2021 (5) TMI 956 - AT - Income Tax

Tribunal rules surrendered income not unexplained, directs normal computation for business income.

M/s Bajaj Sons Ltd. Versus The DCIT, Central Circle-III Ludhiana

M/s Bajaj Sons Ltd. Versus The DCIT, Central Circle-III Ludhiana - [2021] 91 ITR (Trib) 498 (ITAT [Chand]) Issues:1. Invocation of Section 115BBE on surrendered income of Rs. 15 lacs.Analysis:The appeal was filed against the order of the Commissioner of Income Tax (Appeals)-5, Ludhiana, regarding the invocation of Section 115BBE of the Income Tax Act on the surrendered income of Rs. 15 lacs. The assessee argued that the surrendered amount did not fall under sections 68, 69, 69A, 69B, 69C, or 69D, and was reflected as 'Income from business or profession' in the return. The assessee contended that the amount was surrendered to cover potential discrepancies in the accounts. However, the Assessing Officer (AO) treated it as income from unexplained sources and applied the higher tax rate under Section 115BBE.During a search operation, the Director of the assessee surrendered Rs. 89.61 lacs on unexplained cash found at his premises, with an additional Rs. 7.50 lacs later surrendered. Subsequently, another Rs. 15 lacs was surrendered to cover any discrepancies. The AO, after the assessee revised the return to include the surrendered amount, invoked Section 115BBE. The assessee challenged this before the CIT(A) but was unsuccessful.The Tribunal noted that while a significant surrender was made by the Director, the Rs. 15 lacs surrender was specifically to address potential discrepancies in the accounts. No unexplained credit, investment, money, expenditure, or loan repayment was found related to this Rs. 15 lacs. As a result, the provisions of sections 68, 69, 69A, 69B, 69C, and 69D were not applicable to this amount. The Tribunal concluded that the invocation of Section 115BBE was unjustified as the surrendered amount did not fall under the specified sections.Therefore, the Tribunal set aside the lower authorities' decision to apply Section 115BBE to the surrendered income of Rs. 15 lacs and directed the AO to compute this income under normal provisions applicable to business income. Consequently, the appeal of the assessee was allowed.This detailed analysis highlights the key arguments, facts, legal provisions, and the Tribunal's reasoning leading to the decision to overturn the application of Section 115BBE on the surrendered income, emphasizing the absence of unexplained elements and the purpose behind the surrender.