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TMI Blog2023 (11) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation about the nature and source of such unrecorded transactions and the necessary nexus with assessee s business has been established, thus, it cannot be said that these are unexplained transactions thus, doesn t satisfy the second condition for invoking the deeming provisions of section 69. AO has duly taken cognizance of the findings of the survey team, the documents found during the course of survey, the statement of the assessee, the surrender letter and the return of income and after examination thereof and due application of mind, the income has been rightly assessed under the head business income. The order so passed by the AO cannot be held as erroneous due to lack of inquiry or for that matter requisite inquiry on the part of the AO. As we have held above, there is no findings recorded by the Ld. Pr. CIT as to how the deeming provisions are applicable in the instant case and the order so passed by the AO is erroneous. We therefore find that merely stating that there was survey operation at the business premises of the assessee and provisions of Section 115BBE of the Act are attracted, the same can be a basis for exercise of jurisdiction under section 263 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued along with detailed questionnaire. After taking into consideration, the submissions of the assessee, the returned income was accepted by the AO and assessment order dt. 28/06/2019 was passed by the AO under section 143(3) of the Act. 2.1 Subsequently, the assessment records were called for and examined by the Ld. Pr. CIT and a show cause under section 263 dt. 22/02/2022 was issued and thereafter, after taking into consideration the submissions so filed by the assessee but not founding the same acceptable, the assessment order passed under section 143(3) was held to be erroneous in so far as prejudicial to the interest of the Revenue and the matter was set aside to the file of the AO for passing a fresh order in accordance with law, keeping in view the observation made in the impugned order and after providing reasonable opportunity to the assessee. 3. Against the said findings and directions of the Ld. Pr. CIT, the assessee is in appeal before us. 4. During the course of hearing, the Ld. AR submitted that the assessee filed his return of income declaring total income of Rs 94,70,540/- under the head "Income from Profit and Gains from Business or Profession". It was further s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in view of the said explanation which has been found reasonable and acceptable to the AO, he has not invoked the deeming provisions along with provisions of Section 115BBE of the Act. 9. In support of the aforesaid contentions, the reliance was placed on the decisions of Coordinate Chandigarh Bench in case of Gandhi Ram Vs. The Pr. CIT (ITA No. 121/Chd/2021 dt. 04/08/2022), in case of Shri Bal Krishan Vs. The Pr. CIT (ITA No. 406 to 409/Chd/2021 dt. 16/03/2023), Gaurish Steels Pvt Limited (ITA No. 1080/CHD/2014 dated 17/09/2015) and DCIT vs Marshal Machines Pvt Ltd (ITA No. 57/CHD/2017 dated 22/05/2018). 10. Per contra, the Ld. CIT DR supported the order and the findings of the Ld. Pr. CIT. It was submitted that during the course of survey, the assessee had surrendered an amount of Rs. 80,00,000/- which is in the nature of excess stock and excess cash which was not accounted for in the books of accounts. It was submitted that assessee in his return of income has shown the surrendered income as business income and has paid taxes as per normal slab rate. It was submitted that during the course of assessment proceedings, the assessee failed to submit any explanation for showing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and now Director in M/s Bindas Foods Pvt Ltd was recorded on 31/08/2016 and the relevant contents thereof read as under: "Q.3:- Your attention is drawn towards the trading account submitted by you and the stock statement counted physically whereby there is a difference of stock to the extent of 2086 Qtls. when this is calculated at average rate, the excess stock comes out to Rs. 1,02,98,582/- Please explain the discrepancy? Ans:- I acknowledge the difference in stock found during physical verification. To cover up the discrepancy, I voluntarily surrender an income of Rs. 1,02,98,582/- over and above my regular income. Q.4:- Your attention is drawn to page no. 1 of Annexure A-2 wherein an amount of Rs. 19,79,682/- is mentioned. The page reads in as Manohar Lal Faqir Chand Commission Agent, Mudki/Kabbar Vachha. Please explain about the same? Ans:- The amount of Rs. 19,79,682/- is receivable from M/s Manohar Lal Faqir Chand, which we did not account for. Now I surrendered this amount of Rs. 19,79,682/- as our voluntary income. Q 5. Your attention is drawn to page no. 11 of Annexure A-2, wherein an amount of Rs. 2,57,147/-is written. The slip reads in as 'Pyare Sukhdev' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tallments due to financial hardship and seasonal nature of our business. It is therefore requested that the installments as requested may be granted. It is further requested that the firm is likely to be taken over on the basis of as it is (assets & liabilities) by a company Bindas Agro Foods Pvt. Ltd. and this surrender will stand in the name of said company if it is taken over and the liabilities of this firm will cease being merged in aforesaid company. Thanking you, Yours faithfully Sd/- Partner 18. The nature of surrendered income was therefore difference in stock and unrealized sundry receivables generated out of out of book sales undertaken by the assessee. The factum thereof has been accepted by the Survey team lead by ld DDIT (Investigation) and thereafter by the Assessing officer during the course of assessment proceedings after due examination. The Assessing officer has issued a specific show-cause dated 26/12/2018 and has referred to the survey proceedings wherein it was stated that stock inventory was prepared physically and compared with the books of account and it was observed that there was difference in the stock. Besides, there were certain loose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has voluntarily surrendered Rs. 2,02,00,000/- over and above the normal business income in his return of income and has accordingly not drawn any adverse inference. 20. We therefore find that the Assessing officer has duly taken cognizance of the 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". In light of the same, we are of the considered view that the order so passed by the Assessing officer cannot be held as erroneous due to lack of enquiry or for that matter, requisite enquiry on the part of the Assessing officer. Where the Assessing officer 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. 21. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the present case which is clearly absent in the instant case. Therefore, where the ld PCIT himself is not clear about the applicability of relevant provisions and in the same breath holding the Assessing officer to task by not invoking the said provisions is clearly shooting in the dark which cannot be sustained in the eyes of law and the order so passed therefore cannot be held as erroneous in the eyes of law." 22. As we have noted above, 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 partner/director 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 provisions of section 115BBE are applicable in the instant case. Where the ld PCIT dispute the nature of such surrender or the findings of department's own survey team as well as that of the AO, he has to lead positive evidence to arrive at any contrary finding. Nothing has been brought on record in this regard. Therefore, the picture which is clearly emerging from the material available on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntries are sundry receivables which has not been accounted for in the books of account and in order to buy peace of mind, the same is surrendered as income under the head business for RY. 2012-13 relevant to Asstt. Year 2013-14 subject to no penalty and prosecution under the I.T. Act, 1961. Since the company is incurring losses in current FY. 2012-13, the surrendered income will be adjusted against these losses." [Extracted from the impugned assessment order; pages 5 & 6]." 20. Clearly, it is evident from the above that the surrender was on account of debtors/receivables relating to the business of the assessee only. The Revenue has accepted the surrender as such, as being on account of receivables. It follows that the debtors were generated from the sales made by the assessee during the course of carrying on the business of the assessee, which was not recorded in the books of the assessee. Though the said income was not recorded in the books of the assessee, the source of the same stood duly explained by the assessee as being from the business of the assessee. Even otherwise, no other source of income of the assessee is there on record, either disclosed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustained." 13. In the instant case, in the show cause issued under section 263 of the Act, the Ld. Pr. CIT has stated that during the course of survey proceedings at the assessee's business premises, certain discrepancy were observed and confronted to the assessee and in response, the assessee offered a sum of Rs. 75,00,000/- towards unexplained stock and a sum of Rs. 5,00,000/- towards unexplained cash in hand. It was further stated by the Ld. Pr. CIT that the assessee during the course of assessment proceedings has submitted a copy of his computation of income along with P&L Account wherein the surrendered income of Rs. 80,00,000/- has been shown under the head "Profit & Gains from Business & Profession". In the said background, the assessee was asked to explain as to how the aforesaid amount has been offered to tax as income from business. Further it was stated by the Ld. Pr. CIT that in the balance sheet submitted by the assessee, an amount of Rs. 95,39,576/- has been credited as net profit in the capital account but the corresponding entry as per the disclosure letter is not apparent and therefore the assessee was asked to furnish full details of the journal entries passed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year. We therefore find that there is thus a difference in terms of the undisclosed income and the unexplained income and the deeming provisions are attracted in respect of the undisclosed income which may be found during the course of survey but before the same is assessed and brought to tax under the deeming provision, what is relevant to examine is the sufficiency and adequacy of the explanation so submitted by the assessee explaining the nature and source of such income. There is thus a difference between the undisclosed income and the unexplained income which apparently is absent on the face of the show cause notice. As we have held in case of Bal Krishan Vs. Pr. CIT and Others (supra), the mere fact that the survey proceedings have been initiated at the business premises of the assessee doesn't by default mandate the AO or for that matter, the ld PCIT to invoke the deeming provision and before invoking the deeming provision, he has to call for the explanation and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provision. 15. Moving further, let's look at the findings of the Ld. Pr. CIT as to how he has held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading of cattle feed and he is in this line of business since September, 2009. In response, to Question No. 11 wherein the assessee was asked to explain the discrepancy in terms of excess stock of Rs. 75,00,000/- which is the difference in terms of physical stock which was found and valued at Rs. 2,17,54,623/- as against the recast trading account as on 23/09/2016 wherein the stock was shown at a value of Rs. 1,42,54,623/-. The assessee in his response submitted that the difference in stock of Rs. 75,00,000/- is not explainable at the moment, however the investment in stock is made from undisclosed business income of the current year, therefore in order to buy peace, he voluntarily disclosed the same for taxation for A.Y 2017-18 subject to no penal action. Thereafter, in response to Question No. 12 where the assessee was asked to explain the excess cash of Rs. 4,99,892/-, the assessee submitted that he is unable to explain the excess cash amounting to Rs. 4,99,892/- and in order to buy peace of mind, he voluntarily surrender a sum of Rs. 5,00,000/- for taxation for A.Y. 2017-18. Subsequently, in the surrender letter dt. 24/09/2016, the assessee has reiterated the surrender of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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