Surrendered business receipts during survey treated as business income and eligible for set-off against business losses.

Surrendered receipts disclosed during a survey that are demonstrably relatable to the assessee's business and recorded in the books are to be treated as business income rather than deemed income under the tax provisions; consequently such receipts qualify for set-off against business losses. The legal effect is that where factual nexus to business and book-entry evidence exist, the receipts should be assessed as business income and not under deemed income provisions, permitting adjustment under the provisions governing set-off of business losses.

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Issues: Whether the sum of Rs.15,00,000 surrendered by the assessee during a survey under section 133A should be treated as business income (and therefore allowable to be set off against business losses under section 71) or treated as undisclosed/deemed income assessable under section 69A.

Analysis: The Bench examined the facts and compared them with a recent coordinate Bench decision in J.B. Resorts (dated 19.05.2016) and related authorities. On the material, the surrendered amount was found to be relatable to the assessee's business and recorded in the books; applying the ratio in the cited Tribunal decision, such surrendered receipts that are relatable to business are to be treated as business income rather than deemed income under section 69A. Consequently, the provisions permitting set off of business losses (section 71) apply to the surrendered amount.

Conclusion: The surrendered amount of Rs.15,00,000 is to be treated as business income and is allowable to be set off against business losses; the appeal is allowed in favour of the assessee and the addition is deleted.

Ratio Decidendi: Where surrendered receipts during a survey are demonstrably relatable to the assessee's business and reflected in books, they constitute business income and may be set off against business losses under section 71 rather than being treated as deemed income under section 69A of the Income-tax Act, 1961.

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