2020 (10) TMI 1118 - AT - Income Tax

Additional income declared in survey - Income attribution - income from other sources OR business income - Deduction on interest and remuneration paid to partners - assessee was contended the amount disclosed during the course of survey as additional income is part and parcel of its regular trading receipts and cannot be deemed as unaccounted money u/s. 69 - HELD THAT - The nature and source of said amount disclosed during the course of survey is established as business income as the assessee does not have any other business activity except business income from construction of housing project. Therefore, we hold the entire disclosed amount are attributable to the business activity and consequently is eligible for all allowances u/s. 40(b) of the Act. - Appeal of assessee is allowed.

Summary

Issues:
Whether additional income declared in a survey should be treated as business income or income from other sources.

Analysis:
The appeal concerned the treatment of additional income declared during a survey by the assessee. The Assessing Officer contended that the additional income should be excluded from the profit and loss account and treated as undisclosed income under section 69 of the Act. The Assessing Officer disallowed certain deductions claimed by the assessee and treated the additional income as income from other sources. The CIT(A) upheld this decision, stating that unaccounted income declared during a survey cannot be considered as trading receipts for claiming deductions. The assessee argued that the additional income was earned from selling a specific area in a project and should be treated as business income. The Tribunal noted that the assessee consistently maintained that the disclosed amount was part of regular trading receipts and not unaccounted money. The Tribunal found that the nature and source of the disclosed amount were established as business income, as the assessee did not have any other business activity besides construction. Citing a similar case, the Tribunal held that the disclosed amount was attributable to the business activity and eligible for deductions under section 40(b) of the Act. The Tribunal set aside the CIT(A)'s order and allowed the appeal.

This judgment highlights the importance of correctly characterizing additional income declared during a survey and its treatment as business income or income from other sources. It emphasizes the need to establish the nature and source of such income to determine its eligibility for deductions under the relevant provisions of the Act. The Tribunal's decision provides clarity on the treatment of disclosed amounts in the context of business activities and underscores the significance of consistent arguments and supporting evidence in such cases.