Evidence For Normal Business Activity: ITAT Upholds Surrendered ₹1.60 Cr as Business Income, Rejects S. 115BBE Application [Read Order]
The Tribunal upheld Rs. 1.60 crore surrendered during a survey as normal business income, rejecting the application of Section 115BBE, as the amount was derived from the assessee’s regular business activities.
![Evidence For Normal Business Activity: ITAT Upholds Surrendered ₹1.60 Cr as Business Income, Rejects S. 115BBE Application [Read Order]](https://images.taxscan.in/h-upload/2025/07/31/2071416-business-income-taxscan.webp "Evidence For Normal Business Activity: ITAT Upholds Surrendered ₹1.60 Cr as Business Income, Rejects S. 115BBE Application [Read Order]")
The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the Rs. 1.60 crore surrendered during a survey constitutes normal business income, dismissing the Revenue’s contention that it should be taxed as unexplained income under Section 115BBE of the Income Tax Act, 1961. Swati Industries (assessee), a firm engaged in the manufacturing of scaffolding...
The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the Rs. 1.60 crore surrendered during a survey constitutes normal business income, dismissing the Revenue’s contention that it should be taxed as unexplained income under Section 115BBE of the Income Tax Act, 1961.
Swati Industries (assessee), a firm engaged in the manufacturing of scaffolding items, underwent a survey across its three business premises on 08.10.2018. During the survey, the assessee surrendered Rs. 1.60 crore, attributed to the suppression of the sale price of scrap and differences in wages and salaries as per the books of accounts.
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The surrendered amount was offered as business income in the profit and loss account for the Assessment Year 2019-20, with corresponding debits made to the capital accounts of the partners.
The Assessing Officer (AO) contended that the surrendered amount was unexplained income and applied the provisions of Section 115BBE, which imposes a higher tax rate on unexplained income.
Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) rejected the AO’s contention and held that the surrendered amount was generated from the assessee’s regular business activities and should be taxed as normal business income.
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Aggrieved by the CIT(A)’s order, the Revenue appealed to the ITAT. The Revenue argued that the CIT(A) erred in treating the surrendered income as business income, citing the Punjab & Haryana High Court’s decision in Khushi Ram & Sons.
The counsel for the assessee argued that the surrendered amount from the suppression of scrap sale prices and wage discrepancies, both directly linked to the firm’s scaffolding manufacturing business.
The counsel emphasized that no other activity was observed during the survey, and the statement of partner Sh. Vaneet Garg, recorded during the survey, confirmed the amount as additional business income.
The two-member bench comprising Rajpal Yadav (Vice President) and Krinwant Sahay (Accountant Member), observed that the survey revealed evidence of suppressed scrap sale prices, as noted in the assessee’s surrender letter.
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The bench found that the surrendered Rs. 1.60 crore was sourced from the assessee’s business activities, with no indication of any non-business operations during the survey. It upheld the CIT(A)’s finding that the amount was normal business income.
The bench held that the surrendered amount was taxable at standard rates, and rejected the application of Section 115BBE. The Tribunal affirmed that the surrendered Rs. 1.60 crore was correctly classified as business income. The appeal of the Revenue was dismissed.
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