In a recent ruling, the Jaipur bench of the Income Tax Appellate Tribunal (ITAT) remanded the case back to the assessing officer (AO), asserting the need for a detailed reassessment of income tax returns filed by the assessee.
The assessee, Yuwam Education Pvt Ltd, a Jaipur-based coaching institute, faced scrutiny under Section 133A of the Income Tax Act. The Survey revealed several unaccounted fee receipts and a total of ₹46.6 lakhs as unaccounted income. The AO observed that the assessee had furnished its ITR along with a profit and loss account in which the assessee had reported gross receipts from tuition and registration fees worth ₹3 Cr, on which the assessee had shown income of ₹52 Lakhs.
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Furthermore, a survey under Section 133A of the Income Tax Act was conducted at the business premises of the assessee, where the assessee was confronted with his profit and loss account, which showed receipts from tuition and registration amounting to ₹3Cr and a net profit of ₹1.55 Cr. The AO classified the recovered amount as unexplained income, invoking Section 115BBE, which mandates a higher tax rate on such cases. The AO also made an addition of ₹1.03 Cr to the taxable income as suppressed profit.
The assessee challenged the AO’s order and filed for an appeal with the Commissioner of Income Tax (Appeals) [CIT(A)] in which, on observation, the CIT(A) upheld the AO’s order observing that the surrendered income was taxed correctly under Section 115BBE as the assessee did not adequately explain its source. The CIT(A) also observed that the inconsistency in income was due to incompetent records and unsupported retractions by the assessee.
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The assessee, aggrieved by the CIT(A) order, appealed to the ITAT. The tribunal, on observation, noted that the AO and CIT(A) did not address the main arguments and evidence presented by the assessee, including the year-end expense adjustments and reconciliation of profits. The tribunal asserted that if the ₹46.68 lakh was part of regular business income, Section 115BBE should not apply.
Similarly, the tribunal also observed that the AO must reassess whether the income was business-related or unexplained. The tribunal recognised the claim made by the assessee that certain expenses, such as salaries, depreciation, etc, were not recorded during the survey but were incorporated later. For clarity, a detailed examination of the accounts was necessary to verify the legitimacy of such claims. The Tribunal directed the AO to conduct a fresh inquiry into the surrender income’s nature and source to determine whether it qualifies as a business or unexplained income under Section 115BBE.
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The tribunal, which consisted of Narinder Kumar (Judicial Member) and Rathod Kamlesh Jayantbhai(Accountant Member), ordered a fresh assessment of the books. It imposed a penalty of ₹5,000 on the assessee to be paid to the Prime Minister’s National Relief Fund and to produce the receipt of the above cost deposit before the AO. As a result, the tribunal allowed the appeal.
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