2023 (8) TMI 289 - AT - Income Tax

Income surrendered during survey considered business income, not deemed income under Section 69. Assessee's appeal allowed.

Shri Baljinder Kumar Prop. Shivam Coir Foam Products Versus The DCIT Central Circle-1, Ludhiana

Shri Baljinder Kumar Prop. Shivam Coir Foam Products Versus The DCIT Central Circle-1, Ludhiana - TMI Issues Involved:1. Whether the income of Rs. 15,00,000/- surrendered during the survey should be taxed as business income or deemed income under Section 69.2. Applicability of Section 115BBE to the surrendered income.Summary:Issue 1: Treatment of Surrendered IncomeThe assessee, a proprietor of M/s Shivam Coir Foam Products, surrendered Rs. 15,00,000/- during a survey under Section 133A. The assessee claimed this amount as business income, reflected in the Profit and Loss Account, and paid taxes accordingly. The AO, however, treated this amount as deemed income under Section 69, arguing that the assessee failed to establish a nexus between the receivables and his business affairs with documentary evidence. The AO held that the amount should be taxed under Section 115BBE as the transactions were not recorded in the books of account at the time of the survey.Issue 2: Applicability of Section 115BBEThe assessee argued that Section 115BBE is a machinery provision to levy tax on unexplained income and does not apply to income already offered as business income. The AO and CIT(A) disagreed, stating that the assessee did not satisfactorily explain the nature and source of the surrendered income, thus invoking Section 69 and Section 115BBE.Tribunal's Findings:The Tribunal examined whether the surrendered income could be deemed as unexplained under Section 69. It noted that the assessee had explained the income as arising from business transactions recorded in a diary found during the survey. The Tribunal emphasized that the foundational requirement for invoking Section 69 is the failure to explain the nature and source of the income, which was not the case here. The Tribunal cited precedents where similar surrendered incomes were treated as business income, not unexplained income.Conclusion:The Tribunal concluded that the income of Rs. 15,00,000/- surrendered during the survey was rightly offered as business income and not as deemed income under Section 69. Consequently, Section 115BBE was not applicable. The appeal of the assessee was allowed.