2023 (9) TMI 942 - AT - Income Tax

Tribunal overturns tax assessment, ruling in favor of assessee in income source dispute.

The Tribunal ruled in favor of the assessee in an appeal against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana, for A.Y. 2019-20. ... Addition of income u/s 69A or Business income - surrender of income during survey proceedings - Charge tax as per provisions of Section 115BBE - HELD THAT:- During survey proceeding the assessee surrendered total income of Rs. 29 lacs out of which amount was related to other discrepancies/miscellaneous business income which was treated as income u/s 69A and calculated tax under special rate during assessment. There entire addition is certainly without forming proper basis for conversion into business income to non-business income. The revenue was not able to submit any evidence during assessment and appeal proceeding that the said income is not connected with the business income of the assessee or accumulated from non-recognising source. Hence, when all the incomes earned by the assessee are only from the business income of the assessee, there do not arise any question as to application of provisions of section 69A and hence taxing such income at special rate as per section 115BBE is improper. It is a settled principle in law that when there is no other/separate source of income identified during the course of survey or during the course of assessment proceedings, any income arising to the assessee shall be treated to be out of the normal business of the assessee only. During survey proceeding the assessee filed surrendered letter and in statement assessee also recorded and income was surrendered. We respectfully relied on the order of Sh. Harish Sharma & M/s. Sham Jewellers [2021 (5) TMI 482 - ITAT CHANDIGARH] and case of Daulatram Rawatmull [1966 (4) TMI 73 - CALCUTTA HIGH COURT]. In considered view, the conversion of business income into other income and application of section 69A is bad and illegal. Accordingly, levy of tax u/s 115BBE on the income amount liable to be quashed. Assessee appeal allowed. Issues:The judgment involves the following Issues:1. Appeal against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana, for A.Y. 2019-20.2. Treatment of amount as Income from undisclosed sources under section 69A of the Income Tax Act and tax calculation under Section 115BBE.3. Proper basis for conversion of income from business to non-business income.4. Application of provisions of section 69A and tax levy under section 115BBE.Issue 1:The assessee filed an appeal against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana, for A.Y. 2019-20, emanating from the order of the ld. DCIT, Central Circle-1, Jalandhar, passed u/s 144 of the Income Tax Act.Issue 2:The dispute centered around the treatment of an amount of Rs. 12,50,321 as Income from undisclosed sources under section 69A of the Income Tax Act and the application of tax provisions under Section 115BBE. The assessee contended that the amount was duly shown as income under the head 'Income from Business or Profession' in the return of income and was disclosed as business income during a survey under section 133A of the Income Tax Act.Issue 3:The primary contention was the proper basis for converting the miscellaneous business income into non-business income. The assessee argued that all incomes earned were solely from the business, and there was no evidence to suggest otherwise.Issue 4:The application of provisions of section 69A and the levy of tax under section 115BBE were challenged. The Tribunal held that when no separate source of income was identified, any income arising should be treated as part of the normal business income. The conversion of business income into other income and the application of section 69A were deemed improper and illegal, leading to the quashing of the tax levy under section 115BBE.This judgment addressed the issues raised by the assessee regarding the treatment of undisclosed income and the tax implications under specific sections of the Income Tax Act. The Tribunal found in favor of the assessee, emphasizing the importance of proper basis for income conversion and the identification of separate sources of income before applying specific tax provisions. The decision highlighted the necessity for a clear connection between income sources and tax calculations, ultimately leading to the allowance of the assessee's appeal.