M/s Abbas Shabuddin Saheb, Nipani V. Income Tax Officer, Ward - 1, Nipani, Nipani

ITA 461/PAN/2018

AI Insights

The case involves M/s. Abbas Shabuddin Saheb, a partnership firm engaged in the tobacco business, which appealed against the order of the Commissioner of Income Tax (Appeals), Belagavi. The dispute centered on the assessment of undisclosed income amounting to Rs.1,45,00,000 disclosed during survey proceedings under section 133A of the Income Tax Act, 1961. The Income Tax Officer assessed this income under section 115BBE, treating it as income from other sources, which was contested by the assessee. The Tribunal's decision clarified that this income should be treated as business income and included in the book profits for calculating partner's remuneration, thus rejecting the application of section 115BBE in this context.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136961 (ITAT-PANAJI)
• Duration Of Justice: 4 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: WT(D)
• Next Hearing Date: 04-09-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 27-12-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 131; 69; 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI – VIRTUAL COURT BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं. / ITA No.461/PAN/2018 िनधाᭅरण वषᭅ / Assessment Year : 2014-15 M/s. Abbas Shabuddin Saheb, 1042, Neharu Chowk, Nipani- 591237. PAN : AAEFA4370K Vs. ITO, Ward-1, Nipani. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals), Belagavi [‘the CIT(A)’] dated 30.11.2018 for the assessment year 2014-15. 2. Briefly, the facts of the case are that the appellant is a partnership firm engaged in the business of purchase of Raw Tobacco from the farmers and converting the same into Jaradi Tobacco and sale thereafter. The Return of Income for the Assessee by : Shri A. S. Patil Revenue by : Smt. Ashwini Hosmani Date of hearing : 05.09.2023 Date of pronouncement : 25.09.2023 ITA No.461/PAN/2018 2 assessment year 2014-15 was filed on 14.11.2014 declaring total income of Rs.58,48,272/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-1, Nipani (‘the Assessing Officer’) vide order dated 13.12.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.1,57,95,455/-. While doing so, the Assessing Officer held that the income declared during the course of survey proceedings of Rs.1,45,00,000/- be assessed to tax under the provisions of section 115BBE of the Act. The brief facts of the case are as under : Survey operations u/s 133A of the Act were conducted on the business premises of the appellant firm on 19.06.2013. During the course of survey proceedings, it was found that purchases of raw tobacco prior to survey operations were recorded into two note books. These note books were impounded by the Department during the course of such survey proceedings. However, it was contended that all the purchases were recorded in regular books of accounts. However, the appellant had agreed to make a disclosure of Rs.1,45,00,000/- during the course of survey proceedings, which was confirmed as undisclosed business income. Even during the ITA No.461/PAN/2018 3 course of recording of statement u/s 131 of the Act, the same was shown in the return of income filed by the assessee. In the circumstances, the Assessing Officer was of the opinion that the income disclosed during the course of survey proceedings constitutes income from business and, therefore, subject to tax u/s 115BBE of the Act. Further, the Assessing Officer was of the opinion that the income disclosed during the course of survey proceedings does not qualify for the purpose of book profits to compute the eligible partner’s remuneration u/s 40(b)(v) of the Act. 3. Being aggrieved by the above order of assessment, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed that the undisclosed income u/s 69 is subject to tax u/s 115BBE of the Act and also confirmed that the undisclosed income u/s 69 does not form part of the book profits for the purpose of computing the partner’s remuneration u/s 40(b)(v) of the Act. 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. We heard the rival submissions and perused the material on record. The first issue in the present appeal relates to the ITA No.461/PAN/2018 4 applicability of provisions of section 115BBE of the Act in respect of income declared during the course of survey proceedings and offered to tax in the return of income filed by the appellant. There is no dispute about the quantum of addition to be made nor was there any dispute regarding the head of income under which the same was to be assessed to tax. The dispute is only with regard to the applicability of the provisions of section 115BBE of the Act. Admittedly, the income offered, during the course of survey proceedings, was credited to the Profit & Loss Account and it was stated that the additional income is derived from the business of sale of tobacco carried on by the appellant. Admittedly, the assessee had offered such additional income under the head “income from business” and the Assessing Officer also assessed the same under the head “income from business”. Thus, it cannot be said that the source for additional income remains unexplained. Therefore, the provisions of section 115BBE have no application to the facts of the present case. Thus, this ground of appeal filed by the assessee stands allowed. ITA No.461/PAN/2018 5 6. As regards to the addition u/s 40(b)(v), in the light of above discussion the income declared during the course of survey proceedings and credited to the Profit & Loss Account is assessable under the head “business income” and the same should form part of the book profits for the purpose of computing the eligible partner’s remuneration u/s 40(b)(v) of the Act. Thus, this ground of appeal filed by the assessee stands allowed. 7. In the result, the appeal filed by the assessee stands allowed. Order pronounced on this 25 th day of September, 2023. Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 25 th September, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), Belagavi. 4. The Pr. CIT, Belagavi. 5. DR, ITAT, Panaji. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.