2019 (4) TMI 88 - AT - Income Tax

Undisclosed income - income on the basis of loose paper - calculation mistake - gross or net surrender - applicability of Section 115BBE HELD THAT - Documents income works out to ₹ 2,10,13,228/- (Gross receipt ₹ 3,26,00,730/- less expenses ₹ 65,19,150/- less expenses ₹ 50,68,352/-), but inadvertently Director Shri Sunil Jain during the course of survey while admitting the undisclosed income totaled the three figures comprising of income and expenses and surrendered income at ₹ 4,41,88,232/- which in our view was a bonafide mistake as the income on the basis of impugned loose paper was desired to be surrendered. CIT(A) has rightly deleted the addition by allowing ground of the assessee and therefore needs no interference as the right amount of undisclosed income has been subjected to tax. We accordingly confirm the view taken by CIT(A) and dismiss revenue s Ground No.1. Set off of expenditure against the unaccounted income - HELD THAT - Alleged expenditure have been thoroughly explained by the assessee before the lower authorities and the impugned account mainly includes salary paid to Shri Sunil Jain and others which have been duly offered to tax by Shri Sunil Jain and others in their respective return of income tax. It is also discernable from the records that the impugned expenditure have been claimed against the income from organizing health camp which is also the part of the business activity of the assessee company. No infirmity in the finding of CIT(A) and the same needs to be confirmed. In the result Ground No.2 of the revenue stands dismissed.

Summary

Issues Involved:

1. Deletion of addition of ?2,30,53,039/- based on the statement recorded during the survey.
2. Disallowance of set-off of expenses amounting to ?19,70,923/- under Section 115BBE.

Issue 1: Deletion of Addition of ?2,30,53,039/-

The Revenue challenged the deletion of the addition of ?2,30,53,039/- by the CIT(A), arguing that the CIT(A) ignored the statement of Shri Sunil Jain recorded during the survey, which admitted undisclosed income of ?4,41,88,232/-. The CIT(A) observed that the statement by Shri Sunil Jain, Director of the assessee, included an arithmetical error where expenses were inadvertently added to the gross receipts instead of being deducted. The CIT(A) found that the actual undisclosed income was ?2,11,29,807/- after deducting the expenses from the gross receipts. The CIT(A) held that the documents found during the survey should be considered in their entirety, supporting the assessee's claim that the gross receipts were ?3,26,00,730/- and not ?4,41,88,232/-. The Tribunal agreed with the CIT(A), noting that the statement was later modified to reflect the correct income, and upheld the deletion of the addition as the right amount of undisclosed income was subjected to tax.

Issue 2: Disallowance of Set-off of Expenses of ?19,70,923/-

The Revenue also contested the CIT(A)’s decision to allow the set-off of expenses amounting to ?19,70,923/- against the unaccounted income. The CIT(A) found that the expenses were directly related to the income from organizing health camps, which was the primary business activity of the assessee. The CIT(A) noted that the expenses, including salaries paid to staff and the director, were duly recorded and reflected in the respective income tax returns. The CIT(A) concluded that the provisions of Section 115BBE were not applicable as the income was not unexplained but related to the business activity. The Tribunal agreed with the CIT(A), confirming that the expenses were thoroughly explained and directly related to the income from health camps, and thus, the set-off was justified.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)’s decisions on both issues. The deletion of the addition of ?2,30,53,039/- and the allowance of the set-off of expenses of ?19,70,923/- were confirmed as being in accordance with the law and supported by the facts of the case. The order was pronounced in the open court on 02.01.2019.