Survey Income Linked to Business Not Taxable at Higher Section 115BBE Rates

Yash Construction Co. Vs ACIT (ITAT Pune)

Income Tax Appellate Tribunal (ITAT), Pune Bench, has ruled in favor of Yash Construction Co., setting aside the application of a higher tax rate under Section 115BBE of the Income Tax Act on additional income declared by the firm during a survey operation. The Tribunal’s common order, pronounced on July 31, 2024, covered assessment years 2017-18 and 2018-19, with the primary dispute centered on whether the declared income constituted “unexplained expenditure” liable for special taxation.

For the assessment year 2017-18, Yash Construction Co. had declared an additional income of ₹1,00,05,000/- during a survey conducted at its business premises. Similarly, for assessment year 2018-19, an amount of ₹4,00,87,000/- was declared. The company, engaged in civil construction, included these amounts in its income tax returns as regular business income.

The Dispute: The core of the dispute revolved around the nature of this additional income. The revenue authorities (Assessing Officer and Commissioner of Income Tax (Appeals) [CIT(A)]) argued that since the assessee could not “explain the source” of the out-of-books cash expenditure, it should be treated as unexplained expenditure under Section 69C, attracting the higher tax rate mandated by Section 115BBE. Section 115BBE applies to “deemed income” under sections like 68, 69, 69A, 69B, and 69C, which pertain to unexplained cash credits, investments, money, or expenditure.