2020 (3) TMI 279 - AT - Income Tax

Taxation of income - whether the surrendered amount can be taxable under section 115BBE read with section 69A of the Act or it was to be taxed as a regular business receipt - HELD THAT - To decide this issue, it is important first to visit the statement of the director of the assessee which was recorded during the course of survey. We have particularly gone through the answer to question No. 35 wherein the director of the assessee has clearly stated that the figures noted in the diary represented sales unrecorded in the books of account and these figures related to the period April 2015 to August 2015 in the present case, the addition under section 69A could have been made only if no explanation, regarding source of such income, was offered or the expla nation offered by the assessee was not satisfactory in the opinion of the Assessing Officer. In the present case, as we have already noted that the assessee had given complete explanation regarding the source of entries recorded in the diary, which were explained to be part of unrecorded sales and the Assessing Officer also did not object to the said explanation. Therefore, addition cannot be made under section 69A of the Act and if the addition cannot be made under section 69A, the provisions of section 115BBE will not be applicable. In a similar situation in the case of Pr. CIT v. Bajargan Traders 2017 (11) TMI 388 - RAJASTHAN HIGH COURT had dismissed the appeal of the Revenue. - Decided in favour of assessee

Summary

Issues Involved:
1. Admission of additional ground of appeal.
2. Taxability of surrendered amount under section 115BBE read with section 69A.
3. Eligibility for deduction under section 80JJA.

Issue-wise Detailed Analysis:

1. Admission of Additional Ground of Appeal:
The assessee sought to introduce an additional ground of appeal, arguing it was a legal ground arising from the facts and materials already on record, referencing the Supreme Court judgment in National Thermal Power Co. Ltd. v. CIT. The Departmental representative did not object, leading to its admission.

2. Taxability of Surrendered Amount under Section 115BBE Read with Section 69A:
The core issue was whether the surrendered amount of ?1.51 crores, admitted during a search operation as unrecorded sales, should be taxed under section 115BBE read with section 69A or as regular business income. The assessee argued that the surrendered amount was part of unrecorded sales, thus included in the profit and loss account. The Assessing Officer treated it as deemed income under section 69A, taxable under section 115BBE, and did not allow any expenditure against it. The Commissioner of Income-tax (Appeals) upheld this view but deleted the profit estimation and allowed exemption under section 80JJA.

The Tribunal examined the director's statement during the survey, confirming the entries in the diary were unrecorded sales. The Assessing Officer did not dispute this explanation, nor did he record any dissatisfaction. The Tribunal emphasized that section 69A applies only if no satisfactory explanation is provided for the money found. Since the assessee provided a satisfactory explanation linking the diary entries to unrecorded sales, the addition under section 69A was deemed unwarranted, making section 115BBE inapplicable.

The Tribunal referenced similar cases, such as Pr. CIT v. Bajargan Traders, where unrecorded investments were treated as business income and not under section 69. The Tribunal concluded that the surrendered amount should be treated as business income, allowing the set-off of expenses against it.

3. Eligibility for Deduction under Section 80JJA:
The Tribunal noted that the Commissioner of Income-tax (Appeals) acknowledged the assessee's eligibility for deduction under section 80JJA. Consequently, the Tribunal held that the surrendered income, being part of the business income, qualifies for this deduction.

Conclusion:
The Tribunal allowed the appeal, ruling that the surrendered amount should be taxed as business income, not under section 115BBE read with section 69A, and the assessee is eligible for deduction under section 80JJA. The order was pronounced on January 10, 2020.