AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (12) TMI 972
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....ave been followed by the Ld. CIT(A), being jurisdictional Bench of ITAT. 3. That the various case laws as relied upon by the CIT(A) while confirming the addition are against the facts and circumstances of the case. 4. 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 this is a case of an assessee which is a partnership firm engaged in the business of the business of manufacturing of wearing apparels. Apart from said business, the assessee is not engaged in any other business and the assessee does not have any other source of income apart from the business income of the assessee. 4. It was submitted that a survey action u/s 133A of the Act was carried out at the business premises of the assessee on 29.08.2018. During the course of survey, certain discrepancies were encountered in physical verification of stock and in order to buy peace of mind and to cover up such discrepancies, the assessee surrendered an amount of Rs. 50,00,000/- as additional business income out of normal business income of the assessee for the FY 2018-19. The copy of the surren....
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....of Rs. 50,00,000/- u/s 37 of the Act. The ld CIT(A) vide order 04.01.2023 although deleted the disallowance of Rs. 50,00,000/- u/s 37 of the Act however, the submissions of the assessee on the alleged application of section 69B of the Act in the case of the assessee were not considered and the ld CIT(A) confirmed the application of section 115BBE of the Act in the case of the assessee on account of amount surrendered by the assessee during the course of survey action on account of excess stock found. Now, against the order of CIT(A), the assessee is appeal before the Tribunal. 10. In the aforesaid factual background, it was submitted that the assessee has been engaged in the business of manufacturing of wearing apparels and is not engaged in any other business and neither the assessee has any other source of income. The same fact has been accepted by the department during the course of survey action as well as during the course of assessment proceedings later on wherein, no adverse opinion w.r.t. any other source of income of the assessee. Hence, in the first instance, it is hereby submitted that the assessee is engaged only in the business of manufacturing of wearing apparels and....
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....xing such income at special rate as per section 115BBE of the Act is invalid. In the case of the assessee also, there has been no other source of income identified, neither during the course of survey action nor during the revision assessment proceedings initiated later on. Hence, the income of the assessee is only on account of the business of the assessee carried on by the assessee since past many years and in these circumstances, the provisions of section 69B of the Act are not applicable. 13. Further, reliance is also placed on the following judgments: * Hon'ble Chandigarh Bench of ITAT in the case of M/s. Sham Jewellers in ITA No. 375/CHD/2022, wherein, it has been held as under: "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 ....
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....d hold that the application of provisions of section 115BBE of the Act in the case of M/s Sham Fashion Mall was bad in law and the same cannot be sustained." * Hon'ble Chandigarh Bench of ITAT in the case of Gaurish Steels Pvt. Ltd. as reported in 82 Taxmann.com 337 wherein it has been held as under: "It has been held that income surrendered by the assessee during the survey on account of discrepancy in cost of construction of building, discrepancy in stock and discrepancy in advances and receivables would be considered as business income and not as deemed income under section 69." * In the case of Bajaj Sons. Ltd., the Hon'ble Chandigarh Bench of ITAT, ITA No. 1127/CHD/2019, has stated as under: "The AO has not pointed out any unexplained credit in the books of account, any unexplained investment, any unexplained money, bullion or jewellery, any unexplained expenditure or any amount of loan repaid in the assessment order in this respect. Therefore, the provisions of Section 68, 69, 69A, 69B, 69C and 69D are not attracted on the surrendered amount of Rs. 15 lacs. The said amount of Rs. 15 lacs was offered in case any discrepancy is found in the books of account. However, in....
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....". * In the case of M/s. Arora Alloys vs. DCIT in ITA No. 1481/CHD/2017 the Hon'ble Chandigarh Bench has held as under: "In the light of the above, let us examine the facts of the present case. The stand of the assessee is that expenditure incurred for construction of building was from the routine business, and such addition of Rs.32 lakhs ought to be treated as business income. We find force in this contention of the ld. counsel for the assessee, because the expenditure incurred for creating a business asset and it must have been generated through the business carried out by the assessee. It is pertinent to bear in mind that expenditure laid out for the purpose of business is to be allowed deduction either as expenditure or to be capitalized on which depreciation will be allowed. The assessee might have earned income from the business which has not been accounted and used for constructing the business asset, though specific details have not been discussed either in the impugned order about the nature of evidence found during the course of survey. We also need not to ponder on this aspect because the assessee has admitted this unexplained expenditure on construction of building....
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.... Bench has held as under: "the assessee, wherein it was alleged that it is for the purpose of the business. Therefore, to the extent the expenditure incurred for construction of the building, out of unexplained source is concerned, it is to be construed as earned from the business and it will take character of the business income. Once this income is to be assessed under the "business income", then all incidental benefits for set off from brought forward loss or any other expenditure is to be given to the assessee." 16. It was further submitted that in the order passed by the ld CIT(A) dated 04.01.2023, the ld CIT(A) has placed reliance on the judgments in the cases of Fakir Mohamad Haji Hasan v CIT 247 IT 290 (Guj), Kim Pharma Pvt. Ltd. v CIT 216 Taxman 153 (P&H), Famina Knit Fab v ACIT 176 ITD 246 (Chandigarh Trib.), Pr. CIT v. Khushi Ram & Sons Foods (P) Ltd. In this regard, it was submitted that the said judgments are duly discussed in the judgment of the Hon'ble Chandigarh Bench of ITAT in the case of M/s Khurana Rolling Mills Pvt. Ltd. as reported in ITA No. 745/CHD/2016 as well as in the case of judgment of the Hon'ble Chandigarh Bench of ITAT in the case of M/s. Bindas F....
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.... offered is not found satisfactory in the opinion of the AO. Therefore, the explanation so offered by the assessee explaining the nature and source of such undisclosed income and the reasonability of the explanation so offered by the assessee needs to be analysed and examined to draw necessary conclusions in this regard. 20. For the purposes, we refer to the statement so recorded of the one of the partners of the assessee firm during the course of survey on 29/08/2018. In Question no. 35, it was stated that during the course of survey proceedings u/s 133A, physical verification of stock lying in the business premises was done with the help of person deputed by the assessee and after physical verification, it comes to Rs 1,94,48,494/- whereas as per provisional trading account submitted by your accountant, the stock as on today is Rs 1,34,48,922/- so there is a difference of Rs 59,99,572/- in the stock and the assessee was asked about the difference in stock found and recorded in the books of accounts. In response, the assessee submitted that purchase bills amounting to Rs 10,04,572/- are yet to be entered in the system against which goods have already been received and for the rem....
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....tisfy the second condition for invoking the deeming provisions of section 69B of the Act. 21. In case of Fashion Fashion Wor ld Vs. ACIT (IT Appeal No. 1634(Ahd. ) of 2006, dt . 12/02/2010), the Coordinate Ahmedabad Benches has held as under : 11. But this does not mean that loss computed under any of the fiveheads 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....
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....o nexus is established with any head then it should be considered as deemed income undersection 69, 69A, 69B & 69C as the case may be. It is because when assessee fails to explain satisfactorily the source of such investment the nit 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 in come 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....