Income Declared During Survey is Taxable as Business Income u/s 28, Not Under Unexplained Income Sections: ITAT [Read Order]

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) ruled that income declared during survey is taxable as business income under Section 28 of the Income Tax Act, 1961 and not under the unexplained income provisions, rejecting the application of Section 115BBE.

Bharat Associates, the assessee, is a partnership firm based in Bundi. A survey under Section 133A was conducted on 09.03.2016, during which the assessee surrendered income. In its return of income, the assessee treated the surrendered amount as part of business income.

The Assessing Officer taxed the income by invoking Section 115BBE, treating it as unexplained. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the action of the Assessing Officer.

Before the ITAT, the assessee's counsel argued that surrendered income during a survey is in the nature of business income and should be assessed under Section 28. The counsel further argued that applying Section 115BBE was contrary to law and without jurisdiction.

The two-member bench comprising Gagan Goyal (Accountant Member) and Narinder Kumar (Judicial Member) observed that surrendered income during a survey has consistently been treated as taxable under Section 28 and not under the provisions of Sections 68, 69A, 69B, or 69C of the Income Tax Act, 1961.

The tribunal explained that once the income is considered business income, there is no scope to apply Section 115BBE. It ruled that any additions confirmed are to be taxed as business income under Section 28 of the Income Tax Act.

The tribunal set aside the application of Section 115BBE and allowed the appeal of the assessee on this ground.

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