2020 (10) TMI 27 - AT - Income Tax

Levy of Tax u/s 115BBE @60% - Income surrendered during the course of search - Addition while making a statement u/s 132(4) which was duly declared in the return of income as income u/s 69 - Business income or otherwise - income was declared in the return filed under section 153A - HELD THAT - Provisions of Section 115BBE (1)(a) of the Act are applicable to the income which is referred in section 68, 69, 69A, 69B, 69C or 69D reflected in the return of income furnished u/s 139. In the present case no such income was reflected in the return filed under section 139 of the Act rather the income was declared in the return filed under section 153A of the Act after the search. The assessee declared the income under section 132(4) of the Act and disclosed the same in the return of income filed under section 153A of the Act. The assessee explained the source of investment of ₹ 1.10 Crore in the reply to Question No. 11. The said explanation given by the assessee to the Ld. CIT(A) has not been rebutted, therefore the provisions of Section 69 were not applicable as the business transactions were recorded in the books of account and the assessee either earned commission or profit on all those Real Estate transactions. The income earned from the Real Estate transactions was claimed to be utilized for making the investment in the property. In the present case it is not brought on record to substantiate that the said income was utilized by the assessee elsewhere and not in the investment of the property. Therefore we are of the view that the A.O. was not justified in taxing the aforesaid income of ₹ 1 Crore separately particularly when nothing is brought on record to substantiate that the assessee had made separate investment different from the income earned on real estate transactions recorded in the pocket diary found seized during the course of search. A.O. is directed to tax the entire surrendered income of ₹ 3.64 at the normal rate of tax. Direction given by CIT(A) to the A.O. to bring to tax the amount of ₹ 2.64 Crores u/s 115BBE - HELD THAT - In the present case the assessee on the basis of the Real Estate transactions recorded in the pocket diary found seized during the course of search surrendered the income amounting to ₹ 3.64 Crore earned from Real Estate transaction i.e. profit amounting to ₹ 2.34 Crore, commission amounting to ₹ 30 Lacs and investment of ₹ 1.00 Crore, therefore the source of the said, income under consideration i.e; ₹ 2.64 Crore (₹ 2.34 Crore ₹ 30 Lacs) was Real Estate business. The A.O. rightly accepted the income as declared by the assessee and the Ld. CIT(A) was not justified in directing the A.O. to treat the said income declared in the statement under section 132(4) of the Act, as the income chargeable to tax separately under section 115BBE CIT(A) has the powers to confirm, reduce, enhance or annul the assessment, however the powers to remand the case back to the file of the A.O. is not provided. In that view of the matter, we are of the view that the Ld. CIT(A) was not justified in restoring the issue under consideration back to the file of the A.O. Appeal of the assessee is allowed.

Summary

Issues Involved:

1. Justification of treating ?1.00 crore as income under section 69 of the Income Tax Act, 1961.
2. Imposition of tax under section 115BBE @ 60% on the sum of ?1.00 crore.
3. Directions to tax the amount of ?2.64 crores under section 115BBE.

Issue-wise Detailed Analysis:

1. Justification of treating ?1.00 crore as income under section 69 of the Income Tax Act, 1961:

The assessee, part of M/s AP Group of Companies, was subjected to a search and seizure operation on 31/08/2016, during which documents and valuables were seized. The assessee surrendered ?3.64 crores as income from real estate transactions and commission. The Assessing Officer (A.O.) noted that the assessee could not provide complete details of the real estate transactions, leading to the assessment of ?1.00 crore as unexplained investment under section 69, chargeable to tax under section 115BBE @ 60%. The Ld. CIT(A) upheld this action, considering the ?1.00 crore as deemed income under section 69 due to lack of documentary evidence. However, the Tribunal found that the income was declared in the return filed under section 153A, and the source of investment was explained as commission and profit from real estate transactions. The Tribunal concluded that the A.O. was not justified in separately taxing ?1.00 crore under section 69, as the income was already declared and explained.

2. Imposition of tax under section 115BBE @ 60% on the sum of ?1.00 crore:

The A.O. imposed tax @ 60% under section 115BBE on ?1.00 crore, considering it as unexplained investment. The Ld. CIT(A) upheld this, stating that the amended provisions of section 115BBE, effective from 01/04/2017, were applicable for A.Y. 2017-18. The Tribunal, however, noted that the income was declared under section 132(4) and included in the return filed under section 153A, not section 139. Therefore, the provisions of section 115BBE (1)(a) were not applicable. The Tribunal directed the A.O. to tax the entire surrendered income of ?3.64 crores at the normal rate, rejecting the separate taxation of ?1.00 crore under section 115BBE.

3. Directions to tax the amount of ?2.64 crores under section 115BBE:

The Ld. CIT(A) directed the A.O. to take necessary action to tax ?2.64 crores under section 115BBE, based on the assessee's statement during the search. The Tribunal found this direction unjustified, as the income was already declared as business income from real estate transactions recorded in the seized diary. The Tribunal emphasized that the Ld. CIT(A) does not have the power to remand the case back to the A.O. under section 251(1)(a) of the Act. Consequently, the Tribunal annulled the Ld. CIT(A)'s direction to tax ?2.64 crores under section 115BBE.

Conclusion:

The Tribunal allowed the appeal, setting aside the orders of the lower authorities. It directed the A.O. to tax the entire surrendered income of ?3.64 crores at the normal rate, rejecting the separate taxation of ?1.00 crore under section 69 and the imposition of tax under section 115BBE. The Tribunal also annulled the Ld. CIT(A)'s direction to tax ?2.64 crores under section 115BBE, emphasizing the lack of power to remand the issue back to the A.O.