Yashudev Enterprises Vs DCIT (ITAT Chandigarh)
The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, delivered a significant ruling in the case of Yashudev Enterprises vs. Deputy Commissioner of Income Tax (DCIT) for the Assessment Year (AY) 2017-18, concerning the applicability of the enhanced tax rate under Section 115BBE of the Income Tax Act, 1961. The dispute centred on whether additional income surrendered by the assessee during a search operation was subject to the normal corporate tax rate or the much higher rate of 60% prescribed by a subsequent legislative amendment.
Factual Background and Lower Authority Holdings
The matter originated from a survey operation conducted under Section 133A of the Income Tax Act on the assessee, Yashudev Enterprises, on October 21, 2016. During the survey, the assessee conceded and offered an additional income of Rs. 33 Lacs to tax. This surrender was made to account for discrepancies noted in stock, cash, and unaccounted investment related to construction activities.
Crucially, the assessee treated this surrendered amount as income arising from normal business activities and, accordingly, credited it to the Profit & Loss Account in its return of income, applying the standard tax rate applicable to business income.
However, the Assessing Officer (AO), in framing the assessment under Section 143(3), rejected the assessee’s application of the normal rate. The AO insisted that the surrendered amount of Rs. 33 Lacs must be subjected to the higher tax rate of 60% as stipulated under Section 115BBE of the Act. The assessee challenged this application before the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi. The CIT(A) upheld the stance taken by the AO, confirming the levy of tax at the elevated 60% rate. This confirmation by the CIT(A) led the assessee to file a further appeal before the ITAT.
