AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (12) TMI 716
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....ppreciate that during survey, documentary evidences had been found and impounded, which established that the said income, as offered, was from the professional Income of the assessee. 3. That the Pr. CIT has failed to appreciate the fact that the assessment had been framed after due application of mind and thorough investigation and all the issues / impounded material has been analyzed, enquired into, and dealt with by the concerned Assessing Officer, before passing the order u/s 143(3). 4. That the replies as filed during the course of proceedings before the Assessing Officer and Ld. PCIT have not considered properly. 5. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off." 3. During the course of hearing, the ld AR submitted that the assessee is an individual carrying on the profession of Medical Practitioner and doing his practice for last many years. Other than the said profession, the assessee does not have any other source of income. The books of accounts of the assessee are duly audited by a Chartered Accountant and copy of audit report in Form 3CB-CD is forming part of paper book at Pg 5-27. 4. It ....
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....s of the assessee and it has been surrendered as additional professional receipts during the course of survey proceedings. Further, the assessee also filed GP ratio including as well as excluding the surrender amount. In the said reply, the attention of the Ld. AO was drawn to the fact that the Gross Profit (in absolute as well as in percentage terms) as calculated by the Chartered Accountant depicts that the sum surrendered during the survey operations has been duly taken into the books of accounts of the profession i.e. the surrendered sum is forming part and parcel of the professional receipts of the assessee. 7. It was submitted that even in the surrender letter filed by the assessee before the department at the time of survey operations, the surrender of Rs. 90,00,000/- as made by the assessee is over and above the regular professional receipts of the assessee and it is also mentioned in the surrender letter that tax shall be paid on such additional income as advance at normal tax rates. The copies of cheques of estimated amount of tax calculated at normal rates were also given to the department which were duly accepted by department and it depicts that surrender was made as ....
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.... the income credited in the Income and Expenditure account was also proved vide filing of GP ratios with or without the surrendered sum. It depicts that the issues which are now enquired by the ld PCIT have already been well enquired by the Ld. AO at the time of assessment proceedings and thereafter, he has taken one of the possible views regarding applicability of section 115BBE of the Act. It was submitted that the ld PCIT however passed the impugned order dated 15.03.2022 u/s 263 of the Act wherein case of the assessee was set aside to the file of the AO on the issue of chargeability of tax @ 60% on income surrendered by the assessee. Against the order passed by the Ld. PCIT, the assessee is now in appeal before the Tribunal. 10. In the aforesaid factual matrix of the case, the ld AR submitted that the assessee had surrendered a sum of Rs. 90,00,000/- on account of Misc. advances given out of the suppressed receipts of the profession. Referring to the statement of Sh. Sandeep Singh proprietor of a diagnostic lab running at the business premises of the assessee, it was submitted that in response to question no. 4, 9 & 10, it has been admitted by him that he is giving 70% of the ....
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....ring the course of assessment proceedings, the issue of taxability of income surrendered by the assessee was well enquired by the AO which is evident from the fact that the details which have already been verified by the AO during the assessment proceedings are now been asked by the worthy PCIT in show-cause dated 23.02.2022. It depicts that there was proper application of mind by the AO and he took a possible view on the taxability of income surrendered by the assessee and accepted the sum surrendered as part of business income of the assessee. It was accordingly submitted that it is definitely not a case of lack of enquiry by the AO and in fact there is proper application of mind by the AO. 14. It was further submitted that the revision proceedings u/s 263 of the Act have been initiated merely on the basis of difference of opinion which cannot be taken as a ground to determine the order passed by the AO as erroneous and prejudicial to the revenue. Reliance in this regard is placed on the following judgments including the judgment of jurisdiction bench of ITAT wherein it has been held that the action of the ld PCIT u/s 263 of the Act is bad in law where the AO, after due applicat....
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....f accounts and relevant documents/vouchers, which were examined on test check basis and placed on record." 18. It was submitted that the above depicts that each and every thing stands examined by the AO and there is no new issue which is pointed out by the PCIT and therefore, the revision proceedings u/s 263 are bad in law and deserves to be quashed and reliance has been placed on the following judgments: * NARAIN SINGLA vs. PCIT in ITA no. 427/CHD/2015 * CIT vs. ANIL KUMAR SHARMA as reported in 335 ITR 83 (Del HC) * CIT vs. HINDUSTAN MARKETING AND ADVERTISING COR. LTD. 341 ITR 180 (Del HC) * CIT vs. LATE SH. VIJAY KUMAR KOGANTI as reported in 195 DTR 428 (Madras HC) * SHRI VARINDER KUMAR GUPTA vs. ITO in ITA No. 754/Chd/2018 order dated 06.05.2020 (Chd Bench) * DHARAMPAL CONTRACTOR HOT MIX PLANT vs. PCIT in ITA No. 211/Asr/2017 order dated 14.06.2019 (Amritsar Bench) * SURINDRA ENTERPRISES vs. ITO (Chandigarh Bench) as reported in 18 ITR 325 (2012) 19. It was further submitted that the nature and source of the income surrendered during the course of survey has been duly explained and the case of the assessee is covered by the decision of the Coordinate Chandigarh B....
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....asan Vs. CIT 247 ITR 290, decisions of Hon'ble Punjab & Haryana High Court in case of Pr. CIT Vs. Khusi Ram & Sons Foods(P) Ltd. in ITA NO. 126 of 2015 (O&M) dt. 21/07/2016, in case of Kim Pharma Pvt. Ltd. Vs. CIT 216 Taxman 153 (P&H) ITA No. 106 of 2011(O&M), and decision of Hon'ble Kerala High Court in case of Maruthi Babu Rao Jadav Vs. ACIT in WA No. 984 of 2019 dt. 23/09/2020. 23. In his rejoinder, the Ld. AR submitted that all these decisions which have been relied on by the Ld. PCIT have been duly considered by the various Coordinate Chandigarh Benches decision which have been relied on by the assessee. It was further submitted that same has been again considered in the recent decisions of Coordinate Chandigarh Bench in case of M/s Sham Jewellers in ITA No. 375/Chd/2022, in the case of M/s Sham Fashions in ITA No. 315/Chd/2022 and in case of Shri Parmod Singla, Prop. M/s Singla Wire & Allied Products vs ACIT in ITA No.516/CHD/2022 dated 24/07/2023. 24. We have heard the rival contentions and purused the material available on record. Recently, we have decided a similar matter in case of Shri Parmod Singla, Prop. M/s Singla Wire & Allied Products vs ACIT (Supra) wherein we ha....
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....er, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. Section 69A provides that where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. 15. In the instant case, for the deeming provisions of section 69 to be attracted, there has to be a finding that the assessee has made investments during the financial year in the stock and by way of advances, such investments are not recorded in the books of accounts so maintained by the assessee, and the assessee offers no explanation about the nature and source of the investments or the ....
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....o give the explanation about the 'nature and source' of such undisclosed income. The ld. PCIT in our view, in this case has confused himself between the 'undisclosed income' and the word 'unexplained income'. As per provisions of Section 68 to 69D are attracted in respect of the undisclosed income but the condition for assessing such income under the said provisions is that the assessee has either failed to disclose the nature and source of such income or the AO does not get satisfied with the explanation offered by him. 15. The perusal of the above relevant part of the Audit Report proposal of the AO and Show Cause Notice issued by the ld. PCIT u/s 263 of the Act, would show that all the aforesaid authorities have been swayed by the notion that the income surrendered by the assessee was undisclosed income of the assessee and therefore, the same has to be assessed u/s 68 to 69D, as the case may be, of the Income Tax Act and thereby would be charged to higher rate of tax u/s 115BBE of the Act. However, as noted above, for an income to be taxed u/s 68 to 69D, as the case may be, it should not only be the undisclosed income but the essential condition is that the assessee has failed....
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....nder this Act. Therefore, what explanation has been offered by the assessee as part of his statement recorded u/s 133A needs to be analysed and examined before drawing any conclusions in this regard. 18. In the instant case, in the statement so recorded of the assessee during the course of survey, in Question No. 3 raised by the survey team, the assessee was asked about the source of his income and in response, the assessee submitted that he was sole Proprietor of M/s Singla Wire and Allied Products, Patiala and except the said business, he has no other source of income. Further, he stated that he was not partner/Director in any of the firm or company. In Question No. 4 raised by the survey team, he was asked to state the date of commencement of his concern and the nature of activity carried out alongwith details of manufactured products. In response, the assessee submitted that the concern started business in the year 2008 and it is involved in manufacturing of aluminum and copper wires and thereafter, he has given the details of manufacturing process. In Question No. 10, he was asked by the survey team that as per assessee's books of account, there was cash in hand of Rs. 66,40....
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....articulars of the cheque issued were mentioned. 19. We therefore find that through various questions raised during the course of survey, the assessee has been asked about the nature and source of his income and various discrepancies so found during the course of survey. In response, the assessee has stated that he is running a sole proprietorship business concern in name of M/s Singla wires and allied products since 2008 wherein he manufactures and sells aluminum and copper wires and all along, the same is his only source of income and thereafter, he has been confronted with discrepancies in terms of cash found excess as compared to what has been recorded in the books of accounts, certain advances relating to his business written in a rough diary and excess value of stock as compared to what has been recorded in the books of accounts. Therefore, we find that the assessee has been confronted with not just the discrepancy so found during the course of survey but the nature and source thereof during the course of survey proceedings and it is clearly emerging that the source of such income is from his business operations. There is a clear statement of the assessee that the advances a....
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.... by the assessee, the deeming provisions are attracted by default and by virtue of the same, provisions of section 115BBE are attracted and the relevant findings read 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....
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....ns from business or profession', (iv) 'capital gains' and (v) 'income from other sources' - cannot at all be adjusted against unexplained investment or expenditure. What is necessary as per Hon. Gujarat High Court is that source of acquisition of asset or expenditure should be clearly identifiable. In the case before Hon. Gujarat High Court the source of gold confiscated was not identifiable and hence adjustment was not permitted. 12. Thus the important aspect that emerges from the entire discussion is that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable asset or expenditure. In the present case we find that entire physical stock of Rs. 25,14,306/- was part of the same business. Both kind of stock i.e. what is recorded in the books and what was found over and above the stock recorded in the books, were held and dealt uniformly by the assessee. There was no physical distinction between the accounted stock or unaccounted stock. No such physical distinction was found by the Revenue either. The assessee has repeatedly claimed that unaccounted business income is invested in stock and there is no amount separately taxable under sec....
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....fore, there is no conflict with the decision of Hon. Gujarat High Court in the case of Fakir Mohmed Haji Hasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, we hold that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. 14. To conclude sum of Rs. 8,10,011/- being difference in stock is represented by undeclared business income. It does not have a separate physical identity. It is to be only taxed under the head 'business'. Other assets have separate physical identity being furniture and fixtures, air conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered under section 69 only." 15. In view of the above, AO is directed to consider the sum of Rs. 8,10,011/- as undisclosed business....
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....e, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon'ble Gujarat High Court in the case of Fakir Mohd. HajiHasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, the Hon'ble Coordinate Bench held that where asset in which undeclared independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case the excess stock was part of the stock. The revenue has not pointed out that the excess stock has any nexus with any other receipts. Therefore, we do not find any fault with the decision of the ld. CIT (A) directing the AO to tr....
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....e assessee is dealing in sale of foodgrains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. Therefore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. The decision of the Co-ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head "business income" and not under the head income from other sources". In the result, ground No. 1 of the assessee is allowed." 26. The said decision of Coordinate Jaipur Benches has since been confirmed by the Hon'ble Rajasthan High Court in case of PCIT vs Bajargan Traders (DB Appeal No. 258/2017 dt. 12/09/2017). 27. Similarly, the Coordinate Chandigarh Benches in case of M/s Gaurish Steels Pvt. Ltd. Vs. ACIT (Supra) has held as under: "10. We have heard the rival contentions and perused the material available on record. This is a fact on record that the assessee surrendered an amount of Rs. 70 lacs as additional income during the course of survey conducted at its premise....
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....which the assessee had surrendered these amounts, i.e. cash, construction of building, discrepancy in stock and discrepancy in advances and receivable. Further, even the survey team has not found any source of income except the business income. Now, following the judgment of Jurisdictional High Court, in the background of the facts of the present case, we can safely infer that apart from cash all other income surrendered may be brought to tax under the head 'business income' while the cash has to be taxed under the head deemed income under section 69A of the Act." 28. Similarly, the Coordinate Chandigarh Bench in case of Famina Knit Fabs Vs. ACIT (Supra) has held as under: "19. In the facts of the case in ITA No.408/Chd/2018, the income surrendered was on account of unaccounted receivables of the business of the assessee amounting to Rs. 1.25 crores. The Ld.CIT(A) in para 9 of 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....
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....ces u/s 69, 69A, 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. 22. Therefore, as per the facts of the case in ITA No.408/Chd/2018 and as per the provisions of law relating to the issue, the surrendered income, we hold, was assessable as business income of the assessee and set off of losses was to be allowed against the same as rightly claimed by the assessee. The appeal of the Revenue, therefore, in ITA No.408/Chd/2018 is dismissed. 23. Now coming to the facts of the case in ITA No/1494/Chd/2017, the income surrendered was on account of the following as narrated above in earlier part of our order: (i) investment of Rs. 60 lacs in Kothi ....
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.... order has it been alleged that some other source of income had been detected which gave rise to additional income. It is seen that during the course of assessment proceedings, the various explanations submitted by the assessee have duly mentioned that the surrendered income was derived from the business. A perusal of the assessment order would also show that nowhere in the body of the assessment order, the AO has even contradicted this explanation of the assessee. The AO has not brought on record any iota of evidence to demonstrate that the assessee had any other source of income except income from business and, therefore, it is our considered view that deeming such income under the provisions of sections 68 or 69 would not hold good. In our view, in such a situation, the AO could not have legally and validly resorted to taxing the income of the assessee at the rate of 60% in terms of provisions of section 115BBE of the Act. 10.18 The Hon'ble Andhra Pradesh High Court in the case of Principal Commissioner of Income Tax Vs. Deccan Jewellers Ltd. reported in (2021) 438 ITR 131 (AP) held that where the assessee was engaged in the business of Gold and Diamond jewellery and Silve....
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....g it further as deemed income u/s 69 would be completely out of place. 10.21 Similar view was taken by the Coordinate Bench of ITAT Ahmedabad in the case of Chokshi Hiralal Maganlal Vs. DCIT reported in 131 TTJ 1 (Ahd.) 10.22 It is also seen that the Ld. CIT(A) has relied on the judgement of the Hon'ble Punjab & Haryana High Court in the case of Kim Pharma Ltd. Vs. CIT in ITA No. 106 of 2011 (O&M) and the Ld. CIT DR has also quoted the same in his arguments before us. However, after going through the aforesaid judgement of the Hon'ble Punjab & Haryana High Court, it is seen that in that particular case, the only issue was with regard to the cash surrendered at the time of survey and no other income. The cash found could not be related to the already disclosed and accepted source of income of the assessee and, therefore, the Hon'ble Punjab & Haryana High Court held that such surrendered cash was to be treated as deemed income u/s 69 of the Act. However, in the present case before us, the assessee has only one source of income i.e. business income and nowhere has it been brought on record that the assessee had any other source of income except business income and, the....
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....ses where the nature and source of acquisition of Money, bullion, etc., owned by the assessee or the source of expenditure incurred by the assessee are not explained at all, or not satisfactorily explained, then the value of such investments and money or the value of articles not recorded in the books of account or the unexplained expenditure may be deemed to be the income of such assessee." In the absence of the explanation / evidence regarding the sources of the additional income being satisfactorily explained by the assessee and applying the ratio of the Hon'ble Gujrat High Court in Fakir Mohmed Haji Hasan Vs. C IT (supra), we hold that the additional income offered is deemed income assessable u/s 69A of the Act and no deduction is allowable against such deemed income assessed u/s 69A of the Act in the hands of the assessee. Following the ratio laid down by the Gujrat High Court in Fakir Mohmed Haji Hasan Vs. CIT (supra), once the assessee has failed to explain the nature and source of cash found available with it and the same is assessed as deemed income u/s 69A of the Act, therefore, the corresponding deductions under the head Profits and gains are not available to the a....
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....ed that the AO, the Ld. CIT(A) and the Tribunal after considering the factual aspect noticed that the amount surrendered during the survey was not reflected in the books of accounts and no source from where it was derived was declared by the assessee and therefore it was deemed income of the assessee under section 69A of the Act and accordingly the findings of the Tribunal were affirmed and it was held that no substantial question of law arises and the appeal of the assessee was dismissed. We therefore find that the statement of the General Manager as recorded during the course of survey played a decisive role and was taken into consideration by the Tribunal wherein he had admitted that cash has been generated out of income from other sources and in the absence of nature of source of cash being proved, it uphold the order of the CIT(A) and thereafter, on further appeal, the order of the Tribunal was upheld by the Hon'ble High Court. Unlike the said case, in the instant case, as we have noted above, the assessee in his statement recorded during the course of survey has clearly stated that he is running a sole proprietorship business concern in name of M/s Singla Wires and Allied pro....
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....ngs at the assessee's business premises, certain discrepancy were observed and confronted to the assessee and in response, the assessee offered a sum of Rs. 90,00,000/- towards unexplained misc. advances. It was further stated by the Ld. Pr. CIT that the assessee in his return of income has disclosed the surrendered income in the profit/loss account and paid taxes at the rates applicable to normal business income. In the said background, the assessee was also asked to justify as to why the tax have not been paid as per the provisions of Section 115BBE of the Act. Basis the above, it was stated by the Ld. Pr. CIT that the assessment seems to be erroneous so far as prejudicial to the interest of the Revenue. 27. We therefore find that the show cause U/S 263 has been issued for the reason that there was a survey operation at the business premises of the assessee and assessee has offered a sum of Rs. 90,00,000/- during the course of survey and since the assessee has paid taxes thereon at normal rate of tax and has not paid taxes as per the provisions of Section 115BBE of the Act, the Ld. Pr. CIT deemed it appropriate to invoke his jurisdiction under section 263 of the Act. In our view....
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....s to call for the explanation and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provision. 28. Moving further, let's look at the findings of the Ld. Pr. CIT as to how he has held that the order so passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue. The Ld. Pr. CIT has stated that survey under section 133A of the Act was conducted at the business premises of the assessee on 30/08/2016 and certain discrepancy were found, confronted and accepted by the assessee during the course of survey proceedings in terms of unexplained misc. advances of Rs 90,00,000/- and the case of the assessee is squarely covered under the deeming provision as advances are covered u/s 69, 69B or 69D and thereafter the discrepancy found during the survey proceedings attracted the provision of Section 115BBE of the Act. As we have noted above, there is no findings recorded by the Ld. Pr. CIT as to whether any explanation was called for from the assessee in terms of these undisclosed transactions either during the course of survey proceedings or during the course of assessment proceedings and how the explanation so offere....
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....er containing name of few persons and certain amounts against their name has been impounded during the course of survey. The assessee thereafter in the surrender letter dt. 05/09/2016 has stated that some discrepancies have been pointed in some heads in the account books during the course of survey and to cover up the discrepancies, he offers additional income of Rs 90 lacs over and above his normal to buy piece of mind and to avoid litigation. 32. Thereafter the assessee filed his return of income disclosing the amount so surrender in the P&L Account and the same was offered to tax under the head business income at the normal rate of tax. During the course of assessment proceedings, the AO in the notice issued under section 142(1) dt. 20/05/2019 has asked the assessee to explain the document impounded during the course of survey wherein details of Rs 90 lacs have been mentioned and details about the business income amounting to Rs. 90,00,000/- shown in the P&L Account. In response to the notice so issued, the assessee has filed his submission stating that these transactions relates to advances given out of professional receipts which were not accounted for in account books. It wa....