TaxTMI 
TaxTMI 
2024 (1) TMI 795
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.... survey proceedings u/s 133 A of Income Tax Act 1961. 3. That Ld Commissioner of Income Tax (Appeals) & Assessing Officer was not justified to assess the surrendered amount as deemed income in contravention to Section 14j)f Income Tax Act 1961 as Assessing Officer assessed these amounts as income from undisclosed sources but added & assessed in business income. 4. That the Ld Commissioner of Income Tax (Appeals) was erred in law to hold and assess the income in accordance to provision of Section 68 whereas the Assessing Officer assessed these income under section 69 which concludes that these both officers are not definite about applicability of specific provision of law. 5. That the surrendered amount has wrongly assessed as "deemed income" whereas appellant has shown these income as "business income" in books & in return of income as the appellant has no other source of income. 6. That the appellant, craves leave to add or amend any ground of appeal before appeal is heard or dispose off. 3. During the course of hearing the Ld. AR submitted that the survey operation u/s 133A was conducted on the business premises of appellant on 16/04/2018. D....
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....7,029.00 on account of excess stock found during the course of survey. 3. Rs. 2,16,341.00 on account of difference in cash found at the time of survey. While completing the assessment u/s 143(3) the Assessing Officer assessed voluntarily surrendered income with the following finding. i. Rs. 14,00,000.00 as deemed income u/s 69 of Income Tax Act 1961 as unexplained investment of capital introduced by Proprietor. ii. Rs. 17,07,029.00 as deemed income u/s 69 as unexplained investment on account of excess stock. iii. Rs. 2,16,341.00 on account of difference in cash was treated and assessed as business income. That only issue/ground of appeal is that Assessing Officer was not justified in eyes of law/facts to assess income u/s 69 of Income Tax Act 1961 whereas appellant has correctly returned as business income & further addition of Rs. 25,961.00 is also in dispute as ground of appeal No.4 of Form No.35 filed online. The written submission ground of appeal wise is as under. Ground of Appeal No.2 income of Rs. 14,00,000.00 wrongly assessed u/s 69 of Income Tax Act 1961 That Para No.2 of assessment order reveals the s....
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....that if the above said conditions are satisfied, the value of such investment may be deemed to be the income of the assessee of such financial year. One of the fundamental differences between section 68 and this section 69 of Income Tax Act 1961 for their application is that whereas for section 68, there should be credit entry in books of account, for section 69 there should not be entry the books of account' i. In Laxmim Narain Gupta Vs CIT 124 ITR 94 ii. In Banshidhar Aggarwal Vs CIT 148 ITR 523 iii. In Prakash Tiwari Vs CIT 148 ITR 474 iv. In Shanta Devi Vs CIT 171 ITR 532 (Pb & Haryana High Court) v. In CIT Vs Shiv Shakti Timbers 229 ITR 505 vi. In Chatna Enterprises Vs ITO 238 ITR (AT) 103 Held in all decided cases that, "The income from undisclosed source, if credited in books of account maintained by the assessee is liable to be assessed u/s 68 of Income Tax Act 1961 but if such income from undisclosed sources, though, invested had not been recorded in the assessee's books, than such income is liable to be assessed in terms of section 69 of Income Tax Act 1961. vii. In Roshan Lal Madan V....
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....was found which means that excess stock related to business transactions. ii. That the difference was determined between physical counting and stock as per books which clearly reveals that excess stock may be due to excess yield or discrepancy in counting or quoting and applying of rate without considering the purchase vouchers. iii. That the Assessing Officer did not find any incriminating documents with regard to bogus purchases or sales outside books of accounts. iv. That survey was conducted on 17/04/2018 i.e only 17 days after close of year. The Assessing Officer accepted the opening stock however did not appreciate the year in which difference in stock relates to section 69 indicates that unexplained investment should be in the year immediate proceedings the assessment year. That excess stock was found at business premises of firm and the firm has no other source of income accepts the business income of manufacturing of agricultural implements. v. That the Assessing Officer did not considered the fact that in surrender letter the addition on account of excess stock was surrendered as over & above business income and entry of surrender was m....
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.... account of excess stock and excess cash found u/s 69 of Income Tax Act 1961. Thus there is no justification for taxing such income u/s 115BBE of Income Tax Act 1961. So at last it is submitted that excess stock without any finding about bogus purchases is assessable under the head "business or profession" and section 69 read with section 115BBE had wrongly invoked. That the Assessing Officer made the addition amounting to Rs. 25,961.00 on account of alleged interest earned on the advances to different persons. During the course of survey operation cash was found excess in books of accounts however physical cash was nil and the officer contended that the said cash was advanced to difference persons. There is no incriminating document which may held that the assessee advanced this said amount. The addition amounting to Rs. 25,961.00 is not justified rather the whole of the addition of surrendered amount of Rs. 2,16,341.00 is also not justified. The amount of difference in cash has wrongly been surrendered and the said amount has been taxed twice as on one hand excess cash was recorded in books of account and further specific addition/ amount surrendered by taxpayer....
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....t is there in the capital account of the proprietor and the assessee has no justification to explain its source or nature. The Hon'ble High Court of Punjab & Haryana in the case of Gumani Ram Siri Ram vs. CIT [1975] 98 ITR 337 held that" the language of Section 68 shows that it is general in nature and applies to all credit entries in whomsoever name they may stand." Also, the Hon'ble MP in the case of CIT vs. Shiv Shakti Timbers [1997] 90 taxman 349 held that "a close reading of Section 68 & 69 makes it clear that in the case of Section 68 there should be a credit entry in the books of accounts whereas in the Section 69 where may not be an entry in the books of accounts." In the case of Roshan Di Hatti vs. CIT [1977] 107 ITR 938, the Hon'ble Supreme Court held that "the onus of proving the source of some of money found to have been received by an assessee is on him." In the case of Kale Khan Mohammad Hanif vs. CIT [1963] 50 ITR 1, the Hon'ble Supreme Court held that "where the nature & source of an receipt cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is income of the assessee and n....
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....he case of V. Subramonia Aiyr vs. CIT [1978] 113 ITR 685 held that "the power conferred on Appellate Authority by Section 246 which is exercised in accordance with procedure with Section 250 indicate the amplitude and width which is no less wide than that of an ITO and the Appellate Authority could substitute the order of the ITO by one of his own." From the above, it is very clear that the powers of CIT(A) are coterminus with that of the AO. Hence, the credit in the capital account of the assessee is treated as deemed income u/s 68 of the Income Tax Act, 1961. The ground of appeal is accordingly dismissed. Penalty proceedings u/s 271AAC are initiated. 4.1 It was further submitted that for the unaccounted stock found during the survey proceedings, there can be no presumption to treat the value representing such excess stock as application of business income in absence of any evidence of earning that income or details as to when, how and from whom such income was derived which has been invested in stock. It was submitted that the assessee has not been able to establish nexus between the excess stock and normal business income. Further no documentary evidence has been sub....
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....Hon'ble High Court referred to the decision of the Hon'ble Supreme court in case of Sumit Dayal versus CIT 1995 (2) SCC 453 wherein it was held by Hon'ble Supreme Court that "In all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the assessing officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee viz. the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature." 6. In the instant case, it is an undisputed fact that a sum of Rs 14,70,000/- has been found credited as addition....
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....tments in stocks not recorded in the books of accounts, the explanation of the assessee has to be sought and 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. 8. During the course of survey proceedings, stock as per books of account was found recorded at Rs 66,80,723/- however, on physical verification of stock lying in the business premises, it was found at Rs 83,87,752/- and there was a difference of Rs 17,07,029/- in the stock which was found by the survey team. We therefore find that the stock physically found has been valued and then, compared with the value of stock so recorded in the books of accounts and the difference in the value of the stock so found belonging to the assessee has been determined. There is thus no dispute that there is a commonality in the stock so found and as recorded in the books and in absence of which, the comparison would not have been possible and difference would not have been worked out. The Revenue has not pointed out that the excess stock has a....
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....nd 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 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 taxa....
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....tablish 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 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. ....