Power of revision u/s 263 cannot be exercised to collect more taxes – ITAT

Power of revision u/s 263 cannot be exercised to collect more taxes by bringing income within the ambit of Sections 68/ 69 etc. and applying higher tax rate u/s 115BBE.

ABCAUS Case Law Citation:
ABCAUS 3741 (2023) (05) ITAT

Important Case Laws relied upon:
PCIT vs. Deccan Jewellera (P) Ltd. (2021) 132 taxmann.com 73(AP)
DCIT vs. Punjab Retail Pvt. Ltd.  
CIT Vs.  Vatika  Township  Private  Limited,  (2014)  367  ITR  466  (SC)
CIT vs. Nirmal Textiles 224 ITR 378 (Guj.)

In the instant case, the assessee had challenged the revisional order passed u/s 263 of the Income Tax Act, 1961 (the Act) by the Principal Commissioner of Income Tax (PCIT).

A survey operation under Section 133A of the Act was carried out on the business premises of the assessee wherein the assessee   admitted undisclosed income and surrendered the same as normal business income in her return of income (ITR).

Thereafter, the case of the assessee was subjected to compulsory scrutiny as per the CBDT guidelines.  The AO inter alia took note of the additional income included by the assessee in its e-return of income and accepted the ITR without any adjustment while framing the assessment order under Section 143(3) after making a brief reference to factum of survey and inclusion of additional income in the Return of income.

Thereafter, the PCIT in exercise of revisionary powers, issued show cause notice under Section 263 of the Act requiring the assessee to show cause as to why the assessment framed under Section 143(3) should not be suitably amended/modified on the ground that such order is erroneous insofar as it is prejudicial to the interest of the Revenue.

As per the show cause notice, the PCIT observed on the basis of perusal of case record that the additional income offered was in the nature of unexplained income which was liable to be assessed under Section 68/69/69A/69B/69C of the Act and consequently the tax payable on such undisclosed income was susceptible to enhanced tax rate of 60% as per Section 115BBE of the Act. 

The PCIT thus alleged that the Assessing Officer had incorrectly adopted the normal rate of taxation at 30% as offered by the assessee overlooking the counterveiling provisions of Section 115BBE of the Act.

After considering the response and explanation of the assessee, the PCIT set aside the assessment order with direction to the Assessing Officer to make a fresh assessment de novo in terms of revisional order and in accordance with law in keeping with the provisions of Section 115BBE of the Act.

Before the ITAT the assessee contended that the income surrendered was clearly attributable to the business operations and therefore the applicability of Section 68/69/69A/69B/69C of the Act were thus excluded having regard to the nature of income declared and consequently Section 115BBE was not attracted in the facts of the case.

Further, it was submitted that the press release issued by the CBDT dated 28.11.2016 contemplated that accelerated rate of 60% would be applicable to black money holders who choose to disclose such black money after Pradhan Mantri Garib Kalyan Yojna, 2016 ends.

Thus, it was submitted therefore, the provisions of Section 115BBE would naturally apply only from a prospective date after the closure of the PMGKY scheme 2016 and therefore does not apply to the assessment year in question.

The Tribunal opined that an order of assessment passed by the Assessing Officer cannot be ordinarily interfered only because some another view is also plausible. 

Section 263 cannot be invoked to correct each and every mistake or error of the AO.

The ITAT stated that if in the given facts and circumstances of the case, two views are possible and one view which is legally plausible  has been adopted by the Assessing Officer then, it is trite, existence  of other possible view alone would not be sufficient to enable the designated authority to exercise powers conferred under Section  263 of the Act. The provisions of Section 263 cannot be invoked to correct each and every type of mistake or error allegedly committed by the Assessing Officer. The error should be material and grievous and continuance of such error would not be befitting to the interest of revenue.

Appreciation of material placed before AO is exclusively within his domain

The appreciation of material placed before the AO is, exclusively within his domain which cannot be freely interdicted by a superior officer while exercising revisional powers. It goes without saying that if so permitted, will render the task of the AO arduous and prone in almost every case.

Determination of true nature and character of income is contextual and no there is no straight jacket formula

The Tribunal said that the determination of true nature and character of income is highly contextual and law has not devised any straight jacket formula in this regard. The classification of income   under a particular head of income may significantly vary having regard to the nuanced facts of each case. When seen contextually.

The Tribunal opined that the additional income in the instant case was conceded by the assessee in the course of survey operations at the business premises. The income surrendered was sort of lumpsum figures offered in the form of excess stock, unaccounted advance to staff, excess cash generated etc. from business operations. Such additional income confessed in survey at business premises gives a facial impression of business attributes.

Power of review cannot be exercised to collect more taxes

The Tribunal stated that the power of review cannot be exercised to collect more taxes merely owing to the reason that the law now provides for penal and steep rate of taxation by bringing such income within the ambit of Sections 68/ 69 etc.

Further with respect to the applicability of the provisions of Section 115BBE, the Tribunal opined that Section 4 of the Act postulates that the law applicable at the beginning of an assessment year would apply to all income of the previous year unless excluded by express enactment.

The law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication. There is no question of the assessee possessing any vested right under the law as it stood before the amendment.

The Tribunal opined that the undisclosed income falling under the sweep of Section 68/69 etc. cannot escape the effect of substituted provisions of Section 115BBE coming into operation in the previous year relevant the assessment year in question.

In conclusion, the ITAT held that the approach adopted by the  Assessing Officer in treating the undisclosed income as business income was a plausible view and therefore the action of the  Assessing Officer cannot be labeled as ‘erroneous’ although it  may be prejudicial to the interest of the revenue.

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