Income Tax Appellate Tribunal - Chandigarh
Sh. Parmod Singla, Patiala vs The Acit, Circle, Patiala on 24 July, 2023
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ , च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH
BENCH 'A' CHANDIGARH
BEFORE: SHRI A.D.JAIN, VICE PRESIDENT AND
SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 516/CHD/2022
नधा रण वष / Assessment Year : 2017-18
Shri Parmod Singla, बनाम The ACIT,
Prop. M/s Singla Wire & Circle,
VS
Allied Products, Patiala.
157-Harinder Nagar, Patiala.
थायी लेखा सं./PAN /TAN No: AMZPS0727R
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Shri Tejmohan Singh, Advocate
राज व क ओर से/ Revenue by : Shri Dharamvir, JCIT, Sr.DR
तार"ख/Date of Hearing : 07.06.2023
उदघोषणा क तार"ख/Date of Pronouncement : 24.07.2023
आदे श/ORDER
PER VIKRAM SINGH YADAV,A.M. This is an appeal filed by the asse ssee against the order of ld.CI T(A) NFAC, Delhi dated 27.04.2022 pertaining to assessment year 2017-18 wherein the assessee has taken the following grounds of appeal:
1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in passing an ex-parte order without considering the submissions on record which is arbitrary and unjustified.
2. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in treating the income of Rs.84,80,000/-
surrendered during the course of survey to be deemed income u/s 69 and 69A of the Act as against business income which is arbitrary and unjustified.
3. That the Ld. Commissioner of Income Tax (Appeals) has further erred in law as well as on facts in upholding the charging of tax @ 60% applying the provisions of Section 115BBE which are not applicable in the facts of the case and as such the order is arbitrary and unjustified.
ITA 516/CHD/2022 A.Y.2017-18 Page 2 of 32
4. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
5. That the order of the Ld. CIT (A) is erroneous, arbitrary, opposed to the facts of the case and thus untenable.
2. 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 08.07.2016 and during the course of survey operations, certain discrepancies were noticed and assessee came forward and surrendered a sum of Rs.84,80,000/-. Thereafter, the assessee filed his return of income, declaring total income of Rs.92,39,690/- on 23.03.2018 including the surrendered income, which was processed u/s 143(1) and thereafter, the case of the assessee was selected for compulsory scrutiny and notices u/s 143(2) and 142(1) were issued. During the course of assessment proceedings, the AO also issued a Show Cause Notice dated 30.11.2019 stating that a s per the Surrender Letter, the assessee made a surrender for a sum of Rs.55 lacs as advances, Rs.20 lacs towards unaccounted stock and Rs.9,80,000/- towards cash in hand and the same has been offered in the return of income @ 30%, however, as per the provisions of Section 115BBE read with Section 69 and 69A, the amount so surrendered is taxable @ 60%.
3. In response to the show-cause, the assessee filed his submissions stating that the tax authorities during the course of survey proceedings had provisionally evaluated the stock which were physically found a t the business premises and compared the same with the values worked out provisionally as per the books of account, that the cash availa ble at the business premises was also counted and compared with the cash as per books of account and that details of certain business adva nces given by the assessee were also noticed and the assessee in order to buy peace of mind had offered the additional business income of ITA 516/CHD/2022 A.Y.2017-18 Page 3 of 32 Rs.55 lacs towards business adva nces, Rs.20 lacs were offered towards possible difference in the value of stock due to comparison purely on provisional basis and Rs.9,08,000/- towards difference in business cash in hand. It was submitted that the comparison had been made with the business transactions as per books of accounts as no other source thereof has been detected by the survey authorities. It was submitted that the survey authorities present during the course of survey thereafter had in principle agreed to the offer of the assessee of additional business income and survey operations were concluded after calculating the estimated tax liability by applying the normal tax rates as per applicable a t the relevant point in time and they have also collected the cheques towards tax from the assessee for payment of advance income tax calculated at the normal rate of tax on such additional business income. It was further submitted that the additional business income was duly recorded in the Profit & Loss Account which has been duly audited by the Chartered Accountant and basis the same, the business income as per the Profit & Loss Account has been reflected under the head 'Profit & Gains of business and profession' and ta x return has, accordingly, been filed.
4. In terms of applicability of Section 69 and 69A, it was submitted that these provisions are not attracted in the instant case as the assessee during the course of survey proceedings had disclosed the source of income in relation to the above income and this disclosure forms part of the statement recorded by the authorities during the course of survey and also the fact that the assessee had only source of income that is, from his business activity. It was submitted that during the course of survey so conducted, no other source was noticed/detected/brought on record by the Revenue Authorities. It was, accordingly, submitted that the source of income so surrendered was not ITA 516/CHD/2022 A.Y.2017-18 Page 4 of 32 unexplained rather the business of the assessee being carried on in the name and style of M/s Singla Wire & Allied products is the only source of income and as such, provisions of Section 69 and 69A are not attracted. It was further submitted that the tax rate u/s 115BBE has been enhanced from 30% to 60% by the Taxation Laws (Second Amendment) Act, 2016 and same cannot be applied in the instant case wherein at the time of survey, tax rate as applicable was 30 % and accordingly, the tax liability has been rightly discharged as per the law, as was in existence at the time of survey.
5. The submissions so filed by the assessee were considered but not found acceptable to the AO. It was held by the AO that during the course of survey, the assessee was directed to explain the discrepancy of excess stock not recorded in the books of account and as the assessee was not able to explain the discrepancy, he volunta rily came forward with the surrender of Rs.20 lacs on account of unexplained stock. Regarding provisional valuation of stock, it was held by the AO that the said contention of the assessee cannot be accepted for the reason that the valuation of stock was arrived at by physically counting each and every item of stock and by applying purchase price of each and every ite m as described by the assessee and it is a matter of record that the assessee has appended his signatures to the inventory of stock prepared at the time of survey and as such, the valuation of stock as determined during the course of survey was not provisional but final and thereafter, the assessee voluntarily came forward with the surrender of Rs.20 lacs on account of unexplained stock because he was not able to establish the source of funds through which he procured such stock. Regarding cash of Rs.9,80,000/-, it was held by the AO that the survey team made a discovery of cash a mounting to Rs.10,46,000/- from the business premises of the assessee and ITA 516/CHD/2022 A.Y.2017-18 Page 5 of 32 the assessee was asked to explain the difference in the cash so found and as recorded in the books of accounts amounting to Rs. 66,400/- and as the assessee could not explain the a mount of cash so discovered and what has been shown in the books of account, the difference was brought to tax in the hands of the assessee as unexplained money and the provisions of Section 69A are clearly attracted. Further reliance was placed on the Hon'ble Punjab & Haryana High Court decision in case of M/s Kim Pharma (P) Ltd. Vs CI T ( IT A No. 106 of 2011) and the Hon'ble Gujarat High Court decision in case of Fakir Mohmed Haji Hasan Vs CI T 247 I TR 290. Further reference was drawn to the amendment brought in by the Taxation Law (Second Amendment) Act. 2016 which have been made applicable w.e.f. 01.04.2017 and it was, accordingly, held by the AO that the contention of the assessee that the tax rate of 30% should be applicable, cannot be accepted in view of the amendme nt brought in by the Taxation Laws, Second Amendment, Act, 2016. Accordingly, the income so surrendered was brought to tax as deemed income u/s 69 and 69A of the Act and ta x @ 60 % was computed u/s 115B BE of the Act.
6. Being aggrieved, the assessee carried the matter in appeal before the ld. CI T(A) who has since sustained the said additions. As per the ld. CIT(A), the advances and unaccounted stock was added u/s 69 by the AO on the basis of discrepancies noticed, state ment of the assessee and the surrender which followed. It was further held by Ld. CI T(A) that while the advances were admitted as being related to business activity, however, these were not explained. Similarly, re corded stock as per books was Rs.17,38,400/-, however, on physical verification, the same was found to be worth Rs.37,38,210/- and accordingly, the excess stock was added as unexplained investment u/s 69 of the Act. Similarly, cash in hand as per books was Rs.66,400/- whereas ITA 516/CHD/2022 A.Y.2017-18 Page 6 of 32 the Survey Team discovered Rs.10,46,000/- from the business premises of the assessee and since the assessee failed to explain the difference on account of cash in hand, the AO added the same u/s 69A of the Act. The findings of the AO were, accordingly, confirmed and against the said findings and directions of the ld. CI T(A), the a ssessee is in appeal before us.
7. During the course of hearing, ld. AR submitted that assessee is running a manufacturing unit wherein aluminum and copper wires are manufactured and the business is carried on in the name of M/s Singla Wire & Allied Products at the business premises located at B-9, Industrial Estate, Patiala. It was submitted that the survey at the business premises were conducted by the tax authorities on 08.07.2016 and the state ment of the assessee was recorded. It was submitted that no other activity, business or otherwise to establish any other source of income was detected during the course of survey at the business premises of the assessee and in this regard, reference was drawn to the response of the assessee in the context of Question No.3 of the statement so recorded. It was further submitted that cash available at the business premises was counted and compared with the balance appearing as per regular books of account and difference was worked out to Rs.9,80,000/- as has been recorded in reply to Question No.10 of the assessee's state ment. It wa s submitted that the authorities also evaluated the business stock physically found at the business premises and compared the value so worked out with the values worked out provisionally as per the books of account and a figure of Rs. 20,00,000/- was determined as has been stated in response to Question No.12 of the assessee's statement. It was further submitted tha t certain documents/records were also seized/impounded in respect of business transactions in the nature of advances given to certain persons and the total amount ITA 516/CHD/2022 A.Y.2017-18 Page 7 of 32 of those business transactions were worked out at Rs.55 lacs and which has been stated in response to Question No. 11 of the assessee's statement. It was further submitted that the documents/records are still in the custody of the Revenue Authorities and therefore, form part of the records which are available to the AO.
8. It was submitted that the assessee had offered sum total of these transactions as business income for taxation in addition to the normal business income at the conclusion of the survey operation vide his letter dated 09.07.2016 which is available in the assessee's Paper Book. It was submitted that the said sum of Rs.84,80,000/- was offered for tax as additional business income at normal rate applicable for the period under reference and which was accepted by the Revenue authorities at the relevant point in time. It was submitted that the Revenue authorities who had conducted the survey were satisfied a bout the source of the said transactions which had been carried on by the assessee under the name and style of M/s Singla Wire & Allied Products and no q uestions or objections were raised during the course of survey proceedings and therefore, the onus cast on the assessee was duly discharged. It was submitted that the AO has not 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 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 ITA 516/CHD/2022 A.Y.2017-18 Page 8 of 32 submissions were filed from time to time which were duly accepted by the AO and towards the closure of the limitation period, the assessee received a Show Cause dated 30.11.2019 wherein the AO had proposed to invoke Section 115BBE and seek to levy tax @ 60%. It was submitted that the said Show Cause came to the notice of the assessee on 02.12.2019 and in response, the assessee filed his submission on 07.12.2019 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.84,80,000/- to tax u/s 115BBE of the Act merely for the reason that such income had been offered for taxation during the course of survey proceedings and thereafter, the said findings have since been confirmed by the ld. CI T(A). In view of the above, it was submitted that it is evident from the records that during the course of survey of the business premises, no other source of income except business being carried on in the name and style of M/s Singla Wire & Allied Products was detected and evidently, the source of additional income offered for taxation was found to be from the said business only as duly corroborated by the statement of the assessee recorded by the Revenue Authorities at the conclusion of the survey proceedings. It was submitted that the additional income so surrendered was offered for taxation at the rates applicable at the relevant point in time and which has also been accepted by the authorities while accepting the surrender letter. It was submitted that the AO has not denied this fact and has rather accepted that the discrepancies found/detected during the survey operations pertain to the business which is being carried on by the assessee. It was further submitted that Section 115BBE is a machinery provision enabling the AO to levy tax as ITA 516/CHD/2022 A.Y.2017-18 Page 9 of 32 per the specified tax rate, provided the income is assessable as deemed income under the deeming provisions. It was submitted that, however, in the instant case, the deeming provisions are clearly not attracted as the source of the income has been duly explained by the assessee during the course of survey proceedings. It was, accordingly, submitted that unless and until the deeming provisions are attracted, Section 115BBE cannot be invoke d in the insta nt case. It was submitted that on perusal of the Show Cause Notice, it is evident that there was no positive material with the AO to prima-facie form a view that the income so surrendered was in the nature of deemed income and the provisions of Section 115BBE are applicable. It was submitted that the Show C ause was issued at the fag end of the limitation period which was expiring on 31.12.2019 and it clearly shows that the AO has already drawn up his conclusion to invoke provisions of Section 115BBE for the simple reason that the income had been unearthed during the course of survey at the business pre mises of the assessee. It was submitted that Section 115BBE is only a machinery provision specifying a special tax rate for bringing deemed income as specified in Section 69, 69A to tax and not for bringing ea ch and every income merely for the reason that the same has been disclosed during the course of survey of the business premises of the assessee.
9. It was further submitted that the AO has referred to the decision of the Hon'ble Punjab & Haryana High Court in case of M/s Kim Pharma Pvt. Ltd. Vs CIT. However, the said case is clearly distinguishable on facts in the present case. It was submitted that the said decision has been considered in various Co-ordinate Chandigarh Bench decisions such as Famina Knit Fabs Vs ACIT 176 I TD 246, Gaurish Steels Pvt. Ltd. Vs ACI T 43 ITR ( Trib) 414 and Marshal Machines Pvt. Ltd. (IT A No. 57/CHD/2017). It was submitted that in the said decisions, the ITA 516/CHD/2022 A.Y.2017-18 Page 10 of 32 Co-ordinate Chandiga rh Benches have adequa tely 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 Co-ordinate Jaipur Benches decision in case of DCI T Vs. Shri Ram Narayan Birla ( IT A No. 482/JP/2015 dt. 30/09/2016), and Bajargan Traders Vs. ACIT (in IT A No. 137/JP/2017 dt. 17/03/2017) which has subsequently been affirmed by the Hon'ble Rajastha n High Court in case of PCI T vs Bajrang Tr aders (ITA No.258 of 2017). Further, reliance was placed on Coordinate Ahmedabad Benches decision in case of Chokshi Hiralal Maganlal Vs. DCI T [2011] 45 SOT 349 (Ahmedabad) and Chandigarh Benches decision in case of M/s Sham Jewellers Vs. The DCIT (in I TA No. 375/Chd/2022).
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 ta x under the head "income from business & profession". Therefore, the action of the AO in treating the business income so offered by the assessee as deemed income u/s 69 and 69A and bringing the same to tax under the amended section 115BBE deserve to be set aside and necessary relief be provided to the assessee.
12. Per contra, the ld. DR has relied on the order of the AO as well as that of the ld. CIT(A) which we have already taken note of supra and the findings of the authorities are not been repeated for the sake of brevity. Further reliance was placed on the Hon'ble Punjab & Haryana High Court decision in the case of M/s Kim Pharma vs CIT (supra).
ITA 516/CHD/2022 A.Y.2017-18 Page 11 of 32
13. We have heard the rival contentions and purused the material available on record. The genesis of the present case lies in the survey operations u/s 133A conducted at the business premises of the assessee on 8/07/2016 wherein the assessee surrendered a sum of Rs 84.80 lacs, thereafter the return of income filed by the assessee on 23/03/2018 was selected for compulsory manual scrutiny as per CBD T guidelines presumably to examine whether the assessee has honoured the surrender so made at the time of survey while filing his return of income, as also evident from the conduct of the assessment proceedings by the AO in terms of issuing the show-cause and seeking comments of the assessee on the amount so surrendered during the course of survey and subsequent passing of the assessme nt order. As per the AO, the a mount so surre ndered by the assessee during the course of survey though has been offered in the return of income and thus, the assessee has honoured the surrender of income so made but at the same time, the income so offered in the return of income falls under the deeming provisions of section 69 and 69A of the Act and thus, the tax liability thereon has to be determined in terms of section 115BBE of the Act. 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 ha s 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 ca se.
14. To appreciate the aforesaid rival positions, we refer to the provisions of section 69 and 69A of the Act. Section 69 provides that where in the financial yea r immediately preceding the assessment year, the assessee has made investme nts which are not recorded in the books of account, if any, maintained by him ITA 516/CHD/2022 A.Y.2017-18 Page 12 of 32 for an y source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. 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 an y, 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 such financial year.
15. In the instant case, for the deeming provisions of section 69 to be attracted, there has to be a finding that the assessee has made investments during the financial year in the stock and by way of advances, 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 was found to be owner of cash so found at the time 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 the cash or the explanation so offered is not found satisfactory in the opinion of the AO.
16. Recently, in case of Surender Kumar & others ( IT A No. 398/Chd/2022), the Coordinate Chandigarh Benches has held ITA 516/CHD/2022 A.Y.2017-18 Page 13 of 32 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 disclose the nature and source of such income or the AO doesn't get satisfied with the explanation so offered by him and the relevant findings read as under:
"10 . W e h av e co ns id e re d the r iv al co nte nt io n s an d h av e g o ne th ro ug h the re co r d . As p e r th e p ro v is io n s o f S e ct io n 1 15 B B E of th e A ct, the in co me t ax o n in co me re f e rre d to in S ec tio n 6 8 o r Se ct io n 6 9 o r Se ct io n 6 9A o r S e ct io n 69 B o r Se ct io n 6 9C o r Se ct io n 69D are c harg e ab le to tax at a h ig h e r r ate . N o w a pe r us al o f the p ro v is io ns o f S e ct io n 68 , 69 , 6 9A , 6 9B , 6 9C an d 69D wo u ld re v e al th at th o s e p r ov is io ns are at tr acte d in re s pe ct of the cre d its , c as h , e x pe n d itu re , in v e s t me n t e tc . re g ard ing wh ic h the as s e s s e e o f f e rs no e x p l an at io n ab o u t th e n atu re an d so urc e the re of . It is to be po in te d o u t that th e inc o me is to be as s e s s e d u/s 68 whe re in an y s u m is f o und cre d ite d in the bo o k s , of wh ic h th e as s e s s e e o f f e rs no e x p l an at io n ab o u t th e ' n atur e and s o ur ce the re o f ' o r th e e x p l an at io n o f f ere d b y h i m is no t f o u nd s at is f ac to r y b y the A O . Se ct io n 6 9 is attr ac te d to th e une x p l aine d inv e s t me n ts o f wh ic h th e as s e s s e e o f f e rs no ex p l an atio n ab o u t the ' n atu re an d s o ur ce ' th e re o f or the ex p l an atio n is no t f o un d s at is f acto r y. S imil arl y, S e ct io n 6 9A is at tr ac te d in c as e o f mo ne y, b u l l io n , je we l le r y o r oth e r v al u ab le ar ti c le s , S e ct io n 69 B re f e rs to th e in v e s t me n ts , Se ct io n 6 9C re f e rs to th e e x p e n d itu re an d Se ct io n 6 9D re f e rs to the amo u nt bo r ro we d o r re p aid o n h un d i. T he p ro v is io n s o f the se S e ct io ns ar e attr ac te d an d th e in co me is as s e s s e d un de r th e se S e ct io n s , if , th e as s e s s e e f ail s to g ive the e x p l an ati o n ab o u t th e ' n at u re an d s o ur ce ' o f s u ch u nd is clo s e d inc o me . T h e ld . P C IT in o u r v ie w, in th is c as e h as co nf use d h ims e lf b e t we e n the ' und is cl o s e d in co me ' an d th e wo r d ' u ne x p l ain e d in co me ' . A s pe r p ro v is io n s o f S ec tio n 6 8 to 6 9D ar e at tr ac te d in re s p e ct o f th e u nd is clo s e d in c o me b u t the co nd it io n f o r as s e s s in g s u ch inco me un d e r th e s aid p ro v is io n s is th at the as s e sse e h as e i th e r f aile d to d is cl o s e the n atur e an d so urc e o f s uch in co me or the AO d o e s no t g e t s at is f ie d with the e x p l an at io n o ff e re d b y h im.
15 . T he p e r us al o f the ab o v e re le v an t p ar t o f the A ud it R e p o rt pro po s al o f the A O an d S ho w C aus e N o t ice is s ue d b y th e l d . P C IT u/ s 2 63 o f the A ct, wo uld s ho w th at all th e af o re s aid au th o ri tie s h av e b e e n s waye d b y th e n o tio n th at th e in co me su rre nd e re d b y the as s e s s e e was un d is clo s e d in co me o f the as s e s s ee and th e re f o re , th e s a me h as to b e as s e s s e d u/ s 68 to 69D , as th e c as e may be , o f the Inco me T ax A ct an d th e re b y wo u ld b e c h arg e d to h ig he r r ate o f t ax u/ s 1 15 B B E o f the A ct. Ho we v e r, as no te d abo v e , f o r an inc o me to b e t ax e d u/ s 68 to 69D , as th e c as e may be , it s ho u ld no t o nl y b e th e u nd is c lo s e d inco me b ut th e e s s e nt i al c o nd i tio n is t h at th e as s es s e e h as f aile d to d is cl o s e th e ' n atur e and s o u r ce ' o f s uc h u nd is c lo s e d ITA 516/CHD/2022 A.Y.2017-18 Page 14 of 32 inco me o r th at th e e xp l an at io n o f f e re d b y th e as s e s s e e is no t f o und s at is f ac to r y b y th e A O. In th e c as e in h and , as no te d ab o ve , th e A O d u l y m ad e e nq u ir ie s f ro m the as s e s s e e as to t he n atu re and th e s o u rce o f the af o re s aid s u rr e nd er e d in co me an d h as als o s h o w c aus e d the as s e s s e e as to wh y th e s a me s ho u l d no t b e c h arg e d at a h ig h e r r ate o f t ax as pe r p r ov is io ns o f Se ct io n 1 15 B B E o f the A ct. T he ld . AO af te r co ns id e r ing th e su b mis s io ns and e x p l an at io ns o f the as se s s e e acce p te d the co nte nt io n o f the as s e s s e e th at th e s urre nd e re d inco me was o ut of the b us ine s s in c o me o f the as s e s se e . T he p e rus al o f the i mp ug ne d o rd er o f the ld . P C IT wo u ld s ho w th at the ld . P C IT h as no t p o in te d o u t as to wh y the e x p l an at io n o f f ere d b y th e as s e s s ee to the AO was no t s atis f acto r y an d f ur the r wh at mo re enq u ir ie s are re q uire d to b e co nd uc te d in th is c as e, wh ich th e AO h ad f ai le d to co nd uc t. T h e ld . P C IT h as s i mp l y b as e d h is op in io n and o rd e r o n th e A ud it Ob je ct io ns / R e p o r t as p o in te d ou t e v e n in th e A ud it Re p o r t th at s in ce the s ame was un d is c lo s e d in co me o f the as s e s s ee wh ic h was s u rr e nd e re d b y th e as s e s s e e d u rin g the s urv e y ac t io n an d th e re f o re , the s a me was to be as s e s s e d u nd e r th e p ro v is io n s o f S e ct io n 68 to 6 9 D of the A ct. T he ab o v e r e as o n ing o f the s u rv e y p ar t y is n o t i n ac co rd an ce wit h th e re le v an t p ro v is io n s o f the A ct. T h er e f o re , we d o no t f in d an y j us t if ic ati o n o n the p ar t o f the ld . P C IT i n inv o k ing the R ev is io n ar y jur is d ic tio n in th i s c as e ."
17. Therefore, the foundational requirement before invoking the deeming provisions is not that there were certain survey operations u/s 133A and some undisclosed income has been detected and surrendered by the assessee and thus, the deeming provisions are automatically attracted. Rather the foundational requirement is whether the assessee has made the investment/has been found to be owner of cash and the explanation offered by the assessee explaining the nature and source of such undisclosed income and the reasonability of the explanation so offered by the assessee keeping into account the facts and circumstances of the relevant case. In fact, if we look at the provisions of section 133A, clause (iii) of sub-section (3) provides that an income ta x authority acting under this section shall record the statement of any person which may be useful for or relevant to any proceedings under this Act. Th erefore, what explanation has been offered by the assessee as part of his state ment recorded u/s 133A needs to be analysed and examined before drawing any conclusions in this regard.
ITA 516/CHD/2022 A.Y.2017-18 Page 15 of 32
18. In the instant case, in the statement so recorded of the assessee during the course of survey, in Question No. 3 raised by the survey team, the assessee was asked about the source of his income and in response, the assessee submitted that he was sole Proprietor of M/s Singla Wire and Allied Products, Patiala and except the said business, he has no other source of income. Further, he stated that he was not partner/Director in any of the firm or company. In Question No. 4 raised by the survey team, he was asked to state the date of commencement of his concern and the nature of activity carried out alongwith details of manufactured products. In response, the assessee submitted that the concern started business in the year 2008 and it is involved in manufacturing of aluminum and copper wires and thereafter, he has given the details of manufacturing process. In Question No. 10, he was asked by the survey tea m that as per assessee's books of account, there was cash in hand of Rs. 66,400/- however on physical verification, Rs. 10,46,000/- is found from your business pre mises thus there is excess cash of Rs. 9,80,000/- and the assessee was asked to explain the discrepancy. In response, the assessee submitted that at this point in time, he was not in a position to explain the said discrepancy found in cash and offered the difference of Rs. 9,80,000/- for taxation. In Question No. 11, the survey tea m noted that one note pad (katcha) was found during the course of survey and advance to various persons to the tune of Rs. 55,00,000/- has been found noted therein and the assessee was asked to explain the nature of these advances. In response, the assessee submitted that these advances relates to his business activity, however he is not in a position to explain the same at this moment of time and to buy peace of mind, he offered this amount of Rs. 55,00,000/- for taxation for the F.Y. 2016-17 pertaining to A.Y 2017-18. In Question No. 12, the survey tea m stated that stock to the tune of Rs. 17,38,400/- has been found ITA 516/CHD/2022 A.Y.2017-18 Page 16 of 32 as per the books of account maintained by the assessee, however on physical verification, stock to the tune of Rs. 37,38,210/- has been determined and the assessee was asked to explain the difference of excess stock valued at Rs. 20,00,000/-. In response, the assessee submitted that at this moment of time, he is not in a position to explain the said difference of Rs. 20,00,000/- however to buy peace of mind, he offered this amount of Rs. 20,00,000/- for taxation for the F.Y. 2016-17 pertaining to A.Y. 2017-18. Thereafter, in the state ment so recorded, it is mentioned that taxes on total additional income of Rs. 84,80,000/- so surrendered by the assessee were worked out and three post dated cheques were given by the assessee to the survey team for securing the payment of due taxes amounting to Rs. 26,20,000/-. Thereafter, in terms of surrender letter dt. 08- 09/07/2016 addressed to the Additional CIT, Patiala Range, Patiala, the assessee has reiterated the amount surrendered of Rs. 84,80,000/- which were offered as additional income at the time of survey on account of certain discrepancies noticed in terms of advances to various persons amounting to Rs. 55,00,000/-, cash in hand of Rs. 9,80,000/-, excess stock of Rs. 20,00,000/- and the tax liability of Rs. 26,20,000/- which has been worked out at the time of survey and the details and particulars of the cheque issued were mentioned.
19. 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 Singla wires and allied products since 2008 wherein he manufactures and sells aluminum and copper wires and all along, the same is his only source of income and thereafter, he has been confronted with discrepancies in terms of ITA 516/CHD/2022 A.Y.2017-18 Page 17 of 32 cash found excess as compared to what has been recorded in the books of a ccounts, 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 accounts. 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 source thereof during the course of survey proceedings and it is clearly emerging that the source of such income is from his business operations. There is a clear statement of the assessee that the advances are related to his business, however since the same have not been recorded in the books of accounts, he has offered the sa me to taxation. Similarly, the stock physically found has been valued and then, compared with stock as recorded in the books of accounts, thus, there is clear nexus of stock with the assessee's business. The statement of the assessee is available on record and related documents so found during the course of survey are stated to be in possession of the Revenue authorities. Apparently, the AO has failed to take into consideration the statement of the assessee recorded during the course of survey holistically, and other documents and findings of the survey team which are very much part of the records. Following the surrender so made during the course of survey, the assessee has honored the surrender so made and offered the additional income as business income in his return of income and paid due taxes thereon.
20. In our view, what is relevant before invoking the deeming provisions is not just the fa ctum of survey action but besides that, what is the explanation so offered by the assessee explaining the nature and source of income so found during the course of survey proceedings and which has not been recorded in the books of accounts and the same is the essence of the statutory provisions as duly recognized by the Courts and ITA 516/CHD/2022 A.Y.2017-18 Page 18 of 32 various Benches of the Tribunal and which has been reiterated from time to time. The statement of the assessee has to be read as a whole and not in piecemeal especially where the Revenue is relying on the same state ment and in such circumstances, the defence available to the assessee in terms of part of the state ment not been considered by the Revenue cannot be ignored. The mere fact that survey/search proceedings have been initiated at the business premises of the assessee doesn't mandate the Assessing officer to automatically invoke the deeming provisions and before invoking the deeming provisions, he has to call for the explanation of the assessee and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provisions.
21. In case of Gandhi Ram ( IT A No. 121/CHD /2021 dated 04/08/2022), speaking through one of us, it was held 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 to our mind 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. The ld PCIT has to record his specific findings as to the applicability of the relevant provisions and how the explanation called for and offered by the assessee is not acceptable in the facts of the present case which is clearly absent in the instant case. Therefore, where the ld PCIT himself is not clear about the applicability of relevant ITA 516/CHD/2022 A.Y.2017-18 Page 19 of 32 provisions and in the same breath holding the Assessing officer to task by not invoking the said provisions is clearly shooting in the dark which cannot be sustained in the eyes of law and the order so passed therefore cannot be held as erroneous in the eyes of law."
22. In case of Chokshi Hiralal Maganlal Vs. DCIT (Supra), briefly the facts of the case were that during the course of survey under section 133A which was carried out at the premises of the assessee, excess stock of gold and silver ornaments were found and in the return of income subsequently filed by the assessee, he had included the value of excess stock as part of closing stock inventory. However the AO observed that the said disclosure was not consistent with the provisions of Section 69B of the Act and same was accordingly brought to tax under section 69B. The Ld. CI T(A) confirmed the order of the AO and thereafter on further appeal, the Coordinate Ahmedabad Bench held that the excess stock found during the survey is not separately and clearly identifiable but is part of mix lot of stock found at the premises which included declared stock as per books and also the excess stock as computed by the Surve y Officers and therefore the provisions of Section 69B cannot be made applicable as primary condition for invoking the said provision is that the asset should be separately identifiable and it should have independent physical existence of its own and since excess stock as a result of suppression of profit from business over the years and has not kept identifiable separately but as part of overall physical stock found, the investment in the excess stock has to be treated as business income and thereafter has referred to the decision of the Tribunal in case of Fashion Fashion World Vs. ACIT ( IT Appeal No. 1634(Ahd.) of 2006, dt. 12/02/2010) wherein the Tribunal had observed as under:
"11 . B ut th is d o es n o t me an th at lo s s c o mp u te d und er an y o f the f ive h e ad s me n t io ne d in s e ct io n 1 4 - ( i) ' s al ar y' , ( ii) ' inco me f ro m ho us e p ro p e r t y' , ( i ii) 'p ro f its an d g ain s f ro m b us ine s s o r pro f e s s io n ' , ( iv ) ' c ap it al g ain s ' an d ( v ) ' inco me f ro m o t he r ITA 516/CHD/2022 A.Y.2017-18 Page 20 of 32 so urc e s ' - c an no t at al l be ad ju s te d ag ai ns t une x p l a ine d inv e s t me n t o r e x p e nd i tur e . W h at is n e ce s s ar y as p e r Ho n . Gu j ar at H ig h Co ur t is th at s o ur ce o f acq u is it io n o f as s e t o r ex p e nd itur e s ho u ld be cle ar l y id e nt if iab le . In th e c as e b e fo re Ho n . G uj ar at H ig h C o ur t the s o u r ce o f go ld co nf is c ate d was no t id e n tif i ab le an d h e nc e ad ju s t me n t was no t p er mit te d .
12 . T h us the i mp o r t an t as pe c t th at e me r ge s f ro m the e nt ir e d is cu s s io n is th at f or in v ok in g d e e min g p ro v is io n s und e r s e ct io ns 69 , 6 9A , 6 9B & 6 9C the re s ho ul d b e cle a rl y id e n tif i ab le as s e t o r ex p e nd itur e . In th e p re s e nt c as e we f in d th at e nt ir e p hys ic al s to ck o f Rs .2 5,1 4,3 06/- was p ar t o f the s ame b us ine s s . B o th k in d o f s to ck i.e . wh at is re co r de d in t he b o o ks and wh at was f o und ov e r an d ab o v e the s to ck re co r de d in the b o o k s , we re he ld an d d e alt un if o r ml y b y the as s e s se e . Th e re was n o p hys ic al d is t in c t io n be t we e n th e acco u nte d s to ck o r un acc o u nte d s to ck . N o s u ch p h ys ic al d is tinc t io n was f o u nd b y the Re v e nue e it he r . Th e as s e s s e e h as re pe ate d l y cl ai me d th at un ac co un te d b us in e s s inco me is inv e s te d in s to c k and th e re is n o amo u n t s e p ar ate l y tax ab le un de r s e ct io n 6 9. T he d e p ar t me n t h as ig n o re d th is cl ai m of th e as s es s e e and s o ug h t to t ax th e d if f e re nce be t we e n bo o k - s to ck an d p h ys ic al - s to c k as u n acco u n te d in v e s tme nt un de r se ct io n 69 wi t ho ut co ns id e r ing th e c l ai m o f the as se s s e e t h at f irs t the b us in e s s re ce ip t h as to b e co ns id e re d an d the n inv e s t me n t s ho u ld b e tr e ate d as co mi ng ou t of s uc h un ac co un te d inco me . T he d if f e re n ce in s to c k s o wo r k e d o u t b y th e au tho r it ie s be lo w h ad no in d e pe n de n t id e n t it y o f its o wn and it is p ar t a nd p arce l o f e n tire lo t o f s to ck . T he d if f e re n ce b e t we e n de cl a re d s to ck in th e b o o ks an d wh at is p hys ic al l y f o un d wo u ld o nl y b e a mat h e m at ic al e x p re s s io n in te r ms o f v al ue and no t a s e p ar ate ind e pe nd e nt id e n tif i ab le as s e t. T he re f o r e , it c an no t b e s aid th at th e re is an u nd is clo s e d as s e t e x is te d ind e pe n de ntl y . O nc e th is is so th e n wh at is no t de c l ar e d to the d e p art me n t is r e ce ip t f r o m bu s ine s s an d no t an y inv e s t me n t as it cann o t b e co - re l ate d wi th an y s p e c if ic as s e t.
13 . T h us in a c as e wh e re s o ur ce o f inv e s t me n t/ e x p e nd itur e is cle ar l y id e nt if iab l e and alle g e d un d is clo s e d as se t h as n o ind e pe nd e nt e x is te nce o f its o wn o r the re is n o s ep ar ate p h ys ic al id e n ti ty o f su ch in v e s t me n t/e x p e nd itur e the n f irs t wh at is to b e tax e d is th e u nd is c lo s e d b us in e s s re ce ip t inv e s te d in un id e nt if i ab le un acc o u nte d as s e t an d o nly o n f ailu re it s ho u ld b e co ns id er e d to b e t ax e d u nd e r s e ct io n 6 9 o n th e p re mis e s th at su ch e x ce s s inv e s t me n t is no t re co r de d in th e b o ok s o f acco un t an d its n atu re an d s o urce is no t id e nt if i ab le . O nc e s uch e x ce s s inv e s t me n t is t ax e d as u nde c l ar e d b us in e ss re ce ip t th e n t ax ing it f urthe r as d e e me d in co me u nd e r s e ct io n 6 9 wo u ld no t b e ne ce s s ar y. T he re f o re , the f irs t at te mp t o f the ass es s in g auth o rit y sh o uld b e to f ind o ut l in k o f un de cl ar e d i nv e s tme n t/ e xp e nd it ure wi t h the k no wn he ad , g iv e op p o rtun it y to th e as s e s se e to es t ab l is h n e x us and if it is s at is f acto r i l y es t ab l is he d th e n f irs t su ch inv e s t me n t s ho u ld b e co ns id e re d as un de cl are d re ce ip t un de r th at p art ic u l ar he ad . It is o n l y wh e re no ne x u s is es t ab l is he d wi th an y h e ad th e n it s ho u ld b e co ns id e re d as de e me d inco me u nd e r s e ct io n 69 , 6 9A , 6 9B & 6 9C as the cas e may b e . It is b e c aus e wh e n as s e s s e e f ails to e x p l ain s at is f ac to r il y th e s o ur ce o f s u ch in v e s t me n t th e n it s ho uld b e tax e d un de r s e ct io n 69 , 6 9A , 6 9B & 69 C as th e c as e ma y b e . It sh o uld no t b e d o ne at th e f irs t ins t anc e with o ut g iv in g ITA 516/CHD/2022 A.Y.2017-18 Page 21 of 32 op p o rtun it y to the as s e s s e e to e s t ab l is h ne x u s . T he ref o re , t he re is no co nf l ic t wi th the de c is io n of Ho n. G uj ar at H ig h C o u rt in th e c as e o f F ak ir M o h me d H aj i H as an (s up r a) whe re inv e s t me n t in an as s e t o r e x p e n d itu r e is n o t id e nt if iab l e and no ne x us was es t ab l is he d the n wi th an y he ad o f in co me an d th us was no t av ai l ab le f o r s e t o f f ag ain s t an y lo s s un de r an y o th e r he ad . Th e re f o re , we ho ld th at whe re as s e t in wh ich und e cl a re d inv e s t me n t is s o ug ht to b e tax e d is no t cle ar l y id e nt if iab le o r do e s no t h av e in de p e nd e n t id e n t it y b u t is in te g r al and ins e p ar ab le ( mix e d ) p art o f d e c l ar e d as s e t, f all in g und e r a p ar t icu l ar he ad , th e n th e d if f e re n ce sh o ul d b e tre ate d as un de cl are d b u s ine s s in co me e x p l ain i ng th e inv e s t me n t.
14 . To co n clud e s u m o f Rs .8 ,10 ,01 1/ - b e ing d if f e re n ce in s to c k is re p re s e nte d b y u nd e c l ar e d b us ine s s in co me . It d o e s no t h av e a se p ar ate p h ys i c al id e nt it y . It is to b e o nl y t ax e d u nde r th e he ad 'b us ine s s ' . O the r as s e ts h av e s e p ar ate p h ys ic al id e n ti ty b e i ng f urn itu re and f ix ture s , air co n d it io n e rs e tc. T he y c an no t h av e a d ir e ct n e x us wit h b us in e ss and the re f ore inv e s t me nt the re in h as to b e co ns id e re d un d e r s e c tio n 6 9 o nl y."
15 . In v ie w o f the ab o v e , AO is d ir e cte d to co ns id e r th e s u m o f Rs .8,1 0,0 11 /- as u nd is c lo s e d b us ine s s inco me as se s s ab le un de r th e he ad ' b us ine s s ' and o th e r t wo s u ms u nd e r s e ct io n 69 . T he bu s ine s s inco me inc l ud ing ap p l i c at io n o f s e ct io n 4 0(b ) h as to b e co ns id er e d acc o r d ing l y. F or c alc u l atio n o f inc o me in v ie w o f o ur ab o ve o b s e rv atio ns , we r e s to r e the mat te r to the f ile o f A O .
23. In the instant case as well, we find tha t the difference in stock so found out by the authorities has no independent identity and is part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as undeclared business income.
24. Following the said decision of the Coordinate Ahmedabad Bench, the Jaipur Bench in case of DCIT Vs. Shri Ram Narayan Birla (Supra) has taken a similar view holding that the excess stock so found during the course of survey was part of the stock and the Revenue has not pointed out the excess stock has any nexus with any other receipts other than the business being ITA 516/CHD/2022 A.Y.2017-18 Page 22 of 32 carried on by the assessee. The relevant findings are contained at para 4.3 which read as under:
"4.3 . W e h av e he ard r iv al co nte n tio n s an d p e ru s e d th e mate r i al av ai l ab le o n re co rd . U nd is p u te d f acts e me r ge d f ro m the r e co rd th at at the t i me of surv e y e x ce s s s to ck w as f o u nd . It is als o no t d is p ute d th at the as s es s e e is e ng ag e d in the b us ine s s of je we lle r y. D ur ing th e co urs e o f s urv e y e x ce s s s to ck v al u in g Rs . 77 ,66 ,88 7/ - was f o u nd in re s pe ct o f g old and s i lv e r je we l l e ry . Th e C o o r d in ate B e n ch in the c as e of C ho ks h i Hir al al M ag an l al vs . D C IT , 13 1 T T J ( A h d .) 1 h as he ld th at i n a c as e s wh e re s o ur ce of inv e s t me n t/ e x p e nd i tur e is cle ar l y id e n t if iab le an d al le g e d un d is c lo s e d as se t has no ind e pe n de nt e x is te nce o f its o wn o r th e re is no s e p ar ate p hys ic al id e n ti ty of s uch inv e s t me n t/ e x p e nd it ure th e n f ir s t wh at is to b e t ax e d is th e un d is c lo s e d b u s ine s s re c e ip t in v e s te d in un id e n tif i ab le un ac co u nte d as s e t and o n l y o n f ailu re it s ho u ld b e co ns id e re d to be t ax e d u nd e r se c tio n 6 9 o n th e p re mi s es th at s uch e x ce s s inv e s t me n t is no t re c o rd e d in th e bo o k s of acco un t an d its n at ure an d s o ur ce is no t id e n t if iab le . O nc e s u ch ex ce s s in v e s t me n t is tax e d as u nd e cl ar e d b us in e s s re ce ip t th e n t ax i ng it f ur the r as de e me d inco me u nd e r s e ct io n 6 9 wo u ld no t b e ne ce s s ar y. Th e re f o re , the f irs t atte mp t o f the as s e s s in g auth o r it y s h o uld b e to f in d o u t l ink o f und e cl are d inv e s t me n t/ e x pe nd itur e with the kn o wn h e ad , g iv e o p p o rtu n it y to the as s e s s e e to e s tab l is h n e x us an d if it is s at is f ac t o r il y e s tab l is he d the n f ir s t s uch in v e s t me n t sh o uld be co n s id e re d as u nde cl ar e d re c e i p t un d e r th at p ar t icu l ar he ad . It is o b s e rv e d th at the r e is no c o nf lic t wit h th e d e c is io n o f Ho n 'b l e G u j ar at H ig h C o urt in th e c as e o f F ak ir M o h d . H aj iH as an (s up r a) wh e re inv e s t me nt in an as s e t o r e xp e nd itur e is no t id e n tif i ab le an d no n e x us was e s t ab l is h e d the n wit h an y he ad o f inco me an d th us was n o t av ail ab le f o r s e t o f f ag ains t an y l o s s un de r an y o th e r he ad . T he re f o re , th e Ho n 'b l e Co o rd in ate B e nch he ld th at whe re as s e t in wh i ch un de cl ar e d in d e p e nd e n t id e nt it y bu t is inte g r al an d i ns e p ar ab le ( mix e d) p ar t o f de cl are d as s e t, f all in g u nd e r a p ar t icu l ar he ad , the n th e d if f e re nc e s h o u ld b e tr e ate d as und e cl ar e d b u s ine s s in co me e x p l a in ing the inv e s t me n t. In th e p re s e nt c as e the e x ce s s s to ck was p art o f the s to ck . T he re v e nu e has n o t p o in te d o u t th at th e e x ce s s s to ck has an y n ex us with an y o the r re ce ip ts . T he r e f ore , we do no t f in d an y f aul t wi th the de c is i on o f the l d . C IT (A ) d ir e c t ing the AO to t re at th e s ur re nd e re d a mo u nt as e x ce s s s to ck q u a the e x ce s s s t o ck f o und ."
25. Thereafter, the Coordinate Jaipur Benches in case of Bajargan Traders Vs. ACIT (Supra) has similarly held as under:
"2.1 0. W e h av e he ar d the riv al co nte n tio ns an d pe r us e d the mat e r ial av a il ab le o n re c o rd . D ur in g th e co u rs e o f s urv e y , the as s e s s ee h as s ur re n de re d an amo un t o f Rs . 7 0, 04 ,81 4/ - to ward s inv e s t me n t in s to ck o f r ice wh ich h ad no t b e e n r e co rd e d in th e bo o k s o f acco u nts . S ubs e q ue n tl y, in th e b o ok s of ac co un ts , the as s e s s ee h as in co r po r ate d th is tr an s ac t io n b y d eb it in g the pu rch as e acco u nt and cre d it in g the i nco me f ro m un d is cl o s e d so urc e s . In th e an nu al ac co un ts , th e p urc h as e s o f Rs . 7 0,0 4,8 14/ - we re f in al l y re f l e c te d as p ar t o f to t al p u rch as e s amo u n t in g t o R s .
ITA 516/CHD/2022 A.Y.2017-18 Page 23 of 32 33 ,47 ,19 ,65 8/ - in th e p ro f it an d lo s s ac co un t and the s a me als o f o und in c lud e d as p ar t o f the cl os ing s to ck amo u n t to Rs . 1,9 4,4 2,5 69 /- in the p ro f it/ lo s s acco u nt s inc e th e s aid s to ck o f ric e was no t s o ld o u t. In ad d it io n to th e p ur ch as e and th e clo s in g s to ck , the a mo u n t o f RS . 7 0,0 4,8 14 /- al s o f o und cre d ite d in the pro f it an d lo s s acco un t as in co me f ro m u nd is c lo s e d s o u rce s . T he ne t e f f e ct o f th is d o ub le e n try ac co u nt in g tre at me n t is th at f ir s t l y th e un re c or de d s to c k o f r ice h as b e e n b ro ug ht o n th e b o ok s and no w f o r ms p ar t o f the re co r de d s to ck wh ich c an be s u bs e q ue n t l y so ld o u t and the p ro f it/ lo s s th e re f ro m wo u ld be s u b je ct to t a x as an y o th e r n o r m al b u s ine s s tr an s ac t io n. Se co nd l y , the unre co rd e d inv e s t me n t wh ic h h as g o ne in p ur ch as e o f s u ch unre co r de d s to ck of rice h as b e e n re c or de d in th e b o o k s o f ac co un ts an d o f f e re d to tax b y cre d it in g th e s aid amo un t in the p rof it and lo s s ac c ou nt. H ad th is in v e s tme nt be e n mad e o u t o f k no wn s o ur ce , the re was no ne ce s s it y f o r as s e s s e e to cre d it the p ro f it/ lo s s ac c o un t an d o f f e r th e s ame to tax . A cc o rd ing l y, we do no t s e e an y inf ir mi t y in as s e s s ee ' s b r ing in g s uc h tr ans ac tio n in its b o o ks o f ac co un ts and th e ac co un t ing tre at me n t th e re o f s o as to re g ul ar is e its bo o k s o f ac co u nts . In f act , th e s a me p ro v id es a cre d ib le b ase f o r Re v e nue to br ing to t ax s u bs e q u en t p ro f it/ lo s s o n s ale o f s uch s to ck o f r ice in f uture .
2.1 1. H av in g s aid th at , th e ne x t is s ue that ar is e s f or co ns id e r at io n is whe th e r th e a mo u nt s ur re n de re d b y w ay o f inv e s t me n t i n th e un re co r de d s to c k o f ric e h as to b e b ro ug ht to tax u nd e r th e he ad "b us in e s s in c o me " or " in co me f ro m o th e r s o urce s " . In the p re s e n t c as e , the as s e ss e e is d e al in g in s ale o f f o o dg r ains , r ice an d o il se e d s , and the ex c e s s s to ck wh ic h h as be e n f o un d d u r in g the co ur s e o f s urv e y is s to ck o f rice . T he r ef o re , the inv e s t me nt in pro cur e me nt o f s uc h s to ck o f r ice is c le ar l y id e nt if iab le an d r e late d to the re g ul ar b us in e s s s to ck o f th e as s es s e e . T he d e c is io n o f th e C o- o rd in ate B e nch in c as e of Sh ri R amn ar a y an B ir l a ( s u pr a) su p po r ts th e c as e o f the as s e s s e e in th is re g ard . T h e re f o re , th e inv e s t me n t in the e x ce s s s to ck h as to b e b ro ug ht to t ax un de r th e he ad "b us ine s s inco me " an d n o t u nd e r t he he ad in c o me f ro m o th e r so urc e s " . In the r e s u l t, g ro u nd N o . 1 o f th e as s e s se e is al lo we d . "
26. The said decision of Coordinate Jaipur Benches has since been confirmed by the Hon'ble Rajasthan High C ourt in case of PCI T vs Bajargan Traders (DB Appeal No. 258/2017 dt. 12/09/2017).
27. Similarly, the Coordinate Chandigarh Benches in case of M/s Gaurish Steels Pvt. Ltd. Vs. ACIT (Supra) has held as under:
"10 . We h av e he ar d the r iv al c o nte ntio n s and p e rus e d th e mat e r ial av ail ab le o n r e co r d . T h is is a f act o n re co r d th at th e as s e s s ee s u rr e nd e re d an a mo u nt o f Rs .70 l acs as ad d i t io n al ITA 516/CHD/2022 A.Y.2017-18 Page 24 of 32 inco me d u ring the co urs e o f sur ve y co nd u cte d at its pr e mis e s o n ac co u nt o f f o llo win g he ad s :
(i) D is c re p anc y o n ac c o u nt o f c as h f o u nd Rs . 9 lac s
(ii) D is c re p anc y o n c o s t of c o ns t ru c t io n o f Rs . 21 lac s b u ild ing (iii ) D is c re p anc y in s t oc k Rs . 10 lac s (iv ) D is c re p anc y in adv a nc e s a nd re c e iv ab le Rs . 30 lac s 11 . T he s e f ac ts h av e no t b e e n d is p ute d b y an y o ne at an y s tag e .
Th e o nl y is s u e to b e co ns id e re d b y u s is whe the r th e inc o me o f Rs .70 l ac s s u rre nd e re d is to be t ax ab l e as b us in e ss inco me o r inco me f ro m o the r s o ur ce s o r as d e e me d inc o me und e r s e c ti on s 69 A , 69 B an d 6 9C o f the A ct as he ld b y t he As s e s s ing Of f ic er . A nu mb e r o f jud ic i al p ro no un ce me n ts h av e be e n c ite d d u r in g the co ur s e o f he ar ing , h o we v e r, we h av e to b o w d o wn to the pro po s it io n l aid d o wn b y th e J u r is d ict io n al P un j ab & H ar ya n a H ig h C o urt in th e c as e o f M / s K im P h ar ma P v t. L td .(s u pr a) s in ce th is is the o nl y j udg me n t o f th e J ur is d ic t io n al H ig h C o ur t wh i ch we re b ro ug h t to o ur no t ice .
12 . O n pe r us al o f the s aid ju dg me n t, we f in d o urs e l v es in ag re e me n t with the s ub mis s io n o f the le arn e d co uns e l f o r the as s e s s ee , th at the o n l y is s ue in th at c as e was the t ax ab il it y o f c as h s ur re n de re d d u ring the co urs e o f s u rve y, as the as s e s s e e h ad als o s ur re n de re d in co me o f Rs .10 l acs in as s e s s me n t y e ar 20 05- 0 6 o n ac co u nt o f su nd r y cre d its , re p air s to b u ild in g and ad v anc e s to s t af f , wh i c h b e ing re l at ab l e to b us ine s s c arr ie d o n b y the as se s s e e was alr e ad y in c lu d e d as in co me f ro m b u s ine s s .
13 . In th e pr e s e nt cas e , we s e e th at th e As s e s s ing Of f ice r h as no wh e re d is p ute d the b us ine s s lo s s e s in cur re d b y th e as s e s s e e . Th e b o ok s h av e no t b e e n re j e c te d . It was s t ate d at the B ar t h at ev e n at th e t i me o f s urv e y, in th e tr ad ing acc o u n t p r e p are d b y th e s u rv e y te a m, the re we re lo s s e s in cu rr e d b y the as s e s s e e . A l l th e s e f ac ts h av e n o t b e e n d is p u te d b y the As s e s s ing Of f ice r . Fu rthe r , th e s u rr e nd e r mad e b y the as s e s s e e was o n ac co un t o f c as h f o un d d u rin g t he co ur s e o f s u rv e y, d is cre p an c y in th e co s t of co ns tru c t io n o f bu ild ing , d is c re p an c y in s to ck and d is cre p an c y in ad v ance s an d re ce iv ab le s . B y no s tr e tch o f imag i n atio n , an y of the s e in co me s ap ar t f ro m c as h c an b e co ns id e re d as in c o me un de r an y h e ad o th e r th at the ' b u s in e s s in co me ' .
14 . No wh e re in h is o rd e r the As s e s s ing Of f ice r h as b e e n ab l e to br ing o n re co rd th e f act th at the in co me s urre nd e r ed d ur ing th e co ur s e o f s u rv e y was no t o u t o f th e b us ine s s o f the ass e s s e e . A ls o no whe r e he has o b j e c te d to th e he ad s u nd e r wh i ch the as s e s s ee h ad s u rr e nd e re d the s e amo u n ts , i.e . c as h , co ns tr uct io n of b uil d in g , d is cr e p anc y in s to ck an d d is cre p an c y in ad v an ce s an d re ce iv ab l e . F ur t he r , e v e n the s urv e y te am h as no t f o un d an y so urc e o f inco me e x ce p t the b us in e s s in c o me . N o w, f o llo wi ng th e jud g me n t o f J uris d ic t io n al H ig h C o ur t, in the b ackg ro un d o f the f acts o f th e p re se n t c as e , we c an s af e l y inf e r th at ap ar t f ro m c as h al l o th e r inc o m e s ur re n de re d may be b ro ug ht to t ax un de r th e he ad 'b us in e s s in co me ' wh il e th e c as h h as to b e tax e d un de r th e he ad d e e me d in c o me un d e r s e ct io n 6 9 A o f th e A ct ."
ITA 516/CHD/2022 A.Y.2017-18 Page 25 of 32
28. Similarly, the C oordinate Chandigarh Bench in case of Famina Knit Fabs Vs. ACIT (Supra) has held as under:
"19 . In th e f acts o f the c as e in IT A N o .40 8/ C h d / 20 18 , the in c o me su rre nd e re d was o n ac co u nt o f un acco u nte d r e ce iv ab le s o f th e bu s ine s s o f the as s e s s e e amo un t ing to R s .1 .25 cr o res . Th e Ld .C IT ( A ) in p ar a 9 o f the o r de r h as o u tl i ne d th e f ac ts re l at in g to th e s ur re n de r mad e b y th e as s e s s ee s t at in g th at d ur ing s urv e y a po ck e t d iar y was f ou nd f ro m the acco un t s e ct io n of the as s e s s e e co mp an y wh i ch co n tain e d e n try o f re ce iv ab le s a mo u n t in g to Rs .1.2 5 cro re s o n p ag e s 27 , 2 8, 31 an d 3 3, wh ic h we re no t re co r de d in the re g u l ar b o o k s o f the as s es s e e an d we re su b se q u e n tl y s ur re n de re d s t at in g th at the s e e n tr ie s we re un ac co u nte d s u nd ry re ce iv ab le s b e ing s u rre nd e re d as in co me un de r the he ad b u s i ne s s , to b u y p ie ce o f mind and s ub je cte d to no p e n al t y and f ur the r th at th e lo s s e s in cu rre d b y th e as se s s e e in th e imp u g ne d ye a r wil l be ad j us te d ag ain s t th is s urre nd e re d inco me . T h e re l e v ant f acts as s t ate d b y the C IT ( A ) in p ar a 9 o f h is o r de r an d wh ich ar e no t d is p ute d , ar e re p ro d uce d he re un d e r:
"9. Ad v e rt in g no w to th e f acts o f the in s tan t c as e , it is s e e n th at whe n s u rv e y p ro ce e d in g s we r e co nd ucte d at th e b u s in e s s pre mis e s o f the app e ll ant co mp an y, a p o ck e t d iar y was f o u nd f ro m the acc o u nts s e c t io n wh i ch co nt ain e d e n tr ie s of re ce iv ab le s amo u n t in g to R s .1.2 5 cro res o n p ag e no s . 27 , 28 , 31 an d 33 , wh ic h we re no t re co r de d in th e re g ul ar b oo k s of ac co un ts . W he n th e s e e n tr ie s we re co nf ro nte d to the app e ll an t co mp an y wh ile re co r d in g the s t ate me n t o n 15/ 0 9/ 20 12 , it was s t ate d : " t h at th e s e e n tr ie s are s un d r y re ce iv ab le s wh i ch h as no t b e e n ac co u nte d f o r in the b o ok s o f acco u nts an d in o r de r to b uy pe ace of min d , th e s ame is s urre nd e re d as i nco me un de r the h e ad bu s ine s s f o r F.Y .20 1 2- 13 r e le v an t to as s t t. Ye ar 20 13- 14 s ub j e ct to no p e n alt y and pr o s e c ut io n u nd e r the I.T . A ct, 19 61 . S in ce the co mp an y is in cu rr ing lo s s e s in c ur re n t F.Y. 20 12 - 1 3, th e su rre nd e re d in co me wil l b e ad ju s te d ag ain s t the s e lo s s e s ."
[Ex tr ac te d f ro m the i mp u g ne d as s e s s me n t o rd e r ; p ag e s 5 & 6] ."
20 . C le ar l y, it is e v i de nt f ro m the ab o ve th at the s ur re n de r was on acc o u nt o f d e b to r s /r e ce iv ab le s re l ati n g to the b us in e s s o f th e as s e s s ee o n l y. T he R e v e nue h as ac ce p te d the s ur re n de r as s uch , as b e ing o n acco un t o f re ce iv ab le s . It f o l lo ws th at th e de b to rs we re g e ne r ate d f ro m the s ale s mad e b y t he as s e s s e e d u ring the co ur s e o f c ar r y in g o n th e b us ine s s o f the as s e s s e e , wh ic h was no t r e co r de d in the b o o ks o f the as s e s se e . T ho ug h th e s aid inco me was no t re c o rd e d in the b o o k s o f the as s e s s ee b u t the so urc e o f the s ame s to o d d ul y e x p l ai n e d b y th e as s es s e e as be in g f ro m the b us in e s s of th e as s e s s ee . E v e n o the r wis e no o t he r so urc e o f inc o me o f the as s e s s e e is the re o n re co r d e it he r d is c lo s e d b y th e as se s s e e o r u ne ar th e d b y the Re v e n ue . Th e pre po n de r anc e o f p ro b ab il it y th e re f o re i s th at th e de b to rs we r e so urc e d f ro m th e b u s i ne s s o f the as s e s s e e . T he re f o re , the re is no que s tio n o f tre at i n g it as d e e me d in co me f ro m un d is c lo se d so urc e s u/ s 69 , 69 A , 6 9B an d 6 9C o f th e A ct and the s ame is he ld to be in the nat ur e of B us ine s s In co me o f the ass e s s e e . H av ing he ld s o , th e s ame was as s e s s ab le u nd e r the h e ad 'b us ine s s an d p ro f e s s io n' and as s t ate d ab o v e , the b e n e f it of s e t of f of lo s s e s b o th cu rre n t and b ro ug ht f o r ward was al lo wab l e to th e as s e s s e e in ac co rd an ce wi th l a w.
ITA 516/CHD/2022 A.Y.2017-18 Page 26 of 32 21 . T he co n te n t io n o f th e Re v e nue the re f o re th at the in co me b e tr e ate d as d e e me d in co me u/ s 69 ,69 A/ B / C o f th e A ct is ac co rd in g l y r e j e c te d and as a co ns eq ue nce the re to the p le a t h at no se t o f f of lo s s e s b e allo we d ag ain s t t he s ame u /s 11 5B B E o f th e A ct als o is re je ct e d .
22 . T he re f o re , as pe r the f ac ts of the c as e in IT A N o .4 08/ C hd / 2 01 8 and as p e r the p r ov is io n s o f l aw re l at in g to th e is s ue , the s u rre nd e re d in co me , we ho ld , was as s e s s ab l e as bu s ine s s inco me o f the as s es s e e an d s e t o f f of lo ss e s was to b e al lo we d ag ains t the s a me as r ig ht l y c l ai me d b y the as s e s s e e . Th e ap pe al o f the Re v e nue , the ref o re , in IT A No .4 08 / C h d/ 20 18 is d is mis s e d .
23 . No w co min g to th e f ac ts of the c as e in IT A N o/ 1 49 4/ C hd / 2 01 7, the in co me s u rr e nd ere d was o n acco un t o f th e f o llo win g as n ar r ate d ab o v e in e arl ie r p ar t o f o u r o r de r :
( i) in v e s t me n t o f Rs . 60 l acs in K o th i at S uk h man i E n c l av e in th e n ame o f S mt . R e k h a M ig l an i;
( ii) S u nd ry cr e d ito r s and ad v an ce s re ce iv e d f ro m cu s to me rs amo u n t in g to R s . 1 32 l acs ;
( ii i) G ro s s p rof it o n s ale o u t o f b o o k s amo un t ing to R s . 1 98 l acs an d ;
( iv ) s urre nd e r to co v e r mis c e l l an e o us d is cr e p an c ie s in lo o s e p ap e rs e tc . amo u n t in g to R s . 10 l ac s .
24 . As f ar as the s urr e nd e r mad e o n acco un t o f inv es t me nt in K o th i o f R s . 60 l acs , ne i the r is th e s a me d is c l o s e d in the b o o k s of th e as s e s s e e no r s o ur ce of the s ame d is clo s e d . T he re f o re , the s a me is to b e as s e s s e d as de e me d in co m e u/ s 6 9 o f the A ct. Th e s a me ap p l ie s to the s u rr e nd er o f Rs .1 0 l acs mad e to co v e r th e mis ce l l ane o us d is cr e p an c ie s in lo o s e p ap e r of Rs .1 0 l acs . N e it he r th e n atur e o f th e d is cr e p anc ie s , no r an y s o urce r e l at in g to th e s a me h as be e n d is c l o s e d and , the re f o re , the s ame is als o to b e as s e s s e d as de e me d in co me u/ s s 6 9, 69 A , 6 9B and 6 9C of the A ct.
25 . As f ar as the s u rr e nd e r o f R s .1 32 l acs mad e o n ac co un t o f su nd ry cre d ito rs an d ad v anc e s re ce iv e d f ro m cus to me r s and Rs .19 8 l acs o n acco u nt of gro s s p ro f it o n s ale o u t o f the b o o k s , bo th o f the m c le ar l y ar e in re l at io n to the b us in e s s c ar r ie d o n b y th e as s e ss e e an d are thu s in th e n atu re o f b us in e s s in co me . Th e re f o re , the s e t o f f of bus in es s lo s s e s , b o th cur re n t and bro ug ht f or ward are to b e al lo we d as p e r the p ro v is io ns o f la w. As f ar as the in co me s ur re n de re d and to b e as s e s s e d u/ s 69 , 69 A , 6 9B and 6 9C o f th e A ct , as he ld ab o v e b e f o re us , th e s ame is to b e s ub je cte d to t ax as p e r the p ro v is io n s o f s e ct io n 1 15 B B E of the A ct ."
29. In the instant case as well, the surrender on account of advances were relating to the business being carried on by the assessee. The ld CIT(A) has a lso returned a finding that the advances were admitted as being related to business activity of ITA 516/CHD/2022 A.Y.2017-18 Page 27 of 32 the assessee. Where the same has been found unrecorded in the books of accounts, the same has to be brought to tax under the head "business income".
30. Similarly, the Coordinate Chandigarh Bench in case of M/s Sham Je wellers Vs. The DCIT (Supra) has held as under:
"10 .17 G ro un d N o s . 8 & 9 ch al le ng e the ac tio n o f th e lo we r au th o ri tie s in ap p l yin g the p ro v is io ns o f s e ct io n 1 15 B B E and th e re b y ch ar g ing t ax at th e r ate o f 60% . The main thr us t o f th e ar g u me n ts o f th e Ld . AR h as b e e n th at al l the ad d it io n s m ad e o r su s t ain e d re l ate o nl y to th e b u s in e s s in co me o f th e as s e s s e e and th at no wh e re in the ass e s s me n t o rd e r has it b e e n al le g e d th at so me o the r s o ur ce o f inco me h ad b e e n d e te cte d wh i ch g av e r is e to ad d it io n al inc o m e . It is s e e n th at d ur in g the co ur s e o f as s e s s me nt p ro ce e d ing s , th e v ar io us e x p l an at io n s s ub mit te d b y th e as s e s s e e h av e d u l y me n t io n e d th at the s ur re n de re d in co me was d e r iv e d f ro m t he b u s ine s s . A p e rus al of the as se s s me n t or de r wo u l d als o sh o w th at no whe re in the b o d y o f th e as s e s s me nt o rd e r, th e A O h as e v e n co ntr ad icte d th is e x p l an at io n of the as s e s s e e . T h e A O h as n o t b ro ug ht o n re c o rd an y io ta o f ev id e nce to d e mo ns t r ate th at the as s e s s e e h ad an y o th e r s o ur ce of inco me e x c ep t in c o me f ro m b us in e s s and , the r e f o re , it is o ur co ns id er e d v ie w th at d e e min g s uch in co me u nd e r the p ro v is i on s of s e ct io ns 68 or 69 wo u ld no t ho ld g o o d . In o ur v ie w, in s u ch a s i tu at io n , th e AO co u ld no t h av e le g all y an d v al id l y re s o r te d to tax ing the inc o me o f th e as s e s s e e at the rate o f 60% in te r m s o f pro v is io ns o f s e ct io n 1 15 B B E o f the A ct .
10 .18 T he Ho n'b le A nd hr a Pr ad e s h Hig h C o u rt in th e c as e o f Pr inc ip al C o m mis s io ne r o f In co me T ax V s . D e cc an J e we l le rs Ltd . re p o rte d in ( 2 02 1) 4 38 IT R 1 31 (A P ) he l d th at wh e r e the as s e s s e e was e ng ag e d in th e b us ine s s of Go ld and D i amo n d je we l le r y and S ilv e r ar t icle s and d u r ing th e s e ar ch an d s e iz ure o pe r at io n u/ s 13 2, e x ce s s s to ck was f o u nd to b e de cl are d an d the as se s s e e h ad s ub mit te d th at e x ce s s s to ck was r es u lt of s up p re s s io n o f pro f it f ro m b us ine s s o v e r the ye ars and the s ame h ad n o t b e e n ke p t id e n t if ie d s e p ar ate l y and the A O had d ul y c o n s id e re d and ac ce p te d the as s e s s e e ' s e x p l an ati o n th at in v e s tme nt in e x ce s s s to ck was to b e tr e ate d as b us in e s s i nco me , the re v is io n al po we r s inv o k e d b y t he P r in c ip al C o mmis s io n e r u/s 2 63 o f th e A ct we re n o t co rre ct in t he e ye s o f l aw.
10 .19 T he IT A T C h an d ig arh B e nch in th e c as e o f F a min a K n it F ab s Vs . A C IT re p o rte d in ( 20 19 ) 17 6 IT D 24 6 ( C h d- T rib ) h as he ld th at, whe re in d u ring th e c o urs e o f s u rv e y, a s ur re n de r was mad e b y th e as s e s s e e o n ac co un t o f de b to rs / re c e iv ab le s wh ich was b as e d o n a d iar y f o u nd d ur in g the co u rs e o f s u rv e y and th e Re v e n ue h ad acce p te d th at the s urre nd e r was o n acco un t o f re ce iv ab le s , it f o llo we d th at the d e b to rs we re g e ne r ate d f ro m the s ale s mad e b y th e as s e s s e e d u r ing th e c o urs e o f c ar r yin g o n th e bu s ine s s o f th e as s e s se e wh ich was no t re c o rd e d in th e b o o k s o f th e as s e s s e e . T he C o o rd in ate B e nch o f the IT A T we nt o n to f urthe r ho ld th at th o ug h th e s aid in co me was no t re co rd e d in th e bo o k s o f th e as s e s s e e b u t th e s o u rce o f th e s a me s to o d d ul y ex p l aine d b y the as s e s s e e as b e ing f ro m th e b us in e s s o f the as s e s s ee and ev e n o the r wis e n o o the r s o urc e o f in co me o f the ITA 516/CHD/2022 A.Y.2017-18 Page 28 of 32 as s e s s ee was o n re co rd e ith e r d is clo s e d b y the as s es s e e o r une ar th e d b y th e R e v e n ue . T he B e n ch f urth e r he ld th at the pre po n de r anc e o f pr o b ab il it y, the r e f o re , is th at th e d e b to rs we r e so urc e d f ro m the b u s ine s s o f the as s e s s e e . T he r e f o re , the re was no q u e s t io n o f tre at in g it as de e me d in co me f ro m und is c lo s e d so urc e s u/ s 6 9, 69 A , 6 9B , o r 69 C o f th e A ct an d th e s ame was he ld to b e in the n at ure o f b us ine s s in co me o f the as s e s s e e .
10 .20 T h us , as in the pr e s e nt c as e , wh e re th e s o ur ce of inv e s t me n t o r e x p e nd itur e is cle ar l y id e n tif i ab le and th e al l e ge d un d is c lo s e d as se t has no ind e pe n de nt e x is te nce o f its o wn o r th e re is no s e p ar at e p h ys ic al id e n t it y o f s uch inv es t me nt o r ex p e nd itur e , the n , f irs t, wh at is to b e tax e d is th e un d is c lo s ed bu s ine s s re ce ip t inv e s te d in u nid e nt if ia b le un acco u nte d as s e t an d o nl y o n f ailu re can i t be co ns id e r ed t o be t ax ed u/ s 69 o f th e A ct an d f ur th e r wh e re o nc e s u ch in v e s t me n t o r e x pe n d itu r e is bro ug ht wit h in th e pu rv ie w o f t ax as u nd e c l ar e d b us in e s s re ce ip t , the n t ax ing it f ur the r as de e me d inco me u /s 6 9 wo u ld b e co mp l e te l y o ut o f p l ac e .
10 .21 S im il ar v ie w was tak e n b y the C o o r d in ate Be n ch o f IT AT A h me d ab ad in the cas e o f C ho k s h i H ir al al M ag an l al V s . D C IT re p o rte d in 1 31 TT J 1 ( A hd .) 10 .22 It is als o s e e n th at th e Ld . C IT( A) h as re l ie d o n th e jud g e me n t o f th e Ho n'b le P u nj ab & H ar y an a H ig h C o urt in the c as e o f K i m P h ar m a L td . V s . C IT in IT A No . 1 06 o f 201 1 ( O & M ) an d th e L d . C IT D R h as als o q uo te d th e s a me in h is arg u me n ts be f o re us . Ho we v er , af te r g o in g thro ug h the af o re s ai d jud ge m en t of th e H o n' b le P u nj a b & H ar y an a H ig h C o ur t, it is se e n th at in th at p ar ti cu l ar c as e , the o nl y is s ue was wi t h re g ar d to the c as h su rre nd e re d at th e ti me o f s urv e y and no o the r in co me . T he cas h f o und co uld no t be r e l ate d to the al re ad y d is clo s e d and ac ce p te d so urc e o f in co me o f th e as s e s s e e an d , the r ef o re , the Ho n' b le Pu nj ab & H ar y an a H ig h Co ur t he ld th at s uc h s u rr e nd e re d cas h was to be tre ate d as de e me d in co me u/ s 6 9 o f th e A ct. Ho we v e r , in the p re s e n t c as e b e f o re us , the as s e s s ee h as o n l y o ne s o ur ce of in co me i. e . b us in e s s in co me an d n o wh ere h as it be e n b ro u gh t on re co rd th at th e as s e s s e e h ad an y o the r s o u rc e o f in co me ex ce p t b u s ine s s in co me an d , th e re f o re , we re s p e ctf ull y s t ate th at jud g e me n t o f the Ho n 'b l e P un j ab an d H a ry an a H ig h Co ur t in th e c as e o f K i m P h ar ma Pv t. L td ( s up r a) wo u l d no t ap p l y o n th e f acts of the p re s e n t c as e .
10 .23 A c co rd ing l y, ke e p ing in v ie w the v ar io u s jud ic ial pre ce de nts as c ite d ab o v e and re s p e ctf ull y f o llo win g the s ame , we ho ld th at th e A O co uld no t h av e le g all y in v o k e d the pro v is io ns o f s e c t io n 11 5B B E o f th e A ct in the p re s e n t c as e and f urthe r th e Ld . C IT ( A ) was als o no t le g all y co rre ct in up ho ld in g o f th e ap p l ic at io n o f pro v is io ns o f s e ct io n 11 5B B E o f th e A ct. A cco rd in g l y, g ro u nd N o s . 8 and 9 ar e als o al lo we d ."
31. Now, coming to the decision of Kim Pharma (P) Ltd. Vs. CIT [2013] 35 taxmann.com 456 (P&H). Briefly the facts of the case were that the survey under section 133A was conducted at the business premises of the assessee and during the course of ITA 516/CHD/2022 A.Y.2017-18 Page 29 of 32 survey, cash a mounting to Rs. 5,00,000/- was found which was surrendered by the assessee for A.Y 2006-07 a nd another amount of Rs. 10,00,000/- was surrendered for A.Y. 2005-06 on account of sundry credits, repair to building and advances to staff. The matter pertaining to A.Y 2006-07 came up for consideration before the Coordinate Chandigarh Benches and taking note of the state ment of the General Manager of the assessee company recorded during the course of survey wherein he had admitted the said cash has been generated out of income from other sources and in the absence of nature of source of cash being proved, it uphold the order of the CI T(A) in including the additional income as deemed income u/s 69A of the Act and relevant findings read as under:
"9. In th e f ac ts o f the p r es e n t c as e be f o re us , we f ind th at un ac co u nte d c as h was f o u nd d ur in g the co ur s e o f s u rv e y op e r at io n in th e p o s s e s s io n of the as s e s s e e co mp an y an d the s a me was s urre nd er e d as ad d i tio n al in c o me f o r th e ye ar un de r ap p e al. T h e as s e s s e e h as f aile d to e x p l ai n th e n atur e an d s o ur ce of th e s aid c as h f ou nd wh ich was no t r e co rd e d in th e b oo k s o f ac co u nt, tho ug h wh il e s urr e nd e r in g the ad d it io n al in co me i t was ad m it te d b y th e M an ag e r o f the as s e s s e e co mp an y, in the s t ate me n t re co r de d d ur ing th e co u rs e o f s urv e y th at th e s aid ad d it io n al inco me is its in co me f ro m o th e r s o ur ce s . T he Ho n' b le Gu jr at H ig h C o ur t in F ak ir M o h me d H aj Hus s ain Vs C IT h ad he ld as u nd e r :
"T he s ch e me o f s e c t io ns 6 9, 6 9A , 69 B , an d 6 9C o f the In c o me - tax A ct, 19 61 , wo u ld s ho w th at in c as e s wh e re the n atu re and so urc e o f acq u is it io n o f M o ne y , b u l l io n, e tc., o wn ed b y th e as s e s s ee o r th e s o ur ce o f e x p e nd i tur e in c ur re d b y th e as s e s s e e ar e n o t e x p l ain e d at al l , o r no t s at is f acto r il y e x p l ai ne d , the n th e v alu e o f s uch inv e s t me n ts an d mo n e y o r th e v alue o f ar ti cle s no t re co r de d in th e b o ok s of ac co un t o r th e u ne x p l ain e d e xp e nd it ure may b e d e e me d to b e th e in co me o f s u ch as s e s s e e ."
In the abs e nce o f the e x p l an at io n / e v id e n ce re g ar d in g th e so urc e s o f the ad d i tio n al in co me b e ing s at is f acto r i l y e x p l ain e d b y th e as s e s s e e an d ap p l y in g the r ati o o f the Ho n'b le G u jr at H ig h Co ur t in F ak ir Mo h me d H aj i H as an V s . C IT (s u pr a) , we ho ld th at the ad d it io n al i nco me o f f e re d is d ee me d in co me as s e s s ab le u/ s 69 A o f t he A c t and no de d u ct io n is al lo wab le ag ain s t s uch de e me d in co me as s e ss e d u/ s 69 A o f t he Ac t in the h and s o f th e as s e s s ee . Fo llo win g th e r atio l aid do wn b y th e G ujr at H ig h Co ur t in F ak ir Mo h me d H aj i H as an V s . C IT ( s u p r a) , o n ce th e as s e s s e e h as f aile d to e x p l ai n the n atur e an d so u rc e o f cas h f o u nd av ai l ab le wit h it an d the s ame is as s e s s e d as d e e me d in c o me u/ s 69 A of t he Ac t , the re f ore , the co rre s p o nd ing d e d uct i o n s un de r the he ad P r o f its and g ains ar e n o t av ail ab l e to the ITA 516/CHD/2022 A.Y.2017-18 Page 30 of 32 as s e s s ee . T he b us ine s s l o s s d e te r min ed f o r the ye ar is no t al lo we d to b e s e to f f ag ain s t s u ch d ee me d inco me in c lu d e d in the bo o k s o f acc o u nt. Th e al te r n at iv e p le a o f th e as s e ss e e of as s e s s ing th e in co me un de r the he ad in co me f ro m o the r s o ur ce s an d all o wing s e t o f f o f lo s s e s u /s 71 of the A ct al s o f ail in v i e w of the ab o v e .
9. T he le ar ne d A R f o r the as s e s s e e h ad p l ace d re l i an ce in C IT & A no the r V s . S .K .S r ig ir i & B ro s . ( s up r a) f o r the p rop o s i t io n th at ev e n in c as e s o f s urv e y, the ad d it io n al in co me s ur re n de re d is inc l ud ib le as in co me f ro m b us in e s s . In th e f acts o f th at c as e , we f ind th at th e T r ib un al af te r co ns id e r ing the re co rd s and s t ate me n t g iv e n b y t he p artn e rs o f the as s e s s e e f ir m, o n f ac ts , c ame to th e co n clus io n th at as s e s s ee had re c e iv e d ad d it io n al inco me f ro m b us ine s s o n l y and no t f ro m o the r s o u rce s . T he s aid co nclu s io n o f the T r i bu n al was up he l d b y th e H o n' b le K arn at ak a H ig h C o urt in C I T & a no t he r v s . S. K . S rig iri & B ro s . (s up r a) and th e re mun e r at io n p a id to th e p ar tn e rs was he ld al l o wab le ag ai ns t th e ad d it io n al in c o me f o r m b us in e s s . T he s aid p re ce d en t h as be e n t ak e n no te o f b y the H o n' b le Gu j r at H ig h Co u rt.
10 . In the f ac ts o f th e p re s e n t c as e , we f ind th at as se s s e e d uri ng th e co urs e o f s urv e y h ad s ur re n de re d the in co me as in co me f r o m o the r s o ur ce s tho u g h a p le a h as b e e n r ais e d b y th e ass e s s e e th at th e in co me was s u rre nd e re d as in c o me f ro m jo b wo rk b u t no ev id e nce to pr o v e th e s t and o f the as s e s s e e h as b e e n bro ug h t o n re co r d . T he as s e s s e e h ad als o s u rre nde re d ad d it io n al inc o m e o f Rs . 10 l ac s in A s s e s s me nt Y e ar 20 05- 0 6 o n ac co un t o f s u nd r y cre d its , re p air s to b u ild i ng and ad v ance s to s t af f , wh ich be in g re l at ab le to b us in e s s c arr ie d o n b y as s e s se e was inc lu d e d as inco me f ro m b us in e s s . Ho we v er , in re s p e ct o f c as h f o un d d uri ng su rv e y, wh ich was no t re f le cte d in th e b o o ks o f acco u nt, no so urc e was d e cl are d b y th e as s e s s e e and in the ab s e n ce o f n atu re o f s o ur ce o f cas h b e ing p ro v e d , th e s a me is no t as s e s s ab le as in co me f ro m b us in e s s . In the c ir cu ms t an ce s , we up ho ld th e o rd e r o f the C IT ( A ) in in c lud in g the ad d it io n al in co me as d e e me d in co me u/ s 6 9A o f t he Ac t and no t allo win g th e be nef it o f th e b us ine s s lo s s e s de te r mine d ag ain s t the s aid de e me d inco me . T he g ro un ds o f ap pe al r ais e d b y the as s e s s e e ar e d is mis s e d . "
32. 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. CI T(A) and the Tribunal after considering the factual aspect noticed that the amount surrendered during the survey was not reflected in the books of accounts 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 arises and the appeal of the assessee ITA 516/CHD/2022 A.Y.2017-18 Page 31 of 32 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 Tribunal wherein he had admitted that cash has been generated out of income from other sources and in the absence of nature of source of cash being proved, it uphold the order of the CIT(A) and thereafter, on further appeal, the order of the Tribunal was upheld by the Hon'ble High Court. Unlike the said case, in the instant case, as we have noted above, the assessee in his state ment recorded during the course of survey has clearly stated that he is running a sole proprietorship business concern in name of M/s Singla Wires and Allied products since 2008 wherein he manufactures and sells aluminum and copper wires 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 a ccounts, 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 accounts. 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 source thereof during the course of survey proceedings and it is clearly emerging that the source of such income is from his business opera tions. Thus, the decision of the Hon'ble High Court, being rendered in the specific fa cts and circumstances of the said case, doesn't support the case of the Revenue in the instant case.
33. In light of aforesaid discussion and in the entirety of facts and circumstances of the case and following the decisions supra, the income of Rs 84,80,000/- surrendered during the course of survey cannot be brought to tax under the deeming provisions of ITA 516/CHD/2022 A.Y.2017-18 Page 32 of 32 section 69 and 69A of the Act and the same has been rightly offered to tax under the head "business income". In absence of deeming provisions, the question of application of section 115BBE doesn't arise for consideration.
34. Ground No. 1 was not pressed during the course of hearing.
Hence, the same is dismissed as not pressed.
35. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Open Court on 24/07/2023.
Sd/- Sd/-
(A.D.JAIN ) (VIKRAM SINGH YADAV)
VICE PRESIDENT ACCOUNTANT MEMBER
"AG"
आदेश क ितिलिप अ ेिषत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु / CIT
4. िवभागीय ितिनिध, आयकर अपीलीय आिधकरण, च डीगढ़/ DR, ITAT, CHANDIGARH
5. गाड फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar FIT FOR PUBLICATION Sd/- Sd/-
(A.D.JAIN ) (VIKRAM SINGH YADAV) VICE PRESIDENT ACCOUNTANT MEMBER