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TMI Blog2023 (7) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... closed income and unexplained income and the deeming provisions are attracted in respect of undisclosed income however, the condition before invoking the same is that the assessee has either failed to disclose the nature and source of such income or the AO doesn t get satisfied with the explanation so offered by him and the relevant findings. In this case PCIT without taking into consideration the findings of the survey team, the documents found during the course of survey, the statement of the assessee company, the surrender letter and subsequent enquiry and examination conducted by the AO during the course of assessment proceedings has recorded a finding that the deeming provisions read with provisions of section 115BBE are applicable in the instant case. As the picture which is clearly emerging from the material available on record is the nature of surrender is excess cash arising out of his past business dealings and advance given to farmers against procurement of agriculture produce regularly dealt with by the assessee in normal course of its business and which have not been recorded in the books of accounts. Where the assessee has subsequently recorded the same in his b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome offered during the course of survey to the tune of Rs.90 lacs at the normal rate of tax since the same was derived out of business income of the assessee and during survey, no other source of Income having been noticed, the assumption of jurisdiction by the PCIT is bad in law. 3. That the Ld. PCIT has failed to appreciate that the assessment had been completed after due consideration of various replies by the Assessing Officer during the course of assessment proceedings and the Assessing Officer having taken a possible view and, therefore, the assumption of jurisdiction u/s 263 was not called for by the Ld. PCIT. 4. That the Ld. PCIT had failed to appreciate that at the time of survey, it was clearly stated that the nature of Income offered during survey was business Income and the same was disclosed in the profit and loss account and even the advance tax/self assessment tax has been deposited as per normal rate of taxes, which proves that the Assessing Officer at the time of survey and lateron was of the view to tax the same at normal rate of tax and, thus, invoking of provisions of section 115BBE is out of context. 5. Notwithstanding the above said ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the observation made in the impugned order and after providing reasonable opportunity to the assessee. 6. Against the said findings and direction of the Ld. Pr. CIT, the assessee is in appeal before us. 7. During the course of hearing, the Ld. AR submitted that the assessee, an individual, is carrying on the business of general commission Agent and has been regularly filing his return of income for past many years. For the impugned assessment year, the assessee filed his return of income declaring total income of Rs. 95,69,780/- under the head Income from Profit and Gains from Business or Profession . It was submitted that the assessee maintains a complete set of books of account which are duly audited by a Chartered Accountant and based on the audited books of accounts, the return of income was prepared and filed by the assessee with the Revenue authorities. 8. It was further submitted that during the course of survey proceedings, the assessee surrendered a sum of Rs. 90,00,000/- in terms of his surrender letter dt. 03/05/2016. The said surrender was on account of cash of Rs. 9,80,000/- and advances given to the farmers amounting to Rs. 80,20,000/-. It was submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no lack of inquiry as specific inquiry was made by the AO on the concerned issue and in depth reply was also filed. It was accordingly submitted that even after the thorough application of mind by the AO, merely because it seems to the Ld. CIT that issue had remained unattended by the AO, he cannot call for application of section 263 by treating the order passed by the AO as erroneous and prejudicial to the interest of the Revenue. 12. It was further submitted that the AO was fully conscious of the provisions of Section 115BBE and he has taken a possible view of taxing the surrendered income at normal rate of tax. 13. It was further submitted that the assessee has duly disclosed the amount of surrendered income in the P L Account which have been duly audited. It was submitted that the surrender amount is only on account of business of the assessee and the same fact has been specifically mentioned in the surrender letter dt. 03/05/2016 which has been accepted by the Department during the survey proceedings as well as during the assessment proceedings wherein no adverse remark has been passed with respect to the business of the assessee or any other source of the income other t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as submitted that the amount so surrendered represent the undisclosed income of the assessee which would have never come to light had there been no survey action under section 133A of the Act and the same could not be treated as normal business income and have to be considered as unexplained income under section 68 - 69C of the Act and the tax rate at the rate of 60% should have been applied as per the provisions of Section 115BBE of the Act in terms of amendment to Section 115BBE by taxation laws 2nd Amendment Act, 2016. It was accordingly submitted that in this case, the AO should have considered the amount so surrendered as unexplained income under section 68 to 69C and the tax should have been levied @60% under section 115BBE of the Act. It was further submitted that this was the only possible view in the facts and circumstances of the present case wherein the provision of Section 115BBE are applicable on surrendered income after taking cognizance of prevalent provisions of law and the contention of the ld AR that the AO has taken a possible view cannot be accepted. It was accordingly submitted that there is no infirmity in the order of the Ld. Pr. CIT wherein the order so pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of assessment proceedings has issued a specific show-cause dated 5/11/2019 and has referred to the survey proceedings and stated that during the course of survey operation carried out at your business premises on 3/05/2016, a diary containing entries of advances made to various persons was impounded and you are requested to explain the entries contained in the said diary. In response, the assessee submitted that the advances were made to some farmers against their agriculture produce to be sold at our shop in future but the amounts of said advances were not recorded in the books of accounts but recorded in the diary. It was further submitted that total amount of unrecorded advances were surrendered and additional income to that extent was offered for taxation. Thereafter, the Assessing officer issued another show-cause dated 9/12/2019 asking the assessee to show-cause why the amount surrendered during the course of survey may not be taxed separately at the maximum tax rate in view of the provisions of section 115BBE of the Act and in response, the assessee submitted that the provisions of section 115BBE are not applicable as the additional income is related to his business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Section 68. section 69, section 69A, section 698, section 69C or section 69D, which are covered by the head 'Income from Other Sources' and thus not applicable on the income which is covered by the head 'Business Income. Since our additional income is related to business, earned from the business of commission agency, shown in profit and loss account as business income, declared in the return under the head of BUSINESS INCOME, so can't be considered as income from other sources and hence not liable to be taxed under the provisions of Section 115BBE. Moreover after considering all the facts related to my income and source of amount the survey team assured us to apply normal rate of tax on the additional income and accordingly whole of the tax was paid before filing of return. To apply provisions of Section 115BBE and charge tax at higher rate now would be against the 'Natural Justice'. 21. And the AO, thereafter, after taking into account the findings of the survey team and his own independent examination, accepted the nature and source of surrendered income as arising out of assessee s business operations subject to normal taxation as agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in books of accounts, the same being in nature of deemed income as mentioned u/s 68/69/69A/69B/69C etc, the provisions of section 115BBE are attracted. In our view, what is relevant before invoking the deeming provisions is not just the factum of survey/search action but besides that, what is the explanation so offered by the assessee explaining the nature and source of income so found during the course of survey/search proceedings and which has not been recorded in the books of accounts and the same is the essence of the statutory provisions as duly recognized by the Courts and various Benches of the Tribunal and which has been reiterated from time to time. The mere fact that survey/search proceedings have been initiated at the business premises of the assessee doesn t mandate the Assessing officer to automatically invoke the deeming provisions 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 (ITA No. 121/CHD/2021 dated 04/08/2022), speaking through one of us, it was similarly held that it is li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the condition before invoking the same is that the assessee has either failed to disclose the nature and source of such income or the AO doesn t get satisfied with the explanation so offered by him and the relevant findings read as under: 10. We have considered the rival contentions and have gone through the record. As per the provisions of Section 115BBE of the Act, the income tax on income referred to in Section 68 or Section 69 or Section 69A or Section 69B or Section 69C or Section 69D are chargeable to tax at a higher rate. Now a perusal of the provisions of Section 68, 69, 69A, 69B, 69C and 69D would reveal that those provisions are attracted in respect of the credits, cash, expenditure, investment etc. regarding which the assessee offers no explanation about the nature and source thereof. It is to be pointed out that the income is to be assessed u/s 68 wherein any sum is found credited in the books, of which the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not found satisfactory by the AO. Section 69 is attracted to the unexplained investments of which the assessee offers no explanation about the nature an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered by the assessee to the AO was not satisfactory and further what more enquiries are required to be conducted in this case, which the AO had failed to conduct. The ld. PCIT has simply based his opinion and order on the Audit Objections/Report as pointed out even in the Audit Report that since the same was undisclosed income of the assessee which was surrendered by the assessee during the survey action and therefore, the same was to be assessed under the provisions of Section 68 to 69D of the Act. The above reasoning of the survey party is not in accordance with the relevant provisions of the Act. Therefore, we do not find any justification on the part of the ld. PCIT in invoking the Revisionary jurisdiction in this case. 25. As we have noted above, in the instant case, the ld. PCIT without taking into consideration the findings of the survey team, the documents found during the course of survey, the statement of the assessee company, the surrender letter and subsequent enquiry and examination conducted by the AO during the course of assessment proceedings has recorded a finding that the deeming provisions read with provisions of section 115BBE are applicable in the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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