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TMI Blog2023 (12) TMI 1408X X X X Extracts X X X X X X X X Extracts X X X X ..... as per law prevailing on the date of survey and this income was duly shown in income tax return and duly reported for tax purposes. AO taking cognizance of the findings of the survey team, the documents found during the course of survey, the statement of the assessee, and the return of income and after examination thereof and due application of mind, has accepted the explanation so offered by the assessee and the returned income was accepted wherein the surrendered income has been offered under the head business income. We therefore find that the assessee has been asked specific questions during the course of assessment proceedngs, after due examination and being satisfied with the explanation of the assessee, the same has been accepted and thus, it is not a case of lack of enquiry on part of the AO or for that matter, accepting the explanation of the assessee on face value. The AO has duly enquired in the matter and thereafter, has taken a view in the matter. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary explanation ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - on account of excess cash). The said surrender was made by the assessee in order to cover up the discrepancies as encountered during the course of survey and only in order to buy peace of mind. Thereafter, the assessee credited the amount surrendered of Rs. 50,00,000/- during the course of survey in the profit and loss account prepared for the FY 2016-17 and declared a net profit of Rs 57,16,416/- and thereafter, filed his return of income on 31.10.2017 at returned income of Rs. 56,25,630/-. 3.1 It was submitted that thereafter, the case of the assessee was selected for compulsory manual scrutiny and a notice u/s 143(2) of the Act dated 20.09.2018 was issued to the assessee. In response to the said notice, the assessee filed his detailed reply on 09.10.2019. Thereafter, various notices were issued during the course of assessment proceedings and the assessee duly replied to all the notices issued by the Assessing Officer. 3.2 It was submitted that on 11.12.2019, the Ld. AO issued notice u/s 142(1) along with specific questionnaire as to why the provisions of section 115BBE of the Act are not applicable in the case of the assessee. In response to the said notice, the assessee filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. AR submitted that the case of the assessee was selected for compulsory scrutiny only on the issue of the amount of Rs. 50,00,000/- surrendered during the course of survey action on 17.08.2016. During the course of assessment proceedings, the Ld. AO vide specific questionnaire dated 11.12.2019 has duly asked the assessee about the amount surrendered during the course of survey action. Thereafter, the assessee replied to the specific questionnaire of the Ld. AO and the Ld. AO after taking cognizance of all the replies file by the assessee and after taking a conscious decision assessed the total income of the assessee at the returned income and accepted the said surrendered amount as business income of the assessee. Hence, it is submitted that the AO took a possible view on the taxability of income surrendered by the assessee and accepted the sum surrendered as part of business income of the assessee vide his assessment order dated 20.12.2019 passed u/s 143(3) of the Act. 4.1 It was submitted that the revision proceedings u/s 263 of the Act have been initiated merely on the basis of difference of opinion which cannot be taken as a ground to determine the order passed by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anil Kumar Sharma 335 ITR 83 (Del HC) CIT vs. Hindustan Marketing And Advertising Cor. Ltd. 341 ITR 180 Loil Continental Foods Ltd. vs. PCIT in ITA No. 577/CHD/2017 CIT vs. Late. Shri Vijay Kumar Koganti 195 DTR 428 (Madras HC) Shri Varinder Kumar Gupta vs. ITO in ITA No. 754/Chd/2018 Shri Hakam Singh vs. PCIT in ITA No. 597/Chd/2019 Harampal Contractor Hot Mix Plant vs. PCIT in ITA No. 211/Asr/2017 Smt. Savita Goyal vs. ITO, Khanna in ITA No. 438/Chd/2007 Durga Dass Surender Kumar and others in ITA No. 397 401/CHD/2022. 4.5 It was further submitted that survey was conducted at the business premises of the assessee on 17.08.2016 i.e. much before the date of announcement of demonetization by the Government on 08.11.2016 as well as prior to the amendment made in section 115BBE of the Act i.e. on 15.12.2016. In this regard, it was submitted that when the surrender was made by the assessee on 17.08.2016, the amended provisions of section 115BBE of the Act were not enacted. Hence, the assessee keeping in mind the then prevailing provisions of section 115BBE of the Act made a surrender of Rs. 50,00,000/- as his additional business income and to buy peace of mind and to cover up the disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any other source of income of the assessee. Hence, the business income is the only source of income of the assessee. And, hence, all the income earned by the assessee is only on account of such business and therefore, needs to be taxed under the business head only. Thus, the Ld. AO was fully conscious about the facts and circumstances of the case of the assessee as well as fully aware about the provision of Section 115BBE but still, he has taken a possible view of charging the surrendered income at normal rate of tax and which is very much correct and reliance was placed on the decision in case of M/s. Arora Alloys vs. DCIT in ITA No. 1481/CHD/2017 wherein the Chandigarh Bench has held as under: the assessee, wherein it was alleged that it is for the purpose of the business. Therefore, to the extent the expenditure incurred for construction of the building, out of unexplained source is concerned, it is to be construed as earned from the business and it will take character of the business income. Once this income is to be assessed under the business income , then all incidental benefits for set off from brought forward loss or any other expenditure is to be given to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see which is evident from the assessment order itself. The Ld. AO has also issued a specific questionnaire wherein, all the details/ explanations pertaining to the amount surrendered during the course of survey has been required and the assessee has duly replied to the said questionnaire. Hence, the case of the assessee is not at all covered under the provisions of explanation 2 to section 263(1) particularly when all the enquiries and verification stands made by the Assessing Officer during the course of original assessment proceedings and has made a conscious order u/s 143(3) of the Act after taking cognizance of all the details/ information available on record. 4.9 It was further submitted that the judgment of the Punjab and Haryana High Court in case of Kim Pharma Pvt. Ltd. v CIT 216 Taxman 153 (P H) as relied upon by the ld Pr. CIT is applicable only in case the source of income being assessed u/s 68 to 69D itself is not explained, however, in the case of the assessee, the assessee has duly explained the source of such income and moreover, reliance in this regard is also placed on the judgment dated 18.02.2021 in the case of Shri Harish Sharma vs. The ITO in ITA No. 327/CHD/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 deemed income and the tax rate @ 77.25% 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 deemed income and the tax should have been charged under section 115BBE of the Act. 5.1. 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 therefore 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 passed by the AO has been held as erroneous in so far as prejudicial to the interest of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the provisions of Section 115BBE of the Act, the Ld. Pr. CIT deemed it appropriate to invoke his jurisdiction under section 263 of the Act. In our view, the very basis of invocation of jurisdiction under section 263 suffers from serious fallacies in the sense that the unexplained income found and surrendered during the course of survey proceedings have been sought to be brought to tax straightway under section 115BBE of the Act. And if we look at the provisions of Section 115BBE of the Act, it provides that where the total income of the assessee includes any income refer to in section 68, 69, 69A, 69B, 69C and 69D which is either reflected in the return of income furnished by the assessee or determined by the AO, the income tax payable shall be at the rate specified therein. Therefore, for section 115BBE, which talks about specified rate of tax, to be applicable in the instant case, the deeming provision of Section 68 to 69D needs to be satisfied at first instance and only in those cases where the deeming provisions are applicable, the tax rate as specified in Section 115BBE of the Act can be applied. Further if we look at the deeming provisions, it provides that where the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found acceptable to the Ld. Pr. CIT. As we have held in case of Gandhi Ram Vs. Pr. CIT(supra), the Ld. Pr. CIT has to record specific findings as to the applicability of the relevant deeming provision and how the explanation called for and filed by the assessee is not acceptable in the facts of the present case and which is clearly absent in the instant case. There is no inquiry or investigation which has been conducted by the Ld. Pr. CIT and there is no positive evidence brought on record as to why the deeming provision read with section 115BBE of the Act are applicable in the instant case. Therefore in absence of clear cut findings recorded by the Ld. Pr. CIT as to how the order passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue, the findings of the Ld. Pr. CIT deserves to be set aside. 10. Having said that, let s look at the nature and source of income surrendered and the explanation submitted by the assessee during the course of survey and whether the matter has been inquired into by the AO during the course of assessment proceedings or not. 11. During the course of survey, the statement of the assessee was recorded. In the statement of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The AO has duly enquired in the matter and thereafter, has taken a view in the matter. 13. No doubt, these transactions were not recorded at the time of survey thus qualify as unrecorded transactions satisfying one of the essential conditions, at the same time, the assessee has provided the necessary 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 the Act. Thus, the view taken by the AO is clearly a plausible view considering the facts and circumstances of the present case and nothing has been pointed out as to how the view so taken is unsustainable in the eyes of law. 14. In light of the above, we are of the considered view that 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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