TaxTMI 
TaxTMI 
2023 (11) TMI 631
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....are not applicable. 4. That the worthy PCIT is erred in treating the surrendered amount u/s 69A 69 or 69B and charging the special rate of tax u/s 115BBE of the Income Tax Act. 5. That the case laws which have been cited by the PCIT Patiala are not applicable to the facts of the case. 6. That the worthy PCIT Patiala is erred in passing the revisional order u/s 263(1) of the Act mainly on the ground that the AO had accepted the surrendered amount under business or profession without making any queries. 7. That the appellant craves leave to add, amend and alter any of the ground(s) of appeal or to take any additional ground(s) of appeal before the appeal is finally disposed off. 2. Briefly the facts of the case are that a survey operation under section 133A was carried out at the business premises of the assessee on 23/09/2016. During the course of survey operation, certain discrepancies were noticed and as a result, the assessee offered a sum of Rs. 80,00,000/- apart from his normal business income. Subsequently, the assessee filed his return of income on 31/10/2017 showing total income of Rs. 94,70,540/- including the surrendered income of Rs.....
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....re made. 6. It was submitted that in the above factual background, the AO took a possible view on the taxability of income surrendered by the assessee and accepted the sum surrendered as part of the business income of the assessee and accordingly the revision proceedings have been initiated by the ld PCIT merely basis difference of opinion which cannot be a ground to determine as to whether the order passed by the AO is erroneous and prejudicial to the interest of the Revenue. 7. It was further submitted that the Ld. Pr. CIT has erred in invoking the Explanation 2 to Section 263 as the case of the assessee does not fall in any of the limb of the said explanation. It was submitted that the AO made independent inquiry on the issue concerned and there is no lack of inquiry as specific inquiry was made by the AO on the issue involved. 8. It was further submitted that the assessee has duly disclosed the amount of surrendered income in the P&L Account and which is only on account of business of the assessee and the said fact has been specifically mentioned in the surrender letter dt. 24/09/2016 which has been accepted by Survey Team during the course of survey as well as by the ....
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.... therefore the contention of the ld AR that the AO has taken a possible view cannot be accepted. It was accordingly submitted that there is no infirmity in the order of the Ld. Pr. CIT wherein the order so passed by the AO has been held as erroneous in so far as prejudicial to the interest of the Revenue. 12. We have heard the rival contentions and pursued the material available on record. We have recently dealt with a similar matter in case of Bal Krishan and Others vs PCIT (supra) in terms of applicability of deeming provisions in context of survey proceedings and the powers of the ld PCIT u/s 263 and we therefore deem it appropriate to refer to the discussions therein, which we find are equally relevant in the present context, and the same read as under: "16. We have heard the rival contentions and pursued the material available on record. The limited issue under consideration relates to nature and source of income surrendered by the assessee during the course of survey and the explanation so offered by the assessee. In this regard, we find that survey operations u/s 133A were conducted at the business premises of M/s Shankar Agro Food and whose business has since be....
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....nd prosecution." 17. In this regard, we further refer to the surrender letter dated 01/09/2016 submitted by the assessee company before DDIT(Investigation), Ludhiana and contents thereof read as under: To. Dated: 01/09/2016 The Deputy Director of Investigation, Ludhiana Sub - Surrender of income in lieu of Survey Action on our premises u/s 133A. Dear Sir Our premises were Surveyed u/s 133A by Income Tax Department and a team lead by Sh. Prem Singh, IRS Deputy Commissioner Income Tax. During the Course of Survey certain discrepancies were found as (per) our recorded statements. To buy peace of mind and to avoid litigation we voluntarily surrendered a sum of Rs. 2,02,00,000/- (Rupees two Crore and two Lacs only) the detail of which are given below:- Due to Difference in Stock - Rs. 1,02,98,582/- On Account of Amount Received - Rs. 99,01,418/- ....
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....as issued a specific show-cause dated 26/12/2018 and has referred to the survey proceedings 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 acco....
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....eming provisions of section 115BBE of the Act. We therefore find that the assessee has been asked specific questions regarding not just the discrepancy but the nature and source thereof during the course of survey and it is clearly emerging that the source of such income is from its business operations. Further, the said fact is corroborated by physical stock taking conducted by the survey team and there is no finding that the stock so found is different from the one in which the assessee deals regularly and comparison thereof with the stock recorded in the books of accounts, the details of the parties from whom the amount was receivables as part of regular business dealings and the surrender letter dated 01/09/2016. Apparently, the ld PCIT has failed to take into consideration these documents and findings of the survey team which are very much part of the records. Following the surrender so made during the course of survey, the assessee has honored the surrender so made and offered the additional income as business income in his return of income and paid due taxes thereon. During the course of assessment proceedings, the Assessing officer has specifically taken cognizance of these....
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....am (Supra), speaking through one of us, it was held as under: 5. "Firstly, how the ld PCIT has arrived at a conclusive finding that the discrepancies found, confronted and accepted by the assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B & 69C is not apparent from the impugned order. Merely stating that excess cash is clearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction of Shed/Godown is covered u/s 69B or 69C and advances made to Sundry Parties is covered u/s 69, 69B or 69D is like an open ended hypothesis which is not supported by any specific finding that the matter shall fall under which of the specific sections and how the conditions stated therein are satisfied before the said provisions are invoked. It is like laying a general rule, which to our mind is beyond the mandate of law, that wherever there is a survey and some income is detected or surrendered by the assessee, the deeming 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....
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....the order has outlined the facts relating to the surrender made by the assessee stating that during survey a pocket diary was found from the account section of the assessee-company which contained entry of receivables amounting to Rs. 1.25 crores on pages 27, 28, 31 and 33, which were not recorded in the regular books of the assessee and were subsequently surrendered stating that these entries were unaccounted sundry receivables being surrendered as income under the head business, to buy piece of mind and subjected to no penalty and further that the losses incurred by the assessee in the impugned year will be adjusted against this surrendered income. The relevant facts as stated by the CIT (A) in para 9 of his order and which are not disputed, are reproduced hereunder: "9. Adverting now to the facts of the instant case, it is seen that when survey proceedings were conducted at the business premises of the appellant company, a pocket diary was found from the accounts section which contained entries of receivables amounting to Rs. 1.25 crores on page Nos. 27, 28, 31 and 33, which were not recorded in the regular books of account. When these entries were confronted to the app....
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....ssed by the ld PCIT though without any corroborative evidence, in any case, the same doesn't lead to the conclusion that the view taken by the Assessing officer as erroneous as the AO has taken into consideration the entirety of facts and circumstances of the case, the explanation offered by the assessee during the course of survey regarding the source of such income and thereafter, has assessed the income under the head "business income". The view so taken by the Assessing officer is after due application of mind and therefore cannot be held as unsustainable in the eyes of law. 24. In light of aforesaid discussions and in the facts and circumstances of the present case, where there are specific questions asked during the course of survey regarding the nature and source of income and which has been adequately responded to by the assessee and thereafter acted upon in terms of disclosing the income in the return of income under the appropriate head of income and where the same is duly examined and taken into consideration by the Assessing officer during the course of assessment proceedings, the order so passed by the Assessing officer cannot be held as erroneous in nature. I....
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.... surrendered during the course of survey proceedings have been sought to be brought to tax straightway under section 115BBE of the Act. And if we look at the provisions of Section 115BBE of the Act, it provides that where the total income of the assessee includes any income refer to in section 68, 69, 69A, 69B, 69C and 69D which is either reflected in the return of income furnished by the assessee or determined by the AO, the income tax payable shall be at the rate specified therein. Therefore, for section 115BBE, which talks about specified rate of tax, to be applicable in the instant case, the deeming provision of Section 68 to 69D needs to be satisfied at first instance and only in those cases where the deeming provisions are applicable, the tax rate as specified in Section 115BBE of the Act can be applied. Further if we look at the deeming provisions, which apparently does not found mention in the show cause notice issued by the Ld. Pr. CIT, it provides that where the assessee has made investments which are not recorded in the books of accounts and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the....
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....e have held in case of Gandhi Ram Vs. Pr. CIT(supra), the Ld. Pr. CIT has to record specific findings as to the applicability of the relevant deeming provision and how the explanation called for and filed by the assessee is not acceptable in the facts of the present case and which is clearly absent in the instant case. There is no inquiry or investigation which has been conducted by the Ld. Pr. CIT and there is no positive evidence brought on record as to why the deeming provision read with section 115BBE of the Act are applicable in the instant case. Therefore in absence of clear cut findings recorded by the Ld. Pr. CIT as to how the order passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue, the findings of the Ld. Pr. CIT deserves to be set aside. 17. Having said that, let's look at the nature and source of income surrendered and the explanation submitted by the assessee during the course of survey and whether the matter has been inquired into by the AO during the course of assessment proceedings. 18. In the statement of the assessee recorded under section 131 during the course of survey, in response to Question No. 1 & 2, the assessee has ....
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....d is from the assessee's business operation of the cattle feed which he is running since 2009. All the stock was found lying at the business premises and the assessee was confronted with discrepancies in terms of stock so found and valued and he has categorically stated that the investment in stock is made from undisclosed business income of the current year. The stock physically found was valued and then, compared with stock as recorded in the books of accounts, thus, there was clear nexus of stock with the assessee's business. There is no finding on record that the difference in stock so found out by the authorities has any independent identity and the same was thus part and parcel of entire stock of cattle feed. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee's business has been established, thus, it cannot be said that these are unexplained transactions thus, doesn't satisfy the second condition for invoking t....