2023 (2) TMI 639 - AT - Income Tax

Addition u/s 69A - amount surrendered during survey - application of section 115BBE - excess stock found during the course of survey and surrendered made - HELD THAT - As in the present case the assessee has successfully explained the source of excess stock and excess cash found during the course of search survey operation and surrendered during the said operation. CIT(DR) has not disputed or controverted very factual position that the assessee filed return of income including the surrendered amount and which was accepted by the AO without any dispute and without making any further addition in the hands of assessee u/s. 69A or any other section of the Act. As the assessee has successfully explained and established the source of excess stock and excess cash as his business activity and of trading in jewellery and gems and activity of Adat/dalali thus the benefit of proposition rendered in the case Kim Pharma (P.) Ltd. 2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT is not available for the department in the present case. AO without making any addition u/s. 69A or any other provision of the Act has accepted returned income of the assessee wherein the assessee has included surrendered amount on account of excess stock and excess cash as business income and has successfully explained the source from where the said surrendered excess stock and excess cash was earned, which was business activity of assessee of trading in jewellery gems and Adat/dalali in the same field. The coordinate bench of the Tribunal in the various orders including order in the case of Shri Lovish Singhal 2018 (5) TMI 1646 - ITAT JODHPUR by following the judgment of Bajrang Traders ( 2017 (3) TMI 1828 - ITAT JAIPUR observed that the excess stock found during the course of survey and surrendered made thereof was found to be taxable as business income under the head Income from business profession . Identical facts and circumstances as noted above have been found to be existing in the present case then the Ld. CIT(A) was correct and justified in dismissing the contention of the AO and holding that the AO was not right in observing that the assessee is liable to be taxed as per provision of section 115BBE. Therefore, we too have no hesitation in concluding that the facts of present case do not bring the impugned income in the clutches of section 69/69A/69B and therefore do not warrant application of section 115BBE at all. - Decided against revenue.

Summary

Issues Involved:
1. Applicability of amended provisions of Section 115BBE of the Income Tax Act, 1961.
2. Classification of surrendered income as business income or deemed income under Sections 68, 69, 69A, 69B, 69C, or 69D.
3. Retrospective application of tax amendments.

Detailed Analysis:

1. Applicability of Amended Provisions of Section 115BBE:
The primary issue was whether the amended provisions of Section 115BBE, effective from 01/04/2017, could be applied retrospectively to the Assessment Year 2017-18. The Revenue argued that the amended provisions should apply to the surrendered income of Rs. 4,53,43,587/- determined under Section 69B. The Tribunal noted that the amendment came into force on 01/04/2017, and the search occurred on 28/09/2016, making the retrospective application inappropriate. The Tribunal cited the Supreme Court's ruling in CIT vs. Vatika Township Pvt Ltd, emphasizing that amendments to tax statutes should not impose retrospective levies causing undue hardship to the assessee.

2. Classification of Surrendered Income:
The Revenue contended that the surrendered income should be taxed under the amended provisions of Section 115BBE, treating it as unexplained money under Section 69A and unaccounted investment under Section 69B. The assessee argued that the surrendered income was business income from trading in bullion and mediation. The Tribunal agreed with the assessee, noting that the excess stock and cash were part of the business income, supported by various judicial precedents, including Bajrang Traders vs. ACIT and Fashion World vs. ACIT. The Tribunal emphasized that the AO did not make any addition under Sections 69A or 69B and accepted the returned income, including the surrendered amount as business income.

3. Retrospective Application of Tax Amendments:
The Tribunal highlighted that the amendment to Section 115BBE was prospective and could not be applied retrospectively to the financial year 2016-17. The Tribunal referenced several judgments, including those from the Rajasthan High Court and ITAT benches, supporting the view that substantive law should be applied prospectively unless explicitly stated otherwise. The Tribunal concluded that the AO erred in applying the amended provisions of Section 115BBE retrospectively.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming that the surrendered income was business income and not subject to the amended provisions of Section 115BBE. The Tribunal emphasized that the amendment was prospective and the AO's acceptance of the returned income without any addition under Sections 69A or 69B supported the assessee's position. The Tribunal's decision was based on the factual matrix and consistent judicial precedents, ensuring that the assessee was taxed under the normal rates applicable to business income.