2023 (7) TMI 1498 - AT - Income Tax

Applicability of provisions of section 115BBE - income declared during the course of survey proceedings and offered to tax in the return of income - AO assessed the said income under the head Income from business HELD THAT - Admittedly, the income offered during the course of survey proceedings was credited to Profit Loss Account and the additional income offered on account of deficit in the physical stock was credited to Trading Account. The income offered on account of alleged expenditure incurred on construction of the commercial building was offered to tax by crediting the same amount to the Profit Loss Account. Thus, the income was offered to tax under the head Income from business , the AO also assessed the same under the head Income from business . Therefore, the presumption is to be drawn that the additional income was derived from the business. Thus, it cannot be said that the source for the additional income remain unexplained and, therefore, the provisions of section 115BBE have no application to the present case. The ratio of the decision of Bajargan Traders 2017 (11) TMI 388 - RAJASTHAN HIGH COURT is squarely applicable to the facts of the present case. The reliance placed by the ld. CIT (A) on the decision of M/s. SVS Oils Mills 2019 (5) TMI 1392 - MADRAS HIGH COURT have no application to the facts of the present case, inasmuch as, in the said case, no explanation as to the source of excess stock was offered, whereas, in the present case, it is undisputed fact that the additional income was derived from business. Therefore, the orders of the AO as well as the ld. CIT (A) are reversed and direct the AO not to tax the additional income under the provisions of section 115BBE of the Act. AO shall tax the additional income under the normal rate of income tax. Accordingly, the grounds of appeal filed by the assessee stand allowed.

Summary

Issues:
Applicability of section 115BBE of the Income Tax Act on income declared during survey proceedings.

Analysis:
The case involved an appeal against an order of the Commissioner of Income Tax (Appeals) for the assessment year 2019-20. The appellant, an individual engaged in the business of dealing in agricultural equipment, had filed the Return of Income declaring total income. During a survey operation, discrepancies were found in the stock-in-trade and construction expenditure, which were agreed to be offered to tax. The Assessing Officer subjected the additional income to tax under section 115BBE of the Act, which was challenged in the appeal.

The main issue was the applicability of section 115BBE to the additional income declared during the survey proceedings. The appellant argued that since the income was offered under the head "Income from business" and assessed as such, it should not be subjected to tax under section 115BBE. The appellant relied on a decision of the Rajasthan High Court to support this argument.

After considering the submissions, the Appellate Tribunal noted that the additional income was credited to the Profit & Loss Account and Trading Account under the head "Income from business". As the Assessing Officer also assessed the same income under the head "Income from business", it was presumed that the additional income was derived from the business. Therefore, the source of the additional income was not unexplained, and section 115BBE was held not applicable. The Tribunal reversed the orders of the lower authorities and directed the Assessing Officer to tax the additional income under the normal rate of income tax, allowing the grounds of appeal filed by the assessee.

In conclusion, the appeal was allowed, and the Assessing Officer was directed not to tax the additional income under section 115BBE but under the normal rate of income tax.