No Section 115BBE tax on income voluntarily disclosed in valid Section 139(1) return accepted without additions

The ITAT allowed the assessee's appeal, holding that tax could not be levied under section 115BBE on income voluntarily disclosed in a return filed under section 139(1). Relying on its own prior precedent, the Tribunal ruled that once the Assessing Officer has accepted the income as returned, without making any addition under sections dealing with unexplained income or search/survey-related provisions, section 115BBE is inapplicable. The AO was directed to recompute tax liability without invoking section 115BBE, thereby granting full relief to the assessee.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether tax under section 115BBE of the Income-tax Act, 1961 can be applied to income disclosed in a return filed under section 139(1) for the year of search, in the absence of any specific addition under sections 68, 69A, 69B, 69C or 69D.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Applicability of section 115BBE to income disclosed in return under section 139(1) for search year

Legal framework

2.1 The judgment considers the scheme of assessment in a search year, the character of a return filed under section 139(1) as an original return disclosing business income, and the scope of section 115BBE, which presupposes an addition made under sections 68, 69A, 69B, 69C or 69D.

Interpretation and reasoning

2.2 The Tribunal notes that the search took place on 17.03.2021, relatable to the assessment year in question, and that no notice under section 153A was issued. The assessee filed a return under section 139(1), which was accepted by the Assessing Officer as such.

2.3 A return filed under section 139(1) is treated as an original return and, in that return, the assessee disclosed its business income, which included the amount disclosed during search under section 132(4). The Tribunal holds that such disclosure in the statement under section 132(4) does not prevent the assessee from correctly disclosing that income in the regular return under section 139(1).

2.4 On examination of the assessment order, the Tribunal finds that the Assessing Officer did not make any addition under sections 68, 69A, 69B, 69C or 69D. Instead, the Assessing Officer merely proceeded on a presumption to invoke section 115BBE.

2.5 Relying on the coordinate bench decision referred to and following its reasoning, the Tribunal holds that section 115BBE cannot be applied merely on presumptions; its application requires an actual addition under sections 68, 69A, 69B, 69C or 69D. Where the income has been disclosed and accepted as part of regular business income in a valid return under section 139(1), and no such specific addition is made, section 115BBE is inapplicable.

Conclusions

2.6 The Tribunal concludes that section 115BBE cannot be applied to the income disclosed by the assessee in its return filed under section 139(1) for the year of search, in the absence of any addition under sections 68, 69A, 69B, 69C or 69D.

2.7 The Assessing Officer is directed to compute tax at regular rates, without invoking section 115BBE, and the assessee's appeal is allowed.

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