Excess cash found during course of Survey  shall not be  taxed under head of Business Income attracts Higher Tax Rate u/s 115BBE of Income Tax Act: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT)  Indore bench held that excess cash found during course of survey should not be taxed under head of business income .Therefore it would attract higher tax rate under Section 115BBE of income Tax Act, 1961

Brij Mohandas Devi Prasad, the taxpayer,  is a partnership firm engaged in the retail business of gold and silver items.When a survey proceedings was carried out the premises of assessee.After recording the statement of assessee partner the department determined the excess stock and excess cash from assessee.

Thereafter, while filing return of income of relevant Assessment year  the assessee faithfully honoured the surrender made by partner and disclosed additional income of Rs. 3,03,37,828/- as “Income from Business” under Section  28 Income Tax Act  and paid taxes @ normal rate of tax as applicable to business income.

During assessment-proceeding, the AO observed that the assessee did not treat  excess cash as unexplained money under section  69A of Income Tax Act.Subsequently AO applied a higher rate of tax under Section  115BBE Income Tax Act and held that the cash would not tax dunder the head of Business income.

Aggrieved by the order, the assessee filed objections before the Commissioner of Income Tax (Appeal){ CIT(A)} . who upheld the decision of the AO. Thereafter the assesee filed another appeal before tribunal .

Before the tribunal Kunal Agrawal, Counsel for assessee submitted that the excess cash found during the survey proceedings assessee's partner immediately and admitted“additional undeclared income” in addition to regular income of current financial year 2017-18 and paid tax.

Further, counsel argued that the survey officer has merely asked the assessee to explain the difference and the assessee’s partner instantly admitted the same as “additional undeclared income” in addition to regular income.

Thus, it cannot be inferred that the “additional undeclared income” was earned from undisclosed or unknown sources.

Ashish Porwal, Counsel for Revenue  submitted that the during survey, assessee’s partner has not stated that the excess cash represented income earned from business.

 It was observed by the tribunal that the survey-officer found excess cash . When the assessee’s partner was asked to explain the difference, he himself explained the difference related to purchase and admitted his inability to explain the remaining difference of Rs. 5,82,644/- which is very much clear from the reply given by him at the very first stage of recording statement itself.

The tribunal after reviewing the facts and submissions of the both parties, the two member bench of B.M. Biyani,(Accountant Member ) and Vijay Pal Rao( Judicial Member) upheld that  action of lower-authorities in holding excess cash as deemed income u/s 69A attracting higher rate of tax under Section 115BBE of Income Tax Act.Therefore excess cash should not be taxed under the head of business Income 

Thus the bench decided the issue in against the assessee.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates