TaxTMI 
TaxTMI 
2023 (11) TMI 1402
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....by the Ld. CIT(A), being jurisdictional Bench of ITAT. 3. That the Ld. CIT(A) has also failed to appreciate that during the course of survey, the assessee was carrying on same business as was reflected in his regular books of accounts and no other activity of any other business had been noticed by the Department and, as such, invoking the provisions of Section 69 r.w.s. 115BBE is bad in law and against the principle laid down in the case of Arora Alloys of Chandigarh Bench of ITAT. 4. That the Ld. CIT(A) has failed to appreciate that the stock & cash as found during the course of survey was compared with the regular business of the assessee and, as such, the same cannot be treated income u/s 69. 5. 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. 6. 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 during the financial year 2018-19 relevant to AY 2019-20, a survey action was carried at the business premises of the assessee on....
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....rvey action. In addition to this, the AO applied the provisions of section 115BBE of the Act on said amount of 10,68,630/-surrendered during survey. 4. Against the order of the Ld. AO, the assessee filed an appeal before the ld CIT(A), and the filed its detailed submissions during the course of appellate proceedings. However, the ld CIT(A) without considering the detailed submissions filed by the assessee passed an order dated 01.03.2023 wherein, the appeal filed by the assessee was disposed off and the additions as made by the AO were upheld. 5. Against the order of the CIT(A), the assessee is in appeal before the Tribunal. 6. The Ld. AR submitted that during the course of survey action, statement of the partner of the assessee (Sh. Malkit Singh) was recorded. In the said statement, the assessee has duly submitted that the cash surrendered during the course of survey action was on account of the unaccounted income of the assessee firm and the excess stock is also the stock of the firm only. However, the assessee not being a legally sound person and not having sufficient knowledge of the Income Tax Act, 1961 inadvertently admitted that the firm will pay tax at the rate of ....
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....re, the surrender amount of Rs.10,68,630/- should be treated as the business income of the assessee. Reliance in this regard is placed on the judgment in the case of Daulatram Rawatmull vs. CIT [1967] 64 ITR 593, wherein Calcutta High Court held that "61. In the instant case the assessee is a firm formed for the purpose of carrying on business. There is nothing on record to show that the firm had any source of income other than business. Therefore, in our opinion, it is not unreasonable to hold that any amount representing secret income arose out of business of the firm." 6.3 Reliance in this regard was placed on the judgment dated 18.02.2021 in the case of Shri Harish Sharma vs. The ITO in ITA No. 327/CHD/2020 wherein, it has been held that that Section 68 not applies when assessee explained nature & source of Income. Hence, when all the incomes earned by the assessee/ assets in the possession of the assessee are only from the business income of the assessee, there do not arise any question as to application of provisions of section 69A of the Act and hence taxing such income at special rate as per section 115BBE of the Act is invalid. In the case of the assessee also, there ha....
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.... is seen that nowhere in the orders of both the lower authorities is there any fact brought on record or even a whisper of any allegation against the assessee that the assessee had any other source of income except income from business and income from other source. There is no iota of evidence to even suggest that the lower authorities had unearthed any other source of income of the assessee except under the heads of income declared by the assessee in the return of income. Therefore, in absence of any such evidence of any other undisclosed source of income of the assessee having been detected by the tax authorities, we are afraid that the invocation of provisions of section 115BBE will not hold good in the present case as well. The detailed reasons and observations in this regard have already been incorporated in Para 10.17 to 10.23 of this order in the case of M/s Sham Jewellers wherein also we have rejected the action of the Income Tax Authorities in applying the provisions of section 115BBE of the Act. Likewise, on identical facts and on identical reasoning and law, we allow the grounds of the assessee in the present appeal also and hold that the application of provisions of sec....
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..... Ltd. as reported in ITA No. 745/CHD/2016- "9. In the facts of the present case, it is not disputed that the surrender had been made on account of undisclosed debtors. Since the facts are identical to that in the case of Famina Knit Fabs (supra), and no distinguishing facts have been brought to our notice by the Ld. DR, the decision rendered in that case will also apply to the present case, following which we hold that the Ld. CIT(A) had rightly treated the surrendered income as in the nature of business income of the assessee and accordingly, allowed the benefit of set off of losses against the same. The order of the Ld. CIT(A) is accordingly, upheld. The ground raised by the Revenue is dismissed." ● In the case of Prashanti Surya Construction Co. Pvt. Ltd. in ITA No. 315/CHD/2014, the Hon'ble Chandigarh (jurisdictional) ITAT Bench has held as under: "Since the facts of the present case are identical to that in Gaurish Steels Pvt. Ltd. (supra), the surrender having been made by the assessee on account of investment made in the BOT project which was the business of the assessee, the decision rendered by the I.T.A.T. in the said case will squarely a....
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....acts and circumstances of the case of the assessee hereby represent that the assessee has been showing his income under the head income from business and not under any other source of income. In addition to this, the cheques for payment of tax on surrender income at normal rate of tax were handed over to the department during the course of survey and the same were duly accepted by the AO. 6.6 It was further submitted that the assessee in the surrender letter has surrender the amount of Rs. 10,68,630/- as additional business income of the assessee and the assessee does not have any other source of income from where, it can earn income. Hence, additional income should be treated as business income of the assessee and the provisions of section 115BBE should not be made applicable on the case of the assesse. Reliance in this regard is placed on the judgment of the Jurisdictional Bench of ITAT Chandigarh in the case of Shri Gurdeep Singh Ubhi, in ITA No. 551/CHD/2022 wherein, it was held as under: "6. Considering the overall facts and circumstances of the case, I am of the view that the aforesaid additional income surrendered by the assessee was not from any other unexplaine....
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....ered by the assessee during the survey action, then the said surrender should be treated as business income of the assessee particularly when the assessee does not have any other source of income. 6.9 Without prejudice to the above, it was submitted that during the course of survey action at the business premises of the assessee on 16.04.2018 as well as during the course of assessment proceedings, the Ld. AO has not passed any adverse opinion with respect to any other source of income of the assessee, neither the AO has brought on record any adverse material on record. Hence, the business income is the only source of income of the assessee and moreover, in the case of assessee excess stock has been found during the course of survey which have been compared with the stock as per the books of account of the assessee, hence, in the first instance, the department itself has accepted that the said stock is the business stock of the assessee and such excess stock is not earned in a single day, hence, it means that the investment in excess stock is only from the business income of the assessee. And, therefore, all the income earned by the assessee is only on account of such business of....
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....s evident from the record that the excess stock found during the survey was nothing but the Business Stock carried business carried on by the assessee. Therefore, in our view, the excess stock is only to be treated as income under the head Business and not under deemed income. We further observe that the excess stock found during the survey was not separately and clearly identifiable but was part of mixed lots of stock found at the premises which included the declared stock and stock of sister concern also. In these circumstances, the provisions of section 69 cannot be invoked and it should be taxable as business income. 19. Under the facts and circumstances of the case, the applicability of provisions of section 115BBE are not relevant in the present case as no excess stock was found. Even otherwise the provisions of section 115BBE cannot be made applicable particularly where the assessee has made a statement that the excess stock was a result of suppression of profit in respect of sales made outside the books of accounts. Therefore, in the present case, investment in excess stock computed by the department is liable to be treated as business income and to be taxed under ....
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....cash at Rs.626220/-. Photocopy of the surrender letter is enclosed in which assessee firm surrendered the amount on the tax rate of 30.90% and the same was accepted by the survey party. Therefore the question of levy of tax u/s 115BBE does not survive .............. .......It is stated that as per provisions of section 115BBE is leviable only if any income referred to in Section 68,69, 69A etc. is reflected in the return of income furnished u/s 139 or determined by the Assessing officer n above mentioned sections. The provisions of section 115BBE thus provides that when income of the assessee includes any income referred to in section 69, the income tax payable shall be at the rate of 60% on income so referred in section 69 and on the remaining income, the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred in section 69. In other words, it provides for a special rate of taxation at the rate of 60% as against the normal rate of taxation which may be applicable to the assessee. In the case of the assessee, both the clauses (a)&(b) of section 115BBE does not applicable as both the....
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.... firms was made telephonically who are outstation at the time of survey It Is further submitted that this additional surrendered income is to buy peace of mind and subject to no penal/prosecution action under any provision of the Income Tax Act. We assure that all tax due on additional surrendered income which pertain to f.Y 2017-18 will be paid before 30.09.2018 i.e. the last date of filling of return of income for A.Y. 2018-19. This offer of additional income is made voluntarily and without any pressure, coercion. That the above surrender includes any discrepancy found at the time of survey or at the time of assessment On the perusal of aforementioned surrender letter, it is observed that assessee was not able to furnish any satisfactory explanation regarding the source of excess stock found, which was noticed during survey and accordingly an additional income of Rs. 4,42,410/- was disclosed by the assessee. Such unrecorded and unexplained excess stock is an unexplained investment and hence deemed income within the meaning of section 69 of the act. However, while filing the Income tax return for the relevant period at a much later date, the assessee has disclosed such in....
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.... us. It is a settled legal proposition that there is difference between the undisclosed income and unexplained income and the deeming provisions are attracted in respect of undisclosed income however, the condition before invoking the same is that the assessee has either failed to explain the nature and source of such income or the AO doesn't get satisfied with the explanation so offered by him. 9. In particular, for the deeming provisions of section 69 to be attracted in the instant case, there has to be a finding that the assessee has made investments in the financial year in the stock and such investments are not recorded in the books of accounts so maintained by the assessee, and the assessee offers no explanation about the nature and source of the investments or the explanation so offered is not found satisfactory in the opinion of the AO. Similarly, for the deeming provisions of section 69A to be attracted, there has to be a finding that the assessee has been found to be owner of cash so found at the time of survey, such cash has not been recorded in the books of accounts so maintained by the assessee, and the assessee offers no explanation about the nature and source of t....