2025 (6) TMI 385 - AT - Income Tax

Assessment order lacks Section 153D approval evidence and Section 115BBE application on surrendered income upheld

The ITAT Hyderabad dismissed the assessee's appeal against a revision order u/s 263. The assessee challenged the validity of the assessment order claiming ... Revision u/s 263 - Validity of assessment order passed by the Assessing Officer for want of a valid approval u/s 153D - HELD THAT:- Though the assessee can challenge the revision order passed u/s 263 of the Act on the ground of validity of the assessment order itself, however, in order to challenge the validity of approval u/s 153D in the proceedings against the order passed u/s 263 of the Act, the assessee himself has to bring on record the very approval order passed u/s 153D to show the legal infirmity in the same. The assessee has not produced any record to show that the said approval was given by the Addl. CIT without application of mine or before passing the impugned order by the Assessing Officer u/s 153(3) of the Act. Once the impugned approval itself is not placed before us, the question of validity of the approval cannot be decided. Therefore, in the absence of any material and the impugned approval itself u/s 153D, we cannot analyze the relevant aspects of the approval and give a finding whether the same is valid or invalid. Hence, in the facts and circumstances of the case, the additional ground raised by the assessee are rejected and stand dismissed. As per CIT AO had failed to apply the provision of Section 115BBE to the income surrendered in search - It is manifest from the record that neither the Assessing Officer has called for any details nor the assessee filed any supporting evidence to substantiate the claim as income from real estate business offered to tax in the return of income, as against the source of cash of Rs. 62.00 lakhs explained by the assessee during the course of search & seizure proceedings as Rs. 15.00 lakhs belongs to himself and his son and balance cash of Rs. 45.00 lakhs belongs to his relatives. This fact itself renders the assessment order erroneous in so far as it is prejudicial to the interest of the Revenue. Accordingly, in the facts and circumstances of the case as discussed above, we do not find any error or illegality in the order of the learned Pr. CIT. The decisions relied upon by the learned AR of the assessee cannot be applied in the facts of the present case. Appeal of the assessee is dismissed. Issues Presented and ConsideredThe core legal questions considered by the Tribunal in this appeal are:1. Whether the Principal Commissioner of Income Tax (Pr. CIT) was justified in invoking the revisionary jurisdiction under Section 263 of the Income Tax Act, 1961, when the assessment order passed under Section 143(3) was neither erroneous nor prejudicial to the interest of the Revenue.2. Whether the Pr. CIT erred in assuming that the Assessing Officer (AO) failed to apply the provisions of Section 115BBE to the income surrendered during search proceedings, despite Section 115BBE not being applicable to income declared and assessed as business income.3. Whether the Pr. CIT was correct in revising the assessment order passed under Section 143(3), notwithstanding the approval accorded by the Additional Commissioner of Income Tax under Section 153D of the Act.4. The validity and effect of the approval under Section 153D of the Act, particularly whether the approval without a Document Identification Number (DIN) as mandated by CBDT Circular No. 19/2019 renders the approval and consequent assessment order invalid, thereby precluding revision under Section 263.5. Whether an assessment order passed after obtaining approval under Section 153D can be subjected to revision under Section 263.6. Whether the AO's acceptance of the assessee's claim regarding the source and nature of seized cash without adequate inquiry or supporting evidence amounted to an erroneous order prejudicial to the Revenue.Issue-Wise Detailed Analysis1. Legitimacy of invoking Section 263 revisionary jurisdictionLegal framework and precedents: Section 263 empowers the Pr. CIT to revise an assessment order if it is found to be erroneous and prejudicial to the interest of the Revenue. The scope of revision is limited and requires that the order under revision suffers from legal or factual error that adversely affects Revenue.Court's interpretation and reasoning: The Tribunal noted that the Pr. CIT initiated revision proceedings on the ground that the AO had accepted the assessee's claim of income from real estate business without conducting necessary inquiries or verifying the source of seized cash. The AO's order was considered non-speaking and subsilentio on a crucial issue, thus amounting to non-application of mind.Key evidence and findings: The AO accepted the assessee's return of income which included Rs. 62 lakhs cash seized during search as business income from real estate, without demanding supporting evidence or details of transactions. The assessee's explanation at the time of search under Section 132(4) was inconsistent with the return, claiming part of the cash belonged to relatives, but no evidence was furnished.Application of law to facts: The Tribunal found that the AO's failure to make inquiries or verify the source of cash rendered the assessment order erroneous and prejudicial to Revenue, justifying revision under Section 263.Treatment of competing arguments: The assessee argued that the AO took a possible view and that the issue was debatable, hence the Pr. CIT could not interfere. The Tribunal rejected this, emphasizing that the AO's order lacked any inquiry or discussion on the key facts, which is beyond mere difference of opinion.Conclusion: The invocation of Section 263 was justified as the AO's order was erroneous and prejudicial to Revenue.2. Applicability of Section 115BBE to income surrendered in searchLegal framework: Section 115BBE prescribes a special tax rate of 60% on unexplained income or cash found during search, typically applicable where income is unexplained. However, it is not applicable if the income is declared and assessed as business income.Court's reasoning: The Pr. CIT held that the AO failed to apply Section 115BBE to the Rs. 62 lakhs cash found, which should have been taxed at 60% as unexplained income. The assessee contended that Section 115BBE was not applicable since the income was declared as business income.Findings and application: The Tribunal observed that the assessee's claim of real estate business income was unsupported by evidence and inconsistent with the explanation given during search. The AO should have treated the amount as unexplained money under Section 69A and applied Section 115BBE. The failure to do so was an error prejudicial to Revenue.Competing arguments: The assessee's argument that the AO's acceptance was a possible view was rejected due to lack of any inquiry or verification.Conclusion: The AO erred in not applying Section 115BBE; the revision was warranted.3. Validity of approval under Section 153D and its effect on revision under Section 263Legal framework: Section 153D mandates approval by the Principal Commissioner or Commissioner before making assessment or reassessment in certain cases. CBDT Circular No. 19/2019 requires issuance of a Document Identification Number (DIN) for communications to ensure transparency.Court's reasoning: The assessee challenged the revision on grounds that the approval under Section 153D was invalid as it lacked a DIN, rendering the assessment order invalid and immune from revision under Section 263.Findings: The Tribunal noted that the assessee failed to produce the approval order under Section 153D or any material showing it was issued without application of mind. The approval was communicated through the ITBA portal, and the absence of DIN on such internal communications was not comparable to orders issued to the assessee. Therefore, the validity of the approval could not be adjudicated in absence of record.Application of law: Since no evidence was placed on record to demonstrate invalidity of approval, the Tribunal declined to accept the assessee's contention that the assessment order was invalid for want of valid approval and hence not subject to revision.Competing arguments: The Revenue argued that the approval is an internal communication between tax authorities and DIN requirement does not apply. The Tribunal agreed with this view.Conclusion: The challenge to the approval's validity was rejected for lack of evidence; revision under Section 263 was permissible.4. Requirement of inquiry by the Pr. CIT before revising the assessment orderLegal framework and precedents: Revision under Section 263 requires the Pr. CIT to conduct a minimum inquiry to satisfy himself that the order is erroneous and prejudicial. Merely disagreeing with the AO's view is insufficient.Court's reasoning: The assessee contended that the Pr. CIT did not conduct any inquiry or determine the correct tax rate before revising the order.Findings: The Tribunal found that the Pr. CIT issued a detailed show cause notice outlining the deficiencies in the AO's order, gave the assessee opportunity to be heard, and considered the assessee's submissions before passing the revision order. The Pr. CIT identified the failure of the AO to verify the source of cash and apply Section 115BBE as errors prejudicial to Revenue.Application: The Pr. CIT's actions satisfied the requirement of inquiry before revision.Conclusion: The revision order was validly passed after due inquiry.Significant Holdings'The assessment order passed by the Assessing Officer without application of mind and contrary to the stand of the assessee taken at the time of search & seizure action is erroneous due to non-application of mind as well as lack of inquiry and therefore, the learned Pr. CIT has rightly invoked the provisions of section 263 of the I.T. Act, 1961.''The claim of the assessee that the cash seized represented income from real estate business during the previous year relevant to A.Y.2019-20 is not supported by any contemporaneous demonstrable evidence. The Assessing Officer merely accepted the claim of the assessee without calling for necessary details and without conducting necessary verification.''In view of the foregoing, it is held that the objections raised by the assessee are not tenable in law as well as in facts. Considering the facts of the case, it is hereby held that the Assessment Order passed by the AO and the Order of approval u/s. 153D are erroneous and prejudicial to the interest of revenue. Accordingly, the same are set aside to the file of the AO and the Addl. CIT for the limited purpose of taxing applying correct rate of tax in respect of unexplained cash after following due procedure.''In the absence of any material and the impugned approval itself u/s 153D, we cannot analyze the relevant aspects of the approval and give a finding whether the same is valid or invalid. Hence, the additional ground raised by the assessee are rejected and stand dismissed.''The invocation of Section 263 was justified as the AO's order was erroneous and prejudicial to Revenue.'Final determinations:- The revision under Section 263 was validly invoked as the AO's order was erroneous and prejudicial to Revenue due to lack of inquiry and non-application of mind.- The AO erred in not applying Section 115BBE to the unexplained cash found during search.- The approval under Section 153D, challenged on grounds of absence of DIN and validity, was not shown to be invalid; hence, the assessment order could be revised.- The Pr. CIT conducted adequate inquiry before revising the order.- The appeal filed by the assessee against the revision order was dismissed.