TaxTMI 
TaxTMI 
2025 (3) TMI 1537
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....his common order. 3. At the outset of hearing the ld. AR of the assessee has submitted that the matter pertaining to A.Y. 2018-19 in ITA no. 1358/JPR/2024 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical. Therefore, for the purpose of the present discussions, the case of ITA No. 1358/JPR/2024 is taken as a lead case. 4.1 In ITA No. 1358/JPR/2024 the assessee has raised following grounds:- "1. The impugned order passed u/s 143(3) dated 27.04.2021 are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be deleted. 2. Rs. 2,00,10,200/-: The CIT (A) erred in law as well as on the facts of the case in confirming the addition made by the Ld. AO in imposing tax, surcharge, cess etc. As per provision of S. 115BBE of the Act on the income surrendered during survey. The consideration of income as unexplained u/s 69C and invoking of S. 115BBE is contrary to the provisions of law, on facts and without jurisdiction. The tax liability so cre....
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....after, due to centralization of case u/s 127, the case was transferred to ACIT/DCIT, Central Circle, Kota. Further, notice under sub section (1) of Section 142 of the Act along with questionnaire was issued on 05.01.2021 and served to the assessee through ITBA Portal. 5.1 In response to these notices, assessee filed submission time to time which were examined by ld. AO, he also noted that he has examined the survey record of the assessee during assessment proceeding. While examining that record he noted that in that survey proceeding, a note pad "Marbito" was found and impounded, which was annexed as annexure -A-1, Ex-1 (page no. 1 to 6). On perusal of that exhibit, he noticed that assessee firm had incurred undisclosed expenditure of Rs. 2,00,10,200/- in development of land and construction during the F.Y 2017-18. The partner of the assessee firm Shri Pradeep Dadhich had accepted in his statement recorded during survey proceedings, that these expenses were not recorded in regular books of accounts of the assessee and stated that the same has been incurred out of the unrecorded income of the assessee and thereby he disclosed income of Rs. 2,00,10,200/- for taxation. ....
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....ons/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- The AO in this case noted that during the survey proceeding, a note pad "Marbito" was found and impounded, which was annexed as annexure A-1, Ex-1 (page no. 1 to 6). On perusal of this exhibit, it was noticed that assessee firm had incurred undisclosed expenditure of Rs. 2,00,10,200/- in development of land and construction during the FY 2017-18. The partner of the assessee firm Shri Pradeep Dadhich had accepted in his statement recorded during survey proceedings, that these expenses were not recorded in regular books of accounts of the assessee and offered undisclosed income of Rs. 2,00,10,200/- for taxation. The assessee had included this offered income of Rs. 2,00,10,200/-in its total income under the head "Business Income" in ITR filed for the relevant year and paid tax at normal rate there on. As the unaccounted/unexplained expenditure are covered u/s 69C of the I.T. Act, therefore tax should be charged as per the provision of section 115BBE of L.T. Act 1961. The assess....
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.... by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year:1 [Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.) As per this section if an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or the explanation, if any. offered by him is not, in the opinion of the [Assessing) Officer, satisfactory, the amount covered by such expenditure may be deemed to be the income of the assessee for such financial year. The language of the section is plain and simple. There is no exception with regard to expenditure belongs to the current year. In fact, the expenditure incurred in the financial year is to be considered for making addition. The assessee is required to explain the source of the expenditure so made. If the source is from the explained sources, the section 69C is not applicable. Now, coming to the facts of the case, it is to be examined whether, the asses....
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....eer Enterprises Vs. DCIT (2024) 206 ITD 289 (Cha) (Tb). On perusal of the decision relied upon by the appellant it is noticed that Hole ITAT not as under "Therefore, it is found that the assessee has been confronted with not just the discrepancy so found during the course of survey but the nature and source thereof during the course of survey proceedings and it is clearly emerging that the source of such income is from its business operations. There is a clear statement of the partner of the assessee that the advances are related to its business, however since the same have not been recorded in the books of account, he has offered the same to taxation." As held by the ITAT in above case, there is a clear statement of the partner of the assessee that the advances are related to its business. However, in the present case, there is no statement of the assessee that the source of unexplained expenditure was from business. In the present case, the representative of the assessee has clearly admitted this amount is surrendered as undisclosed income of the assessee. There is no claim made in the statement that the amount was earned by the assessee from the regular busines....
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....Charging of Tax u/s 115BBE The appellant has also raised the issue of charging tax u/s 115BBE of the Income Tax act. The section 115BBE is charging section. The argument of the appellant are considered. The Income Tax Act is a self-contained code consists of both charging and machinery sections. Charging sections are those sections by which liability is created or fixed. Machinery sections are those sections which ensure quantification, imposition and collection of tax created by the charging sections". Thus "Machinery Provisions' are basically subordinates to the charging section. On applying the above principles section 115BBE is categorized as 'machinery provision' which is subordinate to the charging sections 68 and section 69 family. There is a very practical rule in the interpretation of taxing Statutes that 'charging provisions' are interpreted strictly while the 'machinery provisions are interpreted liberally. The above criteria of Interpretation of the 'Statute' is supported by several judicial precedents. Some land mark judicial precedents are as under, J.K. Synthetics Ltd. v. CTO 1994 taxmann.com 370 (SC). ....
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....on is made under these sections, the tax has to be charged as per provisions of section 115BBE. The charging of tax as per provisions of section 115BBE is automatic. Hence, no separate show cause notice is required for charging tax u/s 115BBE. Therefore, the argument of the appellant are not found to be acceptable. The arguments of the appellant are against the expressed provisions of the Income Tax Act. Sub-section (2) of section 115BBE of the Income-tax Act, 1961 (Act) provides that where total income of an assessee includes any income referred to in section(s) 68/69/69A/698/69C/69D of the Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provisions of the Act in computing the income referred to in section 115BBE(1) of the Act. The issue raised by the appellant is therefore not found to be acceptable and rejected. This ground of appeal is treated as dismissed. 5. In the result, the appeal filed by the appellant is treated as dismissed." 7. Feeling dissatisfied from the above order of the ld. CIT (A) dismissing the appeal of the assessee, the assessee preferred the s....
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....ld be considered as earned from business activity. If the argument of the assessee are accepted then there will be no addition u/s 68, 69, 69A or 69C in case the assessee is engaged in some business activity. This is not found to be acceptable as per the provisions of Income Tax Act. There was no such intention of the legislature. There is no provision in the Income Tax which says that the sections of deemed income family are not applicable on the assessee who is engaged in the business activity. Hence, the arguments of the assessee are not found to be acceptable. The addition made by the AO u/s 69 C of Rs. 2,00,10,200/- is therefore found to be justified and confirmed." Submission: G.O.A 1, 2 & 3: Invalid Invocation of Sec 115BBE: 1. Section 115BBE wrongly invoked and applied even on assessed business income: 1.1 Legal Position: At the outset it is submitted that S.115BBE specifically refers to the income which are of the nature as referred in S.68, 69, 69A of the Act being the income from other sources. Therefore, subjected income has essentially to be classified u/s 14 of the Act as income from other sources and that is possible only when....
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.... 1.5 On perusal of the Finance Minister's speech and Explanatory Memorandum (2), it is clear that the legislative intent behind introduction of section 115BBE was to curb the generation and use of unaccounted money and tax the same at the highest rate. 2. It is submitted that whatever, was disclosed was nothing but additional income only and it cannot be termed as excess/undisclosed/ unaccounted income/expenditure for the simple reason that survey was carried out on 08.11.2017 i.e. before ending of the relevant previous year ending. Since, the current period was running it was usual that some of the transactions remain pending and hence, the books of accounts were not complete on the day of survey. Therefore, such transactions, which could not be accounted for then for want of receipt of details, were accounted for thereafter, and hence, cannot be termed as excess shortage/ undisclosed/unaccounted money, quantity etc. Even the Return of income was not filed by the assessee, on the date of survey dt. 08.11.2017. At the best it was only additional income stated during survey. In any case, the assessee admittedly accounted for such income in regularly maintained books....
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....r Shri Pradeep Dadhichn or any finding recorded in the impugned assessment order u/s 143(3) for A.Y. 2018-19 in case of the appellants that the additional income was something other than the Income from business or that there was some other source of income giving rise to such alleged undisclosed Income. In these circumstances, the only inescapable conclusion is that the such income was nothing but a business income from the purchase and sale of properties or material from the transactions in real estate. The very source of alleged undisclosed income emanated from, was well connected with and related to the real estate business transactions alone and not from any other activities or from any other source of income. Notably, the authorities below completely failed to establish that such additional income/expenditure is clearly separately identifiable, in the existing real estate business and had its independent existence detached from the said business. Consequently, S. 69C could not be invoked. 5. Accounting: It is submitted that income so admitted in shape of the unrecorded purchase of construction material and land development, was admittedly entered in the regular books....
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....se not falling u/s 69C of the Act. 7. Judicial Guideline- Covered Issue: The Hon'ble Rajasthan High Court, ITAT Jaipur and various other courts have held that where the additional income/ undisclosed income declared during the course of survey is relatable to some business activity then it cannot be considered to be income from other sources and consequently S. 115BBE cannot be invoked. 7.1 The Hon'ble Ahmedabad Tribunal in case of Chokshi Hiralal Maganlal vs DCIT (ITA No. 3281/Ahd/2009 dated 5 August 2011) held that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable investment or asset or expenditure (i.e. in our understanding not connected with business so as to make convenient to invoke aforesaid sections). In case source of investment or asset or expenditure is clearly identifiable and has no independent existence of its own where a case arises to claim that it cannot be separated from business then first 'what is to be taxed is the undisclosed business receipt. Only on failure of such exercise, it would be regarded as taxable under section 69 on the premises that such excess investment or asset or expen....
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....in day-to-day business activities- Questions which were raised and the answers given during the survey show that the additional income declared on account of advances and the cash found emanated from and related to the real estate business only-Even the Principal CIT has admitted in the impugned order that this income pertains to recovery of cash amounts of advances made by the assessee to the other persons for purchase of land/plots- Undisputedly the assessee is engaged in the real estate business and there is no undisclosed or unknown source of income and the source of additional income so admitted is clearly identifiable and is the regular business of real estate-Since the additional income is related to the real estate business it is certainly assessable as business income and cannot be considered as income falling under s. 68/69A-AO having applied his mind in accepting the said additional income as business income, there was no error in the assessment order-Thus, the Principal CIT was not justified in expecting the AO to apply s. 115BBE as also s. 271AAC by merely imposing and substituting his own opinion, which is not the legislative intent even behind Expln. 2(a) to s. 263-F....
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....cting the contention that the additional income relating to the expenditure towards the construction expenditure related to the current year only and the survey having taken place mid of the year i.e. that is prior to the close of the year. The same having been duly accounted for in audited accounts (based on which, the income of this year was declared), consequently such additional income remained no more unexplained or unrecorded so as to invoke section 69 C. 8.2 The allegation of lack of source is irrelevant and rather misleading in the sense that once then there is an additional income to the extent of Rs. 2,00,10, 200/- in the current year which was utilized towards the construction expenses, it can't be said that such incurrence of expenditure was sourceless so as to invite section 69C and consequently S.115 BBE was also not applicable. 8.3 Importantly, whatever additional income was shown and ROI was filed, was accepted and assessed at the same figure without any variation therein, meaning thereby the Ld. AO did not find anything over and above the additional income which, if made, would have given rise to some unexplained/unrecorded income/expendi....
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....e levy of special tax is bad in law and thus, deserves to be deleted. GOA-4 Charging of Interest u/s 234A & 234C: is consequential and kindly be decided accordingly. The above submissions have been made based on the instructions and the information provided of/by the client." 7.1 To support the contentions raised in the written submission the ld. AR of the assessee has relied upon the following evidences:- S.NO. PARTICULARS Pg. No. 1. Copy of Return of Income filed dated 13.08.2018 1-3 2. Copy of audited Balance Sheet & P&L Account for the A.Y. 201819 4-29 3. Copies of the Impounded note pad Annexures A-1, Ex-1 (Pg. 1 to 6) 30-34 4. Copies of statement of the appellant recorded u/s 133A dated 08.11.2017 35-45 7.2 To drive home to the contention raised in the written submission, ld. AR of the assessee serviced the following decision; S.NO. PARTICULARS Pg. No. 1. Smt. Rekha Shekhawat v. PCIT (2022) 219 TTJ (JP) 1-39 2. CIT vs. Bajargan Traders (ITA No. 258/2017) 40-44 3. Nikhaar Fashions v. ACIT (ITA No. 1020/JPR/2024) 45-58 8. Ld. AR of the assessee in addition to....
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.... under law were issued to the assessee from time to time. In the assessment proceeding ld. AO noted that in the survey proceeding, a note pad "Marbito" was found and impounded, which was annexed as annexure -A-1, Ex-1 (page no. 1 to 6). On perusal of that exhibit, he noticed that assessee firm had incurred undisclosed expenditure of Rs. 2,00,10,200/- in development of land and construction during the F.Y 2017-18. The partner of the assessee firm Shri Pradeep Dadhich had accepted in his statement recorded during survey proceedings, that these expenses were not recorded in regular books of accounts of the assessee and stated that the same has been incurred out of the unrecorded income of the assessee and thereby he disclosed income of Rs. 2,01,00,000/- for taxation [ page 27 being the audited profit & loss account ] under the head "income surrender in survey". The assessee contended that the source of that expenditure which were found to be unrecorded as on the date of survey for an amount of Rs. 2,00,10,200/- were met from the income of Rs. 2,01,00,000/- disclosed. The assessee contended in a statement that source of that expenditure which was considered as out o....
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....;ये 8,90,000 /- इस प्रकार कुल रूपये 2,09,00,200/- को अघोषित मानकर सम्बन्धित फर्मों की चालू वित्तीय वर्ष की अघोषित आय मानकर नियमानुसार कर अदा कर देंगे। उपरोक्त बयान मैने पढ़ व समझ लिये है जो मेरे ज्ञान व जानकारी में पूर्णतया सत....