Case Law Details
DCIT Vs Tapesh Tyagi (ITAT Delhi)
In a recent appeal, the Income Tax Appellate Tribunal (ITAT) Delhi ruled on a case involving the Deputy Commissioner of Income Tax (DCIT) and Mr. Tapesh Tyagi. The dispute primarily revolved around the applicability of the special tax rate under Section 115BBE of the Income Tax Act, 1961. The ITAT’s decision, rendered on October 27, 2023, provides insights into the interpretation of tax provisions and the treatment of surrendered income during a search and seizure operation.
Background: Mr. Tapesh Tyagi, a resident individual, underwent a search and seizure operation under Section 132 of the Income Tax Act on August 11, 2016. During this operation, a document was found in Mr. Tyagi’s possession, indicating an amount of Rs. 30.20 crores with the notation “Com Trade.” In subsequent statements recorded under Section 132(4), Mr. Tyagi claimed that this amount represented profits from offline commodity trading. Consequently, he voluntarily surrendered this amount as income for the assessment year 2017-18 and duly paid the taxes.
During the assessment proceedings, the Assessing Officer characterized the surrendered income as unexplained money under Section 69A of the Act but did not alter the tax rate. In a subsequent order under Section 154, the Assessing Officer applied the higher tax rate prescribed under Section 115BBE. Dissatisfied with the elevated tax rate, Mr. Tyagi appealed to the Commissioner of Income Tax (Appeals), who ruled in his favor, stating that the income surrendered should not be treated as falling under Section 69A, and hence, the normal tax rate would be applicable.
Key Points from the ITAT Decision:
- Nature of Surrendered Income: The ITAT emphasized that Mr. Tyagi had consistently explained the source of the surrendered income as profits from commodity trade. The authorities did not dispute or doubt this explanation during the search operation or subsequent assessment proceedings.
- Section 69A Interpretation: Section 69A uses discretionary language, implying that if the assessee’s explanation regarding the source of the money is satisfactory, it cannot be treated as unexplained money. In this case, there was no indication that Mr. Tyagi’s explanation was doubted or disputed.
- Applicability of Section 115BBE: The ITAT clarified that Section 115BBE is applicable only under specific conditions – either when the total income includes certain specified incomes and is reflected in the return of income, or when the Assessing Officer determines income falling under specific sections. In this instance, as the income was not offered under Section 69A, and the Assessing Officer did not make a separate addition under this section, Section 115BBE was not applicable.
Conclusion: The ITAT upheld the decision of the Commissioner (Appeals), emphasizing that the income surrendered by Mr. Tyagi cannot be treated as unexplained money under Section 69A. Consequently, the provisions of Section 115BBE, which prescribe a special tax rate under certain conditions, were deemed not applicable to the facts of this case. The appeal by the Revenue was dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This is an appeal by the Revenue against order dated 08.06.2021 passed by the learned Commissioner of Income-Tax (Appeals)-4, Kanpur for the assessment year 2017-18. The solitary dispute arising in the present appeal, as culled out from the grounds raised in revised Form 36 furnished by the Revenue is, in relation to applicability of special tax rate under Section 115 BBE of the Income-Tax Act,1961.
2. Briefly, the facts are, assessee is a resident individual. A search and seizure operation under Section 132 of the Act was carried out on the assessee on 11.08.2016. In course of search and seizure operation, a loose paper/document was found from the wallet of the assessee, wherein, the amount of Rs.30.20 crores was mentioned against the noting “com trade”. When the seized document was confronted to the assessee, in a statement recorded under Section 132(4) of the Act, assessee stated that the figures mentioned in the seized document represent profit from offline commodity trading. Accordingly, he surrendered the amount of Rs.30,20,00,000 as income in assessment year 2017-18 and followed it up in the return of income filed for the assessment year under dispute and also paid the taxes thereon.
3. In course of assessment proceedings, the Assessing Officer observed that assessee has calculated his tax liability on the surrendered income of Rs.30,20,00,000 by applying the normal rate. According to the Assessing Officer, income surrendered by the assessee is in the nature of unexplained money in terms of section 69A of the Act. Though, he did not make any separate addition of the said amount in the assessment order, however, he treated it as income under Section 69A of the Act. However, he did not make any change to the tax rate applied by the assessee. Subsequently, the Assessing Officer passed an order under Section 154 of the Act, wherein, he applied the rate of tax as prescribed under Section 115BBE of the Act.
4. Being aggrieved with the higher tax rate charged under Section 115BBE of the Act, assessee preferred an appeal before learned Commissioner (Appeals). Being convinced with various submissions of the assessee, learned Commissioner (Appeals) held that the income subjected to tax at the rate prescribed under Section 115BBE of the Act cannot be treated as income of the nature provided under Section 69A of the Act. Hence, normal tax rate would be applicable to such income.
5. Being aggrieved with the aforesaid decision of learned First Appellate Authority, the Revenue is before us.
6. We have heard Ms. Sapna Bhatia, learned CIT-DR appearing for the assessee and Shri Ajay Wadhwa, learned counsel for the assessee. Short issue arising for consideration is whether special rate of tax provided under Section 115BBE of the Act would be applicable to the income surrendered by the assessee in course of search and seizure operation and offered in the return of income.
7. As discussed earlier, in course of search and seizure operation carried out in case of the assessee, a loose paper/document was found from the possession of the assessee, wherein, amount of Rs.30,20,00,000 was mentioned with the description “Com Trade”. In the statement recorded under Section 132(4) of the Act in course of search and seizure operation, when the assessee was confronted with the said loose paper/document, the assessee submitted that it indicates profit earned by him from “Commodity Trade”. It is a fact that in the statement recorded under Section 132(4), assessee surrendered the amount as income. It is also a fact on record that in the return of income filed for the assessment year under dispute, assessee offered the amount of Rs.30.20 crores as income. Thus, the aforesaid facts clearly establish that at the time of search and seizure operation itself, assessee has explained the source of the amount offered as income to be the profit derived from “commodity trade”, which is in the nature of business income. It also appears that the departmental authorities have no dispute with regard to the explanation of the assessee regarding the source of the surrendered income.
8. As rightly observed by the learned First Appellate Authority, section 69A uses word “may”, which implies that if explanation offered by the assessee regarding source of money, bullion, jewellery or other valuable articles is satisfactory, it cannot be treated as unexplained money under Section 69A of the Act. In the facts of the present appeal, there is nothing on record to suggest that assessee’s explanation regarding the source of the income offered has either been doubted or disputed at the time of search and seizure operation or even during the assessment proceedings. Therefore, in our view, the income offered by the assessee cannot be treated as unexplained money under Section 69A of the Act. Therefore, as a natural corollary, section 1 15BBE of the Act would not be applicable.
9. Having held so, we may further add that a reading of section 115BBE of the Act makes it clear that the special rate of tax provided under the said provisions shall be applicable under two conditions. Firstly, where the total income includes any income referred to in sections 68, 69A, 69B, 69C or 69D and reflected in the return of income under Section 139 of the Act. Secondly, if the income determined by the Assessing Officer includes any income referred to, in sections 68, 69, 69A, 69B, 69C or 69D, if such income is not covered under the first condition. In the facts of the present appeal, admittedly, assessee has not offered the income under Section 69A of the Act. Even, the Assessing Officer has not made any separate addition under Section 69A of the Act. He has merely re-characterized the nature of income offered by the assessee. Thus, in our considered opinion, the provisions of sections 115BBE would not be applicable to the facts of the present appeal.
10. In view of the aforesaid, we uphold the decision of learned First Appellate Authority and dismiss the grounds.
11. In the result, the appeal is dismissed.
Order pronounced in the open court on 27 .10.2023.
