TaxTMI 
TaxTMI 
2015 (11) TMI 1375
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....ssessee surrendered an additional income of Rs. 1,25,00,700/- over and above the normal income for the year under consideration. The assessee filed its return of income on 26.07.2010 and declared income of Rs. 63,02,570/-. The case of the assessee was selected for scrutiny. During the assessment proceedings, the assessee was asked to justify the low returned income as compared to the surrendered income. The assessee was asked to file with the documentary evidences in the farm of breakup of various expenses before and after the survey, as well as a comparison chart showing the breakup and comparison with reasons. The Assessing Officer after examination of the reply of assessee completed the assessment and made disallowances of Rs. 2,02,690/- and Rs. 7,68,019/- on account of expenses and Gross Profit rate respectfully. The learned CIT after examination of assessment records of the assessee observed that during the survey u/s 133 A of the Act, the Assessee had surrendered an income of Rs. 1,25,00,700/- and such surrendered income was to be taxed under the provisions of Section 69A of the Act and whereas, the assessee had credited the surrendered income to the Profit and Loss account a....
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....ledger account. However, the said entry in the ledger account are nothing but the repetition of the entries mentioned in para 4.3 above and the corresponding transfer of these items in the credit side of the Profit and Loss Account of the current year. The learned Counsel of the assessee could not explain from the books of accounts as to how the said entries are intricately connected with his business transactions. 4.4 The assessee has contended that the decision of Hon'ble Pubjab and Haryana High Court in the case of M/s Kim Pharma Pvt. Ltd. vs. CIT in ITA No.106 of 2011 (O & M) dated 27.04.2011 is not applicable in their case because the facts of the assessee are entirely different. The learned Counsel has highlighted these difference in his submission dated 05.03.2014, as under. "The point for determination in this appeal is, whether Rs. 5,00,000/- which was surrendered by the assessee during the course of survey under section 133A of the Act would form part of business income or was assessable under section 69A of the Act. The Assessing Officer, the CIT(A) and the Tribunal after considering the factual aspect noticed that the amount surrendered during the ....
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....manner since this issue is directly and squarely covered by the jurisdictional High Court in the case of Kim Pharma (supra). To give an example, the assessee has relied heavily on the judgment of Hon'ble Karnatka High Court in the case of CIT vs. S.K. Srigiri and Bros., 298 ITR 13 (Kar). In this case, there was a clear finding of facts by lower appellate authorities that additional income received by the assessee was from business and from no other sources and therefore the salary paid to the partners was required to be deducted while considering profit and loss. However, in the case of the present assessee, neither the assessee nor the Assessing Officer have brought any cogent evidence or a reasonable explanation to prove that any of the items of additional income surrendered during survey was derived from the business activities of the assessee. In any event, the assessee could not prove the source of the stated items of income surrendered during survey. Therefore, the ratio of the said case is not applicable on the facts of this assessee. As result, all other contentions of the assessee w.r.t. reliance placed on various others case laws stand discussed and disposed off again....
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....s letter dated 18.1.2013 placed at paper book page 37 to 40 and he further, took us to paper book page 44 where a further explanation submitted by the assessee vide letter dated 01.03.2013 was placed. The learned AR submitted that the assessee during the assessment proceedings had explained each and every item of expenditure and specific attention was invited to reply in response to query raised by Assessing Officer vide para-11 of his letter dated 15.07.2011. It was submitted that again Assessing Officer vide latter dated 22.2.2013 raised this issue and assessee again reiterated its reply which was placed at paper book page-44. In view of the above examination by Assessing Officer and explanation by assessee the Assessing Officer was satisfied with the reply and therefore, had passed reasoned order and therefore, it cannot be said that Assessing Officer had not applied his mind and therefore, CIT was not justified in passing the order under section 263. Reliance in this respect was placed on the case laws of CIT vs. Gabriel India Ltd. 203 ITR 108 (Bom). The learned AR submitted that in this case, the assessee had claimed certain expenses as revenue expenditure. The Assessing Offic....
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....revisional jurisdiction to Commissioner under section 263 of the Act. The learned AR further submitted that the case law decided by Chandigarh Tribunal is squarely applicable to the facts and circumstances of the case as in this case similar surrender was made by assessee and the same was credited to the Profit and Loss account and the Hon'ble Chandigarh Tribunal had quashed the order of Commissioner passed under section 263 of the Act. Without prejudice to the above the learned AR further argued that section 69A as imposed by learned CIT was not applicable in this case and in this respect provisions of section 69A were read. The learned AR submitted that these provisions were applicable in a case where the source of money or an asset found during the survey was not explained. He submitted that in the present case, the source of surrendered was duly explained in the letter of surrender itself wherein the assessee mentioned that the surrender was over and above the normal profits of the concern and in this respect the learned AR took us to paper book page 38 and invited our attention to the contents of surrender letter wherein the assessee had stated that the surrendered income ....
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....of losses and expenses against the surrendered income and therefore, he argued that the case law of Kim Pharma (supra) was squarely applicable in the present case, which the Assessing Officer had ignored. In view of the above arguments the learned DR submitted that order of Commissioner needs to be upheld. 6. The learned AR in his rejoinder submitted that the observations made by Assessing Officer vide para 2 of his order are for guidelines for selection of scrutiny cases and in this respect he read the entire para 2 of assessment order and argued that since returned income was lower than the surrendered income, therefore, as per CBDT guidelines the assessee's case was selected for scrutiny. He further reiterated that surrender was made as business income and in the case of Kim Pharma Pvt. Ltd. (supra), the surrender was not made as business income and assessee had not credited the surrendered income in the Profit and Loss account whereas in the present case, the income was credited to the Profit and Loss account and therefore, the Assessing Officer had passed a reasoned order and therefore, he prayed that order under section 263 be quashed and that of AO be restored. 7. ....
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....be said to be erroneous as he has taken a plausible view, keeping in view the facts and circumstances of the case. The Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma 335 ITR 83 has held as under: "There is a distinction between "lack of inquiry" and 'inadequate inquiry" If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act,1961, merely because he has a different opinion in the matter: Held, dismissing the appeal, that the present case would not be one of "lack of inquiry" even if the inquiry was termed inadequate. The Tribunal found that complete details were filed before the Assessing Officer and that he applied his mind to the relevant material and facts, although such application of mind was not discernible from the assessment order. The Tribunal held that the Commissioner in proceedings under section 263 also had all these details and material available before him, but had not been able to point out defects conclusively in the material, for arriving at a conclusion that particular income had escaped assessment on account of non-appli....
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....irmity in the replies of the assessee. The nature of business of the assessee revealed that it might not be possible to give the exact details of manufacturing large number of sweets of different quantities or of the closing stock. Hence, the assessee submitted complete details before the Assessing Officer at the assessment stage regarding all the issues which had been raised by the Commissioner in the order under section 263 of the Act. The Assessing Officer was satisfied with all the items and allowed the claim of the assessee after conducting proper enquiry into the matter. The Commissioner had not given any elaborate reasons as to how the assessment order was erroneous and prejudicial to the interests of the Revenue. Hence, the opinion of the Assessing Officer could not be substituted by the Commissioner and as such the assessment order could not be treated as erroneous and prejudicial to the interest of the Revenue and could not be set aside in the proceedings under section 263 of the Act." In the present case the Assessing Officer had made enquiries and assessee had explained the taxable income viz-a-viz surrendered income and Assessing Officer found the explanation as sat....
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.... but no evidence to prove that stand of the assessee has been brought on record. The assessee had also surrendered additional income of Rs. 10 lacs in assessment year 2005-06 on account of sundry credits, repairs to building and advances to staff, which being relatable to business carried on by assessee was included as income from business. However, in respect of cash found during survey, which was not reflected in the books of account, no source was declared by the assessee and in the absence of nature of source of cash being proved; the same is not assessable as income from business. In the circumstances, we uphold the order of the CIT(A) in including the additional income as deemed income u/s 69A of the Act and not allowing the benefit of the business losses determined against the said deemed income. The grounds of appeal raised by the assessee are dismissed." 11. From the above findings of Ho'ble Punjab & Haryana High Court, we find that surrender in this case was made in two years i.e., 2005-06 and 2006-07. The Hon'ble Tribunal had recorded that in Asst. Year 2005-06, the income surrendered related to business carried on by the assessee and therefore, was included a....