assessee was allowed.