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TMI Blog2020 (3) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... ed sales and the Assessing Officer also did not object to the said explanation. Therefore, addition cannot be made under section 69A of the Act and if the addition cannot be made under section 69A, the provisions of section 115BBE will not be applicable. In a similar situation in the case of Pr. CIT v. Bajargan Traders [ 2017 (11) TMI 388 - RAJASTHAN HIGH COURT] had dismissed the appeal of the Revenue. - Decided in favour of assessee - I. T. A. No. 675 /Lucknow/2018 - - - Dated:- 10-1-2020 - A. D. Jain Vice-President And T. S. Kapoor Accountant Member For the Assessee : Rakesh Garg , Advocate For the Department : S. K. Madhuk , Commissioner of Income-tax (Departmental representative) ORDER T. S. KAPOOR (ACCOUNTANT MEMBER). - 1. This is an appeal filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals)-IV, Kanpur dated September 25, 2018 pertaining to the assessment year 2016-17. 2. At the time of hearing, the learned authorised representative invited our attention to its petition for admission of additional ground of appeal and stated that the said ground is purely a legal ground and which could not be inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Assessing Officer further rejected the books of account and estimated the net profit of the assessee at 8.41 per cent. on the balance amount of sales. It was further explained that the Commissioner of Income-tax (Appeals) though upheld the addition under section 115BBE but deleted the other addition, which the Assessing Officer had made by estimating the profits. It was further submitted that the learned Commissioner of Income-tax (Appeals) also accepted the fact that the assessee was otherwise eligible for deduction under section 80JJA of the Act and therefore, he held that estimation of profits after rejection of books of account was a futile exercise. The learned authorised representative in this respect invited our attention to the fact that the Assessing Officer held the amount of surrender as income and not sales, which is wrong as in the statement recorded by the authorities during survey, the director of the assessee had clearly stated that the amount recorded in the diary is sales unrecorded in the books of account and in this respect our specific attention was invited to question No. 35 and its answer placed at page 24 of the paper book. The learned authorised repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 157/Jaipur/ 2017 where again the Tribunal had decided the issue in favour of the asses see. Therefore, in view of the above judicial precedents, it was argued that the assessee had rightly included the amount of surrender in the sales and offered the income arising out of it as business income and therefore, section 115BBE was not applicable. 5. The learned Departmental representative, on the other hand, submitted that the assessee had surrendered the amount as additional income and the income representing unaccounted turnover was not substantiated by any evidence and therefore, the authorities below have rightly assessed the same under section 115BBE read with section 69A of the Income-tax Act. 6. In his rejoinder the learned authorised representative submitted that when the assessee has itself admitted that the entries recorded in the diary were unrecorded sales therefore, it could not have been substantiated with the bills and moreover he argued that the Assessing Officer has not rejected the explanation of the assessee and has simply held that by claiming excess expenditure the assessee had set off the surrendered income, which means he was satisfied with the explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing expenses and manure processing charges' totalling ₹ 1,48,88,937 (77,19,030 + 23,46,436 + 12,03,346 + 36,20,125) but it could not produce any supporting evidence to substantiate its claim. The learned Commissioner of Income-tax (Appeals) also mistook the surrendered sales as undisclosed income of the assessee and confirmed the addition. However, he deleted the addition which the Assessing Officer had made by applying the net profit rate and also allowed exemption under section 80JJA of the Act. 7.2 We find that the provisions of section 115BBE are overriding pro visions which provide for taxing the income referred to in section 68 and from sections 69 to 69D at a flat rate of tax and do not allow any deduction in respect of expenditure or allowance under the provisions of the Act. Therefore, it is important for application of section 115BBE that the asses see should first fall in any of these sections. In our opinion, in the present case, the addition under section 69A could have been made only if no explanation, regarding source of such income, was offered or the expla nation offered by the assessee was not satisfactory in the opinion of the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he co-ordinate Bench was 'whether the Commissioner of Income-tax (Appeals)-2, Udaipur has erred in directing the Assessing Officer to assess the unexplained investment surrendered by the assessee under the head income from business ignoring the decision of the hon'ble Gujarat High Court in the case of Fakir Mohmed Haji Hasan v. CIT [2001] 247 ITR 290 (Guj) that unac counted income ought to be categorised under the residuary head of Income from other sources . In respect to the said issue, the findings of the co-ordinate Bench are as follows : 'We have heard the rival contentions and perused the material available on record. Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed that the assessee is engaged in the business of jewellery. During the course of survey excess stock valuing ₹ 77,66,887 was found in respect of gold and jewellery. The co-ordinate Bench in the case of Chokshi Hiralal Maganlal v. Dy. CIT [2011] 141 TTJ 1U (Ahd) has held that in a case where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent exist ence of its own or there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sources. In the annual accounts, the pur chases of ₹ 70,04,814 were finally reflected as part of the total pur chases amounting to ₹ 33,47,19,658 in the profit and loss account and the same also found included as part of the closing stock amount to ₹ 1,94,42,569 in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of ₹ 70,04,814 also found credited in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business trans action. Secondly, the unrecorded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of account and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for the assessee to credit the profit/loss account and offer the same to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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