2023 (4) TMI 1206 - AT - Income Tax

Chargeability of tax u/s 115BBE - Nature of income declared in survey proceedings u/s. 133A? - Undisclosed income u/s 69A and 69C or Business Income - as per assessee since the amount that was surrendered was business income, the same was liable to be taxed u/s. 28 and therefore it should suffer normal tax rate of 30% and not the high tax rate as per section 115BBE - HELD THAT - There is no finding of the lower authorities as to whether the income declared during the course of survey is arising out of business or it is from the income from other sources. In such a situation more so, when the contention of the assessee is that the assessee has no other business then the present business and the income declared is out of the business of the assessee, we are of view that the matter needs to be re-examined at the end of AO. We therefore restore the issue back to the file of AO, and direct him to give a categorical finding as to whether the income declared by the assessee is business income or income from other sources. Assessee is also directed to promptly furnish the details called for by the AO. Thus, this ground of assessee is allowed for statistical purposes.

Summary

Issues involved:
The issues involved in the judgment are the treatment of undisclosed income declared during a survey as per sections 69A and 69C, the application of tax provisions under section 115BBE, and the classification of the surrendered income as either business income or income from other sources.

Treatment of undisclosed income:
The assessee, a company in the business of chemicals, declared Rs. 4.06 crores as undisclosed income during a survey conducted under section 133A. The income included differences in stock, construction and renovation expenses, purchase of silver catalyst, and flat renovation costs. The Assessing Officer (AO) considered this income as taxable under section 115BBE, as expenses were adjusted against the undisclosed income. The assessee argued that the surrendered income was business income and should be taxed at the normal rate of 30% under section 28 of the Income Tax Act. The Tribunal found that the lower authorities did not determine if the declared income was from the business or other sources. Thus, the matter was remanded to the AO for further examination and a clear finding on the nature of the income.

Application of tax provisions under section 115BBE:
The AO and CIT(A) upheld the application of section 115BBE to tax the undisclosed income declared during the survey. The assessee contended that the higher tax rate of 60% under section 115BBE should not apply as the survey was conducted before the amendment introducing the higher rate. The Tribunal directed the AO to reevaluate the nature of the surrendered income to determine if it qualifies as business income or income from other sources, providing the assessee with a fair hearing and an opportunity to submit necessary details.

Classification of surrendered income:
The Tribunal found that the lower authorities did not ascertain whether the undisclosed income declared during the survey was derived from the assessee's business activities or other sources. The assessee argued that the surrendered income was directly related to its business operations and should be taxed at the standard rate of 30%. The Tribunal remanded the matter to the AO for a detailed examination to establish if the declared income indeed originated from the business, emphasizing the need for a conclusive determination on the nature of the income surrendered during the survey.