2018 (4) TMI 787 - AT - Income Tax

Unaccounted surrendered income emanating from the seized document - business income OR deemed income u/s 69 - Held that - The surrender admittedly was made qua the biana received by the assessee allegedly for the five specific properties which had not been reflected and recorded in the regular books of accounts of the assessee. The consistent stand of the assessee is that records have been destroyed after the deals were done as would be evident from the specific question No.6 put by the Investigation Wing to the assessee. The transaction as per reply to question No. 5 was also through irregular market brokers whose addresses had not been retained and records were also not retained. The surrender, admittedly was on account of the property transactions. In the face of the material available on record where the surrender is made on account of seized documents and the stated business of the assessee being only real estate business we find no good reason to vary the conclusion arrived at by the Ld. CIT-A. Being satisfied with the consistent explanation offered on behalf of the assessee which stands unrebutted and considering the legal position thereon the departmental ground is dismissed. Acting on the apprehension that there may be certain other documents which may demonstrate that surrender amount was not adequate in the peculiar facts and circumstances of the present case, the assessee specifically to cover up any discrepancies came up with the said offer. The said action cannot be said to be outlandish or not relevant. The hyper cautious approach taken in the circumstances does not warrant in the peculiar facts of the present case for the Department to conclude that it was deemed income. The income is business income relatable to property business. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the surrendered sum of ?1,21,85,000/- should be treated as income/deemed income.
2. Whether the surrendered business income of ?1,21,85,000/- should be treated as deemed income under section 69.
3. Whether the unaccounted surrendered income emanating from seized documents should be treated as business income or deemed income under section 69.

Issue-wise Detailed Analysis:

1. Treatment of Surrendered Sum of ?1,21,85,000/- as Income/Deemed Income:
The assessee argued that the surrendered sum of ?1,21,85,000/- was a blanket surrender to cover discrepancies found, if any, and since no discrepancies were found in the seized documents, it should not be treated as income/deemed income. The Revenue contended that the CIT(A) correctly treated the unaccounted surrendered income as business income against deemed income under section 69 of the Income Tax Act, 1961. The Tribunal noted that the assessee participated fully in the proceedings and provided all relevant information supported by bills and vouchers. The Tribunal concluded that the surrendered income of ?1,21,85,000/- was indeed business income and not deemed income, as it was related to the real estate transactions of the assessee.

2. Surrendered Business Income of ?1,21,85,000/- as Deemed Income under Section 69:
The CIT(A) upheld the assessing officer's treatment of the surrendered business income of ?1,21,85,000/- as deemed income under section 69, stating that the assessee did not link this income to any specific document or source of business. The Tribunal, however, found that the surrendered income was related to the business of real estate and should be treated as business income. The Tribunal emphasized that the income was a result of unrecorded real estate transactions and the assessee had made a blanket surrender to cover any discrepancies in the seized documents. The Tribunal held that the surrendered income should not be treated as deemed income under section 69 but as business income.

3. Unaccounted Surrendered Income Emanating from Seized Documents:
The Revenue argued that the unaccounted surrendered income should be treated as deemed income under section 69, as it was not reflected in the books of accounts. The Tribunal considered the facts and submissions, noting that the assessee was engaged in the real estate business and the surrendered income was related to real estate transactions. The Tribunal referred to the decision of the jurisdictional High Court in the case of Kim Pharma and the ITAT decision in the case of Gaurish Steels, concluding that the surrendered income was business income and not deemed income under section 69. The Tribunal found no good reason to vary the conclusion arrived at by the CIT(A) and dismissed the Revenue's appeal.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, holding that the surrendered income of ?1,21,85,000/- should be treated as business income and not deemed income under section 69. The Tribunal emphasized the assessee's consistent explanation that the surrendered income was related to real estate transactions and not unexplained money or investment. The Tribunal also noted that the assessee had made a blanket surrender to cover any discrepancies in the seized documents, which was a hyper-cautious approach in the given circumstances.