2016 (1) TMI 1029 - AT - Income Tax

Unexplained money - Addition as income from other sources - Held that - Section 69A is applicable where 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, and the assessee offers no explanation about the nature and source of acquisition, or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, then 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. For this section to come into operation, the assessee must be found to be the owner of any money, bullion, jewellery or other valuable article. The terms money, bullion, jewellery or other valuable article signify concrete things and do not mean amounts recorded in books of account or documents. Therefore, in such cases where unaccounted entries are found recorded in the books or documents seized, section 69A cannot be invoked. This provision can be invoked only when unaccounted cash, bullion, jewellery or any other valuable article or thing is found during search or otherwise. We find that it is not the case of A.O. that the assessee has not offered any explanation. It is also not the case of A.O. that explanation offered by him with regard to source and acquisition of money is not satisfactory. The nature of receipt is business income being advance against sales and source of receipt is the respective customers. The A.O. is very much satisfied with the nature and source of amount. Infact the nature and source of the unaccounted receipts is self-established from the seized material itself. Thus, the nature and source stands duly explained. Therefore, there is no applicability of provision of section 69A of the Act. We are of the view that the Income is different from receipt . Even when the receipt is unaccounted, it is only the income which is taxable and income has to be computed in accordance with the provision of Act and in accordance with the method of accounting regularly followed by assessee. The assessee has been following the percentage of completion method regularly since inception. The A.O. has duly accepted the method even in assessment done u/s 153A. It is a settled law that once the method followed by assessee has been accepted, the income has to be computed in accordance with that regularly followed method. Therefore, it was not appropriate for the revenue to invoke section 69A to charge the amount to tax. Keeping in view of the facts and circumstances explained above, we are of the view that AO has wrongly made the addition in dispute and similarly, Ld.CIT(A) has also wrongly confirmed the same without going through the facts and circumstances of the case of assessee. Therefore, we are unable to upheld the impugned order and, hence, cancel the impugned order by deleting the addition in dispute. Accordingly, we delete the addition - Decided in favour of assessee

Summary

Issues:
1. Addition of income from other sources
2. Jurisdiction of assessment order under section 143(3) r.w.s. 153A

Issue 1: Addition of income from other sources
The case involved a search and seizure operation under section 132 of the Income Tax Act, 1961, in the Gardenia Group of cases. The appellant was covered in the search, and the assessment was made at an income of Rs. 14,00,000 after considering undisclosed receipts admitted by the appellant. The Ld. CIT(A) dismissed the appeal of the Assessee against the assessment order. The appellant contended that the addition of Rs. 14,00,000 as income from other sources was erroneous. The Ld. CIT(A) invoked section 69A to tax the amount as income from other sources for the assessment year 2007-08. However, the Tribunal disagreed with this approach.

Issue 1 Analysis:
The Ld. CIT(A) confirmed the addition of Rs. 14,00,000 as income from other sources under section 69A. The appellant argued that the amount should be considered for assessment under the head "business & profession" as per the percentage of completion method followed by the company. The Tribunal noted that the appellant did not account for the received amount in the books, and since it was not recorded, it did not form part of the revenue receipt. The Tribunal held that income from regular business transactions is taxed under the business head, while income from undisclosed business transactions is treated differently and taxed under the head 'income from other sources.' The Tribunal concluded that the amount should be taxed on a receipt basis and not on the percentage of completion method. Therefore, the Tribunal disagreed with the Ld. CIT(A) and canceled the addition of Rs. 14,00,000 made by the AO, allowing the appeal filed by the Assessee.

Issue 2: Jurisdiction of assessment order under section 143(3) r.w.s. 153A
The appellant challenged the assessment order passed by the AO under section 143(3) r.w.s. 153A as illegal and without jurisdiction. The Ld. CIT(A) upheld the assessment order. However, since the Tribunal decided in favor of the Assessee on the first issue, it did not adjudicate on the jurisdiction of the assessment order under section 143(3) r.w.s. 153A.

Final Decision:
The Tribunal allowed the appeal filed by the Assessee by canceling the addition of Rs. 14,00,000 made by the AO and confirmed by the Ld. CIT(A) as income from other sources. Since the addition was deleted, the Tribunal did not adjudicate on the other issues raised by the Assessee.