2023 (11) TMI 333 - AT - Income Tax

Tribunal Rules Surrendered Income from Search as Business Income, Normal Tax Rates Apply, Not Special Rate.

The Tribunal dismissed the Revenue's appeal, upholding the decision of the Commissioner (Appeals) that the special tax rate under Section 115BBE of the ... Applicability of special tax rate u/s 115BBE - income surrendered in search and seizure operation u/s 132 and offered in the return of income - loose paper/document was found from the wallet of the assessee, wherein, the amount was mentioned against the noting “com trade” and when confronted assessee stated that the figures mentioned in the seized document represent profit from offline commodity trading - as per AO Assessee has calculated his tax liability on the surrendered income applying the normal rate but as income surrendered by the assessee is in the nature of unexplained money in terms of section 69A applicable rate of tax as prescribed u/s 115BBE should be applied HELD THAT:- Section 69A uses word “may”, which implies that if explanation offered by the assessee regarding source of money, bullion, jewellery or other valuable articles is satisfactory, it cannot be treated as unexplained money u/s 69A of the Act. In the facts of the present appeal, there is nothing on record to suggest that assessee’s explanation regarding the source of the income offered has either been doubted or disputed at the time of search and seizure operation or even during the assessment proceedings. Therefore, in our view, the income offered by the assessee cannot be treated as unexplained money under Section 69A of the Act. Therefore, as a natural corollary, section 115BBE of the Act would not be applicable. Section 115BBE of the Act is applicable where the total income includes any income referred to in sections 68, 69A, 69B, 69C or 69D and reflected in the return of income under Section 139 of the Act. Secondly, if the income determined by the Assessing Officer includes any income referred to, in sections 68, 69, 69A, 69B, 69C or 69D, if such income is not covered under the first condition. In the facts of the present appeal, admittedly, assessee has not offered the income u/s 69A - Even, AO has not made any separate addition under Section 69A - He has merely re-characterized the nature of income offered by the assessee. Thus, in our considered opinion, the provisions of sections 115BBE would not be applicable to the facts of the present appeal. Decided in favour of assessee. Issues Involved:The judgment deals with the issue of the applicability of the special tax rate under Section 115BBE of the Income-Tax Act, 1961 to the income surrendered by the assessee during a search and seizure operation.Summary:The appeal was filed by the Revenue against an order passed by the Commissioner of Income-Tax (Appeals) for the assessment year 2017-18. The main dispute was regarding the applicability of the special tax rate under Section 115BBE of the Act to the income surrendered by the assessee during a search and seizure operation. The assessee, a resident individual, had surrendered an amount of Rs. 30.20 crores as income derived from offline commodity trading. The Assessing Officer initially treated this income as unexplained money under Section 69A but later applied the special tax rate under Section 115BBE. The Commissioner (Appeals) held that the income should be taxed at the normal rate, not under Section 115BBE.Upon hearing arguments from both sides, the Tribunal found that the explanation provided by the assessee regarding the source of the surrendered income was satisfactory and not disputed by the departmental authorities. As per Section 69A, if the explanation regarding the source of money is satisfactory, it cannot be treated as unexplained money. Since the income offered was explained as profit from commodity trading, it was considered business income and not unexplained money under Section 69A. Therefore, the special tax rate under Section 115BBE was deemed inapplicable.The Tribunal further noted that Section 115BBE applies when income falls under specific sections, including Section 69A, and is reflected in the return of income. Since the assessee did not offer the income under Section 69A and the Assessing Officer did not make a separate addition under that section, the provisions of Section 115BBE were held not to be applicable. Consequently, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the appeal filed by the Revenue.In conclusion, the Tribunal dismissed the appeal, upholding the decision that the special tax rate under Section 115BBE was not applicable to the income surrendered by the assessee during the search and seizure operation.