Suppression in Net Sales assessable as ‘Business Income’, can’t be treated as Deemed Income u/s 68

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the income surrendered for suppression in the net sales shall be assessable as “Income from Business or Profession” and the same cannot be treated as deemed income for the purpose of section 68 of the Income Tax Act, 1961.

In consequent to a search in the case of A2Z Group, it was found that assessee was maintaining two sets off books of accounts. When it was confronted with Shri Amit Mittal, the promoter of the Company, he accepted that there were two sets off books of accounts and accordingly he surrendered the suppression of sales to the tune of Rs. 15,65,53,738/-. This amount was considered as deemed income u/s 68 by the AO while computing the assessment. He also did not allow set off of loss against this income which was surrendered by the assessee.

On appeal, the CIT(A) held that the assessee company offered this amount which is nothing but a difference in net sales made during the current assessment year and it constitutes business income falling under the head “Business or Profession”. He also allowed set off of loss against this income surrendered by the assessee.

The Tribunal bench comprising Shri G.S. Pannu, President and Shri Challa Nagendra Prasad, Judicial Member observed that “On perusal of the assessment order it is clear that assessee was maintaining two sets off books of account which are all related to the business of the assessee and they are maintained as per AS7. It is also not in the dispute that this income which was surrendered is nothing but difference in net sales as per these two set off books of account. In the circumstances, the income surrendered by the assessee is nothing but suppression in net sales and is assessable under the head income from business and cannot be treated as deemed income u/s 68 of the Act. The Ld. CIT(A) has rightly held that this income is assessable under the head “Income from Business or Profession”. Once this is assessed as business income the assessee is entitled for set off this income against loss.”