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Facts
A search was conducted on M/s Bajwa Group, including the assessee. In response to a notice under Section 153A, the assessee filed a return of income, but no incriminating material was found. The AO treated a portion of the declared income as unexplained and applied a higher tax rate under Section 115BBE.
Held
The Tribunal ruled that the AO failed to prove how the income, which the assessee had voluntarily offered from regular business sources, was unexplained. Since no incriminating material was found during the search, the higher tax rate under Section 115BBE was not applicable, and the income should be assessed at the regular rate.
Key Issues
Whether income voluntarily declared by an assessee post-search, in the absence of any incriminating material, can be subjected to a higher tax rate under Section 115BBE as unexplained income.
Sections Cited
153D, 115BBE, 132(1), 153A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
O R D E R PER RAJPAL YADAV, VP The assessee is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 26.02.2023 passed for assessment year 2015-16. 2. The assessee has taken four grounds of appeal out of which Ground No. 3 and 4 are general grounds and they do not call for recording of any finding. A.Y.2015-16 2
3. In Ground No. 2, the assessee has pleaded that approval granted under Section 153D is not in consonance with the provisions of law, hence, impugned assessment
order is not sustainable. This ground was not addressed by the ld. Counsel for the assessee, hence rejected.
In Ground No. 1, assessee has pleaded that ld. AO has erred in charging of tax under Section 115BBE on a sum of Rs.1,58,333/-.
With the assistance of ld. Representative, we have gone through the record carefully. A perusal of the record would indicate that a search was carried out under Section 132(1) on the business and residential premises of M/s Bajwa Group of cases. Shri Sukhdev Singh Bajwa was one of the persons covered under Section 132 of the Income Tax Act. In response to the notice issued under Section 153A, assessee has filed his return of income declaring total income at Rs.2,25,000/-. There was no incriminating material found at the premises of the assessee, no separate addition was made. The AO has observed that out of the total income declared by the assessee, Rs.66,666/- was A.Y.2015-16 3 alleged to be received from Bajwa Developers Ltd. He did not dispute this amount but rest of the amount was treated as unexplained income of the assessee upon whom, Income Tax is being levied at a higher rate under Section 115BBE of the Income Tax Act.
On due consideration of the above facts and circumstances, we are of the view that AO failed to demonstrate as to how it is an unexplained income. It is an income offered by the assessee. The AO was unable to made any addition on the basis of any incriminating material found during the course of search. According to the assessee, it is an income from his regular source of business which has been offered for taxation. Now it is for the AO to demonstrate as to how this income is required to be assessed as undisclosed income for the purpose of a search assessment under Section 153A, but nothing has been done by the AO. Therefore, no higher rate of tax under Section 115BBE is to be applied on this income offered by the assessee himself. A.Y.2015-16 4
Accordingly, appeal of the assessee is allowed and charging of tax under Section 115BBE on the alleged declared income is deleted. This income be assessed under the regular rate of tax.
In view of the above, appeal is allowed.