2020 (7) TMI 240 - AT - Income Tax

Computing the Income surrendered in Survey proceedings - applying the provisions of section 115BBE(1) - taxing the Income declared at the maximum rate - as submitted that the alleged surrendered income is in the nature of business income duly offered to tax and the assessee do not have any other source of income except business income liable to normal rate of tax - HELD THAT - Alleged surrendered income is the cumulative total of unrecorded and undisclosed income for preceding years which were not offered to tax during the year when they were earned. Before the insertion of Provision of Section 115BBE of the Act w.e.f. 1.4.2013 during the course of survey u/s 133A of the Act if any excess cash or excess stock was found and then the assessee was subjected to tax on the normal rate of tax applicable for the year in which the survey proceedings were carried out. No mechanism to make the distinction between the genuine assessee who regularly offers his correct income to tax on year to year basis and the assessee who conceals the income in the preceding years and only in case if he is subjected to survey action then he offers undisclosed income of excess cash or excess stock during the year when the survey takes place and offers it to tax. Section 115BBE of the Act was inserted w.e.f. 1.4.2013 indicating that only if the income falls u/s 68 to 69D as discussed above which does not necessarily be income of business but can be from any head of income i.e. the income defined in Section 2(24) of the Act for which the assessee is unable to offer any explanation, then such higher rate of tax i.e. 60% is to be levied u/s 115BBE of the Act. In the present case though the alleged surrendered income is a business income but since assessee being individual having no limitation of earning income from sources other than for the objects of the business and also the assessee having not offered any explanation in the statement given during the course of survey which stands unrebutted, therefore the alleged unexplained/undisclosed income is liable to be taxed as income falling under Section 68 to 69D of the Act as applicable to the type of income and has been rightly taxed by Ld. A.O applying the higher rate of tax provided in Section 115BBE of the Act. We therefore confirm the findings of Ld. CIT(A).- Decided against assessee.

Summary

Issues Involved:
1. Applicability of Section 115BBE on the surrendered income during survey proceedings.
2. Classification of the surrendered income as business income or income from other sources.
3. Validity of the assessment order and appellate order.

Issue-wise Detailed Analysis:

1. Applicability of Section 115BBE on the Surrendered Income:
The primary issue revolves around whether the income surrendered by the assessee during the survey proceedings under Section 133A should be taxed under Section 115BBE of the Income Tax Act, 1961. The assessee argued that the surrendered income was purely business income and should not be taxed at the higher rate of 60% as per Section 115BBE. However, the Tribunal upheld that the surrendered income, which included excess stock, excess cash, and receivables from sundry parties not shown in the books, falls under the provisions of Section 115BBE. The Tribunal emphasized that under Section 115BBE, any income referred to in Sections 68, 69, 69A, 69B, 69C, and 69D is subject to tax at the rate of 60%. The Tribunal noted that the assessee failed to provide any explanation for the source of the excess stock, cash, and receivables, thereby justifying the application of Section 115BBE.

2. Classification of the Surrendered Income:
The assessee contended that the surrendered income should be classified as business income and not as income from other sources. The Tribunal examined the provisions under Sections 68 to 69D, which deal with unexplained cash credits, investments, money, bullion, jewelry, and other valuable articles. It was highlighted that these sections do not distinguish between different heads of income but rather focus on unexplained income. The Tribunal found that the assessee did not provide any explanation for the excess stock, cash, and receivables, and thus, the surrendered income was rightly classified under Sections 68 to 69D. Consequently, the income was subjected to the higher tax rate under Section 115BBE.

3. Validity of the Assessment Order and Appellate Order:
The assessee challenged the validity of the assessment order and the appellate order, claiming that they were not based on facts and were illegal. The Tribunal reviewed the assessment proceedings and the findings of the Commissioner of Income Tax (Appeals). It was noted that the assessment was completed by accepting the returned income but applying the tax rate of 60% on the surrendered income as per Section 115BBE. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision, observing that the surrendered income was unrecorded and fell under the nature of income classified in Section 115BBE. The Tribunal concurred with the findings of the lower authorities, confirming that the assessment and appellate orders were valid and legally sound.

Conclusion:
The Tribunal dismissed the appeal, confirming that the surrendered income of ?92,81,150, which included excess stock, excess cash, and receivables from sundry parties not shown in the books, was rightly taxed under Section 115BBE at the rate of 60%. The Tribunal upheld that the income fell under the provisions of Sections 68 to 69D, and the assessee's failure to provide any explanation for the source of the income justified the application of the higher tax rate. The other grounds raised by the assessee were deemed general and did not require adjudication. The appeal was dismissed in its entirety.