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TMI Blog2023 (3) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... e findings of the survey team, the documents found during the course of survey, the statement of the partner/director of the assessee company recorded during the course of survey, the surrender letter and the return of income, and after examination thereof and due application of mind, income has been rightly assessed under the head business income . Order so passed by AO cannot be held as erroneous due to lack of enquiry or for that matter, requisite enquiry on the part of the AO. Where AO after due appreciation of facts and circumstances of the case, assessed the income under the head business income and didn t invoke the deeming provisions as so suggested by the ld PCIT, we do not believe that there is any error on part of the Assessing officer and the order so passed by him cannot be held as erroneous. Deeming provisions are not applicable. Where there are specific questions asked during the course of survey regarding the nature and source of income and which has been adequately responded to by the assessee and thereafter acted upon in terms of disclosing the income in the return of income under the appropriate head of income and where the same is duly examined and taken into co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 pandemic and it was requested that the delay may be condoned. The ld. Sr. DR didn't controvert the aforesaid contention of the ld AR. After hearing both the parties and considering the material placed on record, the delay of 198 days in filing the present appeals by the aforesaid assessees is hereby condoned as we find that there was reasonable cause beyond the control of the assessee on account of Covid-19 pandemic and the appeals are hereby admitted for adjudication. ITA No. 409/Chd/2021 4. With the consent of the parties, the case of the assessee in ITA No. 409/Chd/2021 was taken as the lead case. In this appeal, the assessee has raised the following grounds of appeal: 1. "That the initiation of proceedings u/s 263 by the Learned Pr. CIT (Central), Ludhiana are against the facts and bad in law. 2. That the Learned Pr. CIT (Central), Ludhiana has erred in initiating the proceedings & in passing the order u/s 263 of the IT Act, 1961 and directing the AO to assess the surrendered income during survey of Rs. 2,02,00,000/- as unexplained income and tax the same under section 115BBE of the IT Act, 1961 and make fresh assessment. 3. That the Learned Pr. CIT (Central), Lud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal income for the A.Y. 2017-18. The tax was calculated by the assessee at normal rate and accordingly paid the taxes. However, in this case the assessee had declared undisclosed income and hence, this case falls under the ambit of section 68/69/69A/69B/69C of the IT Act, 1961, which is to be taxed u/s 115BBE of the Income Tax Act, 1961. 04. Section 115BBE of the Income Tax Act provides that where the total income of an assessee includes any income referred to in Section 68, Section 69. Section 69A, Section 69B, Section 69C or Section 69D (specified income) and such income is (a) reflected in the return of income furnished Section 139; or b) which is determined by the Assessing Officer. Then, income tax payable in respect of such income would be @60% u/s 115BBE. 05. In this case, the returned income includes an amount of Rs. 2,02,00,0007- being the undisclosed income, the tax applicability of the section 115BBE to be applied for the tax computation purpose whereas in the returned income, tax was calculated at normal rates. This had resulted in short levy of tax and interest. 06. In light of the above, it is evident that the assessment order passed on 30.12.2018 u/s 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the stock as well as amounts receivables, these have been declared as additional income over and above the normal income for the A.Y. 2017-18 as detailed below: Surrendered on account of difference in stock Rs. 1,02,98,582/- Surrendered on account of amount receivable from Monahar Lal Fakir Chand. Rs. 19,79,822/- Surrendered on account of amount receivable From Pyare Sukhdev Rs. 2,57,147/- Surrendered on account of amount receivable As per loose papers Rs. 76,63,171/- Total amount surrendered Rs. 2,01,98,582/- 2. As per provision of section 115BBE, it has been provided as under: [(I) Where the total income of an assessee,- (a) Includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or (b) Determined by the assessing officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), The income tax payable shall be the aggregate of- (i) The amount of income tax calculated on the income referred to in clause (a) and clause (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Amount Receivable As per Loose papers 76,63,171.00 Total Amount Surrendered 2,01,98,582.00 It is apparent from above, that stock is a business commodity & is not covered U/s 115BBE read with Section 68, 69, 69A, 69B, 69C, 69D. In the Normal Course of business difference in stock arises which at the time of survey has been surrendered as business income. Surrendered Amount on Account of Debtors as detailed above is merely business debtors having trading of food grains etc. with the assessee. All the above firms are also having Regular business dealing with us (Copy of Account is here enclosed). There is no applicability of section as below:- Section 68 :- "No Sum Found credited in Books of Accounts" No Unexplained Sum has been found credited in Books of Accounts and so Section 68 is not applicable. Section 69 :- "Unexplained Investments" There is no Unexplained Investments in our surrender, So Section 69 is Not applicable. Section 69A :- "No Unexplained" Money, Jewellery, Bullion or other valuable article has been found during the survey and hence Section 69A is not applicable. Section 69B :- "No Unexplained Invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21/Chd/2021 vide order dt. 04/08/2022). It was accordingly submitted that the order so passed by the ld PCIT(Central) be set-aside and the appeal of the assessee may be allowed. 13. Per contra, the Ld. CIT/DR has relied on the order of the Ld. Pr. CIT(Central) and it was submitted that it is clear case where the AO accepted the version of the assessee without verifying and examining as to how the income surrendered has been offered to tax as normal business income. It was submitted that no details of purchase made from various persons which resulted in unaccounted / unexplained stock in trade were divulged nor the details of sales made to various persons from whom receivables of Rs. 99,00,000/- have been shown have been submitted. It was submitted that mere recording of these transactions in the books of account subsequently without any corroborative evidence and offering the same to tax would not meet condition of recording in the books of account and offering the satisfactory explanation with regard to nature and source thereof. It was submitted that provisions of Section 69/69A still get triggered because the primary requirement of explaining the source of income from any parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the AO, would also lead to invoking the provisions of 263 of the Act. In view of the above, the order passed by AO not only lacks the inquiries which should have been made but is also found to be clearly erroneous as well as prejudicial to the interest of revenue on the issue of unaccounted/unexplained stock-in-trade of Rs.1,02,98,582/- and unaccounted/ unexplained receivables of Rs.99,00,000/- shown in its P & L account of the relevant year. The AO has failed to ascertain and verify that whether the requisite entries have been passed in regular books of account duly corroborated by bills/challans/ transport details/labour charges/debit/credit notes/vouchers/receipts, funds being received/ transferred through banking channels, etc even though not recorded in books till the date of survey." 15. Further reliance was placed on the decisions in case of Famina Knit Fab Vs. ACIT 176 ITD 246 (Chd Trib), Fakir Mohamad Haji Hasan Vs. CIT 247 ITR 290 (Guj), Pr. CIT Vs. Khusi Ram & Sons Foods (P) Ltd. in ITA No. 126 of 2015 dt. 29/07/2016 (P&H) and Kim Pharma Pvt. Ltd. Vs. CIT 216 Taxman 153 (P&H). He accordingly supported the order and the findings of the Ld. Pr. CIT(Central) and subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge the fact that these amounts could not be entered into books of accounts at that time. Now realising the mistake, I voluntarily surrender the amount of Rs. 76,63,171/- over and above my normal income. Q 7. Do you have anything else to say? Ans: - I am surrendering total amount of Rs. 2,02,00,000/- purely on voluntary basis without any pressure or fear. Further, I want to state that the Income Tax Team was very courteous and cooperative. I further plead that I may be excused from penalty and prosecution." 17. In this regard, we further refer to the surrender letter dated 01/09/2016 submitted by the assessee company before DDIT(Investigation), Ludhiana and contents thereof read as under: To. Dated: 01/09/2016 The Deputy Director of Investigation, Ludhiana Sub - Surrender of income in lieu of Survey Action on our premises u/s 133A. Dear Sir Our premises were Surveyed u/s 133A by Income Tax Department and a team lead by Sh. Prem Singh, IRS Deputy Commissioner Income Tax. During the Course of Survey certain discrepancies were found as (per) our recorded statements. To buy peace of mind and to avoid litigation we voluntarily surrendered a sum of Rs. 2,02,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of amount receivable from Monahar Lal Fakir Chand. Rs. 19,79,822/- Surrendered on account of amount receivable From Pyare Sukhdev Rs. 2,57,147/- Surrendered on account of amount receivable As per loose papers Rs. 76,63,171/- Total amount surrendered Rs. 2,01,98,582/- 19. And the assessee was issued a show-cause as to why the provisions of section 115BBE be not invoked and thereafter, after taking into account the findings of the survey team and his own independent examination, the AO has accepted the nature and source of surrendered income as arising out of business operations subject to normal taxation as against taxation under the deeming provisions of section 115BBE of the Act. We therefore find that the assessee has been asked specific questions regarding not just the discrepancy but the nature and source thereof during the course of survey and it is clearly emerging that the source of such income is from its business operations. Further, the said fact is corroborated by physical stock taking conducted by the survey team and there is no finding that the stock so found is different from the one in which the assessee deals regularly and comparison thereof with the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o offered by the assessee explaining the nature and source of income so found during the course of survey/search proceedings and the same is the essence of the statutory provisions as duly recognized by the Courts. The mere fact that survey/search proceedings have been initiated at the business premises of the assessee doesn't mandate the Assessing officer to invoke the deeming provisions automatically and before invoking the deeming provisions, he has to call for the explanation of the assessee and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provisions. In case of Gandhi Ram (Supra), speaking through one of us, it was held as under: 5. "Firstly, how the ld PCIT has arrived at a conclusive finding that the discrepancies found, confronted and accepted by the assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B & 69C is not apparent from the impugned order. Merely stating that excess cash is clearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction of Shed/Godown is covered u/s 69B or 69C and advances made to Sundry Parties is covered u/s 69, 69B or 69D is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in accordance with accepted accounting methodology and the nature of such income is other than business income. We find that similar view has been taken by the Coordinate Chandigarh Benches in case of Famina Knit Fab (Supra) after taking into consideration the decisions of the Hon'ble Punjab and Haryana High Court in case of Khushi Ram (supra) and Kim Pharma (supra) and wherein it was held as under: "19. In the facts of the case in ITA No. 408/Chd/2018, the income surrendered was on account of unaccounted receivables of the business of the assessee amounting to Rs. 1.25 crores. The Ld. CIT (A) in para 9 of the order has outlined the facts relating to the surrender made by the assessee stating that during survey a pocket diary was found from the account section of the assessee-company which contained entry of receivables amounting to Rs. 1.25 crores on pages 27, 28, 31 and 33, which were not recorded in the regular books of the assessee and were subsequently surrendered stating that these entries were unaccounted sundry receivables being surrendered as income under the head business, to buy piece of mind and subjected to no penalty and further that the losses incurred by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current and brought forward, was allowable to the assessee in accordance with law. 21. The contention of the Revenue, therefore, that the income be treated as deemed income u/s. 69,69A/B/C of the Act is, accordingly, rejected and, as a consequence thereto, the plea that no set off of losses be allowed against the same u/s. 115BBE of the Act, also is rejected." 23. In the instant case, as we have discussed above, it is evident that deeming provisions are not applicable. Even for sake of argument, where such a view is taken on face value, it would be a case where a different point of view has been expressed by the ld PCIT though without any corroborative evidence, in any case, the same doesn't lead to the conclusion that the view taken by the Assessing officer as erroneous as the AO has taken into consideration the entirety of facts and circumstances of the case, the explanation offered by the assessee during the course of survey regarding the source of such income and thereafter, has assessed the income under the head "business income". The view so taken by the Assessing officer is after due application of mind and therefore cannot be held as unsustainable in the eyes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring total income of Rs. 43,79,870/- on 30/10/2017 which was selected for scrutiny and notices under section 143(2) and 142(1) were issued and thereafter after calling for necessary information and documentation, the assessment was completed under section 143(3) vide order dt. 17/12/2018 accepting the returned income. 28. Subsequently, the assessment records were called for and examined by the Ld. Pr. CIT and a show cause dt. 08/03/2021 was issued to the assessee. In the show cause notice, the Ld. Pr. CIT has stated that the assessee has voluntarily declared an income of Rs. 25,00,000/- being the amount of undisclosed income on account of documents found during the survey operation. As per the order sheet dt. 07/12/2018 and the surrender letter, the assessee has surrendered an amount of Rs. 25,00,000/- on account of amounts receivables and the tax was calculated by the assessee at the normal rate and accordingly paid the taxes. However, the assessee has declared undisclosed income of Rs. 25,00,000/- in his ITR and hence the case falls under the ambit of section 68 of the Act, which is to be taxed under section 115BBE of the Act. It was stated by the Ld. Pr. CIT that the income re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of survey, the assessee was merely a partner in the firm and he has surrendered the income of Rs. 25,00,000/- being profit earned from the business and he was not having any other independent source of income. Therefore the surrender so made was accepted by the Survey team. It was further submitted that the surrender letter has been duly accepted by the Department and which mentioned the calculation of income tax of Rs. 7.40 lacs on the surrender income of Rs. 25,00,000/-. It was accordingly submitted that the amount of tax at normal rate has been duly accepted by the Department well before the assessment order and which has again been verified during the course of assessment proceedings and therefore there is no question of applicability of deeming provisions on the amount so surrendered by the assessee. 34. Per contra, the Ld. CIT DR submitted that the assessee has offered the unexplained investment / receivables as income in his ITR though he has not done any business as proprietor. There is no mention of any undisclosed business activity resulting in receivables in the surrender letter. Thus the receivables shown under the head business as such cannot be assessed as business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby enclose cheque the detail of which are as under:- Ch. No. 656547 dated 15/11/2016 3,65,000/- Ch. No. 656548 dated 30/01/2017 3,65,000/- 7,30,000/- This is for your information please. Thanking You Yours Faithfully Sd/- ( Bal Krishna ) 37. As is evident from the surrender letter, the survey was conducted at the business premises of the partnership concern where the assessee was the partner and the books of accounts of the partnership concern were examined during the course of survey and basis certain discrepancies, an amount of Rs 23,64,000/- on account of account receivables have been surrendered. Where the books of accounts maintained by the concern in which the assessee was a partner were examined and there are discrepancies so found, the surrender of undisclosed income should ordinarily happen in the hands of the business concern and not in the hands of the assessee, being a partner in the said concern. In the instant case, the factum of the matter is that the surrender was made and accepted by the Survey team in the hands of the assessee, being the partner of the concern for reasons best known to both the parties, the same will however not change ..... X X X X Extracts X X X X X X X X Extracts X X X X
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