ITA No. 1080/DEL/2022: Vikas Kumar vs. Pr. CIT (Assessment Year: 2017-18) – Appeal on Taxation of Surrendered Income

ITA No. 1080/DEL/2022: Vikas Kumar vs. Pr. CIT (Assessment Year: 2017-18)

Introduction

The case of Vikas Kumar vs. Pr. CIT concerns an appeal filed by the appellant, Vikas Kumar, against the order of the Pr. Commissioner of Income Tax, Rohtak, pertaining to the assessment year 2017-18. This appellate decision, pronounced by the Income Tax Appellate Tribunal, Delhi Bench, articulates issues related to the classification and taxation of surrendered income following a survey operation under Section 133A of the Income Tax Act, 1961.

Background

Vikas Kumar, the appellant, engaged in business through his proprietorship firm M/s. Mitthan Misthan Bhandar, came under the Income Tax Department’s lens during a survey operation. The survey revealed undisclosed income, including unexplained cash, advances to suppliers, and investments in property and jewellery. Kumar surrendered additional income amounting to Rs. 65,00,500 during the survey. However, controversy arose when this income was disclosed as normal business income in the original income tax return, implicating the applicability of taxation laws and amendments, particularly Section 115BBE introduced by the Taxation Laws (Second Amendment) Act, 2016.

Issues at Hand

The primary issue revolves around whether the surrendered income should be considered as normal business income or treated under the provisions of Section 115BBE, which mandates taxation at the maximum marginal rate without providing for any deductions. The Pr. CIT, invoking Section 263, contested that the assessing officer erred in not applying the higher tax rate as prescribed under Section 115BBE on the unexplained income, rendering the order prejudicial to the interests of revenue.

Judgment and Analysis

The tribunal, after considering the submissions and pertinent legal provisions, upheld the decision of the Pr. CIT. It was determined that the surrendered income, due to its nature of being unexplained cash, advances to suppliers, and investments, does not qualify as normal business income. The tribunal emphasized that such income falls under the ambit of Sections 68 to 69D and is liable for taxation at the rate of 60% as per Section 115BBE. This decision takes into account the amendments made to the Income Tax Act, aligning with the government’s intent to tax undisclosed income at a higher rate to deter concealment of income.

Conclusion

The appellate tribunal’s decision in the case of ITA No. 1080/DEL/2022 brings to the foreground the nuances of tax law concerning undisclosed income. By dismissing the appeal and endorsing the taxation of surrendered income at the maximum marginal rate, the tribunal underscores the legislative intent to clamp down on tax evasion and ensure compliance with tax laws. This judgment serves as a referential point for similar cases, highlighting the rigorous examination of income sources and the stringent application of tax laws to safeguard revenue interests.

ITA No. 1080/DEL/2022: Vikas Kumar vs. Pr. CIT (Assessment Year: 2017-18) – Appeal on Taxation of Surrendered Income