If AO has taken one of the possible views by treating the income offered during survey operation as income under the head business and profession, PCIT cannot exercise its revisionary power U/s 263
The power of Revision of CIT u/s 263 has been a matter of disputes and litigation in numerous cases.
In a recent case before ITAT Rajkot, income surrendered during survey operation was not verified in pursuance to the provision of section 69 r.w.s. 115BBE. PCIT while exercising its power u/s 263 has held that the assessment has been framed u/s 143(3) of the Act without verification with respect to undisclosed income offered by the assessee in pursuance to the provisions of section 69 r.w.s. 115BBE of the Act which is erroneous and causing prejudice to the interest of revenue.
The question was whether there was any inquiry conducted by the AO during the assessment proceeding qua the income offered by the assessee during the survey operation?
The case before ITAT Rajkot was as under:
M/S VAIDYA REALITIES
THE PRINCIPAL COMMISSIONER OF INCOME TAX, RAJKOT-1,
.- ITA No. 113/Rjt/2022
Dated.- January 19, 2024
ITAT Rajkot has held as under:
“From the above, it is transpired that to tax any item of income/ expenditure, unaccounted investment at the specific rate r.w.s. 115BBE of the Act, it is necessary to classify the income under the head deeming provision under section 69, 68, 69B etc. In the present case, the income surrendered was to be classified u/s 69 of the Act. As per the direction of the Ld. PCIT, however, we find that the Ld. PCIT has nowhere pointed out any contravention that the income surrendered by the assessee falls within the provision of section 69 of the Act. As such, the assessee in the present case was able to justify the source of income surrendered during survey operation and therefore we are of the view that the same cannot be treated as deemed income u/s 69 of the Act. Once the income goes out of the preview of the deeming provision, the provision of section 115BBE of the Act, cannot be applied.
6.8 From the above, we note that the AO has taken one of the impossible view by treating the income offered during survey operation as income under the head business and profession. The Ld. PCIT cannot substitute the view taken by the AO as per his understanding of facts of the case. In view of the above, and after considering the facts in totality, we hold that the order passed u/s 263 of the Act is not sustainable. Accordingly, we quash the same. Hence, the ground of appeal of the assessee is hereby allowed.
7. In the result, the appeal filed by the assessee is hereby allowed.”
Cases relied upon
ITAT Chandigarh in the case of Shri Parmod Singla v. ACIT reported in 154 taxmann.com 347
The copy of the order is as under: