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Income Tax Appellate Tribunal, DIVISION BENCH, “A” CHANDIGARH
Before: SHRI AAKASH DEEP JAINAND SHRI VIKRAM SINGH YADAV
आदेश/ORDER
PER A.D.JAIN, VICE PRESIDENT
This is assessee's appeal for assessment year 2018-19 against the order dated 04.11.2022 passed by the ld. CIT(A)- 5, Ludhiana. The following grounds have been taken :
1. That the Worthy Commissioner of Income Tax(Appeals) - V, has erred in upholding the contention of the Assessing Officer by treating the Surrendered Business Income of Rs.3 0,00,000 under the head Building as Deemed Income u/s 69 of the Income Tax Act, 1961.
ITA 755/CHD/2022 A.Y. 2018-19 2 2. That the Worthy Commissioner of Income Tax (Appeals) - V, has erred in upholding the contention of Assessing Officer by1 not allowing depreciation claim on the said Building.
3. That the Worthy Commissioner of Income Tax (Appeals) - V, has erred in upholding an addition of Rs.2,11,600 on account of addition in the value of Building based on the valuation report of the Department valuer.
That the Worthy Commissioner of Income Tax (Appeals) - V, has erred in upholding the action of the Assessing Officer by treating the Business Income surrendered Rs.30,00,000 chargeable to tax under Section 115BBE @60 percent instead of Normal Tax Rate.
The matter was recalled with regard to Ground No.2, vide order dated 06.10.2023, since in the order dated 21.07.2023, whereby, the assessee's appeal was allowed, inadvertently, no finding had been given on the said Ground No.2.
We have heard the parties and have perused the material on record with regard to Ground No.2. The Assessing Officer disallowed depreciation on building, of Rs.3 lacs, against the sun surrendered as investment in the building. The AO held that since the surrendered income had been adjudicated as unexplained investment u/s 69 of the Income Tax Act, deduction of Rs.3 lacs against the same on account of depreciation could not be allowed. The ld. CIT(A) confirmed the disallowance, holding that since the AO’s action in treating the surrendered amount, of Rs.30
ITA 755/CHD/2022 A.Y. 2018-19 3 lacs, under the head of ‘building’, as income u/s 69 of the Income Tax Act, chargeable to tax @ 60% u/s 115 BBE of the Act, had been upheld, depreciation could not be allowed to be claimed, and that as per the provisions of Section 115BBE(2) of the Act, w.e.f. assessment year 2017-18, no demand of deduction in respect of any expenditure or allowance can be allowed under any provisions of the Act.
4. The aforesaid observations and findings of the ld. CIT(A) no longer hold good. In our order dated 21.07.2023, concerning the grievance of the assessee against the CIT(A)’s action of upholding the action of the AO in treating the surrendered business income of Rs.30 lacs under the head ‘building’, as deemed income u/s 69 of the Act, chargeable to tax @ 60% u/s 115BBE instead of at the normal tax rate, we have held that. The ld. Counsel for the assessee had contended that a perusal of the surrender letter dated 05.10.2017 would reveal that firstly, there was neither any cash, nor any incriminating material found during the survey action; that however, a surrender was obtained by the Department, stating that there might be professional receipts which may not be included in the income returned by the assessee; that therefore, to cover up the expenditure
ITA 755/CHD/2022 A.Y. 2018-19 4 incurred on the building and other professional income, the assessee had surrendered the amount of Rs.30 lacs as his undisclosed professional income; that the assessee had also paid due tax thereon, @ 30% plus surcharge etc.; and there was nothing on record that the assessee had received any unexplained income; that the surrender had been made just on estimation basis that the assessee might have received some professional receipts, it might not have been accounted for; that even the CBDT has issued instructions that the income tax authorities at the time of survey/search, should not harp upon taking a surrender/confession statements and rather, they should collect the evidence relevant to unaccounted/unexplained income and the additions should not be based merely on obtaining surrender statements; that in the present case, however, the surrender had been obtained and there was no evidence of any income having been earned by the assessee from any other source; that in fact, no such income had been found during the survey action. The Tribunal held that in view of these facts, the provisions of Section 115BBE of the Act are not applicable in this case; that further, addition of Rs.2,11,600/- made by the AO on account of addition in the value of a building also ITA 755/CHD/2022 A.Y. 2018-19 5 cannot be held to be justified, since the assessee had surrendered additional professional income covering the expenditure on building also.
In view of these findings of the Tribunal, obviously, the provisions of Section 115BBE of the Act do not get attracted to the case of the assessee and, therefore, the ld. Counsel for the assessee went wrong in confirming the action of the AO in not allowing depreciation claimed by the assessee on the building.
In view of the above, finding merit therein, Ground No. 2 raised by the assessee is accepted. The AO is directed to allow the depreciation claimed by the assessee.
In the result, the appeal is allowed.
Order pronounced in the Open Court on 26.02.2024.