2023 (8) TMI 1062 - AT - Income Tax

Tribunal rules in favor of assessee, rejecting AO's additions under Income Tax Act

Shri Jaspreet Singh Mauj, Versus The DCIT/ACIT, CC-1, Ludhiana.

Shri Jaspreet Singh Mauj, Versus The DCIT/ACIT, CC-1, Ludhiana. - TMI Issues involved:The issues involved in the judgment are:1. Treatment of Surrendered Business Income as Deemed Income under Section 69 of the Income Tax Act, 1961.2. Disallowance of depreciation claim on the building.3. Addition in the value of the building based on the valuation report.4. Taxation of Business Income surrendered at a higher rate under Section 115BBE.Issue 1: Treatment of Surrendered Business IncomeThe assessee surrendered an amount of Rs. 30,00,000 to cover building expenses and unaccounted income during a survey action. The Assessing Officer treated this surrendered amount as unexplained income and assessed it under Section 69 of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) upheld this addition. However, the assessee argued that the surrender was voluntary, based on an estimation of unaccounted professional receipts, and that no incriminating material was found during the survey. The Central Board of Direct Taxes guidelines discourage relying solely on surrender statements. The Tribunal held that the AO's assessment of the surrendered income as unexplained was not justified, as the assessee had offered it as additional professional income.Issue 2: Disallowance of Depreciation ClaimThe AO did not allow the depreciation claim on the building surrendered by the assessee. The Tribunal considered that since the surrendered income was accepted as genuine professional income, the disallowance of the depreciation claim was not justified. The addition made by the AO was set aside as the surrendered income covered the building expenses.Issue 3: Addition in the Value of BuildingThe AO separately added Rs. 2,11,600 on account of an increase in the value of the building. The Tribunal found this addition unjustified as the surrendered income already covered the building expenses. Therefore, the addition in the value of the building was set aside.Issue 4: Taxation under Section 115BBEThe AO taxed the surrendered business income at a higher rate under Section 115BBE instead of the normal tax rate. The Tribunal held that since the surrendered income was genuine professional income, the invocation of Section 115BBE was not applicable. The appeal of the assessee was allowed, and the additions made by the AO were set aside.In conclusion, the Tribunal ruled in favor of the assessee, setting aside the additions made by the Assessing Officer and allowing the appeal.