M/S. 9TH STREET ARCHITECTS,AHMEDABAD V. THE DY.CIT, CIRCLE-4(1)(1), AHMEDABAD

ITA 1463/AHD/2025

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The case involves M/s. 9th Street Architects, who during a survey under section 133A of the Income Tax Act, 1961, admitted to unaccounted receipts of Rs. 1,50,00,000. The Assessing Officer treated this amount as unexplained money under section 69A, taxable at a special rate under section 115BBE, and rectified the assessment order under section 154. The assessee contested this rectification, arguing it was a debatable issue and not a mistake apparent from the record. The CIT(A) upheld the rectification, leading to the assessee's appeal to the Tribunal. The Tribunal, referencing various precedents, concluded that the rectification involved a debatable issue and thus was beyond the scope of section 154, allowing the assessee's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779453 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 21-07-2025
• Other Referred Cases: T.S. Balaram, ITO v. Volkart Brothers, ACIT v. Saurashtra Kutch Stock Exchange Ltd., Hussain Mohideen Ibrahim Sha v. ACIT, SMILE Microfinance Ltd. v. ACIT, Naranbhai Samatbhai Bharwad v. ACIT, Mohit Sakhija v. NFAC, Manoj Aggarwal v. DCIT, Dr. Prakash Tiwari v. CIT, Namdev Arora v. CIT, Rajmeet Singh v. ITO, Shri Arif v. ACIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT
• Assessee Lawyers: S.N. DIVATIA; SAMIR VORA; ARS
• Keywords: Set aside; Business income; Difference of opinion; Change of opinion; Income from undisclosed sources; Principle of natural justice; Rectification of order; Assessment record; Deemed to accrue or arise in india
• Section: 154; 68; 69; 133A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.1463/Ahd/2025 (Assessment Year: 2017-18) M/s. 9th Street Architects, 501, Vrundavan Enclave, Nr. Saptak Party Plot, 132 Ft. Ring Road, Naranpura, Ahmedabad-380013 Vs. Deputy Commissioner of Income Tax, Circle-4(1)(1), Ahmedabad [PAN No.AAMFM6777E] (Appellant) .. (Respondent) Appellant by : Shri S. N. Divatia & Shri Samir Vora, ARs Respondent by: Shri Abhijit, Sr. DR Date of Hearing 16.10.2025 Date of Pronouncement 17.10.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-11, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 20.06.2025 passed for A.Y. 2017-18. 2. The assessee has raised the following grounds of appeal: “1.1 The order passed u/s.250 on 20.06.2025 for A.Y.2017-18 by CIT(A)-11, A'bad upholding the order of rectification passed u/s 154 on 28.03.2024 whereby holding the income of Rs. 1,50,00,000/- disclosed during survey u/s 133A as liable to tax at a special rate u/s 115BBE is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned rectification to charge tax at a special rate u/s 115BBE in respect of income disclosed during survey. 2.1 The Ld.CIT(A) has grievously erred in law and on facts in confirming that there was a mistake apparent on record of not charging the income disclosed during the course of survey at a special rate u/s 115BBE so that the same could be rectified u/s 154. Printed from counselvise.com ITA No. 1463/Ahd/2025 M/s. 9th Street Architects vs. DCIT Asst.Year –2017-18 - 2– 2.2 Both the lower authorities have failed to appreciate that the issue of charging tax at special rate u/s 115BBE being debatable and possible to have two views, it was not a mistake apparent from record which could be rectified u/s 154. 2.3 That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have upheld that there was a mistake apparent on record of not charging the income disclosed during the course of survey at a special rate u/s 115BBE so that the same could be rectified u/s 154. 3.1 The Ld.CIT(A) has erred in upholding that the income of Rs. 1,50,00,000/- declared during the course of survey as consultancy fees from the profession was not business income but headless income so that it was liable to tax at a special rate u/s 115BBE. 3.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought to have held that the income of Rs. 1,50,00,000/- declared during the course of survey as consultancy fees from the profession was business income and not headless income so that it was not liable to tax at a special rate u/s 115BBE. 3.3 The observations made and case law relied upon by CIT(A) in this regard are not admitted and contrary to the facts of the case as well as law.” 3. The brief facts of the case are that a survey under section 133A of the Income-tax Act, 1961 (Act) was conducted in the case of the assessee during which it was admitted by the appellant firm that a sum of Rs. 1,50,00,000/- was not accounted for in its regular books of account. The nature of these unaccounted receipts was explained as being from the firm’s professional activities, namely architectural and allied fees. However, the assessee failed to explain the source of such funds at any stage. The assessee subsequently disclosed the said sum as part of its business turnover in its books of account, instead of offering it under the deeming provisions of the Act as unexplained income. The Assessing Officer, upon verification of the assessment records, observed that although the assessee had disclosed the amount in its business income, it should have been treated as unaccounted money under section 69A of the Act, taxable at the special rate prescribed under section 115BBE of the Act. Considering this omission as a mistake apparent from record, the Assessing Officer rectified the Printed from counselvise.com ITA No. 1463/Ahd/2025 M/s. 9th Street Architects vs. DCIT Asst.Year –2017-18 - 3– assessment order under section 154 by holding that the unaccounted income of Rs. 1,50,00,000/- ought to have been taxed under section 69A read with section 115BBE instead of being treated as normal business income. 4. Aggrieved by the rectification order passed under section 154, the assessee preferred an appeal before the learned CIT(A). During appellate proceedings, the assessee contended that the rectification order passed by the Assessing Officer was wholly illegal, unlawful, and without jurisdiction. It was submitted that the question whether income disclosed during survey should be treated as business income or as unexplained money under section 69A was a highly debatable issue involving interpretation of law and hence, beyond the purview of section 154. The assessee argued that the Assessing Officer could not invoke section 154 of the Act to change the character of income accepted as business receipts in the regular assessment, as such action amounted to a change of opinion. The assessee further submitted that there was no mistake apparent from record within the meaning of section 154 of the Act, as the issue required detailed consideration of facts and application of law. Reliance was placed on the decision of the Hon’ble Supreme Court in T.S. Balaram, ITO v. Volkart Brothers (1971) 82 ITR 50 (SC), where it was held that a debatable point of law is not a mistake apparent from record, and also on ACIT v. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 227 (SC), wherein it was reiterated that only an obvious and patent error can be rectified under section 154. The assessee also relied on Hussain Mohideen Ibrahim Sha v. ACIT (ITA No. 449/Chny/2017, ITAT Chennai), where it was held that section 69A would apply only where the assessee was found to be the owner of unexplained Printed from counselvise.com ITA No. 1463/Ahd/2025 M/s. 9th Street Architects vs. DCIT Asst.Year –2017-18 - 4– money, bullion, or jewellery not recorded in the books and where both nature and source of the same were not satisfactorily explained. It was argued that since the assessee had clearly explained the nature of the receipts as business income, section 69A was not applicable. The assessee further relied on SMILE Microfinance Ltd. v. ACIT (Madras High Court, citation not reported) and Naranbhai Samatbhai Bharwad v. ACIT (ITA No. 272/Ahd/2024, ITAT Ahmedabad) to contend that section 115BBE is applicable only from 01.04.2017 onwards and not prior to that date. It was submitted that the Assessing Officer had wrongly invoked the provisions retrospectively. The assessee also relied upon Mohit Sakhija v. NFAC (2025) 175 taxmann.com 94 (ITAT Delhi) to argue that where the assessee has already declared the source for cash deposits in its books, the provisions of section 68 or 69A cannot be invoked. Finally, the assessee argued that the rectification proceedings were void ab initio and without jurisdiction since the conditions precedent for invoking section 154 were not fulfilled, and prayed for the order to be quashed. 5. The learned CIT(A), after considering the submissions and perusing the record, observed that it was an undisputed fact that the sum of Rs. 1,50,00,000/- was unaccounted and accepted as such by the assessee during the survey. The assessee had explained only the nature of the receipts as business income but had not explained the source of such funds. The CIT(A) held that as per settled law, both the nature and source of such receipts must be explained to avoid invocation of deeming provisions. Reliance was placed on Mrs. Rupal Jain v. CIT (2023) 152 taxmann.com 345 (Allahabad), SLP dismissed in (2023) 152 taxmann.com 346 (SC), and Gautham Chand Jain v. Printed from counselvise.com ITA No. 1463/Ahd/2025 M/s. 9th Street Architects vs. DCIT Asst.Year –2017-18 - 5– ACIT (2025) 173 taxmann.com 172 (Madras), wherein it was held that mere declaration of unaccounted receipts as commission or business income without satisfactory explanation of the source would attract section 69A and the special rate of tax under section 115BBE. The CIT(A) also placed reliance on Manoj Aggarwal v. DCIT (2008) 27 CCH 0557 (Del) (SB); 11 DTR 1 (Del), where it was held that even if section 68 is not directly applicable, unexplained cash or credits may be taxed as deemed income under sections 69 or 69B, and that it is not necessary for the revenue to identify the precise section if the assessee fails to explain the source. Further reliance was placed on Dr. Prakash Tiwari v. CIT (1984) 148 ITR 474 (MP), Namdev Arora v. CIT (2016) 72 taxmann.com 124 (P&H), Rajmeet Singh v. ITO (2024) 160 taxmann.com 83 (Jharkhand), and Shri Arif v. ACIT (ITA No. 976/Bang/2022, ITAT Bangalore) to support the view that when the source of income is not explained, such income is taxable under deeming provisions. On examining the case laws cited by the assessee, the CIT(A) held that the reliance on Volkart Brothers (82 ITR 50) and Saurashtra Kutch Stock Exchange (305 ITR 227) was misplaced, as those cases dealt with situations of interpretative ambiguity, whereas in the present case, the issue was settled by the Supreme Court. The reliance on Hussain Mohideen Ibrahim Sha was also held to be unhelpful to the assessee since even that decision emphasized the requirement to explain both nature and source, which the assessee failed to do. Similarly, the cases of SMILE Microfinance Ltd. and Naranbhai Samatbhai Bharwad were distinguished on facts, as the assessee had disclosed the receipts in A.Y. 2017-18 to which section 115BBE applied. Accordingly, the CIT(A) held that the Assessing Officer had merely corrected an error that was apparent from the record, as the omission to apply sections Printed from counselvise.com ITA No. 1463/Ahd/2025 M/s. 9th Street Architects vs. DCIT Asst.Year –2017-18 - 6– 69A and 115BBE to unaccounted receipts was inconsistent with binding judicial interpretation. Since the source of the unaccounted income remained unexplained, the deeming provisions were correctly invoked. The CIT(A) thus upheld the rectification order passed under section 154 as lawful, finding that the issue was not debatable and that the action of the Assessing Officer was in accordance with law and binding precedents. The appeal was accordingly dismissed. 6. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 7. We have heard the rival contentions and perused the material on record. The brief facts of the case are that a survey under section 133A of the Act was conducted in the case of the assessee-firm, during which a sum of Rs. 1,50,00,000/- was admitted as not accounted for in the regular books of account. The assessee explained the nature of the receipts as business income arising from its professional activities of architecture and allied services and subsequently offered the same to tax as part of its business turnover in the regular return of income. The Assessing Officer, however, considered that the said amount ought to have been assessed as unexplained money under section 69A, taxable under section 115BBE, and accordingly invoked section 154 of the Act on the ground of a mistake apparent from record. On careful consideration of the rival submissions, we find force in the contention of the assessee that the issue whether the disclosed income during the course of survey represents business income or unexplained money under section 69A is a debatable issue and, therefore, cannot fall within the limited scope of rectification under section 154 of the Act. The Assessing Officer’s action in Printed from counselvise.com ITA No. 1463/Ahd/2025 M/s. 9th Street Architects vs. DCIT Asst.Year –2017-18 - 7– changing the character of the income from business receipts to unexplained money amounts to review or reappraisal of facts, which is impermissible under section 154 of the Act. We also find merit in the reliance placed by the assessee on the decision of the Hon’ble Delhi Tribunal in Mohit Sukhija v. NFAC [2025] 175 taxmann.com 94 (Delhi - Trib.) / [2025] 213 ITD 251 (Delhi - Trib.) (dated 30.05.2025), wherein it has been held that when the assessee has already declared the source for cash deposits in its books of account, the Assessing Officer or the Commissioner (Appeals) cannot invoke the deeming provisions of sections 68 or 69A. Similarly, in S. Balaji Mech- Tech (P.) Ltd. v. ITO [2025] 170 taxmann.com 639 (Delhi - Trib.) / [2024] 116 ITR(T) 31 (Delhi - Trib.) (dated 25.09.2024), it was held that where cash sales have been recorded in the regular books and accepted as part of business results, there remains no scope for treating such receipts as unexplained cash under section 68 of the Act, as the explanation of the assessee already forms part of its audited accounts. In the present case, it is undisputed that the assessee has duly accounted for the said receipts in its books of account and offered them as business income, which has been accepted in the regular assessment. The source of the receipts, being from the assessee’s professional activity, stood duly declared in the return and books. Therefore, the provisions of section 69A or section 115BBE could not have been invoked by way of rectification under section 154 of the Act, as such exercise requires fresh verification and determination of facts, which lies outside the scope of a “mistake apparent from record.” We further note that the Hon’ble Supreme Court in T.S. Balaram, ITO v. Volkart Brothers (1971) 82 ITR 50 (SC) and ACIT v. Saurashtra Kutch Stock Exchange Ltd. (2008) 305 ITR 227 (SC) has categorically held that only a patent, obvious, and apparent error can be Printed from counselvise.com ITA No. 1463/Ahd/2025 M/s. 9th Street Architects vs. DCIT Asst.Year –2017-18 - 8– rectified under section 154 and that a debatable point of law cannot be the subject matter of rectification. Applying the settled law to the present case, it is clear that the rectification order passed by the Assessing Officer involves a debatable issue and, hence, is beyond the jurisdiction conferred by section 154 of the Act. 8. In view of the above facts and in light of the judicial precedents referred to hereinbefore, we hold that the rectification order passed by the Assessing Officer under section 154 is unsustainable in law. 9. The order passed by the CIT(A) confirming such rectification is accordingly set aside, and the appeal of the assessee is allowed. 10. In the result, the appeal filed by the assessee is allowed. This Order pronounced in Open Court on 17/10/2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER (True Copy) Ahmedabad; Dated 17/10/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "