AI Drafter 
TaxTMI 
TaxTMI 
2024 (4) TMI 921
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....e business carried on by the assessee during the course of normal business as per books of accounts. 3. That the various judgments which assessee has relied upon of the jurisdictional Chandigarh Bench of ITAT have been ignored and the order has been passed against the facts & circumstances of the case. 2. The Assessee in this case has also taken an additional Ground, which reads as under: "That the ld. CIT(Appeals), has erred in invoking section 69 read with section 115BBE of the Income Tax Act on the excess cash of Rs. 1,34,004/- and since the excess cash was related to same business of purchase and sale of jewellery and hence the normal rate of tax should be levied on excess cash." 3. Briefly the facts of the case are that a survey u/s 133A of the Income Tax Act was carried out at the business premises of the Assessee on 24.01.2019 and during the course of survey operations, certain discrepancies were noticed and Assessee came forward and surrendered a sum of Rs. 1,00,00,000/-. The Assessee filed its return of income, declaring total income of Rs. 1,08,37,187/- on 24.09.2019 including the surrendered income, which was processed u/s 143(1) and thereafter, t....
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.... to the satisfaction of the AO, such income could be held to be liable under section 115BBE. (Sources of the income and satisfaction of the Assessing Officer already established during the course of survey) (iv) Further, during the course of survey proceedings, the assessee has offered a sum of Rs. 1 Crore as business income on account of excess business stock of Gold, Silver & Diamond. Regarding your good self's query related to income offered by the Assessee amounting to Rs. 1 crore shown as Business Income in the Profit & Loss account already field with your good self, in this regard, it is submitted that in the case of assessee, sum of Rs. 1 crore offered during the course of survey relates to same business activity of the assessee and amount was offered merely to cover the discrepancies pointed out by department of stock arising out of the trading business transactions. It is also pertinent to note that during survey proceedings, no document/ paper was found which can prove that assessee has undertaken any unexplained business other than the activities carried on by it in regular course of business. The income offered by the assessee is out of the similar modus operan....
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....004/-, being unexplained, was added to the returned income of the Assessee u/s 69A of the Act and the total income of the Assessee was assessed at Rs. 1,09,71,190/- as per the provisions of section 115BBE of the Income Tax Act. 5. Being aggrieved, the Assessee carried the matter in appeal before the ld. CIT(A) who has sustained the said additions. As per the ld. CIT(A), surrender was made during the course of survey on account of excess stock and investment in construction of building of the Assessee. The AR in his submissions has tried to justify the same as business transactions of the Assessee. The AR has claimed that the Assessee was not having any other source of income. Further, the AR relied upon judgments as quoted in his submissions. The ld. CIT(A) observed as follows : "5.1 The judgments quoted by the AR have been gone through. It is important to emphasize here that in all the judgments quoted by the AR in his support, the ld. Tribunal Benches have very clearly held out that the AO shall give an opportunity to the Assessee to establish a linkage between the surrendered income under the business income, if any. If the Assessee is able to do that then the income....
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....e of the Assessee is not acceptable and the additions made u/s 69, are to be treated separately and it would not be possible to classify such deemed income falling under Chapter-VI, under any of the heads including 'income from other sources' but they will be aggregated along with the incomes computed under Chapter IV. The AR has not been able to adduce documentary evidence to establish the nexus between the surrendered income and business and no source for the surrendered income could be related to." 5A The ld. CIT(A) relied on - 1. 'Fakir Mohammed Haji Hasan Vs. CIT', [2001[ 247 ITR 290(Guj.) 2. 'PCIT vs. M/s. Khushi Ram & Sons Pvt. Ltd.', the Hon'ble High Court of Punjab & Haryana in ITA No. 126 of 2015 dated 21.07.2016. 3. 'SVS Oil Mills vs. ACIT', Chennai, the Hon'ble High Court of Madras in ITA No. 765 of 2018 dated 26.03.2019. 4. 'Kim Pharma Pvt. Ltd. vs. CIT', in ITA No. 106 of 2011 dated 27.04.2011. 5. The Hon'ble Supreme Court in the cases of 'Roshan Di Hatti vs. CIT', [1977] 107 ITR 938 (SC). 6. Hon'ble Supreme Court in' CIT vs. M Ganpati Mudaliar', [1964] 53 ITR 623 and 'GovindrajuluMudalia....
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....ions on behalf of the Assessee, hereon, to para 11 are that during the course of survey, statement of Shri Rakesh Kumar (son of the Assessee was also recorded), which is placed in the paper book at pages 24A to 24H; that the Assessee declared the surrendered amount of Rs. 1,00,00,000/- in the profit and loss account which was duly audited and on the basis of audited report, the Assessee paid tax on the total income including the surrendered income at normal rate which was then accepted by the survey party; that the case of the Assessee was selected for compulsory scrutiny and notices u/s 143(2) and 142(1) along with detailed questionnaires were issued to the Assessee and the Assessee filed detailed response to the notices; and that no adverse material was found during the course which showed that the said excess stock was unexplained and hence, the excess stock found during the course of survey should be treated as business income of the Assessee and the provisions of section 115BBE of the Act are not applicable to the same. It is submitted that the A.O. without considering the replies filed by the Assessee made addition to the tune of Rs. 1,34,004/- to the total income on account ....
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....t the time of survey was enclosed. 7.3 The Assessing Officer just simply mentioned that the submissions of the Assessee were not found acceptable as no cogent reasons supported by documentary evidence were being cited by it during survey. The same was treated as an unexplained investments u/s 69 and taxed the same at the rate of 60%, thus she failed to prove authoritatively a view taken by her and contrarily whatever the Assessee declared in the return of income. However, the income surrendered during survey was accepted by the AO at that time and the Assessee has also offered the same for taxes while filing its return of income. 7.4 In case, the investment is to be treated as unexplained, the Assessing Officer has to bring on record some conclusive evidence/ convincing finding as how the said investment is being treated as unexplained. In the circumstances, it is a bald allegation of the Assessing Officer to consider the income declared as an unexplained investment. Further, merely based on guess work of the Assessing officer, there should not be invocation of provisions of section 69 of the Act. During the course of survey, not even an iota of evidence was found which sugge....
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....tified and the action of the Assessing Officer deserves to be negated. 7.6 Reliance can also be placed on the Judgement of the ITAT, Chandigarh Bench in case of 'Shri Harish Sharma Vs. The Income Tax Officer, Ward 5, Khanna', Distt. Ludhiana in ITA No. 327/Chd/2020, wherein it was held that: "Find merit in the contention of the Assessee that in the absence of any adverse findings by the AO on the source of earning of the Assessee, the authorities below have wrongly treated the amount in question as undisclosed income u/s 68 of the Act and computed the Tax liability under the provisions of the section 115BBE of the Act." 7.7 As regards, the charging of income tax @ 60% invoking the provisions of section 115BBE on the income declared by the Assessee in its return of income. The Assessee has already made its detailed submissions with respect to the invocation of the provisions of section 69 above. In case the Bench is also of the view that the action of the Assessing Officer in invoking the provisions of section 69 of the Act is not warranted then this ground will consequently become inoperative as the charging of income at a higher rate does not arise when an income is....
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.... been able to controvert the aforesaid submissions which were also made during the course of assessment proceedings. It was further submitted that the books of account were maintained in the normal course of the Assessee's business which were duly audited and in the Tax Audit Report, the auditors have also mentioned that there is no change in the nature of the business so carried on by the Assessee as compared to earlier years. It was submitted that the additional income so offered was duly recorded in the books of account and on the basis thereof, was offered to tax by the Assessee while filing his return of income. It was submitted that during the course of assessment proceedings, the submissions were filed from time to time which were duly accepted by the A.O., and, wherein it was submitted that none of the income offered for taxation at the conclusion of survey proceedings was in the nature of deemed income and therefore, the deeming provisions as well as provisions of Section 115BBE were not applicable. It was submitted that the AO, however, brought these transactions amounting to Rs. 1,00,00,000/- to tax u/s 115BBE of the Act merely for the reason that such income had bee....
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....eels Pvt. Ltd. Vs ACIT 43 ITR (Trib) 414 and Marshal Machines Pvt. Ltd. (ITA No. 57/CHD/2017). It was submitted that in the said decisions, the Co-ordinate Chandigarh Benches have adequately discussed the judgement of the Hon'ble Punjab & Haryana High Court in case of M/s Kim Pharma Pvt. Ltd. as well as Gujarat High Court in case of Fakir Mohmed Haji Hasan Vs CIT. 10. Further reliance was placed on the judgement of the Hon'ble Calcutta High Court in the cases of 'DaulatramRawatmull vs. CIT', 64 ITR 593, in 'Mansfeild and Sons vs. CIT', 48 ITR 254 (Cal.), and Coordinate Chandigarh Benches decision in cases of 'M/s Sham Jewellers Vs. The DCIT', (in ITA No. 375/Chd/2022, 'M/s Sham Fashion Mall' in ITA 315/Chd/2022, 'Bajaj Sons Ltd.', (ITA No. 1127/Chd/2019)', 'DCIT vs. M/s Khurana Rolling Pvt Ltd' (ITA No. 745/Chd/2017) and some other decisions of the other Benches of the Tribunal. 11. It was, accordingly, submitted that in light of the aforesaid submissions, the amounts so surrendered during the course of survey proceedings is clearly in the nature of business income and it has been duly offered to tax under the head "income from business & profession". Therefore, the a....
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.... As per the ld AR, the Assessee has honoured the surrender so made at the time of survey not just in terms of the quantum of income so surrendered but also in terms of nature of income so surrendered, and the rate of tax at which the surrender has been made and surrender so made has been accepted by the survey team and thus, the deeming provisions of section 69 and 69A r/w section 115BBE are not attracted in the instant case. 14. To appreciate the aforesaid rival positions, we refer to the provisions of Section 69A of the Act. 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....
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....ut 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 to disclose the 'n....
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....refore, 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. 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 Riwaz Jewellers, Khanna and allied products wherein he is engaged in the business of trading of various kind of jewellery, i.e., gold, silver and diamond and related products 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 account, 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 account. 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 sour....
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....d 04/08/2022), speaking through one of us, it was held by the Chandigarh Bench of the Tribunal, 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 satisfied before the said provisions are invoked. It is like laying a general rule, which t....
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....hd.) 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 recorded in the books, were held and dealt uniformly by the Assessee. There was no physical dis....
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....se 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 to be only taxed under the head 'business'. Other assets have separate physical identity being....
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....nder 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) part of declared asset, falling under a particular head, then the difference should be treated a....
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.... 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." 25. The said decision of Coordinate Jaipur Benches has since been confirmed by the Hon'ble Rajasthan High Court in case of PCIT vs Bajarang Traders (DB Appeal No. 258/2017 dt. 12/09/2017). 26. Similarly, the Coordinate Chandigarh Benc....
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....y 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." 27. 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 busine....
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....he 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.408/Chd/2018 and as per the provisions of law relating to the issue, the surrendered income, we hold, was assessable as business ....
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....9. 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 except income from business and, therefore, it is our considered view that deeming such income under the provisions of sections 68 or 69 would no....
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....early 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 ChokshiHiralalMaganlal 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 ....
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....o 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 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 in....
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....sessee 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." 31. 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 account 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 arose 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 Tri....