Survey surrender linked to stock in trade is business income, not unexplained investment, so enhanced tax rates do not apply.

Surrendered income linked to stock and loose papers found during survey was treated as business income, because the record did not show any unexplained investment or income from a source outside the timber and plywood business. In the absence of the deeming fiction under section 69, the enhanced tax rate under section 115BBE could not be applied. The analysis also notes that the higher rate under section 115BBE was regarded as operating prospectively from the relevant cut-off date, not on earlier concluded transactions. The surrendered amount was therefore taxable at the normal business rate rather than at the enhanced rate.

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Issues: Whether the surrendered amount relatable to stock and loose papers found during survey could be treated as unexplained investment and subjected to tax at 60% under section 115BBE, or whether it constituted business income taxable at the normal rate applicable on the date of survey and surrender.

Analysis: The surrendered amount arose from discrepancies noticed in the business premises during survey, and the record did not establish any source of income outside the assessee's timber and plywood business. The amount was described as stock in trade, and no concrete finding showed it to be an unexplained investment within the meaning of section 69. In the absence of satisfaction of the deeming fiction, the enhanced rate under section 115BBE could not be invoked. The Tribunal also accepted the view that the amended higher rate under section 115BBE would operate only prospectively from the relevant cut-off date and not for transactions already concluded earlier. Accordingly, the surrender was to be assessed as business income at the normal rate.

Conclusion: The taxability under section 115BBE at 60% was held to be unsustainable, and the surrendered amount was directed to be taxed at 30%.

Ratio Decidendi: Where surrendered income is traceable to stock in trade found in the course of survey and is not shown to be an unexplained investment, the deeming provision under section 69 does not apply and section 115BBE cannot be invoked to impose the enhanced rate of tax for an earlier transaction.

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