Survey Disclosure is Business Income Not Taxable Under Section 115BBE: ITAT

The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, in an appeal filed by Shri Dilip Kumar, a tent business proprietor operating as M/s. Mahaveer Tent House, challenging the order passed by CIT(A), Udaipur-2, dated December 11, 2024, upholding the additions made by the Assessing Officer treating a part of the income surrendered during a survey as unexplained investment taxable under Section 69 read with Section 115BBE of the Income Tax Act, 1961, for AY 2018–19, has allowed the said appeal. The assessee himself had voluntarily disclosed an additional income of Rs. 40,02,994, attributing it to advances given, house construction, tent equipment purchase, and excess cash, during a survey conducted under Section 133A on February 8, 2018. This disclosure was recorded in the books under “Exceptional Business Income Surrendered in Survey” and offered for tax deduction under the head “Business Income.” However, the AO assessed the amount as “Income from Other Sources” under Sections 69 and 69A, making it taxable at the higher rate under Section 115BBE. The CIT(A) partially accepted the assessee’s stand for the tent equipment and excess cash but upheld that the additions related to advances and house investment were income from unexplained sources under Section 69. The appellant, thereby being aggrieved by the said order of CIT(A), filed an appeal to the ITAT Jaipur.

Issue Raised: Whether the income disclosed during the survey could be considered business income, or whether it should be taxed as unexplained investments under Section 69, thereby subjecting it to higher tax under Section 115BBE, even though it was included in the books and offered in the return.

ITAT Jaipur’s Decision: The Tribunal decided the appeal in favour of the assessee, ruling that since the Revenue did not bring any evidence suggesting the assessee had another source of income, the surrendered income must be treated as business income as originally declared. The tribunal thereby relied on decisions by the coordinate benches in Orthopaedics and Trauma Centre vs. DCIT, Surendra Kumar Patni vs. ACIT, and Veer Enterprises vs. DCIT and decided that revenue could not use section 115BBE of the Act to get a higher tax rate when the assessee had already paid the normal rate of tax based upon the disclosure during the survey.

The tribunal concluded that the assessee’s argument that the disclosed income resulted from business activity and was appropriately taxed under normal provisions had not been adequately refuted and rebutted by the Revenue. On the basis of the above reasoning, the appeal was granted and the CIT(A) order was overturned by the Hon’ble tribunal.

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