Suresh Kumar Vs DCIT (ITAT Delhi)
Survey Income of 2016, Tax Rate of 60%: Delhi ITAT Directs Normal Taxation
The surrender during survey
Suresh Kumar, proprietor of Shiv Shakti Trading Co., carried on a business trading in edible oils, sugar, rice and other goods. A survey under Section 133A was conducted at his business premises on 11 August 2016. During the survey, he surrendered additional income of ₹50.20 lakh. His return for assessment year 2017–18 declared total income of ₹55,84,170.
The Assessing Officer (AO) considered that including the surrendered amount in the return did not prevent an enquiry into its nature and source. On the footing that it remained unexplained, the AO charged tax at 60% under Section 115BBE. The CIT(A) upheld the assessment.
Before the Delhi ITAT, the assessee challenged both the assessment procedure and the special rate of tax. The outcome, however, turned entirely on the rate applicable to the additional income connected with the 2016 survey.
The issue before the Tribunal
The assessee’s argument was that the transaction belonged to August 2016, when, according to him, the rate under Section 115BBE was 30%. He objected to applying the subsequently enhanced 60% rate to income surrendered in connection with an earlier transaction.
In support, he relied on the Madras High Court’s decision in S.M.I.L.E. Microfinance Ltd. v. ACIT and a coordinate Bench decision in Vijay Kumar Bansal v. DCIT. The latter decision had directed taxation under the normal provisions, without recourse to Section 115BBE, for a transaction stated to have occurred in September 2016.
The Revenue supported the orders of the AO and CIT(A). Thus, the Tribunal had to decide whether the AO could continue to apply Section 115BBE at 60% to the additional income in this case.
What happened to the other grounds?
The assessee had also questioned the validity of the Section 143(2) notice, the jurisdiction of the officer who issued it, the transfer of the case, the selection for manual scrutiny and the AO’s invocation of Section 68. These were potentially distinct challenges to the assessment.
At the hearing, however, the assessee’s representative did not press grounds 1 to 3. The Tribunal decided those grounds against the assessee without adjudicating their merits. The order should therefore not be cited as a ruling on the validity of the notice, the transfer of jurisdiction or the Section 68 objection. The surviving dispute concerned the taxation of the surrendered income.
The Tribunal’s direction
The Delhi ITAT noted that the transactions in Suresh Kumar’s case pertained to 11 August 2016. Following S.M.I.L.E. Microfinance and its coordinate Bench’s decision in Vijay Kumar Bansal, it directed the AO to tax the additional income under the normal provisions, without recourse to Section 115BBE. Grounds 4 and 5 were allowed, and the assessee’s appeal was partly allowed.
That direction deserves to be read carefully. The relief granted was not merely a reduction of the Section 115BBE rate from 60% to 30%. The operative direction was to apply the normal provisions of taxation to the additional income. Nor did the Tribunal set aside the entire assessment: the procedural grounds had been expressly left unpressed.
An inconsistency in the order
There are minor but material inconsistencies in the order’s narration. It records the survey and surrender as occurring on 11 August 2016, but, while reproducing the assessee’s argument, refers to a survey on 16 September 2016—the date associated with the cited coordinate Bench case. It also states the surrendered amount as ₹50.20 lakh in one passage and refers to ₹50.02 lakh in its account of the AO’s reasoning.
The operative finding uses 11 August 2016 as the date relevant to this assessee. Anyone relying on the decision for a similar assessment should nevertheless check the underlying assessment record for the precise amount and the date of the transaction.
Author’s comment
The important point in this order is the Tribunal’s focus on when the underlying transaction occurred and its decision to follow the cited precedents while directing normal taxation. The decision offers support in disputes where the Department applies the enhanced Section 115BBE rate to income linked to a transaction from 2016.
Its use should remain fact-specific. A survey surrender does not automatically settle the character of the income in every case, and this order does not contain a detailed independent examination of its source. It also does not decide the notice and jurisdiction objections, since those grounds were not pressed. The strongest application of the ruling will be where the taxpayer can establish the relevant transaction date, identify the income’s character from the records and show why the cited decisions govern the proposed rate.
Suresh Kumar v. DCIT, ITA No. 1070/Del/2026, Delhi ITAT, order dated 28 September 2026.
Cases Discussed
- S.M.I.L.E. Microfinance Ltd. v. ACIT, W.P.(MD) No. 2078 of 2020, dated 19.11.2024 (Madras High Court) — Relied upon for the proposition that the impugned statutory provision would operate in respect of transactions done on or after 01.04.2017; the Tribunal followed the decision while directing taxation under the normal provisions.
- Vijay Kumar Bansal v. Deputy Commissioner, ITA No. 1317/Del/2026, AY 2017-18 (ITAT Delhi) — Coordinate Bench decision expressly followed; for the transaction pertaining to 16.09.2016, the Bench had directed the AO to tax additional income under normal provisions without recourse to Section 115BBE.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-3 Gurgaon [hereinafter referred to as (“Ld.CIT(A)”] vide order dated 23-12-2025 arising out the assessment order dated 30-12-2019 u/s 143(3) of the Income Tax Act 1961 (in short “the Act” pertaining to A.Y. 2017-18.
2. The assessee has raised the following grounds in appeal:
1. The ld. Assessing Officer i.e DCIT, Bhiwani has erred in law and on facts by passing the order u/s 143(3) of the Income Tax on following jurisdictional grounds:-
a. Without issuing any valid notice u/s 143(2) by the AO
b. On transfer of case without having any order passed u/s 127 of the Act.
2. The ld. AO has erred in law and on facts while passing an order u/s 143(3) of the Act based on a notice u/s 143(2) which was
a. issued by ITO, ward -1 Jind (a non-jurisdictional assessing officer)
b. Issued in a format other than the one prescribed by the board.
c. Selected for manual scrutiny contrary to the instructions/guidelines issued by the Board.
3. The ld. AO has erred in law and on facts while passing the order without application of mind and further by invoking the provisions of section 68 of the Act in the given facts and circumstances of the case.
4. The ld. AO has erred in law and on facts while charging the tax@60% u/s 115BBE of the income tax on an income already settled and agreed upon between the parties i.e. assessee and revenue at the time of survey when the statute has a provision of tax@ 30% u/s 115BE of the Income Tax Act.
5. The ld. AO has erred in law and on facts while imposing a sort of penalty on agreed surrender subject to no penalty by applying the retrospective effect of the amendment in provisions of section 115BBE of the Income Tax Act.
6. The Assessee hereby requests to be allowed to make any addition alteration amendment or deletion to any ground or grounds of appeal at any time before or during the course of hearing of the appeal.
3. The brief facts of the case are that the assessee is a proprietorship firm carrying a business of trading in edible oils, sugar rice etc. with the name of M/s Shiv Shakti Trading Co. Janta Bazar Jind. A survey operation dated 11-08-2016 under section 133A of the Act was conducted at the business premises of assessee. During the course of survey, the assessee surrendered additional income of Rs.50,20,000/-. The assessee filed his income tax of return on 27-10-2017 declaring an income of Rs.55,84,170/-. The case of the assessee was selected for compulsory manual scrutiny as being a survey case by the then Assessing Officer and notice under section 143(2) of the Act issued to the assessee. Later, on the case was transferred from ITO Ward-1 Jind to the present jurisdictional Assessing Officer. Notice under section 142(1) along with annexture was issued to the assessee on 20-09-2019. In the compliance of the notice the assessee furnished the reply. The Assessing Officer completed the assessment and charged the tax @ 60% under the section 115BBE of the Act. The Assessing Officer found that mere incorporating the amount of Rs.50,02,000/- in the income Tax Return by the assessee could not disentitle the revenue to further investigate the income nature and its source. According to Assessing Officer if the assessee failed to explain the nature and source then the receipt should be charged at the rate of 60% under section 115BBE of the Act.
4. Aggrieved by the order of the Assessing Officer, the assessee preferred the appeal before Ld. CIT(A), who vide order dated 23-12-2025 dismissed the appeal. Being aggrieved the order of the Ld. CIT(A) the assessee is in appeal before the tribunal on the various grounds.
5. We have heard both the parties and perused the material available on record.
Ground No. 1to 3
6. These grounds not pressed by the Ld. AR of the assessee, hence decided against the assessee.
Ground No.4 &5;
7. The Ld. AR of the assessee submitted that the survey was conducted on 16-09-2016 and on that date maximum tax rate was 30% and same was special rate of tax prescribed under section 115BBE of the Act. The section 115BBE of the Act was amended by the government with effect from 01-04-2017 and prescribed the 60% tax rate in this section. In the case of S.M.I.L.E. Microfinance Ltd. V. ACIT W.P.(MD) No. 2078 of 2020 dated 19-11-2024 (Madras) the Hon’ble Madras High Court held that the impugned statutory provision would come into effect on the transaction done on or after 01-04-2017 only. Reliance also placed the decision of Vijay Kumar Bansal V. Deputy Commissioner ITA No. 1317/Del/2026 AY 2017-8.
8. The Ld. DR relied upon the orders of the lower authorities.
9. The Ld. AR stated that the tax was charged at a higher rate under section 115BEE of the Act. In the case of Vijay Kumar Bansal V. Deputy Commissioner ITA No. 1317/Del/2026 AY 2017-8 the co-ordinate bench held as under:
11. In so far as assessee’s levy of tax at a higher rate under section 115BEE of the Act is concerned, we find that the Madras High Court in the Writ petition in the case of of S.M.I.L.E.Microfinance Ltd. V. ACIT W.P.(MD) No. 2078 of 2020 dated 19-11-2024 (Madras) has held that the impugned statutory provision would come into effect on the transaction done on or after 01-04-2017 only. We find the transaction of the Assessee pertain to period to 16-09-2016. Accordingly, we direct the AO to tax the additional income under normal provisions of tax without any recourse to the provisions of section 115BBE. The ground 4& 5 raised by the assessee are allowed.
10. We find that in this case the transactions of the assessee pertain to period to 11-08-2016. Respectfully, following the above cited decisions, we direct the Assessing Officer to tax the additional income under normal provisions of tax without any recourse to the provisions of section 115BBE of the Act. The ground no. 4&5 raised by the assessee are allowed.
11. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 28.09.2026
