Case Law Details
Mukesh Agarwal Vs ACIT (ITAT Agra)
The ITAT Agra allowed the assessee’s appeal and held that the Assessing Officer was not justified in taxing ₹25 lakh under Section 115BBE of the Income-tax Act. During a survey conducted on 31.08.2016, the assessee voluntarily disclosed ₹75 lakh, comprising ₹50 lakh as business receipts and ₹25 lakh relating to a hospital building under construction. The entire surrendered amount was subsequently offered as business income in the return for AY 2017-18. During assessment proceedings, the assessee produced audited books of account, balance sheet, capital account, and fixed asset records. The Assessing Officer examined these records but neither identified any defect nor rejected the books of account. The Tribunal noted that the investment in the hospital building was recorded in the books and formed part of the disclosed income. Since the disclosure was made before the amendment enhancing the tax rate under Section 115BBE came into force on 15.12.2016, the provision could not be applied retrospectively. Accordingly, the addition taxed under Section 115BBE was deleted and the appeal was allowed.
Assessee was represented by by Shri Deepak Maheshwari, Adv
FULL TEXT OF THE ORDER OF ITAT AGRA
This appeal has been preferred against the impugned order dated 15.01.2026 passed in Appeal No CIT(A)-IV/KNP/10762/2019-20 by the Id Commissioner of Income Tax, Kanpur [hereinafter referred to as the “CIT(A)] u/s. 250(6) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act), for the A.Y. 2017-18, wherein Id CIT(A) has dismissed assessee’s appeal.
2. The brief facts state that the assessee e-filed his return of income on 18.09.2017, declaring total income at Rs. 88,20,210/- for A.Y. 2017-18. A search action u/s. 133A of the Act was carried out in the case of assessee on 31.08.2016. Subsequently, the case was selected for compulsory manual scrutiny due to said survey proceedings. Statutory notices u/s. 143(2) and 142(1) of the Act were issued and served upon the assessee. The assessing officer noticed in the course of assessment proceedings that assessee surrendered income of Rs. 75,00,000/-, which included an amount of Rs. 50,00,000/- in the head of business receipts and an amount of Rs. 25,00,000/- in building construction. Assessee was asked to submit evidence of investment in building construction of Rs 25,00,000/- but the assessee could not give any supporting evidence to show that these were out of his business receipts. Accordingly, the assessing officer subjected the amount of Rs. 25,00,000/- to tax under provisions of section 115BBE @ 60% as against the rate of 30% paid by the assessee.
3. Assessee filed an appeal against the assessment order before Id CIT(A), who dismissed assessee’s appeal, approving the action of assessing officer.
4. Appellant assessee has raised following grounds under this second appeal:
“1. That on the facts and in the circumstances of the case, the learned Assessing Officer erred in invoking section 115BBE of the Income-tax Act, 1961 in respect of the voluntary disclosure made during survey on 31.08.2016, which was prior to the amendment introducing the enhanced rate of tax, rendering the application of section 115BBE legally unsustainable and it will be applicable from A.Y. 2018-19.
2. That the learned Assessing Officer and the learned Commissioner of Income-tax (Appeals) erred in law in applying section 115BBE without recording a valid and independent finding under section 69 of the Act, despite the books of account having been produced, examined, and not rejected.
3. That the authorities below erred in treating the investment of Z25,00,000/-in hospital building as unexplained, ignoring the fact that the investment was duly recorded in the books of account, supported by audited financial statements, and formed part of the regular business activity of the appellant.
4. That the learned Assessing Officer and the learned Commissioner of Income Tax (Appeals) erred in applying the amended provisions of section 115BBE of the Income-tax Act, 1961, brought into force by the Taxation Laws (Second Amendment) Act, 2016 and published in the Official Gazette on 15.12.2016 with the stipulation that it ‘shall come into force at once’, to a disclosure made during survey on 31.08.2016, prior to the coming into force of the amendment, rendering such application contrary to law.
5. That the impugned orders are vitiated for violation of principles of natural justice, as no adverse material or third-party evidence was confronted to the appellant before re-characterising the disclosed income as unexplained or before invoking section 11566E.
6. That the learned authorities erred in law in re-characterising a voluntary disclosure made during survey proceedings under section 133A as income falling under section 69, even though the disclosure was duly honoured in the return of income and accepted under normal provisions of the Act.
7. That section 11566E, being a special and penal provision, has been applied mechanically and on presumptions, contrary to settled judicial principles requiring strict interpretation, rendering the impugned action unsustainable in law.
8. The appellant craves for liberty to add fresh ground(s) of appeal and also to amend, alter and modify any of the grounds of appeal.”
5. Perused the records and heard Id representative for the appellant assessee and Id Sr DR for the respondent revenue.
6. The main point for determination, on the basis of aforesaid grounds raised under appeal, is as to whether Id CIT(A) has erred in confirming the action of the assessing officer in subjecting Rs. 25,00,000/- to tax under the provisions of section 115BBE?
7. Ld AR has submitted that during the survey conducted u/s. 133A of the Act on 31.08.2016, appellant, voluntarily disclosed Rs. 75,00,000/-,under IDS scheme 2016, as income from business but during the course of survey it was sum up that out of this, Rs. 25,00,000/- was declared in the hospital building under construction and balance Rs. 50,00,000/- as income from relevant A.Y. 2017-18, however, the whole income was from business related to A.Y. 2017-18. Appellant assessee also declared his surrendered income in his return for A.Y. 2017-18 as income from business. However, Id A.O. has applied Rs. 50,00,000/- as income from business and Rs. 25,00,000/- from other sources subjecting it to tax u/s. 115BBE. Ld AR has further submitted that section 115BBE was introduced after demonetization with effect from 15.12.2016 after the survey action dated 31.08.2016. Hence, the provisions of section 115BBE cannot be applied in assessee’s case retrospectively.
8. Ld AR has referred order dated 19.11.2024 passed by Hon’ble /Madras High Court in W.P (MD) No. 2078/2020 and WMP (MD) No. 1742/2020 in S.M.I.L.E Microfinance Ltd v. ACIT, wherein it has been held that enhanced rate of tax @ 60% as provided in section 115BBE of the Act could be made applicable only from assessment year 2018-19 onwards and cannot be applied for earlier years. Ld AR has further referred order dated 03.02.2025 passed by the Agra bench of this tribunal in ITA No. 209/Agr/2023 (A.Y. 2017-18), Jai Narayan Maheshwari v. ITO, wherein, this tribunal has referred and relied S.M.I.L.E Microfinance Ltd. (supra)
9. Ld DR for the respondent revenue has submitted that Rs. 25,00,000/-was not part of assessee’s business income and was unexplained amount. Ld DR submitted that the said addition has rightly been confirmed by the Id CIT(A). Prays to dismiss assessee’s appeal.
10. It is an undisputed fact that assessee declared Rs. 75,00,000/- as income, under IDS scheme 2016, from business on 31.08.2016 when the survey was conducted. According to assessee, he has also declared his surrendered income in his return income in A.Y. 2017-18, as income from business. All audited books of accounts, balance sheet, capital account and fix assets schedule were produced before the assessing officer during the assessment proceedings. The assessing officer examined all documentary evidence produced by assessee and could neither point out any defect in assessee’s books nor rejected assessee’s books of accounts. According to assessee, the said investment of Rs. 25,00,000/- in the hospital building was part of ongoing construction activity and was also duly recorded in the books. In such circumstances, more particularly when the assessee has declared the entire amount of Rs. 75,00,000/-, including the disputed amount of Rs. 25,00,000/-, under IDS 2016, there was no occasion for the assessing officer to subject Rs. 25,00,000/- to tax under the provisions of section 115BBE retrospectively. In such circumstances the proviso of section 115BBE of the Act cannot be applied in the case in hand. The aforesaid point is accordingly determined in positive in favour of the appellant assessee and against the revenue. The appeal is liable to be allowed.
11. In the result, the assessee’s appeal is allowed.
Order pronounced on — 21.05.2026
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