Section
115BBE has been introduced with effect from 01.04.2013 (i.e. from Assessment
year 2013-14) with an intention to tackle with people who shows their black
income as white by paying less tax. Therefore any income for which assessee
would not be able to explain the source, now will be taxed at 60% (30% upto
Assessment year 2016-17).
The
“White Paper on Black Money” presented in the Parliament on 16.05.2012 was, inter
alia, concerned with the laundering of unaccounted money by taking
advantage of basic exemption limit. The above stated position of taxing income
of the nature referred to in the specified sections at the normal rate/applicable rate of income-tax applicable
on total income of the assessee has been changed with effect from 01.04.2013 by
the Finance Act, 2012 as a result of introduction of section 115BBE dealing
with a special rate of tax applicable to income of the nature referred to in
sections 68, 69, 69A, 69B, 69C and 69D.
Speech
of FM and Explanatory Memorandum for introduction of section 115BBE
The
Finance Minister, in his speech, while introducing the Finance Bill, 2012 on
16.03.2012, said: “I propose a series of measures to deter the generation and
use of unaccounted money. To this end, I propose ......................Taxation
of unexplained money, credits, investments, expenditures, etc., at the highest rate
of 30 per cent irrespective of the slab of income”.
Background
Certain
unexplained cash credit, investment, expenditure, etc., are deemed as income
under Section 68, Section 69, Section 69A, Section 69B, Section 69C and Section
69D of the Act and were earlier subjected to tax as per the tax rate applicable
to the taxpayer. As a consequence, in case of individuals, HUF, etc., no tax
was levied up to the basic exemption limit and even if such income was higher
than basic exemption limit, it could be levied at the lower slab rate.
Object,
purpose and amendments of section 115BBE
In
order to curb the practice of laundering of unaccounted money by taking
advantage of basic exemption limit, it is proposed to tax the unexplained credits,
money, investment, expenditure, etc., which has been deemed as income under
section 68, section 69, section 69A, section 69B, section 69C or section 69D,
at the rate of 30% (60% - with effect from assessment year 2017-18) plus
surcharge and Health & Education cess as applicable. It is also proposed to
provide that no deduction in respect of any expenditure or allowance shall be
allowed to the assessee under any provision of the Act in computing deemed income
under the said sections. This amendment will take effect from 01.04.2013 and
will, accordingly, apply in relation to the assessment year 2013-14 and subsequent
assessment years.
Thus,
section 115BBE is designed to impose greater tax burden on the assessees who
fail to explain the “nature and source” of their income, investments, expenses,
etc. However, substantive law dealing with provisions of sections 68, 69, 69A,
69B, 69C and 69D is unchanged.
Text
of section 115BBE
[1][115BBE. Tax on income
referred to in section 68 or section 69 or section 69A or section 69B or
section 69C or section 69D
[2][(1)
Where the total income of an assessee,—
(a)
includes any income referred to in section 68, section 69, section 69A, section
69B, section 69C or section 69D and reflected in the return of income furnished
under section 139; or
(b)
determined by the Assessing Officer includes any income referred to in section
68, section 69, section 69A, section 69B, section 69C or section 69D, if such
income is not covered under clause (a), the income-tax payable shall be the
aggregate of—
(i)
the amount of income-tax calculated on the income referred to in clause (a) and
clause (b), at the rate of sixty per cent; and
(ii)
the amount of income-tax with which the assessee would have been chargeable had
his total income been reduced by the amount of income referred to in clause
(i).]
(2)
Notwithstanding anything contained in this Act, no deduction in respect of any
expenditure or allowance [3][or set off of any loss] shall be allowed to the assessee
under any provision of this Act in computing his income referred to in clause
(a) [4][and
clause (b)]
of sub-section (1).]
KEY NOTE
1. Inserted by the Finance Act, 2012, with
effect from 01.04.1913.
2. Substituted by the Taxation Laws
(Second Amendment) Act, 2016, with effect from 01.04.2017. Prior to its
substitution, sub-section (1) read as under:
“(1) Where the total income of an assessee
includes any income referred to in section 68, section 69, section 69A, section
69B, section 69C or section 69D, the income-tax payable shall be the aggregate
of—
(a) the amount of income-tax calculated on
income referred to in section 68, section 69, section 69A, section 69B, section
69C or section 69D, at the rate of thirty per cent; and
(b) the amount of income-tax with which
the assessee would have been chargeable had his total income been reduced by
the amount of income referred to in clause (a).”
3. Inserted by the Finance Act, 2016, with
effect from 01.04.2017.
4. Inserted by the Finance Act, 2018, with
retrospective effect from 01.04.2017.
If
the Assessing Officer detects cash credits, unexplained investments, unexplained
expenditure etc., the source for which is not satisfactorily explained by the
assessee to him, there are various provisions in the Income Tax Act which
empower the assessing officer to charge tax on such amount. Comparison between
section 68, section 69, section 69A, section 69B and section 69C:—
|
Particulars
|
Section
68
|
Section
69
|
Section
69A
|
Section
69B
|
Section
69C
|
|
Plain
reading
|
Where
any sum is found credited in the books of an assessee maintained for any
previous year, and the assessee offers no explanation about the nature and
|
Where
in the financial year immediately preceding the assessment year the assessee
has made investments which are not recorded in the books of
|
Where
in any financial year the assessee is found to be the owner of any money,
bullion, jewellery or other valuable article and such money, bullion,
|
Where
in any financial year the assessee has made investments or is found to be the
owner of any bullion, jewellery or other valuable article, and the Assessing
|
Where
in any financial year an assessee has incurred any expenditure and he offers
no explanation about the source of such expenditure or part thereof, or the
explanation,
|
|
|
source
thereof or the explanation offered by him is not, in the opinion of the
Assessing Officer, satisfactory, the sum so credited may be charged to
income-tax as the income of the assessee of that previous year.
|
account,
if any, maintained by him for any source of income, and the assessee offers
no explanation about the nature and source of the investments or the
explanation offered by him is not, in
the opinion of the Assessing Officer, satisfactory, the value of the
investments may be deemed to be the income of the assessee of such financial
year
|
jewellery
or valuable article is not recorded in the books of account, if any,
maintained by him for any source of
income, and the assessee offers no explanation about the nature and source of
acquisition of the money, bullion, jewellery or other valuable article, or the explanation
offered by him is not, in the opinion of the Assessing Officer, satisfactory,
the money and the value of the bullion, jewellery or other valuable article
may be deemed to be the income of the assessee for such financial year.
|
Officer
finds that the Amount expended on making such investments or in acquiring
such bullion, jewellery or other valuable article exceeds the amount recorded
in this behalf in the books of account maintained by the assessee for any
source of income, and the assessee offers no explanation about such excess
amount or the explanation offered by him is not, in the opinion of the
Assessing Officer, satisfactory, the
excess amount may be deemed to be the income of the assessee for such
financial year.
|
if
any, offered by him is not, in the opinion of the Assessing Officer,
satisfactory, the amount covered by such expenditure or part thereof, as the
case may be, may be deemed to be the income of the assessee for such
financial year: Provided that, notwithstanding anything contained in any
other provision of this Act, such enexplained expenditure which is deemed to
be the income of the assessee shall not be allowed as a deduction under any
head of income.
|
|
Maintenance
of Books of Accounts
|
Compulsory
|
Not
Compulsory as the word“if any” is used
|
Not
Compulsory as the word “if any” is used.
|
Compulsory
|
Not
Compulsory
|
|
Explanation
to Assessing Officer
|
Assessing
Officer can ask for explanation only when the sum is credited in the Books of
Accounts.
|
Assessing Officer can ask for explanation only if
investment is not recorded in the Books of Accounts.
|
Assessing
Officer can ask for explanation only only if money, bullion, jewellery or any
other valuable article
|
Assessing
Officer can ask for explanation only if the investment, money, bullion,
jewellery or any other valuable article is is not recorded in the Books of
Accounts.
|
Assessing
Officer can ask for the source of
“incurred expenditure”. recorded in the Books of Accounts and the
value recorded is less than the amount spent in acquiring.
|
Overview of Sections 68, 69, 69A, 69B, 69C and 69D
|
Sr. No.
|
Section
|
Nature of addition
|
What can be taxed
|
Year in which taxable
|
|
1.
|
68
|
Unexplained Cash
credits
|
(a) Unexplained loans
(b) Unexplained Gifts, received (from residents as well as from
non-residents) (c) Share Capital including share application money, share
premium, etc.
|
Previous year in which
amount credited in books of account
|
|
2.
|
69
|
Unexplained
investments
|
Unexplained
investments not recorded in books of account maintained
|
Previous year in which
amount invested
|
|
3.
|
69A
|
Unexplained money,
etc.
|
Unexplained money,
bullion, jewellery or valuable article
|
Previous year in which
assessee is found in possession of money, bullion, jewellery or valuable
article
|
|
4.
|
69B
|
Amount of investments,
etc. not fully disclosed in books of account
|
Investments, money,
bullion, jewellery or other article not fully disclosed in books maintained
|
Previous year in which
investment made or bullion, jewellery or other article is found in possession
|
|
5.
|
69C
|
Unexplained
expenditure
|
Expenditure incurred
out of unknown sources
|
The year in which
expenditure is incurred
|
|
6.
|
69D
|
Amount borrowed or
repaid on hundi
|
Amount borrowed or
repaid otherwise than by an account payee cheque
|
Amount borrowed or
repaid otherwise than by an account payee cheque. If addition is made of
amount borrowed, same amount cannot be added when repaid (Refer CBDT’s
Circular No. 204, dated 24.07.1976)
|
Consequences
of section 115BBE
No
basic exemption allowed while calculating tax at special rate under section 115BBE
No
basic exemption is provided for while calculating the tax liability under the
provisions of section 115BBE. In the Memorandum explaining the Finance Bill,
2012, the Legislature had made it clear that it desired to curb the practice of
laundering of unaccounted money by taking advantage of the basic exemption
limit. So, no basic exemption is allowed while calculating tax at special rate
under section 115BBE.
Restriction
on deductions under Chapter VI-A
Section
115BBE(2) restricts deduction in respect of any expenditure allowable to the
assessee under any provision of the Act. As per Section 115BBE(2).
Notwithstanding anything contained in this Act, no deduction in respect of any
expenditure or allowance or set off of any loss shall be allowed to the
assessee under any provision of this Act in computing his income referred to in
section 115BBE(1)(a).
Impact
of section 115BBE in cases of persons having income from profession
The
expression “sum credited” is wide enough to include receipts from a profession.
So, in case of all sums credited/received as professional receipts, the
assessee would be dutybound to explain the nature and source thereof, failing
which no deduction will be allowed for expenses incurred for carrying out the
profession.
Applicability
of section 115BBE
(i)
This Section is applicable where assessee’s income is recorded in books but has
not been offered to tax and the assessee fails to prove the nature and source
to the satisfaction of the Assessing Officer.
(ii)
This section is also applicable to the assessee who is not required to maintain
books of accounts but is found to have made unexplained investment, unexplained
expenditure or he is found to be in possession of money, bullion, jewellery or
other valuable articles.
(iii)
Where an assessee voluntarily shows income in his return but he is unable to
prove the source of such income to the satisfaction of the Assessing Officer,
such income could be held to be liable under section 115BBE.
(iv)
The provision of section 115BBE can be applied in the following circumstances:—
(a)
Claiming exempt income from any source which the assessee fails to substantiate
to the satisfaction of the Assessing Officer.
(b)
Claiming income from agricultural operations which the assessee fails to
substantiate to the satisfaction of the Assessing Officer.
(v)
The provision of section 68 will be attracted to the credits in the books of
account on account of cash sales. Such cash sales may be treated as unexplained
income chargeable to tax under section 68 read with section 115BBE, if the
names and addresses of the buyers are not mentioned in the cash memo.
Rate
of Tax : Section 115BBE
The
Finance Act, 2012, inserted section 115BBE with effect from 01.04.2013, which
provides that in case total income of an assessee includes an income chargeable
under sections 68, 69, 69A, 69B, 69C or 69D, the income would be chargeable @
30% without there being any benefit of slab rate which would have been
otherwise available to such assessee. This amendment was brought to ensure that
the undisclosed income is chargeable to tax @ 30% and the assessees should not
be able to take advantage of the basic exemption limit or lower slab of the
rate of tax applicable to assessees.
This
section was further substituted by the Taxation Laws (Second Amendment) Act,
2016 with effect from 01.04.2017 wherein rate of tax was increased from 30% to
60%. The amended section further provides that the section would apply
irrespective of fact, whether the income is disclosed by the assessee in its
return of income under sections 68 to 69D or the Assessing Officer makes such
an addition.
Total tax in the cases covered under section 115BBE:
|
S. No.
|
|
For Assessment year 2013-14
to 2016-17
|
From assessment year
2017-18
|
|
1.
|
Tax on income under
section 115BBE
|
30%
|
60%
|
|
2.
|
Surcharge
|
25% of such tax (i.e.
15% of such income)
|
25% of such tax (i.e.
15% of such income)
|
|
3.
|
In case where income
not included in return filed under section 139 penalty under section 271AAC
|
|
10% of such tax
|
|
4.
|
Cess
|
3% of tax &
surcharge
|
Health and Education
cess @ 4% of tax & surcharge (i.e. 1+2) [3% upto assessment year 2018-19)
|
PROVISIONS ILLUSTRATED - 1
For Instance, income of Rs.10,00,000/- is determined
by the Ld. Assessing Officer after making addition under sections 68-69D of the
Act. The liability of tax and penalty would arise as under:
|
(i)
|
Tax @ 60% [as per section 115BBE]
|
6,00,000/-
|
60%
|
|
(ii)
|
Surcharge @ 25% of Tax payable [7th Proviso to
Section 2(9) of Finance Act, 2016 as Inserted by the Taxation Laws (Second
Amendment) Act, 2016, with effect from 15.12.2016]
|
1,50,000/-
|
|
|
(iii)
|
(60 + 15) = 75
|
7,50,000/-
|
75%
|
|
(iv)
|
Health and Education cess @4% of Tax and Surcharge
|
30,000/-
|
|
|
(v)
|
Total [(iii) + (iv)]
|
7,80,000/-
|
78%
|
|
|
Penalty under section 271AAC [10% of tax-payable
under section 115BBE, i.e., 10% of 60% of (i)]
|
60,000/-
|
|
|
|
Total
|
8,40,000/-
|
84%
|
PROVISIONS
ILLUSTRATED - 2
|
S.
No.
|
Income under section 115BBE – Rs. 10,00,000
|
If the person voluntarily declares the unaccounted
income in his/her return of income
|
If
the person does not voluntarily declare the unaccounted income in his/her
return of income
|
|
1.
|
Tax
@ 60%
|
6,00,000
|
6,00,000
|
|
2.
|
Surcharge @ 25% of tax
|
1,50,000
|
1,50,000
|
|
3.
|
Penalty
under section 271AAC @ 10%
|
—
|
60,000
|
|
4.
|
Health
& Education Cess @ 4%
|
30,000
|
30,000
|
|
5.
|
|
7,80,000
|
8,40,000
|
PROVISIONS
ILLUSTRATED - 3
|
S.
No.
|
Particulars
|
Tax impact
|
|
Upto
assessment year 2012-13
|
For
assessment years 2013-14 to 2016-17
|
From
assessment year 2017- 18
|
|
(i)
|
Unexplained
items deemed as income under section 68, etc.
|
1,50,000
|
1,50,000
|
1,50,000
|
|
(ii)
|
Other
income
|
50,000
|
50,000
|
50,000
|
|
(iii)
|
Total
income
|
2,00,000
|
2,00,000
|
2,00,000
|
|
(iv)
|
Tax
on unexplained income (30%/60% w.e.f. A.Y. 2017-18 of (i))
|
Nil
|
45,000
|
90,000
|
|
(v)
|
Tax
on other income
|
Nil
|
Nil
|
Nil
|
|
(vi)
|
Tax on total income [(iv) + (v)]
|
Nil
|
45,000
|
90,000
|
Applicability of section 115BBE in survey cases
The
total tax in these cases covered under section 115BBE is worked out as under:—
|
1
|
Tax on income under section 115BBE
|
60%
|
|
2
|
Surcharge
|
25% of such tax
|
|
3
|
In case where income not included in return filed
under section 139, Penalty under section 271AAC
|
10% of such tax
|
|
|
This is further subject to Health & Education
cess as applicable
|
CBDT’s Circular No. 11/2019, dated the 19th of June,
2019
Subject: Clarification
regarding non-allowability of set-off of losses against the deemed income under
section 115BBE of the Income-tax Act, 1961 prior to assessment-year
2017-18—Reg.
With effect from 01.04.2017,
sub-section (2) of section 115BBE of the Income-tax Act, 1961 (Act) provides
that where total income of an assessee includes any income referred to in
section(s) 68/69/69A/69B/ 69C/69D of the Act, no deduction in respect of any
expenditure or allowance or set off of any loss shall be allowed to the
assessee under any provisions of the Act in computing the income referred to in
section 115BBE(1) of the Act.
2. In this regard, it has been
brought to the notice of the Central Board of Direct Taxes (the Board) that in
assessments prior to assessment year 2017-18, while some of the Assessing
Officers have allowed set off of losses against the additions made by them
under Section(s) 68/69/69A/69B/ 69C/69D, in some cases, set off of losses
against the additions made under Section 115BBE(1) of the Act have not been
allowed. As the amendment inserting the words ‘or set off of any loss’ is applicable
with effect from 1st of April, 2017 and applies from assessment year 2017-18
onwards, conflicting views have been taken by the Assessing Officers in
assessments for years prior to assessment year 2017-18. The matter has been
referred to the Board so that a consistent approach is adopted by the Assessing
Officers while applying provision of section 115BBE in assessments for period
prior to the assessment year 2017-18.
3. The Board has examined the
matter. The Circular No. 3/2017 of the Board dated 20th January, 2017 which
contains Explanatory notes to the provisions of the Finance Act, 2016, at para
46.2, regarding amendment made in section 115BBE(2) of the Act mentions that
currently there is uncertainty on the issue of set-off of losses against income
referred to in section 115BBE. It also further mentions that the pre-amended
provision of section 115BBE of the Act did not convey the intention that losses
shall not be allowed to be set-off against income referred to in section 115BBE
of the Act and hence, the amendment was made vide the Finance Act, 2016.
4. Thus keeping the legislative
intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to
remove any ambiguity of interpretation,
the Board is of the view that since the term ‘or set off of any loss’ was
specifically inserted only vide the Finance Act, 2016, w.e.f. 01.04.2017, an
assessee is entitled to claim set-off of loss against income determined under
section 115BBE of the Act till the assessment year 2016-17.
5. The contents of this Circular
may be circulated widely for information of all stakeholders and departmental
officers. The pending assessments and litigations on this issue may be handled
accordingly.
Section 115BBE being machinery provision has to be
interpreted liberally
The Income Tax Act is a self
contained code consists of both charging and machinery sections. Charging
sections are those sections by which liability is created or fixed. Machinery
sections are those sections which ensures quantification, imposition and
collection of tax created by the ‘charging sections’. Thus ‘Machinery
Provisions’ are basically subordinates to the charging section.
On applying the above principles
section 115BBE is categorized as ‘machinery provision’ which is subordinate to
the charging section 68 and section 69 family. There is a very practical rule
in the interpretation of taxing Statutes that ‘charging provisions’ are
interpreted strictly while the ‘machinery provisions’ are interpreted
liberally. The above criteria of interpretation of the ‘Statute’ is supported
by several judicial precedents.
The Hon’ble Supreme Court in the
case of J.K.Synthetics Ltd v. The CTO, held that “It is well-known that
when a statute levies a tax it does so by inserting a charging section by which
a liability is created or fixed and then proceeds to provide the machinery to
make the liability effective. It, therefore, provides the machinery for the
assessment of the liability already fixed by the charging section, and then
provides the mode for the recovery and collection of tax, including penal
provisions meant to deal with defaulters. … Ordinarily the charging section
which fixes the liability is strictly construed but that rule of strict
construction is not extended to the machinery provisions which are construed
like any other statute. The machinery provisions must, no doubt, be so
construed as would effectuate the object and purpose of the statute and not
defeat the same. (Whitney v. Commissioners of Inland Revenue 1926 A C 37, CIT
v. Mahaliram Ramjidas (1940) 8 ITR 442 (PC), Indian United Mills Ltd. v. Commissioner
of Excess Profits Tax, Bombay, (1995) 27 ITR 20 (SC) and Gursahai Saigal
v. CIT, Punjab, [1963] 48 ITR 1 (SC).”—[J.K. Synthetics Ltd. v. The Commercial
Tax Officer (1994) 1994 taxmann.com 370 (SC)]
The Hon’ble Supreme Court in the
case of Gursahai Saigal v. CIT held that those sections which impose the
charge or levy should be strictly construed; but those which deal merely with
the machinery of assessment and collection should not be subjected to a
rigorous construction but should be construed in a way that makes the machinery
workable.”—[Gurshai Saigal v. CIT (1963) 48 ITR 1 (SC)]
The Hon’ble Supreme Court in the
case of ‘India United Mills Ltd. v. CEPT’ applied the principles laid
down by the Privy Council in the case of ‘CIT v. Mahaliram Ramjidas (1940) 8
ITR 442 (PC)’ held that “Ordinarily, the charging section which fixes
liability is strictly construed but the rule of strict construction is not
extended to the machinery provisions which are construed like any other statute.
The machinery provision must, no doubt, be so construed as would effectuate the
object and purpose of the Statute and not to defeat the same.”— [India
United Mills Ltd. v. CEPT (1955) 27 ITR 20 (SC)]
Undisclosed income surrendered
during search and seizure proceedings was derived from regular business
activities, it was liable to be taxed at normal rate instead of tax rate
stipulated under section 115BBE
Assessee during search and seizure
action surrendered undisclosed income on account of excess stock and excess
cash which was not entered in regular books of account. Assessing Officer was
of view that undisclosed income falls within ambit of section 69A and,
therefore, is liable to be taxed at special rate within meaning of section 115BBE.
On appeal, Commissioner (Appeals) allowed appeal of assessee and held that
undisclosed income so surrendered was derived from regular business activities,
therefore, it was liable to be taxed at normal rate instead of under provisions
stated under section 115BBE. On second appeal, Tribunal dismissed appeal of
revenue. Since Tribunal had dealt with all grounds raised by assessee in order
impugned and had passed a well reasoned and speaking order taking into
consideration all material available on record, interference with concurrent
findings of Commissioner (Appeals) as well as Tribunal therewith was not
warranted. [In favour of assessee] (Related Assessment year : 2017-18) – [PCIT v. Krishna Kumar Verma (2024)
161 taxmann.com 44 (MP)]
Unaccounted
receipts found during survey at hospital to be taxed as business income under
section 28; section 68 was not applicable
Assessee-company
ran a hospital. Competent Authority carried out survey under section 133A at
business premises of assessee and found that loose papers reflected certain
unaccounted receipts in name of doctors. Director of company accepted that
alleged receipts were unaccounted and offered same for taxation as part of
profit or gain of business of hospital. Assessee thereafter filed revised
return and disclosed unaccounted receipts as offered during survey as part of
profit or gain of business of hospital. Assessing Officer held that unaccounted
receipts were an unaccounted income of assessee and added same to assessee's
income by invoking provisions of section 68 and taxed same under section
115BBE. Since assessee had already disclosed unaccounted receipts offered
during course of survey in revised return filed, there was no reason to add
same again in assessee’s income invoking provisions of section 68 and brought
them to tax under section 115BBE. As unaccounted receipts were relating to
business operations of assessee's hospital, they were taxable as business
income under section 28; section 68 read with section 115BBE was not
applicable. [In favour of assessee] (Related Assessment year : 2013-14) - [ACIT
v. Surat Life Care (P) Ltd. (2024) 160 taxmann.com 239 (ITAT Surat)]
Surrendered
amount derived from business operations could not be brought to tax under
deeming provisions of section 69B read with section 11BBE
Undisclosed investment - (Excess
stock) - Assessee-firm was engaged in business of manufacturing of wearing
apparels. During course of survey, assessee had surrendered certain amount to
cover up discrepancies. Assessing Officer treated surrendered amount as excess
stock under section 69B read with provisions of section 115BBE. It was found
that stock physically found had been valued and then, compared with value of
stock so recorded in books of accounts and difference in value of stock so
found belonging to firm had been offered to tax. Revenue had not pointed out
that excess stock had any nexus with any other receipts other than business
being carried on by assessee. Further, in surrender letter, the assessee had
stated that during course of survey operations, certain discrepancy out of
excess stock of Rs 50 lakhs had been found and to avoid litigation, he had
offered additional business income of Rs 50 lakhs out of excess stock found out
of their normal business income over and above normal business income -
Assessee had provided necessary explanation about nature and source of such
unrecorded transactions and necessary nexus with assessee's business has been
established. There was no physical distinction between accounted stock and
unaccounted stock. On facts, income surrendered by assessee during survey was
from business operations and, thus, should be treated as business income.
Therefore, same could not be brought to tax under deeming provisions of section
69B read with section 11BBE and normal tax rate should be applied. [In favour
of assessee] (Related Assessment
year : 2019-20) – [Montu Shallu Knitwears v.
DCIT(C), Ludhiana (2024) 159 taxmann.com 677 (ITAT Chandigarh)]
Assessee claimed that
entire amount of excess cash found from business premises was generated from
undisclosed sale of medicine, since revenue was unable to show any other
sources related to excess cash, excess cash was from business of assessee and,
thus, application of section 115BBE on amount of excess cash was bad in law
The assessee was a trader
of medicines and other allied product. A survey was conducted under section
133A at premises of assessee. During survey proceedings, statement of assessee
was recorded. Assessee surrendered certain amount out of which certain amount
was related to excess stock found during survey and certain amount was related
to excess cash found from business premises of assessee. In books, assessee
declared lesser cash on date of survey. Assessing Officer added difference in
cash found during survey to total income under section 69A and tax was levied
on said amount under section 115BBE(2). It was noted that during statement
recorded in survey, assessee declared that entire amount of excess cash was
generated from undisclosed sale of medicine. Since revenue was unable to show
any other sources related to excess cash, source of excess cash was from
business and thus, application of section 115BBE was bad in law. Thus, assessee
was to be assessed under normal rate of tax. [In favour of assessee] (Related Assessment year : 2018-19) –
[Tejpal Singh v. ACIT (2024) 158 taxmann.com 679 (ITAT Amritsar)]
Unexplained cash attracts 69A & Section 115BBE
de hors Assessee’s income disclosure & categorization
The Assessee, a resident of Andhra Pradesh, along
with two others, was apprehended at the Excise check post while travelling in a
bus from Hyderabad to Kozhikode and cash of Rs. 2.40 Cr. was found and seized.
The three deposed before the Excise officials, giving mutually consistent
statements, i.e., of Rs.1.62 Cr. belonged to Shri Sravan Neela Kumar, one of
the three persons, and the balance Rs.77.10 Lac belonged to the Assessee.
The Assessee initially claimed that the said of Rs. 77.10 Lac belonged to his
employer, Shri D. Ramesh, a Hyderabad based trader dealing in gold/gold
jewellery and that they were travelling to Kozhikode to purchase gold.
Based on the information provided by the Excise Department, the Revenue made
requisition under Section 132A and seized the cash. The Assessee could not
furnish any evidence in support of either the stated purpose of the visit or
the contention that cash belonged to the said Shri D. Ramesh. Shri. D. Ramesh
also neither owned the amount nor issued any confirmatory statement. On the
contrary, the Assessee submitted a written statement to the DDI stating that he
was running a petrol pump in his hometown at Telangana for the past several
years on leased land and that he was travelling to Kozhikode for exploring
petrol business prospects thereat. The amount of Rs.77 lakhs seized from him
had been pooled by him from his friends and relatives for the said purpose. So,
however, they were reluctant to come forward to admit the same and, therefore,
he was surrendering the cash seized as income from other sources for impugned Assessment
year 2017-18, further requesting for appropriating tax on this income,
refunding the balance, and relieving the Assessee of penal proceedings. This
was followed by returning the said amount as his income in response to notice
under Section 148. The income was returned as ‘other income’, under the head
‘income from other sources’. The Revenue accepting the returns of
income for Assessment years 2011-12 to 2016-17, i.e., in the proceedings
initiated by issue of notices under Section 153A, assessed the income returned
of Rs. 77.10 Lac for the impugned Assessment year under Section 69A as
unexplained and levied tax under Section 115BBE. The Assessee filed an appeal
before the CIT(A) who dismissed the same. The present appeal is filed
before the ITAT against the CIT(A) order.
Before the ITAT, the Assessee filed additional
evidence in the form of 33 Affidavits (dt. 27.03.2023) by Shri D. Ramesh and
others, stated to be his friends and relatives. Shri Ramesh admitted to be
resident of Andhra Pradesh, carrying on the business of making ornaments and
gold jewelry, and that the Assessee, his employee, was carrying cash (Rs. 77.10
Lac) to Kerala for purchase of gold therefrom. Further, several people, the
list of which was attached, were his clients, who had approached him on 01.07.2016
with cash for purchasing gold.
Cochin ITAT holds that once the Assessee is
unable to substantiate the source of the seized cash or admits being
sourced from unspecified persons, Section 69A would automatically apply;
Holds that offering such income under the head ‘Income
from Other Sources’ is inconsequential as for attracting
deeming provision of Section 69A and higher tax-rate under Section 115BBE; ITAT
holds that once the Assessee has himself returned the cash found on
him as his own income and stated that the friends and relatives from
whom the same had been obtained, were reluctant to come forward, there is an
admission of non-explanation of the source of income and therefore, Revenue is
fully justified in regarding the same as unexplained, both as to its nature and
source; Relies upon the Supreme Court judgment in CIT v. Prakash Chand Lunia (Decd.) v. CIT (2023) 454 ITR 61 : 293 Taxman
229 : 149 taxmann.com 416 (SC) wherein the Supreme Court
confirmed the application of Section 115BBE for deemed incomes; ITAT
observes that there is no factual basis for the Assessee to raise the legal
ground against Section 69A since in penalty proceedings the Assessee
admitted to have surrendered his income under Section 69A which
removes the factual basis for assuming the legal stance that
his ITR for the impugned Assessment year claiming the
income to be under Section 56 is not on record; Relies upon the judgment
of Gujarat High Court in Fakir Mohmed Haji
Hasan (2002) 247 ITR 290 120 Taxman 11 :
(Guj.) and of
Punjab & Haryana High Court in Kim
Pharma (P) Ltd. (2013) 258 CTR 454 : 35 Taxmann.com 456 (P&H) wherein it was held that
the computational provisions applicable to different heads of income, are not
attracted qua income brought to tax under the deeming provisions 69 to 69C
which accordingly is not liable to be classified under those heads of income; ITAT
rejects the additional evidence filed by the Assessee in the form
of 33 affidavits from his employer, friends and
relatives claiming to be owners of seized cash due to delay in
furnishing the evidence and contradiction with Assessee’s ITR; Holds
that the only manner in law in which the Assessee could amend his ITR, is
by filing a revised ITR, which is impermissible in reassessment
proceedings; Further observes that the Assessee having admitted the
income, “the only issue that arises is of it being assessable under
section 56, i.e., as returned, or under section 69A, as assessed, with the tax
rate being consequential. The plea for admission of additional evidence is not
maintainable, both on facts and in law.”; Thus, dismisses
the Assessee’s appeal; [In favour of revenue] (Related Assessment year :
2017-18) - [Uma Maheshwara Rao Chinni v. ACIT(C), Kozhikode [TS-259-ITAT-2024(COCH)] – Date of Judgement : 15.04.2024 (ITAT Cochin)]
Section 115BBE inapplicable
where satisfaction for Section 68/69 invocation not recorded; Quashes
rectification order
Hyderabad ITAT allows
Assessee’s appeal, quashes rectification order under Section 154 passed for
taxing the additional income offered by Assessee during survey proceedings at
30% under Section 115BBE; Holds that Section 115BBE is not applicable in the instant
case as Revenue failed to record satisfaction for treating the additional
income as undisclosed under Section 68/69/69A/69B/69C/69D; During survey
conducted on Assessee's business premises, Assessee gave statement under
Section 131 offering an additional income of Rs. 20 Lacs for Assessment year
2015-16; Consequently, Assessee filed a return of income admitting an income of
Rs. 23.62 Lacs including the additional income offered earlier, which was
accepted by the Revenue; Subsequently, Revenue passed a rectification ordear
under Section 154 holding that the unaccounted income declared by the Assessee
of Rs. 20 Lacs was to be taxed under section 115BBE at flat rate of 30% instead
of slab rates, which was upheld by CIT(A); ITAT observes that the Revenue
did not invoke Section 115BBE during the course of assessment and accepted the
additional income offered by the Assessee; Accepts Assessee’s argument that the
option of rectification under Section 154 would have been available to the
Revenue if Section 115BBE was invoked but the Revenue levied the tax at a
different rate by mistake, relies on Jaipur ITAT ruling in Hari Narain Gattani v. DCIT (2021) 123 taxmann.com 8 (ITAT Jaipur) and ACIT
v. Sudesh Kumar Gupta in ITA No. 976/JP/2019 (Assessment year : 2014-15), dated
09.06.2020
wherein it was held that if the Revenue accepted Assessee’s return of income
and levied the tax on the undisclosed income as per the slab rates, without
determining such income as undisclosed under Sections 68 or 69, then subsequent
exercise of powers under section 154 to invoke Section 115BBE is bad in law;
Referring to provisions of Section 115BBE as also Section
68/69/69A/69B/69C/69D, observes that unless the Revenue records that the
Assessee has not offered any explanation about the nature and source of the
unexplained money or the explanation offered is not to his satisfaction,
Sections 68, 69, 69A, 69B, 69C or 69D cannot be invoked; Points out that in the
absence of compliance on the part of Revenue to record the aforementioned
satisfaction, it cannot be presumed that such an order was passed in respect of
any income determined under Sections 68, 69, 69A, 69B, 69C or 69D or that the
tax has to be levied under section 115BBE; Thus opines that, “it cannot be said
that there was any mistake apparent from record or that the proceedings are
amenable to the jurisdiction of the learned Assessing Officer under section 154”;
Thus holds that exercise of jurisdiction under section 154 by the Revenue is
bad in law and quashes the order under section 154.
[In favour of assessee] (Related Assessment year : 2015-16) – [Anjanee Vijetha Kasturi v. ACIT, Kurnool [TS-246-ITAT-2023(HYD)]
– Date of Judgement : 09.05.2023 (ITAT Hyderabad)]
Amended provisions of section 115BBE
providing for prohibition of set-off of losses against income determined under
section 115BBE is applicable prospectively from assessment year 2017-18
Memorandum explaining the Finance
Bill 2016 viz-a-viz the above amendment, read as under:
“Clarification regarding set off
losses against deemed undisclosed income.”
“Section 11588E of the
Act, inter alia, provides that the income relating to section 68
of section 69 of section 69A or section 69B
or section 69C or section 69D is taxable at the rate of
thirty percent and further provides that no deduction in respect of any
expenditure or allowances in relating to income referred to in the
said sections shall be allowable.
Currently, there is uncertainty on
the issue of set off of losses against income referred
in section 11588E of the Act. The matter has been carried to judicial
forums and courts in some cases has taken a view that losses shall
not be allowed to be set off against income referred to
an section 11588E. However, the current language
of section 11588E of the Act does not convey the desired intention
and as a result the matter is litigated. In order to avoid unnecessary
litigation, it is proposed to amend the provisions of sub-section (2)
of section 11588E to expressly provide that no set off of any loss
shall be allowable in respect of income under section 68
of section 69 or section 69A or section 69B or section 69C
or section 69D.
This amendment will taken effect from
I April 2017 and will accordingly, apply in relation to assessment year 2017-18
and subsequent years.”
Amended provisions of section 115BBE
providing for prohibition of set-off of losses against income determined under
section 115BBE is applicable prospectively from assessment year 2017-18.
Therefore, assessee would be entitled to claim set-off of loss against income
determined under section 115BBE till assessment year 2016-17. [In favour of
assessee] (Related Assessment year : 2015-16) – [Sri Balaji Forgings (P) Ltd.
v. ACIT
(2022) 144 taxmann.com 126 (ITAT
Delhi)]
Upholds revision of wrong
tax-rate under Section 115BBE after CIT(A) passed quantum order
Chandigarh ITAT dismisses
Assessee’s appeal, upholds revisionary order setting aside assessment order due
to failure in applying the correct rate of tax as per Section 115BBE on
the addition made under Section 69C; Assessee, in pursuance to a search
operation declared income of Rs. 7.80 Lac for Assessment year 2017-18 which was
subsequently assessed by making an addition of Rs. 1.36 Cr as normal income and
Rs.42 Lac under Section 69C being unexplained salary and Rs. 12.46 Lac being
unexplained investment under Section 69; CIT(A) reduced Section 69C addition to
Rs. 28.37 Lac and deleted addition of unexplained investment under Section 69;
Subsequently, PCIT initiated proceedings under Section 263 on the premise that Assessing Officer calculated the whole income at
normal rate of 30% instead of charging special rate prescribed in Section
115BBE for unexplained salary expenditure and investment; Assessee raised
objection on the ground that CIT(A) has already reduced the quantum additions
and Assessing Officer’s order got merged with
CIT(A) order which cannot be subject matter of revision under Section 263; PCIT
disposed of objection by holding that that the issue of special rate of tax was
never agitated or adjudicated in the appellate proceedings and accordingly, the
same is subject matter of revision under Section 263; ITAT observes that Assessing
Officer gave clear cut finding and recorded satisfaction that there is a
failure on the part of Assessee to furnish any explanation regarding
unexplained salary expenditure and accordingly, made addition under Section 69C
which was subsequently reduced by appellate authority but the
applicability of Section 69C remained untouched while disposing off Assessee’s
appeal; Clarifies that the issue does not pertain to non-applicability of
Section 115BBE but pertains to applicability of rate of tax under Section
115BBE as applicable for the year under consideration; Also observes that Assessing
Officer determined the Assessee’s income under Section 69C read with Section
115BBE and determined the tax-rate of 30% under pre-amended law instead of 60%
in accordance with the law applicable for the year under consideration;
Accordingly, holds that Assessing Officer erred in not applying the rate of tax
as per the amended law and the order so passed is rightly held by PCIT as
erroneous in so far as prejudicial to the interest of Revenue. [In favour of revenue]
(Related Assessment year : 2017-18) – [Agya Ram Manohar Lal v. PCIT(C),
Ludhiana [TS-892-ITAT-2022(CHANDI)]
– Date of Judgement : 10.11.2022 (ITAT Chandigarh)]
Business loss eligible for
set off till Assessment year 2016-17 against income covered under Section 115BBE
Kerala High Court allows
Assessee’s appeal, holds Assessee eligible to set off of business
loss from deemed income under Section 68 by relying on coordinate
bench ruling in Vijaya Hospitality and Resorts Ltd. v CIT
and others (2019) 419 ITR 322;
For Assessment year 2013-14, Assessee-Company filed its return of income
claiming set-off of business loss of Rs. 1.76 Cr against deemed income under
Section 68 of Rs. 1.86 Cr; While framing the assessment order, Revenue made a
lumpsum addition of Rs. 3 Lacs, which was proposed to be revised
by the CIT under Section 263; CIT held that as per Section 115BBE, income
referred to in section 68, section 69, section 69A, section 69B, section 69C or
Section 69D are not eligible for set off of brought forward business loss and
unabsorbed depreciation and since the set-off of loss was allowed in the
assessment order, it was erroneous and prejudicial to the interests of Revenue,
which was upheld by ITAT; Before the High Court, Assessee submitted that the
deemed income falls under one head or the other under Section 14 and thus
set-off of business loss is available and also that Section 115BBE as was
applicable for the subject Assessment year did not contain the words “or set
off of any loss” and thus set off of business loss is not one of the prohibited
items for setting off of loss from the income earned by the Assessee; On the
contrary, Revenue contended that as on the date of CIT order, the precedent
binding on the Revenue was Kerala Sponge Iron Ltd. and thus no
revision could be made out by referring to a view taken by coordinate bench
in Vijaya Hospitality subsequently and CBDT Circular; High Court
accepts Assessee’s reliance on coordinate bench ruling in Vijaya
Hospitality as also CBDT Circular No.3/2017 dated 20.01.2017
whereby it was clarified that since the term ‘or set off of any loss’ was
specifically inserted only by the Finance Act 2016, with effect from
01.04.2017 an assessee is entitled to claim set-off of loss against income
determined under Section 115BBE till Assessment year 2016-17. [In
favour of assessee] (Related Assessment year : 2013-14) – [Bhima Jewellers
v. CIT, Kozhikode [TS-754-HC-2022(KER)] – Date of Judgement : 25.08.2022 (Ker.)]
Provisions of section 115BBE had
been invoked by Assessing Officer during assessment proceedings and tax rate
had been charged at rate of 30 per cent on surrendered income under section
115BBE and thus, action of Assessing Officer in rectifying and increasing rate
of taxation from 30 per cent to 60 per cent on undisclosed income in view of
amended section 115BBE did not come within purview of section 154
Assessing
Officer completed assessment in case of assessee under section 143(3) at
assessed income of Rs. 41.78 lakhs which included income surrendered pursuant
to search of Rs.22.19 lakhs as current year’s business income offered to tax,
by charging tax and interest at normal rates and raised nil
demand. Thereafter, Assessing Officer issued notice under section 154
firstly, on ground that tax rate on surrendered income was to be charged as per
provision of section 115BBE and secondly, during assessment proceedings, tax
rate on surrendered income had been charged at 30 per cent, however, as per
amended provisions of section 115BBE, it should have been charged at 60 per
cent. Order of Assessing Officer is affirmed by the CIT(A). On appeal the
Tribunal held that there was nothing stated in either pre-amended or
post-amended provisions of section 115BBE that where assessee surrenders
undisclosed income during search action for relevant year, tax rate has to be
charged as per provisions of section 115BBE. Further there was no finding that
provisions of section 115BBE had been invoked by Assessing Officer during
assessment proceedings and tax rate had been charged at rate of 30 per cent on
surrendered income under section 115BBE and thus, action of Assessing Officer
in rectifying and increasing rate of taxation from 30 per cent to 60 per cent
on undisclosed income in view of amended section 115BBE did not come within
purview of section 154. Accordingly action of Assessing Officer in invoking
jurisdiction under section 154 was not legally tenable. [In favour of
assessee] (Related Assessment year : 2017-18) – [Hari Narain Gattani v. DCIT
(2021) 210 TTJ 771 : 186 ITD 434 (ITAT Jaipur)]
Section
115BBE not applicable on voluntary surrender of income to cover discrepancy
Chandigarh ITAT allows Assessee’s
appeal, sets aside Revenue’s order for applying Section 115BBE on income
voluntarily surrendered; In a search operation carried out at the
Assesee-Company’s premises and at the residence of Directors whereby the
director surrendered Rs. 97.11 lacs on account of unexplained cash on which due
taxes were paid by him, further additional Rs. 15 lakh was offered to tax for
Assessment year 2017-18 to cover any discrepancy resultant of the search
operation; Assessee disclosed Rs. 15 lacs in the revised return filed
after being show-caused by the Revenue about its non-disclosure, Revenue
treated the amount as income from unexplained sources, and charged it at a
higher rate of tax under section 115BBE; ITAT observes that Revenue did not
point out any unexplained credit, unexplained investment, money, bullion or
jewellery or unexplained expenditure pertaining to the 15 lacs, observed that
this amount is offered to cover up an discrepancies relating to business
income; Holds that since provisions of section 68, and section 69 to 69D are
not applicable in respect of the income, provisions of section 115BBE not
attracted, directs Assessing Officer to compute tax on surrendered income of 15
lacs under normal provisions as applicable to business income. [In favour of assessee] (Related Assessment
year : 2017-18) – [Bajaj Sons Ltd. v. DCIT(C), Ludhiana (2021)
190 ITD 128 : 128 taxmann.com 406 : TS-456-ITAT-2021(CHANDI) (ITAT Chandigarh)]
Term ‘or set-off of any loss’ being specifically inserted
only vide Finance Act, 2016, with effect from 01.04.2017, an assessee is
entitled to claim set-off of loss against income determined under section 115BBE till assessment year 2016-17
Tax on income referred to in section 68 to section 69D - Whether any expense or allowance shall not be
allowed from income assessed under section 69 but, section 115BBE
does not indicate that set off of brought forward business losses shall not be
allowed from income assessed under section 69 for purpose of calculating tax under section 115BBE. Since term ‘or set off of any loss’ was
specifically inserted only vide Finance Act, 2016, with effect from 01.04.2017,
an assessee is entitled to claim set-off of loss against income determined
under section 115BBE till
assessment year 2016-17. [In favour of assessee] (Related Assessment year :
2015-16) - [ACE Infracity Developers (P) Ltd. v. DCIT(C), Noida (2021) 127
taxmann.com 264 (ITAT Delhi)]
Section 115BBE does not apply to
business receipts/business turnover - Where Department had itself accepted
undisclosed amount of assessee in his bank account as undisclosed business
receipts/ turnover, section 115BBE would not attract
Tax on income referred to in section 68 to section 69D (Applicability of) – The limited question is
that whether business receipts/business turnover is taxable under section 115BBE of the Act? As per the intention of
legislature, the burden to apply section 115BBE and section 68
to section 69D of the Act rest
on revenue shoulder. That burden cannot be discharged on the basis of
assumption and presumption made by the assessing officer. Having gone through
the section 115BBE, we are of
the view that business activity related income may not ordinarily get placed
u/s 68 to section69D of the
Act. In the assessee’s case under
consideration, the assessee submitted before the assessing officer that
deposits of Rs. 91,48,326/- in bank were business receipts. Where
Department had itself accepted undisclosed amount of assessee in his bank
account as undisclosed business receipts/turnover, section 115BBE would not attract. [In favour of
assessee] (Related Assessment year : 2014-15) – [Abdul Hamid v. ITO
(2020) 183 ITD 711 : 117 taxmann.com 986 (ITAT Gauhati)]
Tax on income referred in Sections
68, 69, 69B 69C, 69D – Set off of loss – Survey - Surrender of income – Set off
of losses was to be allowed – The amendment made to section 115BBE denying the
benefit of set off of losses with effect from 01.04.2017 was retrospective in
nature
The assessee surrendered the
additional income during the survey. The income surrendered were partly in
nature of business income and partly deemed income. The assessee had set off
debit entries and business loss against the same. The Assessing Officer treated
the entire additional income surrendered as deemed income as provided under
sections 69, 69A, 69B and 69C separately and charged to tax under section
115BBE and denied the set off of losses. On appeal the Tribunal held that the
amendment made to section 115BBE denying the benefit of set off of losses with
effect from 01.04.2017 was retrospective in nature, it is prospective, hence
the assessee is entitled to setoff of the losses against deemed income assessed
under Sections 69, 69A and 69C of the Act. Followed, PCIT v. Khushi Ram
& Sons Foods (P) Ltd. in (ITA No. 126 of 2015, dated 29.07.2016
(P&H). Thus, it is held that the income surrendered by the assessee is
partly assessable as business income and partly assessable as deemed income and
against both of them, the assessee was entitled to claim set off of business
losses, both the current and brought forward. [In favour of assessee] (Related
Assessment years : 2013-14, 2014- 15) - [Famina Knit Fabs. v. ACIT, Ludhiana
(2019) 176 ITD 246 : 104 taxmann.com 306 (ITAT Chandigarh)]
Unexplained investments - Income
Surrendered during survey proceedings on account of undisclosed debtors is
business income and not deemed income - Assessee entitled to set off of
business loss against such surrendered income
Tribunal held that the surrender
had been made on account of undisclosed debtors. The CIT(A) had rightly treated
the surrendered income as in the nature of business income of the assessee and
accordingly, allowed the benefit of set off of losses against it. (Related
Assessment year : 2012-13)—[DCIT v. Khurana Rolling Mills (P) Ltd. (2019) 73
ITR 613 (ITAT Chandigarh), DCIT v. Khurana Steels Ltd. (2019) 73 ITR 613 (ITAT
Chandigarh)]
Set-off of losses not permissible against unexplained
income, investments, money etc. chargeable under sections 68/69/69A/69B/69C/69D
[Section 115BBE]
It was held that the income
surrendered by the assessee voluntarily in a survey could not be reduced by set
off of brought forward losses. It held that sections 70 and 71 could not be
applied for setting off of losses against the income surrendered consequent to
survey.—[Kim Pharma (P) Ltd. v. CIT (ITA No. 106 of 2011)(P& H)]
Assessing Officer made addition to assessee’s income
in respect of excess stock by invoking of provisions of section 115BBE, in view
of fact that amended provisions of section 115BBE were applicable with effect
from 01.04.2017 and not prior to that, impugned addition was to be set aside
During
course of search and survey operation, assessee surrendered income on account
of excess stock - However, in return of income, assessee showed lower income on
account of excess stock by taking a plea that prevailing price of gold had
fallen as on 31.03.2013. Assessing Officer rejected assessee’s explanation and
made addition under section 69, read with section 115BBE on account of excess
stock - Commissioner (Appeals) deleted said addition by accepting claim of
assessee that price of gold as on 31.03.2013 was much less than price at time
of valuation done during survey. So far as applicability of amended provisions
of section 115BBE is concerned, same is applicable with effect from 01.04.2017
and not prior to that. Therefore, Assessing Officer was not justified in
invoking provisions of section 115BBE for assessment year in question. However,
in view of fact that question as to whether entire stock which was found excess
at time of survey remained as unsold till 31.03.2013 so that assessee could take
benefit of reduction in prevailing price of gold against surrendered income on
account of unexplained investment in stock, had not been examined by lower
authorities, matter was to be remanded back for said limited purpose of
verification. [In favour of assessee/Matter remanded] (Related Assessment year
: 2013-14) – [ACIT(C), Jaipur v. Satish Kumar Agarwal (2018) 172 ITD 143 :
96 taxmann.com 373 (ITAT Jaipur)]
Impact of section 115BBE under various circumstances
Income shown as agricultural but not proved is taxable as other income
The assessee had declared a sum of
Rs. 12,36,000 as agricultural income. During the course of assessment, the
Assessing Officer held that agricultural income offered for rate purpose is in
respect of six properties which is claimed to be belonging to the members of
Muthoot family. The Assessing Officer after examining the documents of each of
these six agricultural properties, held that the said properties did not belong
to the assessee, but to the other family members. Further, it was categorically
concluded by the Assessing Officer that the assessee has not produced any
documentary evidence to show that he was in receipt of agricultural income on
account of operation conducted by him on the said family properties. It was
held that the categorical findings of the Assessing Officer was never dispelled
by the assessee by placing contra evidence. Admittedly, the assessee was never
the owner of the agricultural properties from where it is claimed that he was
in receipt of agricultural income of Rs. 12,36,000. The assessee did not
produce any documentary evidence to prove that he was in receipt of any
agricultural income on account of any agricultural operation carried out by
him. Therefore, we are of the view that the Income-tax Authorities have
correctly held that the assessee was not in receipt of Rs. 12,36,000 as
agricultural income. Having held Rs. 12,36,000 as not agricultural income, the
sum that is credited to the book of account has to be necessarily added as
income from other sources under section 68 of the Income Tax Act. Therefore, we
see no reason to interfere with the order of the CIT(A) and we confirm the
same. (Related Assessment year : 2009-10) - [Sri George M George v. ACIT -
Date of Judgement : 04.10.2018 (ITAT Cochin)]
Claiming bogus income from agricultural operations as
exempt
In the case of Avdhesh Kumar
Jain v. CIT (1990) 48 Taxman 266 (All.), the assessee claimed that certain
amount earned from agricultural operations was exempt. The ITO found that the
assessee had failed to produce any satisfactory evidence about his being
engaged in agricultural activities. The assessee was also not able to state as
to whom the agricultural produce was sold. He, therefore, assessed the
aforesaid amount as income from undisclosed sources in the hands of the
assessee.
Bogus income claimed as exempt income from horse
racing
In the case of B.C. Paul v. CIT
(1981) 6 Taxman 170 (Cal.), in return filed for the assessment year
1965-66, the assessee, being not a regular punter, disclosed receipts of Rs.
1,58,250 but claimed the same to be exempt from tax on the ground that they
were casual receipts from horse racing. ITO treated impugned amount as an
income from undisclosed sources holding that there were discrepancies in
assessee’s statement and that assessee had failed to discharge onus of proving
nature and source of impugned receipt. As the assessee failed to prove the
receipts from horse racing as a genuine claim, the application of section 68 by
the Assessing Officer was upheld.
