TaxTMI 
TaxTMI 
2024 (7) TMI 1620
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....and on the facts of the case for want of jurisdiction and various other reasons and further contrary to the real facts of the case hence the same may kindly be quashed. 2.1 The ld. AO as well as the ld. CIT (A) have grossly erred in law as well as on the facts of the case in treating the surrendered income on account of sundry debtors and excess cash fond as income undisclosed or unexplained investment or money u/s 69 & 69A in place of "business income" as the same was generated from business or was of business income and also erred in making the addition of Rs. 2,06,60,000/- u/s 69 and 69A on account of surrendered income. also erred in making the addition without invoking the provision of sec. 145(3) and without rejecting the books of accounts, also erred in not considering the material and details in their true perspective and sense despite available on record. Which are against the provisions as per law and further contrary to the real facts of the case hence the ld. AO may kindly be directed to treat the surrendered income as business income and the additions may kindly be deleted in full. 2.2 The ld. AO as well as the ld. CIT (A) have also grossly erred....
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....ASS. Accordingly, a notice u/s 143(2) of the Act was issued to the assessee on 01.09.2018, and duly served upon the assessee through registered e-mail by ITBA on 01.09.2018 and also by registered post. 3.1 Due to change of incumbent, a fresh opportunity of being heard was given by ld. AO u/s 129 of the IT Act, on 05.08.2015. Further, a notice u/s 142(1) of the Act and a questionnaire were issued to the assessee on 21.08.2019 and 15.10.2019, and duly served to the assessee through email. In compliance with the notice issued u/s 142(1), the assessee submitted its reply on e-proceeding module on different dates and same was taken on record by the assessing officer. 3.2 The assessee firm is a partnership firm engaged in the business of real estate as developers and builders. For the year under consideration, the project was in the initial stage and no flat whatsoever was completed or sold by the assessee. After examination of the replies and documents submitted by the assessee, the assessment was concluded by the AO on the returned income. 3.3 But, while doing so, ld. AO noted that a survey u/s 133A was carried out at the business premises of assessee on 04.07.2016, whereupon ....
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....tax in respect of income expenditure investment on the assessee who fails to explain the nature and source of said income/expenditure/investment. (v) It is clear that the purpose and object of the latest amendment is only to prevent the unaccounted money in system and if found any income under section 68, 69, 69A 69B 69C and 69D tax should be charged @ 60%. (vi) The plea of the assesses that the amendment to section 1158BE should come into force wef. AY 2018-19 is not acceptable because it is clearly mentioned in the amended section u/s 115BBE that the amendment is applicable for A.Y. 2017-18 and onwards. (vii) The case laws given by the assessee are not applicable in the case of assessee because facts of cases given by the assessee and this cases are differ. (viii) The assessee himself admitted in reply filed on 06.11.2019 that unexplained investment in form of sundry debtors are covered u/s 69 &excess cash is covered u/s 69A of the IT Act but the disclosed income u/s 69 & 69A in the hand the assessee has not disclosed such undisclosed sundry debtors u/s 69 & excess cash u/s 69A of IT Act in the IT return but disclosed under income from other so....
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....ended vide Taxation Laws (Second Amendment) Act, 2016 w.e.f. 01.04.2017 i.e. for A.Y. 2017-18 and onwards. In this amendment, the Government has only changed the income tax rate from 30% to 60%. 3.3 In circular No. 3/2017 and 11/2019 of the CBDT it has been clearly mentioned that this amendment takes effect from 01.04.2017 and will, accordingly, apply from A.Y. 2017-18 and subsequent assessment years. The real purpose of introducing this amendment was only change higher tax in respect of income/expenditure/investment on the assessee who fails to explain the nature and source of said income/expenditure/investment. It is clear that the purpose and object of the latest amendment is only to prevent the unaccounted money in system and if any income is found under deeming sections tax should be charged at higher rate. 3.4 Circular clarifies the language of amendments in a language easily understandable to norma taxpayers. The plea of the assessee that the amendment to section 115BBE should come into force w.e.f. A.Y. 2018- 19 is not acceptable because it is clearly mentioned in the amended section u/s 115BBE that the amendment is applicable for A.Y. 2017-18 and onw....
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....ice u/s 143(2) on dt. 01.09.2018 and also u/s. 142(1). In response thereto the assessee has filed the reply and details. The ld. AO has stated that the assessee firm has not declared such undisclosed debtors u/s 69 of the act in the return of income but disclosed under income from other sources and paid tax at normal rate. 3. The ld. AO has stated that unexplained debtors in the form of debtors are covered u/s 69 and excess cash is covered u/s 69A of the I.T. Act hence tax should be chargeable u/s 115BBE. Hence, the ld. AO has issued the show cause notice on dt. 15.10.2019 asking to the assessee why the tax on Rs. 2,06,60,000/- should be charged @60%+surcharge @25% and cess 3% u/s 115BBE. In response to the same, the assessee firm has filed his reply on date. 08.11.2019 also reproduced from page No. 2 to 7 of the assessment order. 4. However, the ld. AO did not accept the contention of the assessee firm and stated that section 115BBE was originally introduced by the Finance Act, 2012 w.e.f 01.04.2013 applicable for A.Y. 2013-14 and onwards. Sec. 115BBE was amended vide taxation laws. (second amendment) act 2016 w.e.f. 01.04.2017 i.e. for A.Y. 2017-....
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..... In the following orders from various benches of ITAT across country remains at idem on impact of in fraction of scope of CBDT instructions dealing with scope of limited scrutiny assessment and that same would be nullity:- i) Delhi bench ITAT CBS International Project Pvt. Ltd. (order dated 28.02.2019) ii) Jaipur bench ITAT Lt. Smt. GurbachanKaur (order dated 05.12.2019) iii) Jaipur Bench ITAT Manju Kaushik (order dated 09.12.2019) iv) Lucknow bench ITAT Ravi Prakash Khandelwal (order dated 08.11.2019) v) Mumbai G Bench ITAT order in case of Su-Raj Diamond Dealers Pvt. Ltd. order dated 27.11.2019 vi) Mumbai D bench ITAT order in case of R&H Property Developer Pvt. Ltd. order dated 30.07.2019. The ld. CIT (A) has not speak a single word on theses issue and submission, which show he either has satisfied with our plea or he is not having anything to rebut our contention. Hence the assessment order is liable to be quashed on this ground. 2. Wrongly Interpreted that assessee has considered declared income in survey under the head of income from other source whereas it should be considered under the head of....
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....ro Foam Industry wherein the assessee surrendered a sum of Rs 90 lacs in terms of discrepancy in stock and construction expenses. Further, in respect of M/s Shivam Coir Foam Products, the assessee was asked about the hand-written particulars in terms of certain names and amounts recorded in a diary found during the course of survey and in response, the assessee has submitted that these entries pertain to his proprietorship concern M/s Shivam Coir Foam products, Khanna. It was further stated that these entries are advances/receivables from various persons in respect of his business dealings and were recorded for the purpose of memory. It was further stated that to buy piece of mind, he offers a sum of Rs 15 lacs as additional income for the current financial year subject to no penal action. The same was subsequently reiterated in the surrender letter dated 5/09/2018 wherein the assessee has stated that he offers the additional income for current financial year at normal rate of tax as the said income has been earned by him out of business transactions in the current year. We therefore find that it is a case where there are unrecorded sales made by the assessee during the current fin....
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....sion and in the entirety of facts and circumstances of the case, the income of Rs 50 lacs surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69B of the Act and the same has to be assessed to tax under the head "business income". In absence of deeming provisions, the question of application of section 115BBE doesn't arise and normal tax rate shall apply. The AO is thus directed to assess the income of Rs 50 lacs under the head "Income from Business/profession" and apply the normal rate of tax. 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 any income which accrue....
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.... 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 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." * In the case of M/s. Sham Fashion Mall in ITA No. 315/CHD/2022, the Hon'ble Chandigarh Bench of ITAT ....
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....oney, 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 actual neither any unexplained investment nor any unexplained expenditure or otherwise any unexplained asset was found during the search action so far as the aforesaid surrender of Rs. 15 lacs was concerned. In these circumstances, the aforesaid surrender of Rs. 15 lacs can be said to have been offered to cover up the discrepancies in respect of likely disallowances of claims, if any, relating to its business income. 9. In view of this, since the aforesaid surrender is not covered under the provisions of Section 68, 69, 69A, 69B, 69C and 69D, the provisions of Section 115BBE are not attracted in this case. 10. In view of the above, the action of the lower authorities in invoking provisions of Section 115BBE on the surrender income of Rs. 15 lacs is set aside and the AO is directed....
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....er 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. This admission has to be accepted as given by 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." The ld. CIT (A) has not spoken a single word on theses issue and submission and no contrary judgments have been brought, which show he either has satisfied with our p....
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....of Section, Sec 69 can be invoked only when the assessee has made investment and not recorded such investment in the books of accounts and offer no explanation or unsatisfactory explanation. Both the condition given in point 2 and 3 are cumulative and satisfaction of either of condition does not automatically triggers rigours of Sec 69. In other words we can say that when the assessee has recorded such investment in his books of accounts then no explanation is required to be offered for the purpose of Sec 69. The addition u/s 69 can be made only when such investment is not recorded in the books of accounts and not offered satisfactory reply. On perusal of the provision it is proved that the provision of Sec 69 of the I. T. Act is not applicable on the assessee. 3.3 That during the F.Y. 2016-17, a survey u/s 133A was conducted on the premises of the assessee on dated 04.07.2016. The assessee declared an amount of Rs. 1,97,35,000/- on account of noted in diary found during the course of survey. Since the survey team could not found any investment made by the assessee which were not recorded in the books of account, any documents/ information/records wh....
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....ion 11 no other question has asked from the partner of the firm, to remove any doubt and partner of the firm has signed the statements as recorded in the mental pressure. Even other-wise no other source of income of the assessee firm is found there on record either disclosed by the assessee firm or unearthed by the Revenue. The preponderance of probability therefore is that the debtors were sourced from the business of the assessee firm. 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 firm. Having held so, the same was assessable under the head 'business and profession' and as stated above. The excess cash found of Rs. 9,25,000/- are related to the undisclosed income of the firm as mentioned in the reply of question no. 10 of the statement recorded. And no provisions of 115BBE of the Act is also applicable. On this preposition kindly refer the case of Famina Knit Fabs And Anr. vs. ACIT AND ANR 198 TTJ 258 (Chd.). The survey team at the time of recording the statements has also not referred the provisions of 68....
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....ation is not bona fide and that all facts relating to same and material to computation of his total income has not been disclosed by him- Ignorance of law is certainly no excuse for a default committed but, at same time, there is no presumption in law that everybody knows law-Application of this rule would differ from case to case and person to person-In a given case, there may be a person who is quite illiterate, living in remote village, rarely coming in touch with law enforcing machinery and not required to discharge any statutory obligations under a particular law-Ignorance of law may be a good excuse in his case-There is no willful failure to comply with summons u/s 131(IA-Therefore order on CIT (A) is accordingly set aside and thus penalty u/s 272A(1)(c) levied by AO is not in accordance with law therefore same is cancelled-Assessee's appeal of allowed. * Hon'ble ITAT, Indore Bench in the case of ACIT v. Anoop Neema vide its order in ITA 05/Ind/2020 dated 06.01.2022 has held: 7. We have heard rival contentions and perused the records placed before us. Revenue's sole grievance is that Ld. CIT (A) erred in not treating the income of Rs. 1,41,75,568/ d....
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.... the Gauhati Tribunal in the case of Abdul Hamid v. ITO 83 ITD 711 (2020) held that assessment order could not be held to be erroneous and prejudicial to the interest of' the revenue on account of non-invocation of section 115BBE of the Act. In the case of Balvinder Singh v. PCIT in ITA number 570/Del/2022 dated 22-08-2022, the Delhi ITAT observed as below: 9. And amendment has not brought in section 115BBE of the Act w.e.f. 2017-18 but the same was not therein the Statute on the date of survey. Taking a leaf out of amended provisions, the PCIT was of the opinion that the tax rate should have been 60% instead of 30% because of which the assessment order has become prejudicial to the interest of the revenue. 10. The mode point is whether the amendment is prospective or retrospective, as on the date of survey, the amended provisions were not there in the statute. In our considered opinion, this is a highly debatable issue, which cannot be subject matter of exemption of jurisdiction under section 263 of the act. Moreover, a perusal of the assessment order clearly shows that the assessing Officer has nowhere Invoked the provisions of section 68/69 of the act to im....
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....k was part of the stock. The revenue has not pointed out that excess stock has any nexus with any other receipts. Therefore we do not fine any fault with the decision of the ld. CIT (A) directing to the AO to treat the surrendered amount as excess stock qua the excess stock." The principal of the above judgment is also applicable in the present case. 3.6 Further, in the present case after considering the true and correct fact of the case, the provisions of section 69 and 69A cannot be invoked and the sundry debtors and excess cash have to be treated as business income of the assessee firm. Admittedly, in the present case, no existence of evidence in relation to any unaccounted independent identifiable other investment which was found during the course of survey. It is also admitted fact the appellant admittedly is engaged in business from past many years. The sundry debtors and excess cash, if any found during the course of survey was of business only and that too on account of the suppressed profits of business over the years. The sundry debtors and excess cash have not been separately identified and the undisclosed income of past years if any was invest....
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....igher side with retrospective effect and others. 4.1 Gross breach of principal of promissory or contract: The survey team has not stated at the time of survey that in future the tax rate shall be at the rate of 60% +25% Surcharges + 3% cess. The assessee firm has surrendered the income on the basis of rate of tax applicable or privileged at that time i.e. on the date of surrender on 05.07.2016. And it was not know by the assessee or by any other person that after the surrender, from the December 2016 the tax rate shall be changed under these circumstances. The surrender made by the assessee firm at rate of tax applicable on the date of surrender on 05.07.2016 as a promise and contract between the assessee firm and department. And the department accordingly had taken the cheques of advance tax from the assessee firm of that tax on surrender amount. Thus the assessee firm has honestly fulfilled his promise while filling the ITR in which firm has paid the entire tax i.e. firm has honoured the surrendered. Firm has not departed from his promise and contract. Now the department has breached from its promise or contract i.e. it is the breach of promissory or contract. The depart....
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....tant to note that in this provision itself provided whichever is more favourable to the assessee, were actually in force. Thus the favourable rate of charging the tax was 30% not 60% +25% +cess. 4.3 Not applicable retrospective effect: Further, it is submitted that the amendment provisions of section 115BBE of the Act as amended by the Taxation (Second Amendment) Act, 2016 are applicable from 15.12.2016 and are not retrospective in operation and therefore, not applicable to the survey operation conducted in case of the assessee on 4th and 5th of July, 2016. It is submitted that the tax laws as the Taxation(Second amendment) Act, 2016 was amended on 15.12.2016 and received the ascent of President of India on the said date. It is submitted that though the amendment was applicable for assessment year 2017-18 but only on income referred to in said section pertaining to the date after 15.12.2016. As in case of the assessee, the unrecorded sundry debtors was found on 4th and 5th of July, 2016 and accordingly at the material time, old provisions of section 115BBE are applicable. It was accordingly submitted that the amendment provisions are not retrospective in operation....
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....viso to sub-section (3) of Section 2 of Finance Act, 2003. This proviso reads as under: "Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part iii of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the income-tax Act. " "Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part iii of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the income-tax Act. " Addition of this proviso in the Finance Act, 2003 further makes it clear that such a provision was necessary to provide for surcharge in the cases of block assessments and thereby making it prospective in nature. The charge in respect of the surcharge, having bee....
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....A, section 69B, section 69C or section 69D,the income tax payable shall be at the rate of 30% on income so referred in said sections. Further, in terms of amended provisions of section 115BBE by the Taxation Laws (Second Amendment Act), 2016, it provides that where the total income of the assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139 or the total income of the assessee determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not reflected in the return of income furnished under section 139 of the Act,the income tax pay able shall be at the rate of 60% on income so referred in said sections. Thus, both the pre-amended and post-amended provisions of section 115BBE talks about the income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D. The change which has been brought about in the provisions relates to income so referred in aforesaid provisions so defined which is either reflected in the return....
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....nal Drill. Inc. v. CIT, (2005) 12 SCC 717 as follows: As was affirmed by this Court in GoslinoMario [(2000) 10 SCC 165] a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute and Industries Ltd. v. CIT [(1980) 1 SCC 139].) An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section [See Sonia Bhatia v. State of U.P., (1981) 2 SCC 585, 598]. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24 (para 44); Brij Mohan Das Laxman Das v. CIT, (1997) 1 SCC 352, 354; CIT v. Podar Cement (P) Ltd., (1997) 5 SCC 482, 506]. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are "it is declared" or "for the removal of doubts". There was and is no ambiguity in the main provision of Section....
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....s as under: "2. The point for consideration in the reference is whether the Appellant Tribunal was correct in law in holding that the share income of minor sons of the assesses, including the share in interest on capital credited to the minor sons out of the partnership firm was to be computed in the hands of their father under Section 64(1)(iii) in the Assessment year 1976-77. The said provision was introduced in the income Tax Act by the Taxation Law (Amendment) Act 1975 with effect from 1.4.1976, whereas the accounting year of the assessee(s) in the instant case(s) came to an end on 10.08.1975 and on 31.12.1975 in Taxation Case No. 126 of 1983 and Taxation Case No. 28 of 1986 respectively. 17. Reading the judgment of the Apex Court in the case of Kesoram Industries and Cotton Mills Ltd. as Wealth Tax Commissioner (Central), Calcutta AIR 1966 SC 1370 harmoniously with the Constitution Bench judgment of the Apex Court in the case of Karimtharuvi Tea Estate Ltd AIR 1966 SC 1385, this Court would observe that the argument advanced by Counsel for the assessees (Amicus Curriae) as well as the Department can be made only in respect of a rate prescribed under....
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....n: * Hon'ble ITAT, Indore Bench in the case of DCIT v. Punjab Retail Pvt. Ltd. vide its order in ITA 677/Ind/2019 dated 08.10.2021 has held: 14. if is also a fact that the Ld. AO has not brought on record any evidence or material to establish that the assessee was involved in any other activities or having any other source of income. While deleting the addition made by the Ld. AO the Ld. CIT (A) observed as follows: "First of all let me discuss whether the provisions of section 15BBE are applicable to this case or not. The provision of disallowance of any loss with the income as computed under clause (a) of sub section (1) of section 115BBE came into force w.e.f 01.04.2017. Hon'ble Supreme court in the case of CIT vs Vatika Township Pvt Ltd (2014) 24 ITJ 532 (SC); (2014) 271 CTR 1: (2014) 227 Taxmann 121 has held that "An amendment made to the taxing statute can be said Io be intended to remove 'hardships' only of the assessee, not of the department on the contrary, imposing a retrospective levy on the assessee would have caused undue hardship. Hon'ble ITAT Indore in the case of Priyadharshani Construction vs ITO (2012) 19 ITJ 276 (Tr....
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....ised, ld. AR for the assessee vehemently argued that the assessee clearly explained the source of amount as recorded in the diary and the names of the debtors. These debtors are stated to be as regards the project of the assessee, as clarified by the partner. As further pointed out, while answering Q No. 11 at the time of survey, he categorically submitted that the list depicted the amounts receivable on account of the business and receipts for the year under consideration. The assessee also stated that he surrendered the undisclosed income as its income for the year under consideration. The assessee while filing the return of income owned up the disclosure of the income made during the survey and paid the due tax thereon. It has been submitted on behalf of the assessee that now in the assessment proceedings, there is no deviation as to the returned income of the assessee, and that the only deviation proposed by the Assessing Officer is that of the rate of tax to be levied. As further submitted on behalf of the assessee, nowhere in the computation of income or in the ITR the assessee claimed that the income falls within the meaning of section 69 or 69A of the Act. ....
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....me hence penalty proceedings u/s. 271AAC of the IT Act is initiated separately." He also noted further that "Assessed u/s. 143(3) of the IT Act at total income of Rs. 2,06,60,000/-. Tax on income determined u/s. 69 & 69A at Rs. 2,06,60,000/- is taxed @ 60 %, surcharge @ 25 % and Cess @ 3 % u/s. 115BBE of the IT Act". As noticed above, the assessee surrendered both the amounts as income for tax purpose for the A.Y. 2017-18 relevant to F.Y. 2016-17 as income from the project that had just started,and paid the tax as regular income of the assessee. The assessee objected to the proposal of the ld. AO, as per his letter dated 08.11.2019, to make provisions of section 115BBE of the Act applicable. Ld. AO did not accept the submission of the assessee and for the following reasons, took the view that the considering the nature of income the provision of section 115BBE would apply to the facts of the case.: "(i) It is clear that section 115BBE was originally introduced by finance Act in 2012 w.e.f 01.04.2013 and applicable for A.Y 2013-14 and onwards. The main object of introduction of this section was to curve the practice of laundering o....
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....r provision of section 115BBE of the Act. The assessee vide letter dated 06.11.2019, copy made available to us by Learned AR in the course of arguments, claimed that the income so disclosed was of the project, which had just started during the year under consideration and further that the amounts shown to have been received from the various parties as booking money. The facts so presented by the assessee were not further enquired by the ld. AO. Ld.AO neither examined the list nor raised a single question about the explanation furnished by the assessee as to the details of the source and nature of income earned. Ld. AO did not dispute the source of such income while also verifying the source of amount deposited into the bank account. So, once the Revenue accepted the income disclosed in the ITR filed source of which was collection from the sundry debtors of the business of assessee firm and said income stands already taxed accepting the source as income arising out of the project, same could not be considered as unexplained investment. Section 69 of the Act reads as follows: "Unexplained investments. 69. Where in the financial year immediately preceding th....
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....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 remaining difference, he sought time to explain after consulting with the accountant. We find that the stock physically found has be....
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....d World 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 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....
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....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 to be only taxed under th....