2023 (6) TMI 1332 - AT - Income Tax

Surrendered income Addition u/s 69A and taxing the same u/s 115BBE - AO treated the surrendered income as income from other sources as against business income claimed by assessee - HELD THAT - The assessee declared the income during the survey. The surrendered income was duly declared in the return of income filed u/s 139(1). Considering the nature of surrendered income is excess cash found, excess stock found, expenditure incurred. The revenue was not able to submit any source of income for the assessee other than the business income. The assessee declared the income and filed the return u/s 44AD of the Act under the presumptive scheme. The assessee declared the surrendered income in the return and all the surrendered income are nature of business transactions. We fully relied on the order of M/S CHOKSHI HIRALAL MAGANLAL 2011 (8) TMI 1341 - ITAT AHMEDABAD and M Ganpati Mudaliar 1964 (4) TMI 22 - SUPREME COURT - Accordingly, the addition made u/s 69A amount to Rs. 49,89,638/- is liable to be deleted and the calculation of tax u/s 115BBE is liable to be quashed. The income of the assessee will be treated as business income. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves appeals filed against the order of the ld. Commissioner of Income Tax (Appeals) for A.Y. 2019-20, emanating from the order of the ld. ACIT/DCIT, Central Circle, Amritsar, under section 143(3) of the Income Tax Act 1961.

ITA No. 65/Asr/2023:
The assessee, running a business under M/s Lakshmi Glass & Plywood House, surrendered business income during a survey. The ld. AO treated the surrendered income as income from other sources under section 69 of the Act, taxing it under section 115BBE. The assessee contended that the entire surrendered income constituted business income under section 44AD, thus challenging the tax treatment.

The ld. AR argued that the surrendered income was covered business income, as the assessee filed the return under section 44AD without the obligation to maintain books of account under section 44AA. The ld. DR, however, relied on the assessment order, emphasizing the lack of proof linking the surrendered income to the business.

The Tribunal considered the nature of the surrendered income, including excess cash and stock found, and expenditure incurred. Relying on precedents, the Tribunal held that for invoking deeming provisions under sections 69, 69A, 69B, and 69C, there must be a clearly identifiable investment or asset. The Tribunal distinguished the case from the High Court's ruling, asserting that the surrendered income was identifiable as business transactions and not unexplained income.

The Tribunal concluded that the addition made under section 69A and the tax calculation under section 115BBE were unjustified. Referring to relevant case law, the Tribunal ruled in favor of the assessee, treating the surrendered income as business income.

Common Observations:
The Tribunal noted that the facts and issues in both appeals were common, thus the decision in ITA No. 65/Asr/2023 applied mutatis mutandis to ITA No. 66/Asr/2023.

Decision:
Ultimately, the Tribunal allowed the appeals of the assessee in ITA No. 65/Asr/2023 and ITA 66/Asr/2023, pronouncing the order in open court on 14.06.2023.