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TMI Blog2023 (9) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... sales turnover for last five years, where the AO had recorded categorical finding that after demonetization, the sales turnover of the assessee has been increased by more than 100%. AO further concluded that the assessee has routinely suppressed its turnover and generated unaccounted cash over the period and the same has been brought into books in the form of discounts and incentives. Therefore, from the reasons given by the AO, it is abundantly clear that the income disclosed under the head discounts and incentives is inextricably linked to the business activity of the appellant. Therefore, once the nature and source of credit found in the books of accounts of the assessee is linked to business, then any income generated out of such business activity is assessable under the head income from business and profession alone, but not under the provisions of section 68 of the Act. The ld. CIT(A), after considering relevant facts has rightly held that income declared by the appellant towards discounts and incentives is assessable under the head income from business and profession, but not u/s. 68 of the Act. Application of provisions of section 115BBE - In the present case, since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating to cash deposits made in the bank account as income under the head Profits gains of business and the said income is to be taxed under normal provisions. 3. The learned CIT(A) failed to appreciate that the assessee has not furnished the details of Incentives and Discounts in spite of the letter dated 07/02/2019 and notice u/ s .142( 1) dated 28/12/2019 of AO calling for the details of discounts and incentives. Without giving the details called for, the assessee only disputed on the applicability of amended provisions of 115BBE amended by Taxation 1aws (Second Amendment) Act 2016 which received the assent OI the president on 15.12.2016 to the transactions recorded in the books prior to the said date. Since the assessee has not explained the cash deposit offered under the caption Incentives and discounts, the AO has rightly treated the sum of 50 Crores under the deeming provisions of Sec. 68 and taxed at higher rates as per the provisions of Sec. 115BBE of the Act. 4. The Ld.CIT(A) failed to appreciate that the assessing officer has properly analyzed the cash deposits made during post demonetization also and accepted the amount of deposit of Rs. 76,72,00,000/- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l cash of Rs. 89,03,81,500/- into its bank account during demonetization period from 08.11.2016 to 31.12.2016. It was further observed that, on perusal of cash book submitted by the assessee, the source for the cash deposits in question has been explained out of sale proceeds on 08.11.2019. The Assessing Officer has analyzed cash deposits into bank account during demonetization period with corresponding sales declared by the assessee for the previous day and also analyzed comparative data of sales for last five years and observed that after demonetization, there is a 100% increase in sales reported when compared to previous financial years. The Assessing Officer had also analyzed comparative data of purchase for last five years and observed that the assessee has admitted discounts and incentives of Rs. 20 crores for financial year 2014-15 and the same has been used for purchase of stock in trade. It was further observed that, the assessee had also admitted Rs. 40 crores income from discounts and incentives for the assessment year 2016-17 and the same has been resulted in increase in stock in trade by 25%. Similarly, during financial year 2016-17 relevant to assessment year 2017-18, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from profit and gains of business to income from other sources, in respect of discounts and incentives income at Rs. 50 crores credited into profit and loss account. The ld. CIT(A), further observed that the Assessing Officer has treated the said income as income chargeable to tax u/s. 68 of the Act, instead of income declared by the assessee under the head profit and gains of business. In order to invoke provisions of section 68 of the Act, any sum is found credited in the books of the assessee, maintained for any previous year and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not in the opine of the Assessing Officer, satisfactory, the sum so credited can be charged to income tax as the income of the assessee for that previous year. In the present case, the appellant is maintaining books of accounts. The appellant has also credited the relevant income of Rs. 50 crores in the books of accounts as discounts and incentives. The appellant has also explained nature and source of the said sum as business receipts by way of discounts and incentives and offered the same to tax as income under the head profit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoking provisions of section 115BBE of the Act. The ld. CIT(A) had also rejected legal arguments taken by the assessee in light of amendment to section 115BBE of the Act, by the Taxation Laws (Second Amendment) Act, 2016 by observing that, since it has been held that the provisions of section 68 of the Act, is not applicable to the facts of the present case, the question of adjudication of legal grounds taken by the assessee on this issue becomes infructuous and thus, the same has been dismissed as infructuous. Aggrieved by the ld. CIT(A) order, the revenue is in appeal before us. 8. The ld. DR, Shri. R. Mohan Reddy, CIT, submitted that the ld. CIT(A) erred in directing the Assessing Officer to treat the income offered under the caption discounts and incentives relating to cash deposits made in the bank account as income under the head profit and gains of business and the said income is to be taxed under normal provisions. The ld. CITDR, further submitted that, during the enquiry it was found that Rs. 60 crores was introduced in the books of accounts of the assessee through cash deposits in the bank during the financial year 2016-17. The said sum was found credited under the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that sum found credited in the books of accounts of the assessee is out of income generated in the normal course of business. The Ld. Counsel for the assessee, further submitted that once it was the accepted position that source of income is from business, then the question of application of provisions of section 68 of the Act does not arise. Further, it is not the case of the Assessing Officer that, the assessee has disclosed Aadhayam income for the first time in the impugned assessment year, because as admitted by the Assessing Officer himself, the assessee has disclosed said income for last two financial years. The ld. CIT(A), after considering relevant submissions has rightly held that sum credited in the books of accounts of the assessee under the head discounts and incentives is assessable under the head income from business as claimed by the assessee, but not under the head unexplained credits as assessed by the Assessing Officer u/s. 68 of the Act. 10. The Ld. Counsel for the assessee, referring to provisions of section 115BBE of the Act, as amended by the Taxation Laws (Second Amendment) Act, 2016, which was received assent of the President on 15.12.2016, submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2017-18 and admitted total income of Rs. 126,97,84,860/-, which included sum of Rs. 50 crores under the head discounts and incentives. The Assessing Officer, has assessed Rs. 50 crores u/s. 68 of the Act and levied tax u/s. 115BBE of the Act. The Assessing Officer has discussed the issue at length in light of financial statement of the assessee for last five years and finally concluded that the appellant firm had disclosed Rs. 50 crores under the head discounts and incentives, towards unaccounted income earned from suppression of sales turnover for earlier period. The Assessing Officer, has analyzed the purchase and sales turnover of the appellant firm for last five years and observed that, there is a substantial increase in sales turnover from assessment year 2017-18 onwards. The Assessing Officer, further observed that the assessee has admitted Rs. 20 crores as income from discounts and incentives and directly credited to profit and loss account during financial year 2014- 15, which has resulted in increase in stock in trade by 135%. The Assessing Officer, further observed that the appellant has admitted Rs. 40 crores as income from discounts and incentives and directly credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orically reached to the conclusion that additional income offered under the head discounts and incentives is earned from suppression of sales turnover for earlier assessment years. This fact has been further strengthened by the reasons given by the Assessing Officer in the assessment order, regarding disclosure of income under the head discounts and incentives for earlier assessment years also. In fact, the Assessing Officer himself has admitted that the appellant had disclosed Rs. 20 crores as income from discounts and incentives and directly credited to profit and loss account for assessment year 2015-16, which has resulted in increase in stock in trade by 135%. It has been further admitted in the assessment order that the appellant had disclosed Rs. 40 crores as income from discounts and incentives for assessment year 2015-16. The Assessing Officer, further admitted fact that the appellant had declared Rs. 50 crores as Aadhayam income from discounts and incentives in the impugned assessment years and said income is generated out of unaccounted cash generated from business activity of the assessee. From the above, it is undoubtedly clear that the Assessing Officer never disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein are not satisfied. Further, it was not a case of the Assessing Officer that the appellant had disclosed income under the head discounts and incentives for the first time in the impugned assessment year. As clearly admitted by the Assessing Officer in the assessment order, the appellant had disclosed income from discounts and incentives for last two assessment years and the Department has accepted the claim of the assessee. Further, the disclosure made by the appellant is taken support from the conclusion drawn by the Assessing Officer in light of analysis of purchase and sales turnover for last five years, where the Assessing Officer had recorded categorical finding that after demonetization, the sales turnover of the assessee has been increased by more than 100%. The Assessing Officer, further concluded that the assessee has routinely suppressed its turnover and generated unaccounted cash over the period and the same has been brought into books in the form of discounts and incentives. Therefore, from the reasons given by the Assessing Officer, it is abundantly clear that the income disclosed under the head discounts and incentives is inextricably linked to the business activit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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