2023 (4) TMI 1405 - AT - Income Tax

Unexplained commission income - unexplained income u/s. 69A which is liable to be taxed u/s. 115BBE - assessee(s) preferred appeal before CIT(A) challenging the action of the AO stating that the search was carried out on the last day of financial year - As argued by assessee no opportunity was granted to explain commission receipts - HELD THAT - First fold of contention that no opportunity was granted by CIT(A) we fail to find any merit as sufficient opportunity was given by both the lower authorities. AO treating the income from other source as unexplained income u/s. 69A and proceeding ahead to tax the alleged income u/s. 115BBE - There is a complete silence on this issue. Only by saying that the alleged unaccounted cash is commission income will not serve the purpose in this case. The assessee in order to not to fall under provisions of section 69A has to explain the source of said income to the satisfaction of the Assessing Officer but the assessee has not filed any detail what to talk about the satisfaction of the AO. In our considered view and under the given facts and circumstances of the case the alleged income of Rs. 85 lakhs i.e. Rs. 50 lakhs in the hands of Shri. Sumermal Kanthilal Jain and Rs. 35 lakhs in the hands of Shri. Goutham Chand Jain shown under the head income from other source has rightly being treated by both lower authorities as unexplained money u/s. 69A. Since we have held that the alleged income is an income u/s. 69A of the Act then automatically provisions of section 115BBE of the Act will be invoked and therefore grounds raised on this issue are decided against the assessee. Cash belongs to the income tax assessee family members living in the same residence as a joint family - As we fail to find any merit in this ground. The situation of the assessee is like sailing on two boats which is always very risky and thus never advisable. Though during the course of survey assessee has stated both the reasons but then the assessee(s) should have stick to one reason. If they had taken the route that the cash belongs to all the family members then those details has to be filed in the respective income tax returns of all those assessees. However it seems that assessee(s) may have thought that it is not advisable to include all other family members in this search proceedings on this issue therefore Goutham Chand Jain along with Shri. Kanthilal Jain unanimously decided to offer it as undisclosed income at Rs. 35 lakhs and Rs. 50 lakhs respectively. Once they stated on oath during the search proceedings they duly complied it and offered it as income from other source in their return of income and paid taxes and have expressly conveyed as their own income under the head income from other source the alternate plea taken at this stage cannot be entertained. We therefore fail to find any merit in the third fold of contention raised by the assessee(s) in the instant appeals. CIT(A) has rightly held the income as unexplained income u/s. 69A of the Act in the hands of assessee(s) namely Shri. Gautham Chand Jain and Shri. Sumermal Kanthilal Jain and has rightly sustained the action of ld. AO invoking the provisions of section 115BBE - Decided against assessee.

Summary

ISSUES PRESENTED and CONSIDERED

1. Whether the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] erred in treating the income as unexplained under Section 69A of the Income Tax Act, 1961, despite the assessee's claim that the income was from commission receipts.

2. Whether the AO/CIT(A) failed to provide an opportunity to the assessees to explain the commission receipts before making additions.

3. Whether the addition under Section 69A was justified when the cash was allegedly recorded in the books of accounts.

4. Whether the cash seized during the search belonged to the joint family and not exclusively to the individual assessees.

ISSUE-WISE DETAILED ANALYSIS

1. Treatment of Income as Unexplained under Section 69A

- Legal Framework and Precedents: Section 69A of the Income Tax Act deals with unexplained money, bullion, jewellery, or other valuable articles found in possession of the assessee but not recorded in the books of accounts. The burden is on the assessee to satisfactorily explain the nature and source of such assets.

- Court's Interpretation and Reasoning: The Tribunal noted that the assessees admitted the cash as undisclosed income during the search proceedings, describing it as commission income. However, they failed to provide any substantial evidence or explanation regarding the source of this income.

- Key Evidence and Findings: The assessees declared Rs. 85 lakhs as income from other sources but did not provide documentation to support the claim that it was commission income. The Tribunal found no evidence of contracts or agreements that could substantiate the commission income claim.

- Application of Law to Facts: Given the lack of evidence to support the claim of commission income, the Tribunal upheld the AO's decision to treat the income as unexplained under Section 69A, leading to taxation under Section 115BBE.

- Treatment of Competing Arguments: The assessees argued that the cash was commission income and should not be treated under Section 69A. However, the Tribunal found the explanation unsatisfactory due to the absence of supporting evidence.

- Conclusions: The Tribunal concluded that the AO and CIT(A) correctly invoked Section 69A as the assessees failed to provide a satisfactory explanation for the source of the income.

2. Alleged Lack of Opportunity to Explain Commission Receipts

- Relevant Legal Framework: Principles of natural justice require that the assessee be given a fair opportunity to present their case.

- Court's Interpretation and Reasoning: The Tribunal found that both lower authorities provided adequate opportunities for the assessees to explain the commission receipts. The assessees' failure to provide evidence was not due to lack of opportunity.

- Conclusions: The Tribunal dismissed the claim of procedural unfairness, affirming that sufficient opportunity was granted.

3. Recording of Cash in Books of Accounts

- Legal Framework and Precedents: Section 69A applies when cash or assets are not recorded in the books of accounts. The assessees claimed the cash was recorded, thus challenging the applicability of Section 69A.

- Court's Interpretation and Reasoning: The Tribunal noted that the assessees admitted the cash was not recorded in the books at the time of the search, contradicting their claim.

- Conclusions: The Tribunal upheld the applicability of Section 69A, as the initial admission of unrecorded cash took precedence over later claims.

4. Claim of Joint Family Ownership of Cash

- Relevant Legal Framework: The burden of proof lies with the assessee to demonstrate that the cash belongs to multiple family members.

- Court's Interpretation and Reasoning: The Tribunal found no merit in the argument that the cash belonged to the joint family, as the assessees had already declared it as their own income during search proceedings.

- Conclusions: The Tribunal rejected the claim of joint family ownership, emphasizing the need for consistency in the assessees' statements and filings.

SIGNIFICANT HOLDINGS

- The Tribunal held that the income of Rs. 85 lakhs, declared as income from other sources by the assessees, was rightly treated as unexplained under Section 69A due to the lack of satisfactory evidence regarding its source.

- The Tribunal affirmed that the provisions of Section 115BBE were applicable, resulting in the income being taxed at a higher rate.

- The Tribunal dismissed the appeals, concluding that the assessees failed to substantiate their claims regarding the nature and source of the income and the ownership of the cash.

The appeals filed by the assessees were dismissed, and the order of the CIT(A) was upheld, confirming the treatment of the income as unexplained under Section 69A and the application of Section 115BBE for taxation purposes.