TaxTMI 
TaxTMI 
2023 (12) TMI 716
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....provisions of section 115BBE are applicable and failed to appreciate 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 cop....
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....of Rs. 90,00,000/- depicts the advances given out of the suppressed professional receipts 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 de....
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....debit or credit entry was explained to the AO. Further, the surrendered sum is forming part of 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 ....
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....e assessee at normal tax rates is totally justified based on the facts of the case. 13. It was further submitted that during 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 I....
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....er: "In response to the notice, Sh. Naresh Jindal CA attended the assessment proceedings from time to time. The counsel of the assessee filed power of attorney along with books of 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 1....
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....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. 22. Further reference was drawn to the decision of Hon'ble Gujarat High Court in case of Fakir Mohamad Haji Hasan 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 ....
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....hich are 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 the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, 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 asses....
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....er valuable articles, Section 69B refers to the investments, Section 69C refers to the expenditure and Section 69D refers to the amount borrowed or repaid on hundi. The provisions of these Sections are attracted and the income is assessed under these Sections, if, the assessee fails to 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 ma....
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.... the facts and circumstances of the relevant case. In fact, if we look at the provisions of section 133A, clause (iii) of sub-section (3) provides that an income tax authority acting under this section shall record the statement of any person which may be useful for or relevant to any proceedings under 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 ....
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....he time of survey on account of certain discrepancies noticed in terms of advances to various persons amounting to Rs. 55,00,000/-, cash in hand of Rs. 9,80,000/-, excess stock of Rs. 20,00,000/- and the tax liability of Rs. 26,20,000/- which has been worked out at the time of survey and the details and particulars 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 h....
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....satisfactory, he can proceed and invoke the deeming provisions. 21. In case of Gandhi Ram (ITA No. 121/CHD/2021 dated 04/08/2022), speaking through one of us, it was held that it is like laying a general rule which 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 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 satisfi....
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.... the decision of the Tribunal in case of Fashion Fashion World Vs. ACIT (IT Appeal No. 1634(Ahd.) of 2006, dt. 12/02/2010) wherein the Tribunal had observed as under: "11. But this does not mean that loss computed under any of the five heads mentioned in section 14 - (i) 'salary', (ii) 'income from house property', (iii) 'profits and gains 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 re....
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....e considered as deemed income under section 69, 69A, 69B & 69C as the case may be. It is because when assessee fails to explain satisfactorily the source of such investment then it should be taxed under section 69, 69A, 69B & 69C as the case may be. It should not be done at the first instance without giving opportunity to the assessee to establish nexus. Therefore, 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 ....
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....in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, 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) par....
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....nts. In fact, the same provides a credible base for Revenue to bring to tax subsequent profit/loss on sale of such stock of rice in future. 2.11. Having said that, the next issue that arises for consideration is whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head "business income" or "income from other sources". In the present case, the 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 Ba....
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....construction of building, discrepancy in stock and discrepancy in advances and receivables. By no stretch of imagination, any of these incomes apart from cash can be considered as income under any head other that the 'business income'. 14. Nowhere in his order the Assessing Officer has been able to bring on record the fact that the income surrendered during the course of survey was not out of the business of the assessee. Also nowhere he has objected to the heads under 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: "....
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....sessee. Though the said income was not recorded in the books of the assessee but 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/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.....
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....re the same has been found unrecorded in the books of accounts, the same has to be brought to tax under the head "business income". 30. Similarly, the Coordinate Chandigarh Bench in case of M/s Sham Jewellers Vs. The DCIT (Supra) has held as under: "10.17 Ground Nos. 8 & 9 challenge the action of the lower authorities in applying the provisions of section 115BBE and thereby charging tax at the rate of 60%. The main thrust of the arguments of the Ld. AR has been that all the additions made or sustained relate only to the business income of the assessee and that nowhere in the assessment 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 ex....
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....the nature of business income of the assessee. 10.20 Thus, as in the present case, where the source of investment or expenditure is clearly identifiable and the alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment or expenditure, then, first, what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure can it be considered to be taxed u/s 69 of the Act and further where once such investment or expenditure is brought within the purview of tax as undeclared business receipt, then taxing 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 Pu....
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....ration in the possession of the assessee company and the same was surrendered as additional income for the year under appeal. The assessee has failed to explain the nature and source of the said cash found which was not recorded in the books of account, though while surrendering the additional income it was admitted by the Manager of the assessee company, in the statement recorded during the course of survey that the said additional income is its income from other sources. The Hon'ble Gujrat High Court in Fakir Mohmed Haj Hussain Vs C IT had held as under : "The scheme of sections 69, 69A, 69B, and 69C of the Income-tax Act, 1961, would show that in cases 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 ....
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....s 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." 32. Thereafter, the matter came up for consideration before the Hon'ble Punjab & Haryana High Court and the Hon'ble High Court has stated 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 t....
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....osed advances and what is the explanation offered by the assessee explaining the nature and source of such undisclosed transaction and the reasonability of the explanation so offered by the assessee keeping into account the facts and circumstances of the present case. Once the deeming provisions are held applicable, the provisions of section 115BBE specifying the specified rate of tax as against normal rate of tax can be held applicable and not otherwise. The same is consistent stand across various of the Benches as we have discussed in aforesaid matter. 26. In the instant case, in the show cause issued under section 263 of the Act, the Ld. Pr. CIT has stated that during the course of survey proceedings 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 w....
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....g the course of survey but before the same is assessed and brought to tax under the deeming provision, what is relevant to examine is the sufficiency and adequacy of the explanation so submitted by the assessee explaining the nature and source of such income. There is thus a difference between the undisclosed income and the unexplained income which apparently is absent on the face of the show cause notice. As we have held in case of Shri Parmod Singla (supra), the mere fact that the survey proceedings have been initiated at the business premises of the assessee doesn't by default mandate the AO or for that matter, the ld PCIT to invoke the deeming provision and before invoking the deeming provision, he has 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 ....
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.... assessee. Thereafter, in response to question no. 4, he stated that whatever he earns from the Diagnostic centre, he gives total receipts to Dr Ravinder Bansal on daily basis. Thereafter, in response to question no. 5, he says that he doesn't's pay any rent to Dr Ravinder Bansal but give him commission @ 70%. In response to question no 8, he says that he maintains a note book where he maintain record of total receipts and then, in response to question no. 9, he says that he earns Rs 1500 to 2000/ per day after giving 70% to Dr Ravinder Bansal. It is also a matter of record that the lab register for the period 31/05/2016 to 29/06/2016 as well as OPD register from 31/05/2016 to 29/07/2016 as well as a sheet of paper 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 assesse....