Pranati Buildcon Vs ACIT/DCIT (ITAT Jaipur)
The appeal filed by Pranati Buildcon challenges the order of the lower authorities confirming the levy of tax, surcharge, and cess under section 115BBE of the Income Tax Act, 1961, in respect of Rs. 8,90,000/- admitted as undisclosed expenditure by the assessee. The issue relates to Assessment Year (AY) 2018-19.
Pranati Buildcon is a firm engaged in real estate. On 08.11.2017, a survey under section 133A of the Act was conducted at the assessee’s business premises. During the survey, a note pad “Marbito” A-1 (Exhibit 1, pages 1-2) was found, revealing that the assessee had incurred Rs. 8,90,000/- as expenditure in land development and construction, which was not recorded in the regular books of accounts. The partner of the firm, Shri Pradeep Dadhich, admitted in his statement that the expenditure was incurred from unrecorded income and disclosed the amount for taxation. The assessee subsequently included the amount in its income tax return under business income, computing total income at Rs. 1,17,31,970/-, and paid the applicable taxes.
The AO applied section 69C read with section 115BBE, treating the Rs. 8,90,000/- as unexplained expenditure subject to tax at the specified rate. CIT(A) confirmed the AO’s finding. The assessee challenged the application of sections 69C and 115BBE, arguing that the surrendered income was fully related to its real estate business and recorded in the books before year-end.
The ITAT examined whether the income voluntarily disclosed during the survey could be taxed under section 115BBE as unexplained income. The tribunal noted that the surrendered sum was related to the purchase of construction materials for ongoing projects. The amount was recorded in the books, credited to the trading account, included in closing stock valuation, and reflected as business income in the tax return. There was no rejection of the books of account by the AO, nor any material suggesting the funds came from unexplained sources.
Relying on the precedent set in Parshavnath Associates and the Rajasthan High Court decision in Pr. CIT vs. Bajargan Traders [2017] 86 Taxmann.com 295, the tribunal held that income recorded and offered as business income cannot be treated as unexplained expenditure under section 69C, and consequently, section 115BBE cannot be invoked. The AO had not identified any source outside the real estate business and had merely argued that the amount was initially unrecorded, which the tribunal found legally and factually insufficient.
Accordingly, the ITAT allowed the appeal, holding that the Rs. 8,90,000/- is to be treated as business income and not as unexplained expenditure under section 69C. The consequential application of section 115BBE was set aside.
Assessee by : Shri Hanedra Gargieya, Adv. (V.C.) and Shri Hemang Gargieya, Adv. | Revenue by : Mrs. Anita Rinesh, JCIT, Sr.-DR
