Income from money lending business assessed as business income not undisclosed investments under Section 69

ITAT Chennai held that income admitted during survey proceedings by assessee family engaged in money lending business for over 20 years should be assessed as business income rather than undisclosed investments under Section 69. The tribunal found that discrepancies in sundry debtors arose from normal money lending operations, as the family had no other substantial income sources. The differential in debtors between two dates represented undisclosed business income that was reinvested into lending activities. Provisions of Section 69 read with Section 115BBE were deemed inapplicable. AO was directed to recompute income treating it as business income. Additionally, CIT(A) was directed to adjudicate on merits an additional ground regarding stamp duty value differences that was previously rejected on technical grounds.

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Issues Involved:
1. Determination of the heads of income under which impugned additions would fall.
2. Addition u/s 56(2)(vii)(b) for the difference in stamp duty value and document value of a purchased property.

Summary:

Issue 1: Determination of Heads of Income
The appeals by two different assessees for AY 2017-18 arose from a common order by CIT(A) concerning assessments framed by AO u/s 143(3). The primary issue was to determine the heads of income for impugned additions. The assessee admitted income of Rs. 343.40 Lacs and was scrutinized for cash deposits during the demonetization period. The assessee's family, engaged in money lending business, was surveyed u/s 133A, revealing additional income offered as 'Business Income'. The AO, however, assessed the income as 'income from other sources' due to lack of substantiation that advances were from money lending business, and taxed it as undisclosed investments u/s 69, subjected to tax rate u/s 115BBE.

During appellate proceedings, the assessee argued that the income was unaccounted business income, supported by a list of debtors and confirmation letters from borrowers. The CIT(A) upheld the AO's decision, noting unexplained sources for the Rs. 4.90 Crores increase in advances. However, the Tribunal found that the assessee's family had no other substantial income sources and the discrepancy in debtors arose from the money lending business. The Tribunal concluded that the excess debtors were part of normal business activity and should be taxable as 'business income', not u/s 69, referencing various case laws including M/s Mookambika Impex vs. DCIT and CIT vs Bajargan Traders.

Issue 2: Addition u/s 56(2)(vii)(b)
In ITA No.897/Chny/2023, an additional issue involved an addition u/s 56(2)(vii)(b) for Rs. 4.31 Lacs, representing the difference between the stamp duty value and the document value of a purchased property. The CIT(A) did not admit the additional ground on technical grounds. The Tribunal directed the CIT(A) to adjudicate this issue on merits, allowing the grounds for statistical purposes.

Conclusion:
Both appeals were allowed, directing the AO to re-compute the income and demand payable by the assessee, and the CIT(A) to adjudicate the additional ground on merits. The provisions of Sec.69 r.w.s. 115BBE were deemed inapplicable, affirming the income as 'Business Income'.

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