Excess income declared during survey proceedings treated as business income

Rajasthan Stone Industries Vs ITO (ITAT Pune)

ITAT Pune held that the excess income declared during the course of survey proceedings cannot be treated as unexplained income, but, the same is treated as business income.

Facts- The assessee-appellant is a partnership firm engaged in the business of cutting, polishing of various types of stones. The assessment was completed by AO vide order passed u/s.143(3) of the Act. Subsequently, the said assessment was set aside by the learned Pr. CIT-2, vide order passed u/s. 263 of the Act on the ground that AO had allowed excess remuneration to partners of Rs.1,69,777/- by considering the excess income of Rs.7,50,190/- declared by the assessee during the course of survey as business income. Consequent to the order of the learned Pr. CIT-2, Nashik, AO completed the assessment disallowing the excess remuneration of Rs.1,69,777/- by treating the income declared during the course of survey proceedings as ‘Income from other sources’, rejecting the contention of the assessee-appellant that it is the business income of the firm credited to P & L A/c.

CIT(A) confirmed the action of AO. Being aggrieved, the present appeal is filed.

Conclusion- Held that the excess income declared during the course of survey proceedings cannot be treated as unexplained income of the assessee-appellant since credited to P & L A/c and cannot be assessed as income from other sources, but, under income from business. I, therefore, set aside the order of the Ld. CIT(A) and allow the appeal of the assessee.

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