Surrender of Additional Professional Income Covering Expenditure Incurred on Building: ITAT deletes Addition u/s 69 of Income Tax Act [Read Order]

The Chandigarh bench of the Income Tax Appellate Tribunal ( ITAT ) has deleted the addition under Section 69 of the Income Tax Act, 1961 citing the surrender of additional professional income to cover the expenditure incurred on building.

The assessee is a Veterinary Doctor and has been returning his income from profession. A survey action was carried out at the premises of the assessee but neither incriminating documents nor any cash etc. was found during the survey action. However, the Survey Party enquired from the assessee about the expenditure incurred on the building. In response, the assessee surrendered an amount of Rs.30 lakhs to cover the building expenses and other unaccounted income.

The Assessing Officer (AO) treated the aforesaid surrendered amount of Rs. 30 lakhs as unexplained income of the assessee and assessed the same under Section 69 of the Income Tax Act. Further, the AO invoked the provisions of Section 115BBE of the Income Tax Act and taxed the said income @ 60%. The AO also separately added an amount of Rs. 2,11,600/- on account of addition in the value of building.

Mr. Y.K.Sud representing the assessee has submitted that a perusal of the aforesaid surrender letter would reveal that firstly there was neither any cash nor any incriminating material was found during the survey action. However, a surrender was obtained by the department stating therein that there might be professional receipts which might not be included in the income returned by the assessee and therefore, to cover up the expenditure incurred on the building and other professional income, the assessee surrendered Rs.30 lakhs as his undisclosed professional income.

 The Central Board of Direct Taxes ( CBDT ) 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. However, in this case, the 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.

However, the assessee to keep his promise, has offered for taxation the surrendered additional professional income of Rs.30 lakhs. Under the circumstances, the action of the AO in assessing the aforesaid surrendered income as income from unexplained sources under Section 69 of the Income Tax Act cannot be held to be justified. Therefore, the said surrendered income has been rightly offered by the assessee his business/professional income.

The two member bench of the tribunal comprising Vikram Singh Yadav (Accountant member) and Sanjay Garg (Judicial member) observed that the addition made by the AO of Rs. 2,11,600/- 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. The addition made by the AO cannot be held to be justified and the same is, accordingly, set aside. Accordingly, the appeal of the assessee was treated as allowed.

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