Mistake In Calculation Of Tax As Per Sec 115BBE Can Be Rectified U/s 154 And Not U/s 263: Ahmedabad ITAT Quashes Revision Made By PCIT

The power under section 263 of the Income tax Act can be exercised where the order of the Assessing Officer is erroneous and prejudicial to the interest of the revenue.

Further, Section 154(1A) of the Income tax Act lays down that rectification can be done for any matter other than the matter considered and decided in appeal/revision.

On the other hand, Section 115BBE of Income tax Act is a provision that deals with the taxation of income earned from undisclosed sources. This provision was introduced to curb the practice of black money and tax evasion.

Similarly, section 68 of Income Tax Act aims to ensure individuals and corporations transparently disclose their income by addressing unexplained cash credits in their books of accounts, placing the responsibility on the taxpayer to prove the legitimacy of such credits.

The Division Bench of Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member) observed that “the PCIT has not pointed out the aspect of Assessment Order being erroneous and prejudicial to the interest of the Revenue”. (Para 7)

Facts of the case:

The assessee, an individual, filed his return declaring total income of Rs.(-) 31,52,060/-During scrutiny assessment, the AO passed an order making addition in respect of interest free advance amounting to Rs.3,60,000/-; addition on cash gift amounting to Rs.34,00,000/-; addition on unsecured loan amounting to Rs.19,50,000/- and addition on cash deposit in bank amounting to Rs.1,63,49,423/-.

The PCIT however issued show cause notice u/s 263 observing that assessee had failed to submit any documentary evidence regarding source of cash deposit in bank and gift received in cash. Hence, the PCIT stated that the AO had made addition u/s 68 without invoking Section 115BBE. Thus, the PCIT directed the AO to calculate tax as per Section 115BBE.

Observations of the Tribunal:

The Bench observed that for invoking Section 263, the PCIT has not pointed out the aspect of Assessment Order being erroneous and prejudicial to the interest of the Revenue.

In fact, all the additions made by the Assessing Officer are in consonance with the Income Tax Statute, added the Bench.

The Bench went on to observe that calculation of tax as per Section 115BBE is a mistake which can be rectified u/s 154, and therefore, the provisions of Section 263 cannot be invoked.

The present is a scenario which is not derived from Section 263, where the mistake in the assessment Order carried out by the Assessing Officer can be rectified, pointed the Bench.

Therefore, the ITAT concluded that invocation of Section 263 itself is not justifiable and allowed the appeal of assessee.

Counsel for Assessee/ Appellant: Dhrunal Bhatt

Counsel for Revenue/ Respondent: Durga Dutt

Case Title: Dasrathsinh Ghanshyamsinh Chudasama verses The Principal Commissioner of Income Tax

Case Number: ITA No. 223/Ahd/2021

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