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2023 (8) TMI 1062 - AT - Income TaxIncome surrendered in survey action - undisclosed professional income - building expenses and other unaccounted income - CIT(A) treating the Surrendered Business Income under the head Building as Deemed Income u/s 69 - AO invoked the provisions of Section 115BBE and taxe the said income @ 60% - AO also separately added an amount on account of addition in the value of building - CIT(A) confirmed the addition so made by the AO - HELD THAT - As surrender has been made just on estimation basis that the assessee might have received from professional receipts which might not have been accounted for. Central Board of Direct Taxes has also issued instructions that the Income Tax Authorities at the time of survey/search action should not harp upon taking surrender/confession statements, rather they should collect the evidences relevant to unaccounted/unexplained income and that the additions should not be based merely on by obtaining surrender statements. Surrender statement has been obtained and there is no evidence nor any allegation of the Survey Party that the assessee had income from any other source. In fact, no such income has been found during the survey action. However, the assessee to keep his promise, has offered for taxation the surrendered additional professional income of Rs. 30 lacs. Action of the AO in assessing the aforesaid surrendered income as income from unexplained sources u/s 69 cannot be held to be justified. Therefore, the said surrendered income has been rightly offered by the assessee his business/professional income. The invocation of Section 115BBE is also held not applicable in this case. Separate addition on account of addition in the value of building - Addition made by the AO on account of addition in the value of building cannot also be held to be justified as the assessee in clear terms has surrendered the additional professional income covering the expenditure incurred on building also - Decided in favour of assessee.
Issues involved:
The issues involved in the judgment are: 1. Treatment of Surrendered Business Income as Deemed Income under Section 69 of the Income Tax Act, 1961. 2. Disallowance of depreciation claim on the building. 3. Addition in the value of the building based on the valuation report. 4. Taxation of Business Income surrendered at a higher rate under Section 115BBE. Issue 1: Treatment of Surrendered Business Income The assessee surrendered an amount of Rs. 30,00,000 to cover building expenses and unaccounted income during a survey action. The Assessing Officer treated this surrendered amount as unexplained income and assessed it under Section 69 of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) upheld this addition. However, the assessee argued that the surrender was voluntary, based on an estimation of unaccounted professional receipts, and that no incriminating material was found during the survey. The Central Board of Direct Taxes guidelines discourage relying solely on surrender statements. The Tribunal held that the AO's assessment of the surrendered income as unexplained was not justified, as the assessee had offered it as additional professional income. Issue 2: Disallowance of Depreciation Claim The AO did not allow the depreciation claim on the building surrendered by the assessee. The Tribunal considered that since the surrendered income was accepted as genuine professional income, the disallowance of the depreciation claim was not justified. The addition made by the AO was set aside as the surrendered income covered the building expenses. Issue 3: Addition in the Value of Building The AO separately added Rs. 2,11,600 on account of an increase in the value of the building. The Tribunal found this addition unjustified as the surrendered income already covered the building expenses. Therefore, the addition in the value of the building was set aside. Issue 4: Taxation under Section 115BBE The AO taxed the surrendered business income at a higher rate under Section 115BBE instead of the normal tax rate. The Tribunal held that since the surrendered income was genuine professional income, the invocation of Section 115BBE was not applicable. The appeal of the assessee was allowed, and the additions made by the AO were set aside. In conclusion, the Tribunal ruled in favor of the assessee, setting aside the additions made by the Assessing Officer and allowing the appeal.
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