YASHUDEV ENTERPRISES,AMLOH vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE, MANDI GOBINDGARH, MANDI GOBINDGARH

The assessee was subjected to survey u/s 133A on 21-10-2016 wherein the assessee offered additional income of Rs.33 Lacs. The assessee honored the surrender and offered additional income to tax in its return of income. The surrender was on account of discrepancy in stock / cash & unaccounted investment in construction. The assessee offered the surrendered income as income arising out of normal business activities and accordingly, credited the same to its Profit & Loss Account. The dispute arose on account of rate of taxation. The assessee applied normal rate of tax whereas Ld. AO held that the surrender of Rs.33 Lacs would be subjected to higher rate of tax of 60% u/s 115BBE. The Ld. CIT(A) confirmed the stand of Ld. AO against which the assessee is in further appeal before us.

It emerges that the survey has happened on the assessee on 21-10- 2016 whereas notification prescribing higher rate of tax has come into force vide Taxation Laws (Second Amendment) Bill, 2016, notification dated 28-11-2016. In other words, the higher rate has been prescribed later on whereas the surrender has been made for income arising to the assessee prior to that date. Secondly, Ld. AO has not disturbed the head of income in the assessment order and there is no discussion in this respect. For both the reasons, the application of higher tax rate of 60% as prescribed u/s 115BBE could not be held to be justified. The Ld. AO is directed to accept the surrender as normal business income only.