The Delhi bench of Income Tax Appellate Tribunal (ITAT) has recently held that additional income surrendered before the 2nd amendment to Section 115BBE of Income Tax Act, 1961 should be chargeable at ordinary rate of 30%. Therefore the bench quashed the revision order.
Assesee Hema Raman is an individual and is deriving income from business of healthcare service and trading in medicine etc.
During the survey operation carried out by the business premises of the assessee, she admitted undisclosed income of Rs.40 lakh and surrendered the same as normal business income in her ITR.
Thereafter the case was selected for compulsory scrutiny as per the guidelines issued by CBDT.
The AO accepted the e-return without any adjustment while framing the e-assessment order under Section 143(3) Income Tax Act after making a brief reference to factum of survey and inclusion of additional income of Rs. 40 Lakhs in the ROI.
Thereafter, the Pr.CIT in exercise of revisionary powers, issued show cause notice requiring the assessee to show cause as to why the assessment framed under Section 143(3) Income Tax Act should not be suitably amended/modified on the ground that such order is erroneous insofar as it is prejudicial to the interest of the Revenue.
PCIT observed that additional income of Rs. 40 lakh offered are largely in the nature of unexplained cash, excess stock and unexplained advances as on the date of survey which is liable to be assessed under Section 68/69/69A/69B/69C of the Income Tax Act.
Consequently the tax payable on such undisclosed income is susceptible to an enhanced tax rate of 60% as per Section 115BBE of the Income Tax Act inserted in this regard.
Therefore the Pr.CIT alleged that the Assessing Officer has incorrectly adopted the normal rate of taxation at 30% as offered by the assessee overlooking the countervailing provisions of Section 115BBE of the Income Tax Act.
Aggrieved by the revision order, the assessee filed an appeal before the tribunal.
Before the tribunal Hari Om Jindal, counsel for the assessee submitted that the income surrendered in the course of the survey was earned from business operations of the assessee and such income had rightly offered as business income in the return of income. Therefore which was not assessed under section 68/69/69A/69B/69C of the Income Tax Act. Consequently Section 115BBE Income Tax Act is not attracted in the facts of the case.
Moreover counsel for assessee further alleged that 2nd amendment to Section 115BBE Income Tax Act has come into force with effect from 15.12.2016 whereas the income tax survey was conducted prior thereto and therefore, the additional income surrendered before the 2nd amendment will be chargeable at the ordinary rate of 30%.
T. James Singson counsel for the revenue submitted that Section 115BBE Income Tax Act has duly come into force with effect from 01.04.2017 and applicable to Assessment Year 2017-18 onwards as per Taxation Laws (2nd Amendment) Act, 2016.
It was observed by the tribunal that ,while the survey was conducted prior to substitution/ modification of Section 115BBE of the Income Tax Act, the assessment year concerned continues to be assessment year 2017-18. The ROI was filed after the substituted amendment had come into force.
Enactment of Section 115BBE came into force with assent of President of India with effect from 15.12.2016 by Taxation Laws Act, 2016 and thus income arising to assessee prior to its substitution from 15th Dec. 2016 shall be governed by erstwhile provision of Section 115BBE of the Income Tax Act, the substituted section shall not apply to income arising or accruing prior to aforesaid date of its substitution whereby the tax rates stood increased from 30% to 60%.
Therefore the two member bench of the Chandra Mohan Garg, (Judicial Member) and Pradip Kumar Kedia, (Accountant Member) allowed the appeal filed by the assessee.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
