DCIT Vs Mangaldeep Chains (ITAT Bangalore)
Bangalore ITAT: Business Link Decides Whether Survey Disclosure Attracts s. 115BBE- When “Undisclosed” Becomes “Business” – Tribunal Splits Verdict on Same Assessee’s Two Years
The Revenue filed two appeals against CIT(A)’s orders treating the excess stock found during survey u/s 133A as business income instead of unexplained money/investment taxable u/s 69A/69B r.w.s. 115BBE.
For A.Y. 2017-18, during survey, the partner admitted undisclosed income of ₹18.27 crore but failed to explain the source of such excess stock. ITAT observed that the statement clearly termed it as undisclosed income & not business profit. Since no nexus with regular business was established, it held that CIT(A) erred in treating it as business income. The AO’s view u/s 69A was restored. Revenue’s appeal allowed.
For A.Y. 2020-21, the Tribunal noted that purchases & sales were recorded up to the date of survey & the difference in stock arose only due to incomplete stock entries. The statement recorded described it as regular business income. Hence, the addition u/s 69B was unjustified. CIT(A)’s view was upheld. Revenue’s appeal dismissed.
Held:
- Disclosure during survey to be taxed as business income only if directly linked to regular business activity.
- If admitted as undisclosed income without explaining source, taxable u/s 69A/69B @ 115BBE.
Result: A.Y. 2017-18 – Revenue succeeds; A.Y. 2020-21 – Assessee succeeds.
