The Chandigarh bench of the Income Tax Appellate Tribunal (ITAT) held that Non-mentioning of the business income in the books of account cannot be the sole reason to invoke the provisions of Section 115BBE of the Income Tax Act, 1961.
A survey action was carried out at the premises of the assessee, during the course of the survey certain discrepancies were found which were in excess stock as compared to the books of account and there were loose slips showing receivables and even excess cash were found. The value of the items was quantified at Rs. 40,05,000/-.
The assessee surrendered the aforesaid amount of Rs.40,05,000/- as his business income over and above the normal business income. The assessee, accordingly, paid the due taxes as applicable for business income.
The Assessing Officer (AO) treated the surrendered amount as unexplained income of the assessee and has invoked the provisions of Section 115BBE of the Income Tax Act and also taxed the income at a higher rate of 60%.
The Commissioner of Income Tax (Appeals) [CIT (A)] confirmed the action taken by the AO.
The counsel for the assessee stated that the surrender letter to show that the assessee had surrendered the aforesaid amount of Rs.40,05,000/- on account of the discrepancies was confronted by the Survey Team. The assessee had submitted that at that point of time, he was unable to explain the discrepancies and accordingly, surrendered the sum of Rs.40,05,000/- as additional business income.
The counsel further submitted that the Survey Team did not doubt the nature and source of the additional income surrendered by the assessee and also that the assessee did not have any other income except the business income.
The Survey Party further pointed out that the assessee was not maintaining Stock Register and asked the assessee to explain how the value of stocks was recorded in the books of account. The assessee in this query replied that the stock was physically verified at the end of the accounting year and the same was recorded in the books of account.
The one-bench member comprised of Sanjay Garg (Judicial member) made the view that the additional income surrendered by the assessee was not from any other unexplained source and same was out-of-business proceeds of the assessee. Therefore, on the part of the lower authorities in applying the provisions of Section 115BBE of the Income Tax Act to the surrendered business income of the assessee was not justified.
The Assessing Officer was redirected to tax the assessee on the surrendered income at normal rates as applicable to the business income. The appeal of the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
