TaxTMI 
TaxTMI 
2025 (11) TMI 633
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....) erred in law as well as on the facts of the case in confirming the addition made by the Id. 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 created, kindly be deleted in full. 3. The CIT(A) erred in law as well as on the facts of the case in confirming the charging of interest u/s 234A, 234B, 234C & 234D of the Act and as also in withdrawing interest u/s 244A of the Act made by the AO. The interest so charged/withdrawn, being contrary to the provisions of law and facts, kindly be deleted in full. 4. The appellant prays your honour to add, amend or alter any of the grounds of the appeal on or before the date of hearing." 3. Brief Facts of the Case are that the appellant is a partnership firm engaged in the business of real estate development. A survey u/s 133A of the Act was conducted on 08.11.2017 at the business premises of the assessee. During the survey, a notepad labelled 'Marbito' was found and impounded a....
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....ing survey proceedings, that these expenses were not recorded in regular books of accounts of the assessee and offered undisclosed income of Rs. 8,90,000/- for taxation. The assessee had included this offered income of Rs. 8,90,000/- 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 I.T. Act 1961. The assessee submitted that the said expenses are routine expenses and related to the current year. Hence these are regular nature of expenditure and related to routine business and there is no evidence found about the payment of such expenses hence the section 115BBE shall not attract on the assessee. As the assessee shown all the expenses which have not verifiable at the time of survey incorporated in his regular return of income and paid the normal rate tax. Hence section 115 BBE not applicable on the same case. The submission of the assessee was not found acceptable because the assessee admitted that these expenses were not recorded....
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.... also not disputed. This fact was evident at the time of survey. In such a case, the amount covered by such expenditure may be deemed to be the income of the assessee for such financial year. Hence, the AO is found to be justifying making addition u/s 69C of the Income Tax Act It is argued that once a comparison is made between the income shown in the accounts and those in ROI, there will be no difference. The assessee has not explained the source of expenditure which was admitted to be not recorded in the books of accounts. Therefore, the case of the assessee is covered by the section 69C. The assessee cannot come out from the clutches of section 69C without explaining the source of the undisclosed expenditure. The arguments of the assessee are therefore not found to be acceptable. Undisclosed income-Business income only. It is stated that Annexure-A-1, Ex.1 pages 1 to 2 are related to the building material purchases totaling to Rs. 8.90,000/- made which has not been accounted for hence, unable to get them verified. Thus, undisputedly the entire amount of Rs. 8,90,000/- related to the purchases of construction material pending accountin....
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....ich is not accounted is in exclusive knowledge of the assessee. The AO cannot be expected to prove which is in exclusive knowledge of the assessee. Therefore, the reply of the assessee is not found to be acceptable. In essence, the assessee is arguing that since the assessee is engaged in business activity, all unaccounted expenditure or income found during search and survey should 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. In view of clear failure on the part of the assessee to explain the source of the advances made by the assessee, the addition made by the AO on account of undisclosed expenditure of Rs. 8,90,000/- is found to be justified and uph....
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....he assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters.... Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. (Whitney v. Commissioners of Inland Revenue 1926 A C 37, CIT v. Mahaliram Ramjidas [1940] 8 ITR 42 (PC), Indian United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay. [1995] 27 ITR 20 (SC) and Gursahai Saigal v. CIT. Punjab, [1963] 48 ITR 1 (SC)." The Hon'ble Supreme Court in the case of Gursahai Saigal (supra) held as under:- "Those sections which impose the charge or levy should be strictly construed; but those which deal merely with the machinery of assessment and collection should not be subjected to a rigorous construction but should be construed in a way that makes the machinery workable. The Hon'bl....
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....from the above order of the ld. CIT(A), the assessee preferred the second appeal before this tribunal. Apropos to the grounds so raised by the assessee, ld. AR of the assessee relied upon the following written submission:- "Brief General Facts: 1. The admitted facts are that the assessee is engaged in the real estate business of purchasing & selling of plots, lands, construction of properties under M/s Pranati Buildcon at Kota. A survey u/s 133A was carried out on dated 08.11.2017 at the premises of assessee as also at the premises of other group member M/s Parshavnath Associates, Kota during the course of which, statement of the Partner Shri Pradeep Dadhich was recorded u/s 133A wherein the partner admitted that these expenses were not recorded in regular books of accounts (till the date of survey) and offered income of Rs. 8,90,000/-. After close of the year, the assessee firm filed its Return of Income u/s 139 (-1-4) on dt. 29.09.2018 declaring total income of Rs. 1,17,31,970/-, which also included such offered additional income of Rs. 8,90,000/-. Thereafter, the case was selected for Complete Scrutiny assessment and the impugned assessment was completed vide o....
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.... upheld the grounds given by the AO and dismissed the appeal as preferred by the assessee by an order dt. 17.12.2024 passed u/s 250 of the Act. "In view of above discussion, when the addition is made in sections 68 and section 69 family. If the addition 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/69B/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. In view ....
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....er rate as per the provision of section 115BBE." Since, to consider subjected income as income liable for a higher tax rate, is an illegal and unjustified attempt to invoke 115BBE which is not clearly applicable on the facts of the present case and contrary to Article 265 of the Constitution of India. Hence, this ground. 2. Section 115BBE wrongly invoked and applied even on assessed business income: 1. Legal Position 1.1 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 the income is not capable of being classified under any other head being income from salary, house property, capital gain, business or profession. 1.2 A combined reading of S. 14 with S. 56 of the Act makes is evidently clear that for the assessment of an income it must have to be classified under four heads of income as enumerated u/s 14 and if it doesn't fall under any specific head of income as per item A....
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....ate Business as stated by the Partner Shri Pradeep Dadhich in reply to answer to Q3 (PB 31) and as admitted by the Ld. AO at para 1 on Pg. 1 that the appellant firm is engaged in construction business. Admittedly, there is no other known or unknown source of business hence there is no possibility of their being any undisclosed stock, material or any assets being found not relating to the said business. Moreover, the said additional income of Rs. 8,90,000/- was only on account of purchase of building construction material made during the year which were pending accounting in the accounts at the time survey and hence such income is directly related to the said real estate business only. In fact, a bare reading of the related questions & answers clearly shows that the partner of assesse firm has also admitted such income as a result of the real estate business activities only. Kindly refer the statement of Shri Pradeep Dadhich recorded u/s 133A on dated 08.11.2017 Q & A no. 11 (PB 39), the concerned officer referred to Annexure-A-1, Ex. 1 asking Shri Pradeep Dadhich as to which firm, these transactions were related, which was replied by him that Annexure-A-1, Ex.1 pages 1 to 2 are rel....
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....50;ैसर्स पर्णति बिल्डकॉन से सम्बंधित Land Development एवं Construction से सम्बंधित खर्चे हे जो April-2017 एवं May-2017 तक के है इन खर्चों का कुल जोड़ रूप्ये 8,90,000/- है। यह खर्चा हमारी नियमित Books of accounts में दर्ज नहीं है अतः मैं इस अघोषित निवेश को अपनी फर्म की चालू वि....
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....osed with this WS. 4. Treatment in Income Tax Return (declared & assessed as business income): Pertinently, in the computation of total income also the assessee disclosed the net profit of Rs. 1,17,31,965/- from the said real estate business and such N. P included aforesaid additional income of Rs. 8,90,000/-. Very interestingly and notably even the AO has not specifically computed and assessed the said income as income from other sources. There is no categorical assertion made by him in the computation part on the impugned Assessment Order. He simply states income admitted at the time of survey.... There is no whisper of Sec.56 or the head of income viz. income from other sources. Meaning there by, the AO also assessed the additional income as income from business only. The Ld. Tax Auditor in the tax audit report (PB 5-20) has not disturbed the treatment so given by the appellant firm. 5. Binding judicial guideline: 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....
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....identified, satisfying the mandate of the law. 5.5 In case of Shri Lovish Singhal vs ITO (ITA No 142 to 146/Jodh/2018 for AY 2014-15 dated 25.05.2018), the Jodhpur Tribunal applying the proposition of law laid down by the Hon'ble Rajasthan High Court in the Bajargan Traders (supra), held that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69 of the Act and accordingly held that there is no justification for taxing such income u/s 115BBE of the Act. 5.6 Useful reference can be made in the case of Smt. Rekha Shekhawat Vs. Principal Commissioner of Income Tax (2022) 219 TTJ (JP)761, which is quite near to the facts available in the present case. In the light of above submissions and the legal position, Sec 115BBE cannot be invoked even remotely. Thus, additional income declared during survey of Rs. 1,15,88,837/- could not be subjected to S. 115BBE of the Act. Hence, the entire impugned additions are bad in law and deserves to be deleted." GOA-4 Charging of Interest u/s 234A & 234C: is consequential and kindly be decided accordingly. The above submissions ha....
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....rded so as to invoke section 69C. 4.2 The allegation of lack of source is irrelevant and rather misleading in the sense that once there is an additional income to the extent of Rs. 8,90,000/- in the current year which was utilized towards the construction expenses, it can't be said that such incurrence of expenditure was source less so as to invite section 69 C and consequently S.115 BBE was also not applicable. 4.3 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/expenditure, which is not the case here. But the ld. CIT(A) will ignore this crucial aspect. 4.4 Further, from pg. 14, he distinguished the decision of the J.K. Synthetics Ltd. v. CTO1994 taxmann.com 370(SC), Gurshai Saigal v. CIT [1963] 48 ITR 1 SC, India United Mills Ltd. v. CEPT [1955] 27 ITR 20 (SC), CIT v. Maliram Ramjidas [1940] 8 ITR 442 (PC) on a purported misreading. The authorities below have utterly failed to demonstrate that t....
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....adjudicated. Ground no. 4 is general and it does not require any adjudication. Ground no. 3 raised for the charge of interest under various sections of the Act which are consequential and does not require specific finding. Thus, now the left-over ground no. 2 raised by the assessee vide which the assessee challenges the finding of the lower authority in confirming the levy of tax and consequential surcharge and cess as per provision of section 115BBE of the Act as the assessee has admitted having been incurred the unexplained expenditure and the same are as per provision of section 69C of the Act. The assessee is a firm and engaged in the business of real estate. The brief facts related to the dispute are that there was a survey u/s 133A of the Act at the business premises of the assessee on 08.11.2017. The assessee after survey filed return u/s 139 for the A.Y. 2018-19 on 13.08.2018 at total income of Rs. 4,77,29,130/-. The case of the assessee was manually selected for compulsory scrutiny as per guidelines issued by the CBDT and notices as required under law were issued to the assessee from time to time. In the assessment proceeding ld. AO noted that in the survey procee....
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....0,000/-] the said income when used for expenditure cannot be considered and added as unexplained expenditure. As regards the oral evidence submitted by the assessee in a statement cannot be ignored and in fact the same have been accepted by the revenue. On this aspect of the oral evidence, we get support from our own jurisdictional high court decision in the case of Satyaveer Singh Vs. CIT(A) [ 154 taxmann.com 619 (Rajasthan) ] wherein the High Court held that that: "6. Be that as it may, we find that all the authorities have appreciated the oral and documentary evidence and recorded their findings of fact on the issue as to what actually was the sale consideration in the matter of transaction of sale of agricultural land. Even though the submission of learned counsel for the appellant would be that there was no proper appreciation of evidence, it is essentially a case of appreciation of evidence and not of substantial question of law. As the appeal does not involve any substantial question of law, we are not inclined to re-appreciate and interfere with the concurrent finding of facts recorded by the all the authorities including the Tribunal." Considering the dis....
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....to 2) 41-43 S. No. Particulars Pg. No. 1. Smt. Rekha Shekhawat vs. PCIT (2022) 219 TTJ (JP) 761 1-2 2. CIT vs Bajargan Traders (2017) 86 taxmann.com 295 (Rajasthan) HC 3-5 3. Nikhaar Fashions v. ACIT (ITA No. 1020/JPR/2024) 6-19 4. Parshavnath Buildestate Private Limited v. ACIT ITA. No. 1357/JPR/2024 6. Before us ld. AR of the assessee vehemently submitted that the amount in question pertained to purchase of construction materials for business purposes and was duly recorded in the books prior to the finalization of accounts. The income was not concealed or independently discovered by the AO but was self disclosed and subjected to regular tax rates as offered by the assessee. He also submitted that the source of income was clearly identifiable and solely from its business operations. There was no separate or unaccounted activity which could be considered unexplained within the meaning of section 69C. The AO did not reject the books of accounts, nor did he make any separate addition on account of unexplained expenditure. Instead, he merely sought to recharacterize the same income under a deeming provision. The....
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....(PB-31- 32)]. The admission of additional income is also made by Shri Pradeep Dadhich commonly vide [Q & A 12 (PB 40)]. Hence the finding recorded in that case is directly applicable on facts of the present case. In addition ld. AR of the assessee also serviced the following decision; - Pr. CIT vs. Bajargan Traders [2017] 86 taxmann.com 295 (Raj HC) - Shri Ram Narayan Birla vs. ITO, ITA No. 482/JP/2015 (ITAT Jaipur) - Veer Enterprises vs. DCIT [2024] 206 ITD 289 (Chandigarh ITAT) - Nikhaar Fashions Pvt. Ltd. vs. ACIT, ITA No. 1020/JP/2024 and those cited therein. Based on that he vehemently argued that the consistent position emerging from these decisions is that where the surrendered income is linked to regular business activity and declared before the close of the year, and further included in the books of account, such income must be taxed as business income and not under deeming provisions such as section 69C. Hence, invocation of section 115BBE in such a scenario is legally unsustainable. 7. Per contra, Ld. DR relied upon the orders of ld. CIT(A), while doing so he vehemently submitted that the survey was conducted in the beginning of ....
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....he survey and subsequently offered to tax as business income, can be taxed under section 115BBE of the Act on the ground that it falls within the scope of section 69C of the Act?. 9. Record reveals that based on a note pad "Marbito" A-1, Ex-1 (page no. 1 to 2) it was found on and noticed that assessee firm had incurred undisclosed expenditure of Rs. 8,90,000/- in development of land and construction and thereby assessee surrendered income voluntarily and accordingly included that income while filling the ITR. The statement of Shri Pradeep Dadhich, partner of the assessee-firm, clearly establishes that the surrendered sum pertained to purchase of construction material related to ongoing real estate projects. It is not in dispute that the assessee recorded the said amount in its books before the end of the year and credited it to the trading account and included the same while valuing closing stock. The total income was computed and reported under the head 'business income' and taxes thereon were paid. The entry passed in the books of account was not rejected and thus when the entry passed in the books of account being not rejected no separation addition be called for. As ....