9911796707
TMI Blog2024 (10) TMI 747X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been made in terms of the prevailing provision and therefore, the addition made by the assessing officer invoking section 115BBE, provision of which came into force only on 01.04.2017 is not sustainable. Thus we are of the considered view that the assessment order is not erroneous in so far as and prejudicial to the interest of the Revenue and accordingly, the appeal of the assessee is allowed. - Smt. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Appellant : Shri Tushar Hemani, Sr. Adv. Shri Parimalsinh B. Parmar, A.R. For the Respondent : Shri R. N. Dsouza, CIT DR ORDER PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Principal Commissioner of Income Tax, (in short Ld. PCIT ), Ahmedabad-1, vide order dated 01.03.2022 passed for A.Y. 2017-18. 2. The Assessee has taken the following grounds of appeal:- 1. The ld. PCIT has grossly erred in law and on facts in assuming jurisdiction u/s. 263 of the Act on the erroneous ground that the impugned assessment order is erroneous in so far as it is prejudicial to the interest of the revenue. 2. The ld. PCIT grossly erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that during the survey, the assessee had disclosed an unaccounted income of Rs. 4,29,81,942/-, which was not recorded in the firm's regular books of accounts and thus not taxed as required under Section 115BBE of the Act. The firm s reported income of Rs. 3,94,98,230/- was calculated after accounting for expenses against this unaccounted income. This resulted in a reported business loss of Rs. 34,83,712/-, which, according to Section 115BBE(2), is not allowable for set-off against the undisclosed income. The Assessing Officer (A.O.) did not address these significant issues during the assessment process, leading to an erroneous order that was detrimental to the Revenue's interests. Consequently, a show cause notice under Section 263 of the Income Tax Act was issued to the assessee on February 7, 2022, requesting a written response by February 11, 2022. In the notice, the assessee firm was asked to demonstrate the connection between the unaccounted income and the firm s business, provide journal entries related to this income, and justify why the business loss should not be disallowed under Section 115BBE(2). In response, the assessee submitted arguments on February 9, 202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual accounts, books of accounts, and the stock register. In response to this notice, the assessee filed letter dated August 7, 2019, giving details of their business activities. The assessee firm submitted that it is engaged in the retail sale and purchase of gold ornaments, jewellery, and silver articles, and submitted that its only source of income was from trading in these items. Additionally, the assessee submitted several documentation for the year under consideration, which included the computation of income, the Tax Audit Report, and the audited financial statements. The assessee also provided its cash book and ledger for the financial year, giving details of recorded excess gold stock valued at Rs. 3,95,24,694/- and excess silver stock valued at Rs. 34,57,248/- that were found during the survey. The evidence supporting these claims was backed by documents such as the day book and daily activity reports. Subsequently, on November 30, 2019, the A.O. issued another notice under Section 142(1), again calling for further details, particularly a reconciliation of the physical stock and book stock as of the survey date, as well as evidence establishing the accuracy and allowabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounted income of Rs. 4,29,81,942/- was indeed related to the firm s business for the year in question. They were also requested to submit all journal entries associated with this unaccounted income and relevant ledgers. Additionally, the Principal CIT sought an explanation as to why the current year's business loss of Rs. 34,83,712/- should not be disallowed, as the income calculated by the CIT after adjusting expenses against the unaccounted income left no room for this loss to be considered allowable under Section 115BBE(2). In response, the assessee furnished a detailed letter on February 9, 2022, addressing the concerns raised in the show cause notice. The assessee clarified that during the survey, excess stocks of gold and silver were discovered, and the partner of the firm had made a statement recorded by the authorized officer. The disclosure of Rs. 4,29,81,942/- made during the survey was accepted as genuine by the survey team. The assessee confirmed that this amount had been credited to the Profit Loss account. The response also included the partner's statement recorded during the survey and emphasized that the current year's business loss of Rs. 34,83,712 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generated. The A.O. found no substantial evidence to suggest that the income arose from activities outside of business operations. Therefore, it is concluded that the undisclosed income found and declared during the survey should be taxed as business income. Furthermore, the Counsel for the assessee submitted that Section 69 serves as a residuary provision and cannot be applied to tax any business income. The A.O. appropriately acknowledged that the income of Rs. 4,29,81,942/-, disclosed during the survey, is to be classified as business income. As a result, there is no error in the A.O.'s order, and the Principal CIT is not justified in invoking jurisdiction under Section 263 of the Act. In terms of record-keeping, the income of Rs. 4,29,81,942/- is duly recorded in the firm's books of accounts. Section 69 can only be invoked for items not recorded, while in this case, the income in question is properly documented. 7. Additionally, the Counsel for the assessee submitted that section 115BBE, which was amended effective December 15, 2016, is applicable only prospectively. Since the survey occurred on September 23, 2016, the additional income disclosed is governed by the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided under section 115BBE of the Act. 11. We have heard the rival contentions and perused the material on record. 12. On going through the facts of the assessee s case and the various documents produced before us for our perusal, we are of the considered view that Ld. PCIT erred in facts and in law in holding that the assessment order is erroneous and prejudicial to the interest of the Revenue. On going through the statement of partner of the assessee firm, he admitted to be in possession of excess stock, which was purchased out of the undisclosed income of the assessee for the impugned year under consideration. Further, on perusal of the Profit Loss Account for the impugned year under consideration, the income declared during the course of survey was also offered to tax by the assessee as it s business income during the impugned year under consideration. Further, we also observe that the Assessing Officer vide notice dated 29.07.2019 have called for the necessary details, to which response dated 07.08.2019 was furnished by the assessee. In the said response, the assessee had also filed copied of books of accounts i.e. cash book, ledger of stock register for the perusal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of Rs. 13 lacs by disallowing claim of the assessee of this amount in respect of partner's remuneration u/s. 40(b) of the Act against the income disclosed at the time of survey has placed reliance only on the statement of the partner of the assessee's firm at the time of survey. While going through this statement, we find that disclosure was made of Rs. 39,96,537/- as income from business. The AO however treated the sum of Rs. 3,93,537/- as income from business and the disclosure of Rs. 36,03,000/- on account of unaccounted net job work income was treated by him as income from other sources only on the ground that assessee has never shown income form job work in earlier years or till the date of survey during the year under appeal, therefore this disclosed income cannot be treated as income from business and profession. To verify this fact, assessee was directed to file details of job work income if any in earlier and subsequent years and it was found that assessee has shown income of Rs. 2,01,215/- and Rs. 48,551/- under the head Veran Majoori income during the assessment years 2008-09 and 2010-11 respectively. The finding of AO being on wrong facts is not sustain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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