9911796707
TMI Blog2023 (3) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO after carrying out due and relevant enquiries and considering the responses of the assessee is not shown to be an erroneous view. There are many orders of the Co-ordinate Benches supporting the view taken by the AO. At this stage, to argue that this was not the business income of the assessee and was amenable to tax under the deeming head and thus, Section 115BBE de-hors facts cannot be accepted. On facts, a conscious and reasonable possible view has been taken by the AO. Thus, merely because the view is not to the liking of the ld. PCIT by itself cannot make the order passed by the AO as an erroneous order. We find that the reliance placed upon by the ld. CIT-DR on the decision of the jurisdictional High Court in the case of Kim Pharma (P) Ltd. ( 2013 (1) TMI 495 - PUNJAB AND HARYANA HIGH COURT ] is misplaced. On a consideration of the peculiar facts, circumstances and position of law, we find that the impugned order at best can be said to attempting to make out a case of a debatable view, however, even then the order cannot be upheld. Revenue has failed to point out the error in the order accepting the surrendered income under the stated heads and hence, no prejudice c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 and holding the order passed by the Ld. Assessing Officer as erroneous and prejudicial to the interest of revenue and setting-aside the assessment already framed to the file of the Assessing Officer, with the direction to pass the assessment order, afresh in accordance with law, after granting sufficient opportunity to the assessee. 2. That the Ld. PCIT has failed to appreciate the fact that the assessment as framed by the Assessing Officer vide order dated 28.06.2019, was after considering various replies as filed during the course of assessment proceedings and after complete application of mind on the issues, raised by the Ld. PCIT in the notice u/s 263. 3. That the Ld. PCIT has failed to consider that in the letter filed during survey proceedings conducted at the premises of the assessee on 18.05.2016, offer of surrender was made over and above the normal business income, meaning, thereby, that the amount offered during survey was in respect of business income only and the Ld. Assessing Officer has taken a possible view and, thus, the finding of the Ld. PCIT for taxing the income offered during survey, at special rate of tax is not proper. 4. Notwithstanding, with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heading 'DOH' (date of hearing). It was submitted that the AO was conscious of the fact that this case was selected for compulsory manual selection because it was a survey case and hence after making all necessary due enquiries, the order was passed. 5.2 Inviting attention to the impugned order, it was submitted, that the ld. PCIT has passed the order ignoring the detailed reply filed by the assessee to the Show Cause Notice dated 08.11.2019 and another Show Cause Notice dated 10.08.2021. Referring to the record, it was submitted that the assessee has also made available a detailed parawise reply to the notice on 20.09.2021 available at pages 58 to 66. Referring to the Paper Book, attention was also invited to yet another notice u/s 263 issued on 22.02.2022. Copy is available at pages 67 and 68. The detailed reply filed to this dated 28.02.2022, it was submitted, is available at pages 69 to 72. These replies, it was submitted, is based on the basis of the replies and queries by the AO. Copies available in Paper Book No.1 filed in the present proceedings. Referring to the said Paper Book, it was submitted, that pages 1 to 4 of the same would be evidence of filing of the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- Subsequently, you have filed ITR forA.Y. 2017-18 in which you have disclosed the surrendered income of Rs.44,39,500/- in the profit and loss account (PartA-P&L of ITR 2017-18) and paid tax at the rates applicable to normal business income. After that your case was selected under compulsory manual selection guidelines. The Assessing Officer, while framing the assessment order u/s 143(3) dated 28/06/2019 accepted the returned income of the assessee. However, you ought to have disclosed the unexplained income u/s 115BBE of the act which would have resulted in an effective tax rate of 77.25%. In view of the above narrated facts, the assessment seems to be erroneous so far as prejudicial to the interest of revenue. Please state as to why on above issue, your case may not be considered for revision u/s 263 of the Act." 5.4 Relying on the record, it was submitted that the ld. PCIT does take note of the reply dated 20.09.2021 and also captures the assessee's submission in brief, however, fails to address it in the order passed. Inviting attention to the order, it was highlighted that the ld. PCIT records that "the assessee is doing trading of electrical goods for last ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained. The fact that the AO has not examined the same is also not the case. The amended position of the provision was another factor taken into consideration and the ld. PCIT held that Section 68 to 69D were applicable. Reliance was incorrectly placed upon the decision of the jurisdictional High Court in the case of Kim Pharma Pvt. Ltd. V CIT 216 Taxman 153 (P&H) and various other decisions of the Courts which have no direct applicability to the facts of the present case. The order, it was argued is whimsical and arbitrary. 5.6 In para 9 ld. PCIT, it was submitted, it has been held that the provisions of Section 115 BBE are consequential in nature. Accordingly, following discrepancies were pointed out : (xi) In the case of the assessee, survey u/s 133A was conducted on 18.05.2016 i.e. relevant assessment year 2017-18. The following discrepancies were found, confronted and accepted by the assessee during the course of survey proceedings. Unexplained Advances made Rs.30,44,200/- Unexplained cash in hand Rs. 8,92,500/- Unexplained investment in building Rs. 5,02,800/- Total Rs.44,39,500/- In this regard, it is noted that the case of the assessee is squarely c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other person. 6. Hence, keeping in view the above discussed facts, figures of the case and lapses on the part of the A.O., I hold the assessment order dated 28.06.2019 for the A.Y. 2017-18 in the case of the assessee is erroneous as well as prejudicial to-the interests of the revenue and therefore set aside the order to the file of the A.O. for passing a fresh order in accordance with law in respect of the issue discussed above and also raised in show cause notice u/s 263(1) of the Act, after giving sufficient opportunity of hearing to the assessee." 5.9 . It was his submission that the order passed may be quashed as the ld. PCIT is proceeding as though Section 115 BBE is automatic in nature which is not so. Enquiries have to be made in the nature of surrendered income and after enquiry, a view has been formed. Notwithstanding these primary arguments, it was further submitted that the order passed by the ld. PCIT further suffers from various shortcomings and thus even otherwise the order which dehors the earlier arguments still cannot be sustained. As per law the ld. PCIT is to pass a clear order setting out the errors and the prejudice caused to the Revenue and not star ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as available on the Statute as on the date of the survey. Thus, in these undisputed facts on record, the action of the ld. PCIT in seeking to impose a higher tax rate as opposed to the tax rate correctly imposed even otherwise in the facts of the present case which was debatable. It was submitted that this issue not only on the facts of the surrender made when the amendment was not on the Statute but even otherwise by a play of facts as two separate Revenue authorities had already accepted the tax rate applicable as the prevalent tax rate on the date of the surrender the assessment order is a valid order, hence the impugned order may be quashed. The Revisionary Powers exercised by the ld. PCIT in the peculiar facts and circumstances of the case went beyond the scope of the power vested. Ld. PCIT, it was argued, cannot be permitted to revise the order merely because he disagrees with the view of the AO. A validly passed assessment order cannot be set aside on mere whims. The view taken by the AO, it was argued has to be shown to be either a view on which the AO was not conscious and made no enquiries or that even if after making the enquiries, the view taken was erroneous and prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of letter dated 17.08.2021 by the ITO, Ward- Sangrur sharing the details of the audit objections, the serial no. of the assessee in such details being S.No. 7. 45-47 14. Copy of the Annotated Reports of the Income Tax Officer, Sangrur, mentioning the debatable issue with regard to section 115BBE. 48-49 15. Copy of the Show Cause Notice dated 08.11,2019 issued u/s 263 of the Act by the Worthy PCIT, Patiala. 50-52 16. Copy of another Show Cause Notice dated 10.08.2021 issued u/s 263 of the Act by the Worthy PCIT, Patiala. 53 17. Para wise reply dated 20.09.2021 to the notice issued u/s 263 of the Act dated 10.08.2021. 54-62 18. Copy of another Show Cause Notice issued u/s 263 dated 22.02.2022. 63-64 19. Reply dated 28.02.2022 filed to the Show Cause Notice dated 22.02.2022. 65-68 5.11 Attention was invited to Paper Book page 1 to 4 which consists of the return filed alongwith computation of income. Attention was also invited to the copy of Tax Audit Report filed and the financial statements accompanying it. Specific page 18 was highlighted to show that the surrendered income stood duly reflected in the assessee's trading and P&L Account and had been includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so invited to Paper Book page 33 to 35 which is copy of the reply dated 07.02.2019 filed by the assessee. Referring to the same, attention was invited to reply to question No.3. Attention was also invited to Paper Book page 35 which is the reply containing detail of fixed assets provided by the assessee on the query raised by the AO informing that no additional depreciation was claimed. Attention was invited to page 36 which is another notice issued u/s 142(1) dated 20.05.2019 wherein the AO put the following specific queries to the assessee : 5.14 Reply of the assessee, it was submitted, is at pages 38 and 39. Said queries and replies, it was submitted, were through ITBA Portal and thus necessarily would be available to the ld. PCIT also and have been relied upon before the said authority : 5.15 Attention was invited to another notice u/s 142(1) dated 26.06.2019 through ITBA Portal wherein the issues were still continued to be enquired into by the AO. The replies of the assessee at pages 43-44 which contains the following explanation of the assessee dated 27.06.2019 on facts was relied upon with the submission that these issues have been considered by the AO before the passing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that some Audit Memo has been referred to and the assessee's name is also referred to therein. The Show Cause Notices issued to the assessee by the ld. PCIT are placed in the Paper Book. In the said backdrop again, attention was invited to Paper Book page 58 onwards which are replies to the ld. PCIT again highlighting that the surrender was from the business income/transactions and these facts, it was submitted, were mentioned in the surrender letter itself which have been referred to in the submissions and the officers of the Survey Team had also accepted the cheques for advance tax against surrendered income as business income. For the specific reason, case was selected for compulsory manual selection under CASS.. Referring to Section 115 BBE and Explanation 2 to Section 263(1), it was submitted that none of the clauses A, B, C or D were attracted. Again the assessee has highlighted that the survey was conducted on 18.05.2016. Relevant provision was introduced much later and only for addressing the demonetization which is evident from the statement of objects and reasons which have been captured at page 63 and 64. The same are reproduced hereunder : "Evasion of taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder was as per tax rate applicable at that point of time. The amendment having been carried out on 15.12.2016 through Taxation Laws (2nd Amendment) Act 2016 in terms of the statements and objects of the Act itself would not have any application. It was further submitted that 115 BBE refers to Section 68 and 69 and in the face of the record, these provisions were not attracted. No bullion etc. or unexplained investment etc. was found. In the facts of the present case, the assessee is in this line of business for the last so many years and there is only one source. It was re-iterated, no new source has been pointed out. The assessee cannot be required to perform the impossible. Accordingly, it was his submission that the order may be quashed. 5.20 Inviting our attention yet again to the reply of the assessee available at pages 58 to 66 of the order, it was submitted that the assessee had again for the benefit of Ld. PCIT (copy at page 60) highlighted the fact that the assessee was in the business for the last so many years and the surrender made during the survey was from this very business income. The business income referring to page 60, it was submitted was from trading in elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Venus Texspin Ltd. in ITA No.793/CHD/2017 vide order dated 12.12.2017 on the issue of u/s 263. 14. Copy of the judgment in the case of M/s. Arora Alloys vs. DCIT in ITA No. 1481/CHD/2017. 15. Copy of the judgment in the case of PCIT vs. DECCAN JEWELLERS P LTD. as reported in 132 Taxmann.com 73(AP). 5.21 The decision cited from S.No. 11, 12, 13 are relied again for the same proposition that once the AO having applied his mind and has taken a plausible view than merely because the decision taken is not to the liking of the PCIT, it cannot be revised. Reliance was also placed on the decision of the Hon'ble Mumbai High Court in the case of Nirav Modi 71 Taxmann.com 272 Bombay-High, which decision has been approved by the Hon'ble Apex Court. Attention was also invited to the latest decision of the Chandigarh Bench of the Tribunal in the case of M/s Arora Alloys Vs. DCIT in ITA No. 1481/Chd/201, decision of the Hon'ble Andhra Pradesh High Court in the case of PCIT Vs. Deccan Jewellers P. Ltd reported in 132 Taxmann.com 73(AP) was also relied upon. 5.22 Apart from these decisions, attention was invited to a consolidated Paper Book of decisions in ITA 366 & 367/CHD/2022 fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered in the case of M/s Sham Jewellers where the sources of expenditure / investment stood identified, the deeming provisions as considered in para 10.20 to 10.22 are not attracted. Referring to para 10.22, it was submitted that the decision in the case of Kim Pharma Ltd Vs. CIT in ITA No. 106 of 2011 (O&M) has been considered therein as reported by the Hon'ble Punjab & Haryana High Court, the decision was distinguished holding as under:- "10.22 It is also seen that the Ld. CIT(A) has relied on the judgement of the Hon'ble Punjab & Haryana High Court in the case of Kim Pharma Ltd. Vs. CIT in ITA No. 106 of 2011 (O&M) and the Ld. CIT DR has also quoted the same in his arguments before us. However, after going through the aforesaid judgement of the Hon'ble Punjab & Haryana High Court, it is seen that in that particular case, the only issue was with regard to the cash surrendered at the time of survey and no other income. The cash found could not be related to the already disclosed and accepted source of income of the assessee and, therefore, the Hon'ble Punjab & Haryana High Court held that such surrendered cash was to be treated as deemed income u/s 69 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned order may be quashed. 6. The Ld. CIT DR relied heavily upon the impugned order. It was his submission that the income having been surrendered during the survey, hence, necessarily the income is sustainable to tax u/s 68 & 69 or any of its deeming provisions. It was argued that once a deeming provision is invoked, applicability of section 115BBE is automatic. Thus, it was his submission that the source of the assets etc. cannot be considered to be from business sources. It was also his argument that it is not for the department to demonstrate the source as these are facts best known to the assessee itself. Once on facts the assessee knowingly fails to explain the source, the deeming provisions directly and automatically apply in full force. Accordingly, the decisions relied upon by the Ld. AR in support of his case, it was argued, were not relevant as the Revenue is supported by the decision of the Hon'ble Jurisdictional High court in the case of Kim Pharma (P) Ltd. Vs CIT, Panchkula & Ors. (ITA 106/2011 dated 27.04.2011), (2013) 35 taxmann.com 456 (P&H). 6.1 It was also his submission that in the decisions relied upon by the Ld. AR of the Chandigarh Bench the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned, reliance was placed on the decision of the Chandigarh Bench in the case of Sham Jewellers & others where the decision of the jurisdictional High Court in the case of Kim Pharma has been considered fully. Apart from that, it was argued there were various other decisions of the Chandigarh Bench namely Harish Sharma order dated 11.05.2021 in ITA 327/CHD/2020 (Paper Book page 116-124), M/s Sab Industries Ltd, Chandigarh Bench in ITA No. 848/CHD/2017; Sanjay Bairathi Gems Ltd., Jaipur Bench in ITA No. 157/JP/2017; M/s Marshal Machines Pvt Ltd., Chandigarh Bench in ITA No. 57/CHD/2017; M/s J.B. Resorts, Amritsar Bench, in ITA No.488/ASR/2015; M/s Raghav Woollen Mills, Chandigarh Bench, in ITA No. 892/CHD/2015; M/s Khurana Rolling Mills (p) Ltd., Chandigarh Bench in ITA No.745/CHD/2016; Shri Bhuwan Goyal, Chandigarh Bench in ITA No.1385/CHD/2019. Copies being submitted in the course of the day fully address the issue that the decision of Kim Pharma of the jurisdictional High Court stands addressed and discussed. 7.1 Referring to the ld. CIT-DR's arguments on cheques accepted by the survey team, as being estimates of assessee for advance tax purposes. The said argument was strongly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and the higher rate post the amendment is a factor which was considered by the AO. The assessee relying upon the surrender letter has argued that the impounded documents relatable to the business income of the assessee considering which the amounts have been surrendered under specific heads. Relying on the facts, it has been pleaded the AO has examined this claim. Appropriate ledger entries in the books of account of the assessee have been shown and the treatment in assessee's books of account to the business income surrender has also been demonstrated by the assessee before the AO. These very facts have been pleaded before the ld. PCIT. In the facts of the present case, information from the assessee on the queries raised by the AO have both moved to and fro through the ITBA portal and thus, what enquiries were raised by the AO and what responses were made by the assessee is a fact not open to manipulation and is available. On going through the submissions and the facts on record, we find that these queries raised and replies made were always available to the ld. PCIT also. No case has been built referring to any material how the order can be said to be erroneous on facts. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has been brought on record. The assessee had also surrendered additional income of Rs. 10 lakhs in asst. yr. 2005-06 on account of sundry credits, repairs to building and advances to staff, which being relatable to business carried on by assessee was included as income from business. However, in respect of cash found during survey, which was not reflected in the books of account, no source was declared by the assessee and in the absence of nature of source of cash being proved, the same is not assessable as income from business. In the circumstances, we uphold the order of the CIT(A)' in including the additional income as deemed income under s. 69A of the Act and not allowing the benefit of the business losses determined against the said deemed income. The grounds of appeal raised by the assessee are dismissed." 6. The Tribunal had relied upon a decision of the Gujarat High Court in Fakir Mohmed Haji Hasan v. CIT( 2001) 247 ITR 290 [2002] 120 Taxman 11. In that case, interpreting the scope and describing the scheme of ss. 69, 69A, 69B and 69C of the Act, it was observed : "The scheme of ss. 69, 69A, 69B and 69C of the IT Act, 1961, would show that in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 incomes which are covered under the provisions of ss. 69, 69A, 69B and 69C of the Act in view of the scheme of those provisions." 7. The said decision fully applies to the facts of the present case. 8. In S.K. Srigiri & Bros, case (supra) before the Karnataka High Court, a finding of fact was recorded that the assessee received additional income from business only and, therefore, it was entitled to deduction on account of remuneration paid to the partners. Such is not the situation here. 9. In view of the above, no substantial question of law arises in this appeal. The appeal is accordingly dismissed. (emphasis supplied) 8.2 On a reading from the above, it is seen that their Lordships did not hold that income surrendered during the survey necessarily has to be added under the deeming provisions. In fact, in the case of Kim Pharma (P) Ltd. itself the assessee has raised the plea before the ITAT tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Kim Pharma (P) Ltd. as in the facts of the said case before the Hon'ble Karnataka High Court, the income was explained as additional income from business. Accordingly, we find that in the facts of the present case, the decision of the jurisdictional High Court in the case of Kim Pharma (P) Ltd. is of no help. The arguments advanced on behalf of the Revenue that since the assessee best knows the source of income surrendered and deeming provisions are automatically attracted and hence, it is not for the Revenue to demonstrate that it was not from the stated heads, we find is misplaced. In the facts of the present case, the assessee has been subjected to survey and documents have been impounded, surrender from stated source has been made which has been accepted by the Survey Team and has also been accepted by the AO after carrying out due enquiries, thus, requiring the assessee to further prove that it was from some other source is asking the assessee to perform the impossible. The assessee cannot prove the negative. If at all it is for the Revenue to demonstrate that the heads as disclosed and accepted as per record is incorrect. No such case is made out by the Revenue. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
