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2023 (3) TMI 854
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....onse, the aforesaid assessees have filed respective application seeking condonation of delay which is placed on record. During the course of hearing, the ld. AR reiterated the contents in the aforesaid applications and submitted that the delay occurred due to Covid-19 pandemic and it was requested that the delay may be condoned. The ld. Sr. DR didn't controvert the aforesaid contention of the ld AR. After hearing both the parties and considering the material placed on record, the delay of 198 days in filing the present appeals by the aforesaid assessees is hereby condoned as we find that there was reasonable cause beyond the control of the assessee on account of Covid-19 pandemic and the appeals are hereby admitted for adjudication. ITA No. 409/Chd/2021 4. With the consent of the parties, the case of the assessee in ITA No. 409/Chd/2021 was taken as the lead case. In this appeal, the assessee has raised the following grounds of appeal: 1. "That the initiation of proceedings u/s 263 by the Learned Pr. CIT (Central), Ludhiana are against the facts and bad in law. 2. That the Learned Pr. CIT (Central), Ludhiana has erred in initiating the proceedings & in passi....
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.... which read as under: "03. The records of the assessment proceedings have been examined. It is observed that the assessment in this case was completed and the tax was calculated at normal rates. The assessee has voluntarily declared an amount of Rs. 2,02,00,000/-as additional income over and above the normal income for the A.Y. 2017-18. The tax was calculated by the assessee at normal rate and accordingly paid the taxes. However, in this case the assessee had declared undisclosed income and hence, this case falls under the ambit of section 68/69/69A/69B/69C of the IT Act, 1961, which is to be taxed u/s 115BBE of the Income Tax Act, 1961. 04. Section 115BBE of the Income Tax Act provides that where the total income of an assessee includes any income referred to in Section 68, Section 69. Section 69A, Section 69B, Section 69C or Section 69D (specified income) and such income is (a) reflected in the return of income furnished Section 139; or b) which is determined by the Assessing Officer. Then, income tax payable in respect of such income would be @60% u/s 115BBE. 05. In this case, the returned income includes an amount of Rs. 2,02,00,0007- being the undisc....
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.... of account. Alongwith it was observed that in addition to the difference in the stock, there were certain loose documents / accounts in respect of certain parties representing the amounts receivables. All these issues were duly confronted to Sh. Kewal Krishan as per the statement recorded on 31.08.2016. Keeping in view the discrepancies in the stock as well as amounts receivables, these have been declared as additional income over and above the normal income for the A.Y. 2017-18 as detailed below: Surrendered on account of difference in stock Rs. 1,02,98,582/- Surrendered on account of amount receivable from Monahar Lal Fakir Chand. Rs. 19,79,822/- Surrendered on account of amount receivable From Pyare Sukhdev Rs. 2,57,147/- Surrendered on account of amount receivable As per loose papers Rs. 76,63,171/- Total amount surrendered Rs. 2,01,98,582/- 2. As per provision of section 115BBE, it has been provided as under: [(I) Where the total income of an assessee,- (a) Includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income ....
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.... before the AO, has submitted as under: "With reference to above subject matter, It is further explained that surrender amount comprises only business reflected as detailed below:- Surrendered on Account of Difference in Stock 1,02,98,582.00 Surrendered on Account of Amount Receivable From Manohar Lai Fakir Chand 19,79,822.00 Surrendered on Account of Amount Receivable 2,57,147.00 From Pyare Sukhdev Surrendered on Account of Amount Receivable As per Loose papers 76,63,171.00 Total Amount Surrendered 2,01,98,582.00 It is apparent from above, that stock is a business commodity & is not covered U/s 115BBE read with Section 68, 69, 69A, 69B, 69C, 69D. In the Normal Course of business difference in stock arises which at the time of survey has been surrendered as business income. Surrendered Amount on Account of Debtors as detailed above is merely business debtors having trading of food grains etc. with the assessee. All the above firms are also having Regular business dealing with us (Copy of Account is here enclosed). There is no applicability of section as below:- Section 68 :- "No Su....
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....g provisions are attracted by default and by virtue of the same, provisions of section 115BBE are attracted. The ld PCIT has to record his specific findings as to the applicability of the relevant provisions and how the explanation called for and offered by the assessee is not acceptable in the facts of the present case which is clearly absent in the instant case and in support, reference was drawn to the Coordinate Chandigarh Bench decision in case of Gandhi Ram Vs. The Pr. CIT (in ITA No. 121/Chd/2021 vide order dt. 04/08/2022). It was accordingly submitted that the order so passed by the ld PCIT(Central) be set-aside and the appeal of the assessee may be allowed. 13. Per contra, the Ld. CIT/DR has relied on the order of the Ld. Pr. CIT(Central) and it was submitted that it is clear case where the AO accepted the version of the assessee without verifying and examining as to how the income surrendered has been offered to tax as normal business income. It was submitted that no details of purchase made from various persons which resulted in unaccounted / unexplained stock in trade were divulged nor the details of sales made to various persons from whom receivables of Rs. 99,00,00....
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....ally provided under Clause (a) of Expln-2 of section 263 of the Act. The use of expression ..." Inquiry or verification which should have been made" ... in clause (a) of Explanation-2 to section 263 of the Act takes into its ambit even the cases, where though some inquiry might have been done but lacks the inquiries which should made in the opinion of PCIT on the facts and circumstances of the case. Thus, now, after amendment, inquiry which should have been made in the opinion of PCIT but not actually made by the AO, would also lead to invoking the provisions of 263 of the Act. In view of the above, the order passed by AO not only lacks the inquiries which should have been made but is also found to be clearly erroneous as well as prejudicial to the interest of revenue on the issue of unaccounted/unexplained stock-in-trade of Rs.1,02,98,582/- and unaccounted/ unexplained receivables of Rs.99,00,000/- shown in its P & L account of the relevant year. The AO has failed to ascertain and verify that whether the requisite entries have been passed in regular books of account duly corroborated by bills/challans/ transport details/labour charges/debit/credit notes/vouchers/receipts, funds be....
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....of Rs.2,57,147/-is written. The slip reads in as 'Pyare Sukhdev'. Please explain about the same. Ans: - This amount of Rs. 2,57,147/- is receivable from M/s Pyare Sukhdev which we did not account for. Now I surrender this amount of Rs. 2,57,147/- as our voluntary income. Q 6. Your attention is drawn to various other loose slips numbering 1 to 15 which deals in Rs. 76,63,171/-. Please explain nature and details of these slips and entries therein? Ans:- These are the various amounts receivable from various parties by us. I acknowledge the fact that these amounts could not be entered into books of accounts at that time. Now realising the mistake, I voluntarily surrender the amount of Rs. 76,63,171/- over and above my normal income. Q 7. Do you have anything else to say? Ans: - I am surrendering total amount of Rs. 2,02,00,000/- purely on voluntary basis without any pressure or fear. Further, I want to state that the Income Tax Team was very courteous and cooperative. I further plead that I may be excused from penalty and prosecution." 17. In this regard, we further refer to the surrender letter dated 01/09/2016 submitted by the assessee ....
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....ngs wherein it was stated that stock inventory was prepared physically and compared with the books of account and it was observed that there was difference in the stock. Besides, there were certain loose documents / accounts in respect of certain parties representing the amounts receivables. All these issues were duly confronted to Sh. Kewal Krishan as per the statement recorded on 31.08.2016. Keeping in view the discrepancies in the stock as well as amounts receivables, these have been declared as additional income over and above the normal income for the A.Y. 2017-18 as detailed below: "Surrendered on account of difference in stock Rs. 1,02,98,582/- Surrendered on account of amount receivable from Monahar Lal Fakir Chand. Rs. 19,79,822/- Surrendered on account of amount receivable From Pyare Sukhdev Rs. 2,57,147/- Surrendered on account of amount receivable As per loose papers Rs. 76,63,171/- Total amount surrendered Rs. 2,01,98,582/- 19. And the assessee was issued a show-cause as to why the provisions of section 115BBE be not invoked and thereafter, after taking into account the findings of the survey team and his own independent ....
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....business income" and didn't invoke the deeming provisions as so suggested by the ld PCIT, we do not believe that there is any error on part of the Assessing officer and the order so passed by him cannot be held as erroneous. 21. The ld PCIT has held that the moment any income representing any excess stock/investment/receivables/cash/bullion etc is found during survey/search and not recorded at that point in time in books of accounts, the same being in nature of deemed income as mentioned u/s 69/69B/69C etc, the provisions of section 15BBE are attracted. In our view, what is relevant before invoking the deeming provisions is not just the factum of survey/search action but besides that, what is the explanation so offered by the assessee explaining the nature and source of income so found during the course of survey/search proceedings and the same is the essence of the statutory provisions as duly recognized by the Courts. The mere fact that survey/search proceedings have been initiated at the business premises of the assessee doesn't mandate the Assessing officer to invoke the deeming provisions automatically and before invoking the deeming provisions, he has to call for the expla....
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....n survey team as well as that of the AO, he has to lead positive evidence to arrive at any contrary finding. Nothing has been brought on record in this regard. Therefore, the picture which is clearly emerging from the material available on record is the nature of surrender is amount of difference in stock of goods regularly dealt with by the assessee in normal course of its business and unrealized receivables from the sales undertaken by the assessee as part of his regular business dealings and which have not been recorded in the books of accounts. Where the assessee has subsequently recorded the same in his books of accounts as part of business income, it cannot be said that the said action on part of the assessee is not in accordance with accepted accounting methodology and the nature of such income is other than business income. We find that similar view has been taken by the Coordinate Chandigarh Benches in case of Famina Knit Fab (Supra) after taking into consideration the decisions of the Hon'ble Punjab and Haryana High Court in case of Khushi Ram (supra) and Kim Pharma (supra) and wherein it was held as under: "19. In the facts of the case in ITA No. 408/Chd/2018, t....
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....e books of the assessee, the source of the same stood duly explained by the assessee as being from the business of the assessee. Even otherwise, no other source of income of the assessee is there on record, either disclosed by the assessee, or unearthed by the Revenue. The preponderance of probability, therefore, is that the debtors were sourced from the business of the assessee. Therefore, there is no question of treating it as deemed income from undisclosed sources u/ss. 69, 69 A, 69B and 69C of the Act and the same is held to be in the nature of Business Income of the assessee. Having held so, the same was assessable under the head " business and profession" and as stated above, the benefit of set off of losses, both current and brought forward, was allowable to the assessee in accordance with law. 21. The contention of the Revenue, therefore, that the income be treated as deemed income u/s. 69,69A/B/C of the Act is, accordingly, rejected and, as a consequence thereto, the plea that no set off of losses be allowed against the same u/s. 115BBE of the Act, also is rejected." 23. In the instant case, as we have discussed above, it is evident that deeming provisions are ....
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.... Explanation 2 to section 263 inserted w.e.f 01.06.2015 as the concerned Assessing Officer had duly made appropriate enquiries and applied his mind and assessed the income offered during survey as business income. 5. That in any case the order of the Learned Pr. CIT (Central) passed u/s 263 is against the law and deserves to be quashed. 6. That the Appellant craves leave for permission to add, amend or alter any ground of appeal at the time of hearing." 27. Briefly the facts of the case are that a survey operation was conducted at the business premises of M/s Shankar Agro Foods and M/s Bindas Agro Foods Pvt. Ltd. C/o Shankar Rice & General Mills. Thereafter the assessee, who is a partner/director in these concerns filed his return of income declaring total income of Rs. 43,79,870/- on 30/10/2017 which was selected for scrutiny and notices under section 143(2) and 142(1) were issued and thereafter after calling for necessary information and documentation, the assessment was completed under section 143(3) vide order dt. 17/12/2018 accepting the returned income. 28. Subsequently, the assessment records were called for and examined by the Ld. Pr. CIT and a show ....
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....e survey team and the documents found during the course of survey and has thus made necessary and requisite inquiry/verification before passing the assessment order and therefore the findings of the Ld. Pr. CIT that there is no proper inquiry or verification done by the AO cannot be sustained in the eyes of law. 32. It was further submitted that in this case, the AO has clearly mentioned that surrendered income is income from business and therefore there is no question of applicability of Section 69 r.w.s 115BBE of the Act as the AO has clearly held that the same is in the nature of business income and once such an opinion has been formed which is a plausible view, the same cannot be substituted for the view taken by the Ld. Pr. CIT. 33. It was further submitted that at the time of survey, the assessee was merely a partner in the firm and he has surrendered the income of Rs. 25,00,000/- being profit earned from the business and he was not having any other independent source of income. Therefore the surrender so made was accepted by the Survey team. It was further submitted that the surrender letter has been duly accepted by the Department and which mentioned the calculation o....
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....surrendered during the course of survey and the explanation so offered by the assessee. In this regard, reference is drawn to the surrender letter and contents thereof read as under: To, The Deputy Director of Income Tax, Ludhiana Sub:- Surrender of Income in lieu of Survey u/s 133A. Dear Sir, Our accounts have been examined during the course of survey on 31.08.2016 at the premises of firm in which I am a Partner/Director. During the course of survey certain discrepancies were found in my accounts for which I hereby surrender a sum of Rs. 23,64,000/- on account of amount receivable over and above my regular income. This surrender is made to buy peace and avoid litigation and is subject to no penalty and prosecution. This amount will be duly shown in our IT Return. I hereby enclose cheque the detail of which are as under:- Ch. No. 656547 dated 15/11/2016 3,65,000/- Ch. No. 656548 dated 30/01/2017 3,65,000/- 7,30,000/- This is for your information please. Thanking You Yours Faithfully Sd/- ( Bal Krishna ) 37. As is evident from the surrender letter, ....