Survey Income Offered Prior to Amendment to Be Taxed as Business Income, ₹33 Lakh Surrender not Liable to 60% Tax u/s 115BBE: ITAT [Read Order]

The appeal was filed by M/s Yashudev Enterprises, Amloh, Fatehgarh Sahib, Punjab, against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [CIT(A)], Delhi, dated May 20, 2025, arising from the assessment framed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961, on November 6, 2019, for the Assessment Year(A.Y.) 2017-18.

A survey under Section 133A of the Income Tax Act was conducted on the premises of the assessee on October 21, 2016, during which discrepancies were found in stock, cash, and unaccounted investment in construction. Consequently, the assessee offered an additional income of ₹33 lakh, which was declared in its return and credited to its Profit and Loss Account as income from business operations.

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However, the AO treated this surrendered income as deemed income under Section 115BBE of the Income Tax Act, 1961, and subjected it to a higher rate of 60% tax. This position was confirmed by the CIT(A), leading the assessee to file an appeal before the Tribunal.

The Appellant, represented by Ashwani Kumar, contended that the surrender of ₹33 lakh was voluntarily made during the course of the business and represented regular business income. It was further argued that the survey occurred on October 21, 2016, while the Taxation Laws (Second Amendment) Bill, 2016, introducing the higher tax rate under Section 115BBE, was notified on November 28, 2016.

Hence, the amended provision could not be applied retrospectively to income surrendered prior to the notification date. Thus, the application of the enhanced rate of 60% was not legally sustainable and that the surrendered income should be taxed at normal business rates.

The Revenue, represented by Dr. Ranjit Kaur, supported the orders of the lower authorities, contending that the surrendered income was not recorded in the books prior to the survey and therefore fell within the ambit of Section 115BBE, which prescribes a higher tax rate for unexplained income.

The Bench comprising of Judicial Member, Laliet Kumar and Accountant Member, Manoj Kumar Aggarwal observed that the survey was conducted on October 21, 2016, whereas the notification prescribing the higher rate of tax under Section 115BBE came into force only on November 28, 2016. Therefore, the provision could not be applied to the surrendered income made before its enactment.

The Tribunal further noted that the AO did not alter the head of income in the assessment order, and there was no discussion suggesting that the surrendered income was not part of business operations. Thus, ITAT held that the application of Section 115BBE was unjustified, and the surrendered income should be treated as normal business income taxable at standard rates.

Accordingly, the appeal of the assessee was allowed, with directions to the AO to accept the surrendered income as business income.

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