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TMI Blog2011 (4) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... ut resorting to any dubious and unfair means to suppress the real receipts. 3. A search and seizure operation under section 132 of the IT Act was conducted in the group cases of Shri. Mallesh Yadav on 4-8-2005. Apparently, the assessee's trust is a tenant in the building owned by Shri B. Mallesh Yadav. Accordingly, the assessee's premises were also surveyed under section 133A of the Act. During the course of survey, it was found that the assessee had taken two premises one owned by Shri B. Mallesh Yadav and the other owned by Smt. Ch. Hemavathi located at Ameerpet, Hyderabad. It was found that substantial amount was paid by way of cash to the owners of the building towards rent. For example, for the building owned by Shri B. Mallesh Yadad, the monthly rent was Rs. 80,000 out of which only Rs. 23,000 was being paid by cheque and balance Rs. 57,000 in cash. Similarly, the monthly rent of the building owned by Smt. Hemavathi was Rs. 50,000 out of which Rs. 20,000 only was being paid by cheque and the balance in cash. During the survey statement of the accountant of the trust and the treasurer was also recorded, who confirmed that the portion of the rent was being paid in cash. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the purpose of which the institution existed no adverse inference may be drawn for the mistake which had crept into the computation of income as there was a matching mistake by way of receipt as well as expenditure. 3.3 The Assessing Officer however did not accept the claim that since the receipt of the institution is below Rs. 1 crore a blanket exemption was provided under section 10(23C)(iiiad). The Assessing Officer was of the view that the assessee would be eligible for the exemption when the affairs of the institution is conducted with all fairness without any dubious or unfair means. Accordingly, the Assessing Officer rejected the claim of the assessee and added the rent paid in cash during the FYs 2003-04 and 2004-05 treating the same as unexplained expenditure under section 69C of the IT Act. Thus the total income for the assessment years 2003-05 and 2005-06 was computed at Rs. 9,15,652 and Rs. 10,37,069 respectively. 4. On appeal the CIT(A) observed that since the assessee has filed return in response to notice under section 153C of the IT Act along with the revised receipt and payments account with duly certified by the Audit Report and the expenditure in the form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005 (AY 2006-07) Rs.97,095 6. The contention of the assessee's counsel herein is that the assessee has considered these payments in the revised return and there is no surviving lapse on that issue. Neither the addition can be made on this neither count nor exemption under section 10(23C)(iiiad) can be denied. 7. In our opinion, the question of un-recording of cash payment of rent is to be determined w.r.t. the original return. Even the expenditure is accounted while filing the revised return after the survey under section 133A of the Act or consequent to the search action, the assessee still has to explain why the expenditure was not shown or furnished in the original return. In case of bona fide error or in case of a technical or venial breach, the assessee might not be held guilty of default. On the other hand, when the assessee has intentionally un-recorded the cash payment of rent and the assessee was forced to file revised return consequent to survey operations, the assessee cannot claim that it has acted bona fidely. Blame worthiness attached to the assessee w.r.t. the original return cannot be avoided by fining revised return after concealment was detected by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is is not permitted under section 69C of the Act which reads as follows: "69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deeded to be the income of the assessee for such financial year: Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income." 8.1 This proviso was inserted by the Finance (No. 2) Act, 1998 w.e.f. 1st April, 1999 thereby it prohibits any deduction towards unexplained expenditure which is offered as deemed income under section 69C of the Act under section 4 of the Act, the income is to be charged in accordance with the provisions of the Act in respect of total income of the previous year of every person. As provided by section 5, the total income of any previous year of a person would, inter alia, include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B and 69C treat unexplained investments, unexplained money, bullion, etc. And unexplained expenditure as deemed income where the nature and source of investment acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head 'income from other sources'. Therefore, the corresponding deductions which are applicable to the incomes under any of these various heads, will not be attracted in the case of deemed income which are covered under the provisions of sections 69, 69A, 69B and 69C of the Act in view of the scheme of those provisions. 8.3 It is therefore, clear that when the expenditure was not recorded in the books of account and the assessee failed to offer satisfactory explanation about the nature and source of such expenditure, it is the deemed income of the assessee, such deemed income did not fall under the head income, of 'profits and gains of business or profes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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