2026 (1) TMI 63 - AT - Income Tax

Applying amended s.115BBE to survey income for AY 2017-18: revision u/s263 rejected, order quashed

The dominant issue was whether the Pr. CIT could revise the assessment under s.263 on the ground that the AO failed to apply amended s.115BBE to the ... Revision u/s 263 - AO while completing the assessment has not applied the provisions of section 115BBE, which was brought into the Act w.e. f 1.4.2017 - Scope of amendment - CIT has taken the stand that the amendment would apply to the assessment year 2017-18 - HELD THAT:- When an amendment is made effective from 1st April of a particular year that relates to the said accounting year. The assessment year in this case would be next year. Thus, the assessment year would be for an amendment which has taken effect from 1.4.2017 will be assessment year 2018-19. CIT has also referred to the decision of Reliance Jute Industries [1979 (10) TMI 2 - SUPREME COURT] has held that the law as on the beginning of the year is the law that has to be applied for the assessment year. The survey in the impugned case appeals took place on 14.9.2016, the Gazette Notification in respect of Section 115 BBE was on 15.12.2016. The effective date for the amendment was 1.4.2017 that is after end of the financial year 31.3.2017, the survey has taken place during the financial year 1.4.2016 to 31.3.2017, relevant to assessment year 2017- 18. The amendment has taken place w.e.f. 1.4.2017. This amendment would be applicable to assessment year 2018-19. As the amended provisions of section 115 BBE does not apply to the impugned assessment year, we are of the view that the provisions of section 115 BBE cannot be made applicable in the case of the assessees for the impugned assessment year 2017-18. We are of the view that the orders of Pr. CIT, Ranchi are unsustainable and consequently, we quash the same. Appeals of the assessees stand allowed. ISSUES PRESENTED AND CONSIDERED 1) Whether the amended provisions of section 115BBE, made effective from 01.04.2017, could be applied to the assessment year 2017-18 in respect of undisclosed income admitted during a survey conducted on 14.09.2016. 2) Whether the revisionary orders under section 263 directing application of section 115BBE for assessment year 2017-18 were sustainable in law when the amendment to section 115BBE became effective after the relevant previous year ended. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of amended section 115BBE to assessment year 2017-18 Legal framework (as discussed by the Court): The Court noted that section 115BBE was amended through a Gazette Notification dated 15.12.2016, with the amendment stated to be effective from 01.04.2017. The Court also relied on the principle (as referred to in the order) that the law as on the beginning of the relevant year is to be applied for the assessment year. Interpretation and reasoning: The Court examined the timing of events: the survey occurred on 14.09.2016 during the financial year 01.04.2016 to 31.03.2017, relevant to assessment year 2017-18. Since the amendment to section 115BBE was effective from 01.04.2017, the Court reasoned that it would relate to the accounting year starting 01.04.2017 and therefore correspond to the subsequent assessment year. The Court concluded that an amendment effective from 01.04.2017 would apply to assessment year 2018-19, not assessment year 2017-18. The Court also found support for this interpretation in the reasoning extracted from a High Court decision that limited the increased rate to transactions from 01.04.2017 onwards and not prior to that cut-off date. Conclusion: The Court held that the amended provisions of section 115BBE could not be applied to the assessees for the impugned assessment year 2017-18. Issue 2: Sustainability of revision under section 263 directing application of section 115BBE for AY 2017-18 Legal framework (as discussed by the Court): The Court considered the revisionary action under section 263 on the footing that the Assessing Officer had not applied section 115BBE while completing the assessment, and the revision sought to enforce that provision for the impugned year. Interpretation and reasoning: Having held that the amended section 115BBE did not apply to assessment year 2017-18, the Court reasoned that the foundational premise of the revisionary orders failed. Since the revision attempted to apply a provision (as amended) to a year to which it was not applicable, the Court found the revisionary orders to be legally unsustainable. Conclusion: The Court quashed the orders passed under section 263, and allowed the appeals.