Dhukha Ram Vs ACIT (ITAT Jodhpur)
Summary: The Income Tax Appellate Tribunal, Jodhpur Bench, allowed the assessee’s appeal concerning the application of the special tax rate under section 115BBE to ₹6,25,000 surrendered during a survey. The appeal arose from the order dated 22.10.2025 passed by the Ld. Addl./JCIT(A)-5, Kolkata, in relation to the assessment framed under section 143(3) for Assessment Year 2016-17.
The assessee was an individual engaged in retail trading of medicines and also derived income from operation of a sonography machine. A survey under section 133A was conducted at the business premises on 20.09.2016, during which ₹6,25,000 was surrendered. The assessee subsequently filed a return declaring total income of ₹14,81,960, including the surrendered amount, and paid tax at the normal applicable rate.
During assessment, the Assessing Officer issued a show-cause notice proposing application of section 115BBE. The assessee contended that section 115BBE could apply only where the income fell within sections 68, 69, 69A, 69B, 69C or 69D, and that none of those deeming provisions applied to the surrendered business income. The AO rejected the explanation and taxed ₹6,25,000 at 30% under section 115BBE. Significantly, the AO did not invoke any particular provision from sections 68 to 69D or record a finding that the statutory requirements of any such provision were satisfied.
The CIT(A) upheld the AO’s action, reasoning that the assessee had not explained the exact source of the surrendered income and that the deeming provisions would consequently apply. According to the CIT(A), the absence of identification of a particular section among sections 68 to 69D did not take the amount outside section 115BBE.
The Tribunal disagreed. It examined the statutory trigger for section 115BBE and held that the provision applies where total income includes income referred to in sections 68, 69, 69A, 69B, 69C or 69D. It therefore held that the mere fact that an amount was surrendered or disclosed during a survey does not, by itself, attract the special rate. The income must first answer the description of income covered by one of the specified deeming provisions.
The Tribunal noted that ₹6,25,000 was already included in the returned income and that the assessment order neither made an addition under sections 68 to 69D nor identified the particular deeming provision invoked. There was also no examination or finding regarding fulfilment of the conditions of any such provision. The Tribunal emphasised that section 115BBE does not create a separate species of income described as “surrendered income” or “undisclosed income”; it prescribes a special rate for income otherwise brought within the statutory fold of sections 68 to 69D.
The Tribunal further rejected the CIT(A)’s approach that unexplained source automatically permits application of the deeming provisions. It explained that each provision has a defined statutory field: section 68 concerns unexplained credits in the books; section 69 unexplained investments; section 69A unexplained money, bullion, jewellery or other valuable articles; section 69B investments or valuable articles not fully recorded; section 69C unexplained expenditure; and section 69D amounts borrowed or repaid on hundi. The Tribunal held that these provisions cannot be treated as interchangeable or invoked in the abstract.
The Tribunal also found it material that the assessment did not make any addition of ₹6,25,000 over and above the returned income. No material or finding established that the amount constituted an unexplained cash credit, investment, money, expenditure or other income falling within sections 68 to 69D. The nomenclature of “undisclosed income” used at the time of survey could not substitute the statutory conditions necessary for application of the deeming provisions.
Accordingly, the Tribunal held that the absence of an identified provision among sections 68 to 69D meant that the statutory foundation for section 115BBE was missing. It set aside the CIT(A)’s finding on the issue and directed the AO to tax ₹6,25,000 at the normal applicable rate instead of the special rate under section 115BBE. The assessee’s grounds on the issue were allowed and the appeal was allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, JODHPUR BENCH
The present appeal has been filed by the assessee against the order dated 22.10.2025 passed by the Ld. Addl./JCIT(A)-5, Kolkata, arising from the assessment order passed under section 143(3) of the Income-tax Act, 1961 for the Assessment Year 2016-17. The principal grievance raised by the assessee is against the application of the special rate of tax prescribed under section 115BBE to the amount of ₹6,25,000, which had been surrendered during the course of survey and was duly offered to tax by the assessee in the return of income.
2. The relevant facts are that the assessee is an individual engaged in the business of retail trading of medicines and also derives income from operation of a sonography machine. A survey under section 133A was carried out at the business premises of the assessee on 20.09.2016, during the course of which an amount of ₹6,25,000 was surrendered. The assessee thereafter filed his return of income declaring total income of ₹14,81,960, which included the aforesaid surrendered amount of ₹6,25,000. During the course of assessment proceedings, the Ld. AO noticed that the assessee had offered the surrendered amount as income and paid tax thereon at the normal applicable rate. He, therefore, issued a show-cause notice requiring the assessee to explain why the said amount should not be subjected to tax at the special rate prescribed under section 115BBE. In response, the assessee specifically contended that section 115BBE could be attracted only where the income falls within the ambit of sections 68, 69, 69A, 69B, 69C or 69D and that none of these provisions was applicable to the surrendered business income. The Ld. AO, however, did not accept the explanation and subjected the amount of ₹6,25,000 to tax at the rate of 30% under section 115BBE. Significantly, while doing so, the Ld. AO did not invoke any particular provision amongst sections 68 to 69D, nor did he record any finding as to how the surrendered amount fulfilled the statutory ingredients of any of these deeming provisions.
3. Before the Ld. CIT(A), the assessee reiterated that the amount surrendered during survey pertained to his business activities and stood duly incorporated in the return of income. It was further contended that, in the absence of any finding bringing the amount within sections 68, 69, 69A, 69B, 69C or 69D, section 115BBE could not independently operate as a charging provision. The Ld. CIT(A), however, rejected the contention. According to him, since the assessee had failed to explain the exact source of the surrendered income, the deeming provisions would apply; and merely because the Ld. AO had not specified whether the income was covered by section 68, 69, 69A, 69B, 69C or 69D, it would not take the amount outside the ambit of section 115BBE. On this reasoning, the action of the Ld. AO was upheld.
4. We have heard the rival submissions and perused the material placed before us. The issue which requires our consideration is whether an amount already offered by the assessee in the return of income can be subjected to the special rate prescribed under section 115BBE merely because it had been surrendered during survey, without first recording a finding that such income is one falling within any of the specific deeming provisions enumerated in section 115BBE. For the year under consideration, section 115BBE, in substance, provided that where the total income of an assessee includes any income referred to in sections 68, 69, 69A, 69B, 69C or 69D, such income would suffer tax at the prescribed special rate of 30%. Thus, the statutory trigger for application of section 115BBE is not the mere circumstance that an income was surrendered or disclosed during survey; rather, the income must answer the description of income referred to in one of the specified provisions. This is manifest from the plain language of the provision itself.
5. In the present case, there is no dispute that the amount of ₹6,25,000 was already included by the assessee in the return of income. More importantly, the assessment order does not bring this amount to tax under section 68, section 69, section 69A, section 69B, section 69C or section 69D. There is neither any identification of the particular deeming provision sought to be invoked nor any examination and finding by the Ld. AO as to the fulfilment of the conditions prescribed therein. After considering the assessee’s reply, the Ld. AO has simply proceeded to apply the rate prescribed under section 115BBE to the surrendered amount. In our view, such a course cannot be sustained. Section 115BBE does not create a separate species of income merely described as “surrendered income” or “undisclosed income”; it prescribes a special rate for income which is otherwise brought within the statutory fold of sections 68 to 69D. The official text of the provision itself describes its subject as tax on income referred to in those specified sections.
6. We are also unable to subscribe to the reasoning adopted by the Ld. CIT(A) that, since according to him the exact source of the income remained unexplained, the deeming provisions would automatically apply even though no particular provision amongst sections 68 to 69D had been invoked by the Ld. AO. Each of these provisions operates in a defined statutory field and contains its own foundational requirements. Section 68 concerns unexplained credits in the books; section 69 deals with unexplained investments; section 69A concerns unexplained money, bullion, jewellery or other valuable articles; section 69B deals with investments or valuable articles not fully recorded; section 69C concerns unexplained expenditure; and section 69D deals with amounts borrowed or repaid on hundi. The Income Tax Department itself explains these as distinct statutory categories of deemed income. Therefore, it cannot be left indeterminate as to which provision applies, while nevertheless fastening upon the assessee the consequence flowing from section 115BBE. A deeming provision cannot be invoked in the abstract, much less by treating several distinct deeming provisions as interchangeable.
7. What is also material is that the assessment framed under section 143(3) does not make any addition of ₹6,25,000 over and above the returned income. The Ld. AO has accepted the amount as forming part of the income disclosed by the assessee and has merely altered the rate at which it is to be taxed. No material or finding has been brought on record to establish that the amount, notwithstanding its disclosure in the return, constituted an unexplained cash credit, unexplained investment, unexplained money, unexplained expenditure or any other income falling within sections 68 to 69D. The mere nomenclature of an amount as “undisclosed income” at the time of survey cannot, by itself, substitute the statutory conditions required for bringing such income within any of these provisions. The character of an income for the purposes of section 115BBE has to be determined with reference to the substantive provision under which it is assessable and not merely by the expression used while making a surrender.
8. In fact, the reasoning of the Ld. CIT(A) that it was “not possible to attribute a specific section” amongst sections 68/69/69A/69B/69C/69D to the surrendered income, far from supporting the application of section 115BBE, militates against it. Once it is accepted that the income has not been found to fall within any identified provision amongst sections 68 to 69D, the indispensable statutory foundation for invoking section 115BBE remains absent. There cannot be a deemed or presumptive application of section 115BBE merely because the source of a surrendered amount is perceived to be insufficiently explained. The special rate prescribed therein follows the characterisation of income under the specified provisions; it cannot precede, or substitute for, such characterisation.
9. Accordingly, on the facts before us, when the amount of ₹6,25,000 had already been offered to tax in the return of income and the Ld. AO has neither invoked nor brought the said amount within the ambit of any of the provisions contained in sections 68 to 69D, the application of section 115BBE cannot be sustained. We, therefore, set aside the finding of the Ld. CIT(A) on this issue and direct the Ld. AO to tax the amount of ₹6,25,000 at the normal rate applicable to the assessee and not at the special rate prescribed under section 115BBE. The grounds raised by the assessee on this issue are accordingly allowed.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 11/08/2026.
