9911796707
TMI Blog2025 (4) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to the real facts of the case hence the same may kindly be quashed. 2.1 The ld. AO as well as the ld. CIT(A) have grossly erred in law as well as on the facts of the case in treating the surrendered income on account of sundry debtors and excess cash found as income undisclosed or unexplained investment or money u/s 69 & 69A in place of "business income" as the same was generated from business or was of business income and also erred in making the addition of Rs. 2,05,00,000/- u/s 69 and 69A on account of surrendered income. also erred in making the addition without invoking the provision of sec. 145(3) and without rejecting the books of accounts, also erred in not considering the material and details in their true perspective and sense despite available on record. Which are against the provisions as per law and further contrary to the real facts of the case hence the ld. AO may kindly be directed to treat the surrendered income as business income and the additions may kindly be deleted in full. 2.2 The ld. AO as well as the ld. CIT(A) have also grossly erred in not giving the benefit of deduction, expenses or losses against the surrendered income, hence the same may kindly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also served on 24.08.2018 upon the assessee through notice server. The case was received on transfer to ACIT/DCIT, Circle-1 Kota on 20.09.2018 as the jurisdiction over the case lies with that office. Notice u/s 143(2) was again issued on 12.09.2018 which was duly served through registered e-mail by ITBA on 12.09.2018 and served by registered post. Due to change in incumbent, fresh opportunity of being heard was issued on 08.08.2019. Notice u/s 142(1) and questionnaire were issued to the assessee on 23.08.2019 which was duly served to the assessee through e-mail. In compliance to notice u/s 142(1), the assessee has submitted his reply on e-filing proceeding module on various dates. 3.1 The assessee is a doctor and runs the hospital in the name of JK Hospital at Bhawanimandi. Besides this he is also engaged in to the business of real estate and developers. In the assessment proceeding the ld. AO noted that the assessee had disclosed unexplained investment in the form of sundry debtors at Rs. 2,05,00,000/- during the survey conducted on 04.07.2016. The receipt from sundry debtors had been credited in the cash book till 25.08.2016 and the cash balance was available at Rs. 51,99,631/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed under income from other sources and tax paid at normal rate. Appellant had deposited old demonetized currency at Rs. 50,00,000 in to HDFC bank account No. 50200002190263 during the period of 09.11.2016 to 30.12.2016. During the course of assessment the appellant was asked to give source of this cash deposit into bank account. The appellant replied vide letter dated 20.09.2019 that the appellant had disclosed unexplained investment in form of sundry debtors at Rs. 2,05,00,000 during the survey conducted on 04.07.2016. The receipts from sundry debtors had been credited in the cash book till 25.08.2016 and the cash balance was available at Rs. 51,99,631 in the books as on 08.11.2016. Out of this cash in hand the appellant had deposited Rs. 50,00,000 in old currency note during demonization period. During the assessment proceedings, the appellant was provided opportunity by the show cause notice and in reply the appellant inter-alia objected on the contention that the rate of tax of 60% as provided under section 115BBE of the Act is not applicable to the assessment year 2017-18. After considering the submissions of the appellant in the assessment proceedings, the learned AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is a doctor and partner and shareholder in real estate businesses. In the submissions the appellant has not explained from which proprietorship business of the appellant such debtors were created. The figures of all the unexplained cash advances / claimed debtors are in round figures / whole figures of lakhs and each figure being less than 10 lakhs. Most of the figures are in the range of 4 to 7 lakhs. Figures mentioned in the page are "4 lakhs", "5 lakhs", "7 lakhs" etc. Such round whole amount figures are not expected to be debtors as the business debtors are in specific sums and many a times even exact rupee and paise. Further the details like address of such person, PAN, exact date of business transaction, details of the items sold on credit or services provided on credit, etc. are also not provided by the appellant and also not mentioned on the diary found during the course of survey. No contents have been mentioned in the diary which can indicate that these are the debtors and not the cash advances or cash loans. Business transactions are usually not recorded like this and this kind of recording of business transactions of large amounts in the diary is beyond human pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of undisclosed cash advances/loans) were mentioned and the appellant was pressurised to surrender the same. First of all this affidavit is not admissible as this is the additional evidence and no application under rule 46A has been filed by the appellant. The same is rejected on this ground. Further the allegation of pressure has been raised by the appellant after a period of six years as the survey was carried out on the date of 04.07.2016. This affidavit has been filed by the appellant after the completion of the assessment wherein tax demand has been raised on the appellant. Considering the totality of the facts and circumstances of the case, it is clear that this affidavit a mere afterthought and is baseless and not bona fide and is liable for rejection. The same is hereby rejected on merits as well. Appellate has not produced any complaint lodged with higher officials supported by affidavit swearing that the contents of statement are incorrect and it was obtained under force, coercion. The statements in the retraction has to be duly supported with evidences. Similarly the allegations of coercion etc., if any, in the retraction has to be supported with evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; x In the case of judgment in the case of Dr. S.C. Gupta vs. CIT [2001] 118 Taxman 252 (Allahabad), it is held by the Hon'ble Allahabad High Court as under :- x x x x The Hon'ble Delhi High Court in the case of Raj Hans Towers (P.) Ltd. V. Commissioner of Income-tax-V [2015] 56 taxmann.com 67 (Delhi)/[2015] 230 Taxman 567 (Delhi)/[2015] 373 ITR 9 (Delhi) [27-01-2015] held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; x x As per the above judgement (i) source of investment/expenditure is (should be) clearly identifiable and (ii) undisclosed asset has no independent existence of its own or (iii) there is investment/expenditure no separate physical identity of such Further, in the judgement of Hon'ble High Court in the case of Principal Commissioner of Income-tax v. Bajargan Traders [2017] 86 taxmann.com 295 (Rajasthan) [12-09-2017], the paras from the judgement of Hon'ble ITAT in the case of 'Bajargan Traders' have been extracted and in the judgement of the Hon'ble ITAT there is reference and reliance upon another judgement of Hon'ble ITAT in the case of Shri Ramnarayan Birla (in ITA No. 482/JP/15 dated 30.09.2016). Hon'ble ITAT in the case of Shri R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968. Wherein the similar underlying legal principle as discussed in the judgement referred by the appellant has been discussed and decided in favour of the revenue. As per the judgement of Hon'ble Supreme Court, unexplained credit (or investment) cannot be presumed to be business income. Onus to identify the source cannot be shifted on the assessing authority. If the assessee claims so, the assesse is required to prove the same. Further, in the case also it is held by the Hon'ble Supreme Court in the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC)[08-03- 1977] that even after the items (stock in trade) were "introduced in the books of account of its business", the assessee was still required to "to prove satisfactorily the nature and source of these assets" and in the event of failure to prove these, " the revenue could legitimately hold that these assets represented the undisclosed income of the assessee". Roshan Di Hatti (supra) is case on the similar issue involving issue of stock in trade which was included by the assessee in the books of accounts and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; x x As per judgments of Hon'ble Supreme Court in the case of CIT v. M. Ganpathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books and it is held that the relevant amount is the income of the assessee, it is not necessary for the department to locate its extract source. Referring to the above judgments of Hon'ble Supreme Court, it is held by the Hon'ble ITAT in the case of Navin Shantilal Mehta vs. ITO, Ward-32(2)(4), Mumbai [2018] 90 taxmann.com 16 (Mumbai-Trib.) as under :- x &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; x SLP against the above judgment Suraj Bhan Oil (P.) Ltd vs. DCIT [2022] 138 taxmann.com 19 (Madhya Pradesh) was dismissed by Hon'ble Supreme Court. Reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25.07.2022] x x x x x x In this case of PCIT vs. Deccan Tobacco Company [2022] 137 taxmann.com 470 (SC)/[2022] 286 Taxman 558 (SC)(11.03.2022) [Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee will have to now record verifiable purchases in his Books of Accounts and for that he will have valid as well as back-dated purchase Invoices from genuine and existing Sellers which is not possible. When the excess stocks were found during the Survey, there is no question of allowing the Assessee to record any additional purchases because actual purchases had already taken place and already been recorded in the books of accounts of the Assessee. Thus this is an impossible proposition of going back in time. Applying the same ratio, in the present case, the appellant is required to show the verifiable details of the cash sources behind the unexplained cash advances found during the course of survey otherwise the same is unexplained cash advances and thus taxable as per section 69. Head of Income Regarding the contention of the appellant regarding applicability of charge to tax under a particular head, the question arises whether the income subject matter of addition is chargeable to tax as per provisions of chapters on salary, profits and gains of business and profession Or capital gain Or income from house property Or income from other sources. If the same is chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. Section 14 of the Income-tax Act, 1961 Heads of income - Assessment year 1984- 85-Whether opening words of section 14, 'save as otherwise provided by this Act." clearly leave scope for 'deemed income of nature covered under scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' Held, yes. [Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat) [10-08-2000]] These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Sections 68/69/69A etc. also provides for year of taxati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Once the income is as per these sections, there cannot be any dispute regarding the applicability of section 155BBE of the Act. These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 155BBE of the Act. These sections 68/69/69A etc. along with section 115BBE are in the nature of complete code in itself. In this regard it is held by Hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat) [10- 08-2000] that "6.2 The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary house property, profits and gains of business or profession, or capital gains, nor is it income from other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments. unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head, 'Income from other sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned cash advances undisclosed in books of account and non disclosure was only with a view to suppress income. [Suraj Bhan Oil (P.) Ltd. V. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh)] [SLP against this judgement was dismissed - reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25-07-2022) (e) Undisclosed income or undisclosed investment cannot be explained through another unexplained income or unexplained source. That tantamounts to mere creation of an artificial layer. Verifiable cash sources trail should be behind the undisclosed cash advances detected otherwise such cash advances is to be treated as unexplained. (f) Deemed income under sections 68/69/69A etc. is separate from any 'head of income. If the assessee claims that the undisclosed investment or undisclosed income falls under any particular head of income, the onus in this regard is on the assessee to show under which clause of with section of the respective head of income the undisclosed income of the appellant gets covered, (g) Taxing the undisclosed investment or the undisclosed income at the normal rates of taxes in the year in which these undisclosed we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.07.2016 the tax rate was 30%. Thus the assessee firm has made total surrendered of the Rs. 2,05,60,000/- on dated 05.07.2016 at the tax rate of 30%. 2. Thereafter, the assessee firm has filed the return of income on dt.06.11.2017 declaring the total income of Rs. 2,16,03,180/-, which are related to the surrendered amount shown under the head of income from other sources. The ld. AO has issue the notice u/s 143(2) on dt. 11.08.2018, 09.08.2018 and 12.09.2018 on the following reasons i. Cash deposit during the year ii. Share capital/Capital The ld. AO also u/s.142(1). In response thereto the assessee has filed the reply and details. The ld. AO has stated that the assessee firm has not declared such undisclosed debtors u/s 69 of the act in the return of income but disclosed under income from other sources and paid tax at normal rate. 3. The ld. AO has stated that unexplained debtors in the form of debtors are covered u/s 69 and excess cash is covered u/s 69A of the I.T. Act hence tax should be chargeable u/s 115BBE. Hence, the ld. AO has issued the show cause notice on dt.03.10.2019 asking to the assessee why the tax on Rs. 2,05,60,000/- should be charged @60%+surcharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... you for A.Y. 2017- 18 on 06.11.2017 is selected for scrutiny". The Id. AO has provided the reason for scrutiny that for what reason it has been selected, as it was mandatory on the part to mention or write the reason in the notice of 143(2) vide CBDT instruction no. 20/2015 and 05/2016. Vide para20 of instruction which states " As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year -- one is 'Limited Scrutiny' and other is 'Complete Scrutiny'. The assessees concerned have duly been intimated about their cases falling either in Limited Scrutiny' or 'Complete Scrutiny' through notices issued under section 143(2) of the Income-tax Act, 1961 ('Act'). The procedure for handling 'Limited Scrutiny' cases shall be as under: For this preposition kindly refer JDB Finance vs. DCIT ITA No.127/Gau / 2019 September 16, 2020 (2020) 60 CCH 0060 GauTrib where it has been held Eventhough the return of income of the assessee was picked up for limited scrutiny only to examine mismatch in sales as per audited books of accounts vis-à- vis the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0104 DelTribAssessment-Conversion of limited scrutiny into complete scrutiny-Assessee company's main source of income was freight income and long term capital gains-Return of income was filed-Case was selected for limited scrutiny through CASS-Assessing Officer noted that assessee's case was selected for limited scrutiny with respect to long term capital gains but it was noticed that assessee had claimed a short term capital loss which had been adjusted against long term capital gains-As per Assessing Officer, loss claimed by assessee appeared to be suspicious in nature primarily due to reason that loss could possibly have been created to reduce incidence of tax on Long Term Capital Gains shown by assessee-In order to verify this aspect, approval of Principal Commissioner of Income Tax (PCIT) was taken to convert case from limited scrutiny to complete scrutiny and that assessee was also intimated about change in status of case-Assessing Officer went on to hold that purchase of shares from four brokers against whom there was detailed investigation by Investigation Wing of Income Tax Department in cases of entry operators/shares brokers did not take place and transactions we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently AO proposed to disallow claim of deduction u/s 54B-Assessee submitted that assumption of jurisdiction by AO to scrutinize claim of deduction u/s 54B without approval of competent authority to convert case from limited scrutiny to complete scrutiny is invalid-Held, iscrutiny by issuing notice dated 25-11-2016-However, said approval of Pr.CIT was communicated to AO only on 29-11-2016-Therefore, notice u/s 142(1) issued on 25-11-2016 for initiation of complete scrutiny assessment proceeding is prior to receipt of approval accorded by Pr. CIT and thus it is apparent that AO has initiated proceedings for full/complete/comprehensive scrutiny in anticipation of approval to be accorded by Pr.CIT-It is also mandated by CBDT Instructions that competent authority has to grant approval only after satisfying itself about requirements of comprehensive scrutiny of case-Further AO is also required to intimate assessee regarding conversion of limited scrutiny to complete scrutiny in such cases-It is pertinent to note that in proceedings for limited scrutiny AO was satisfied with source of increase in capital of assessee and even did not proceed further after reply and documents filed by asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord to show that the case was not converted into full scrutiny." Are absolutely incorrect and wrong because in the assessment order at page 1 it is clearly mentioned that the case was selected for "limited scrutiny through CASS" And all the notices were available on the income tax portal, hence the observation and allegation of the ld. CIT(A) incorrect and liable to be ignored and may kindly be quashed. Further if the ld. CIT(A) was having any doubt he may call the report of the ld. AO and may further asked to the assesse. But he failed to do so and rather make false observation. Hence the assessment is illegal invalid and liable to be quashed and consequent demand so raised made by the AO may kindly be deleted in full and oblige. Written submissions On Merit 5. Directly covered Matter: At the very outset it is submitted that the above mater is directly covered by the decision of this Honble Bench in the assessee's Group case namely M/s Silver Wings Life Spaces v/s DCIT Circle-01 Kota in ITA No. 511/Jp/2024 dt. 31.07.2024 copy is enclosed. As the assessment order of both the case i.e assessee and M/s Silver Wings Life Spaces were identical and verbatim. Copy of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that through various questions raised during the course of survey, the assessee has been asked about the nature and source of his income and discrepancies so found during the course of survey. In response, the assessee has stated that he is a partner along with his wife in M/s Supreme Petro Foam Industry, a partnership firm engaged in manufacturing of Foam products and sole proprietor in M/s Shivam Coir Foam Products which is selling Foam products on wholesale and retail basis, and besides that, they have no other source of income/interest in any other business / concern. There were certain discrepancies noticed in respect of M/s Supreme Petro Foam Industry wherein the assessee surrendered a sum of Rs 90 lacs in terms of discrepancy in stock and construction expenses. Further, in respect of M/s Shivam Coir Foam Products, the assessee was asked about the hand-written particulars in terms of certain names and amounts recorded in a diary found during the course of survey and in response, the assessee has submitted that these entries pertain to his proprietorship concern M/s Shivam Coir Foam products, Khanna. It was further stated that these entries are advances/receivables from var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the accounted stock and unaccounted stock. No such physical distinction was found by the Revenue either. We therefore find that the difference in stock so found out by the authorities has no independent identity and is in terms of value terms only and thus part and parcel of entire stock, therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co- related with any specific asset and the difference should thus be treated as business income. 23. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the income of Rs 50 lacs surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69B of the Act and the same has to be assessed to tax under the head "business income". In absence of deeming provisions, the question of application of section 115BBE doesn't arise and normal tax rate shall apply. The AO is thus directed to assess the income of Rs 50 lacs under the head "Income from Business/profession" and apply the normal rate of tax. 10. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of the business of the assessee carried on by the assessee since past many years and in these circumstances, the provisions of section 69B of the Act are not applicable. (x) Further, reliance is also placed on the following judgments: * Hon'ble Chandigarh Bench of ITAT in the case of M/s. Sham Jewellers in ITA No. 375/CHD/2022, wherein, it has been held as under: "Ground Nos. 8 & 9 challenge the action of the lower authorities in applying the provisions of section 115BBE and thereby charging tax at the rate of 60%. The main thrust of the arguments of the Ld. AR has been that all the additions made or sustained relate only to the business income of the assessee and that nowhere in the assessment order has it been alleged that some other source of income had been detected which gave rise to additional income. It is seen that during the course of assessment proceedings, the various explanations submitted by the assessee have duly mentioned that the surrendered income was derived from the business. A perusal of the assessment order would also show that nowhere in the body of the assessment order, the AO has even contradicted this explanation of the assessee. The AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been held that income surrendered by the assessee during the survey on account of discrepancy in cost of construction of building, discrepancy in stock and discrepancy in advances and receivables would be considered as business income and not as deemed income under section 69." . In the case of Bajaj Sons. Ltd., the Hon'ble Chandigarh Bench of ITAT, ITA No. 1127/CHD/2019, has stated as under: "The AO has not pointed out any unexplained credit in the books of account, any unexplained investment, any unexplained money, bullion or jewellery, any unexplained expenditure or any amount of loan repaid in the assessment order in this respect. Therefore, the provisions of Section 68, 69, 69A, 69B, 69C and 69D are not attracted on the surrendered amount of Rs. 15 lacs. The said amount of Rs. 15 lacs was offered in case any discrepancy is found in the books of account. However, in actual neither any unexplained investment nor any unexplained expenditure or otherwise any unexplained asset was found during the search action so far as the aforesaid surrender of Rs. 15 lacs was concerned. In these circumstances, the aforesaid surrender of Rs. 15 lacs can be said to have been offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the routine business, and such addition of Rs. 32 lakhs ought to be treated as business income. We find force in this contention of the ld. counsel for the assessee, because the expenditure incurred for creating a business asset and it must have been generated through the business carried out by the assessee. It is pertinent to bear in mind that expenditure laid out for the purpose of business is to be allowed deduction either as expenditure or to be capitalized on which depreciation will be allowed. The assessee might have earned income from the business which has not been accounted and used for constructing the business asset, though specific details have not been discussed either in the impugned order about the nature of evidence found during the course of survey. We also need not to ponder on this aspect because the assessee has admitted this unexplained expenditure on construction of building. This admission has to be accepted as given by 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 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) also reproduced from page 2 to 6 of the assessment order. Thus the conclusion of the ld. AO was based on wrong facts and liable to be quashed. 7.3 Definition of Sec 69 of the Income Tax Act is "where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and assessee offers no explanation about the nature and source of the investments may be deemed to be the income of the assessee of such financial year". After reading of Sec 69 it was proved that the following condition must be fulfilled for applicability of Sec 69 of I.T. Act 1961. 1. Assessee has made investment in during the A. Y. 2. Such statement is not recorded in the books of accounts, if any maintained by him for any sources of income. 3. Assessee offer no explanation or explanation is found not satisfaction by A.O. As per language of Section, Sec 69 can be invoked only when the assessee has made investment and not recorded such investment in the books of accounts and offer no explanation or unsatisfactory explanation. Both the condition given in point 2 and 3 are cumu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business of medical and real estate developers and builders and as the word debtors are used in the firm or business entity as business transaction. For others it is used loan and advances or deposits etc. And the lower authorities have not disputed the same. 7.7 Thus, the surrender was on account of debtors/receivables relating to the business of the assessee firm only and the ld. AO no-where disputed these facts. The Revenue has accepted the surrender as such, as being on account of sundry debtors. It follows that the debtors were generated from the sales/receipts made by the assessee firm during the course of carrying on the business of the assessee firm, which was not recorded in the books of the assessee firm. Though the said income was not recorded in the books of the assessee firm but the source of the same stood duly as being from the business of the assessee firm, the survey team after question 13 no other question has asked from the assesee, to remove any doubt and assessee has signed the statements as recorded in the mental pressure. Even other-wise no other source of income of the assessee firm is found there on record either disclosed by the assessee firm or unearthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA Nos. 1073 & 1074/JP/2018 Mar 15, 2022 (2022) 64 CCH 0234 Jaipur Trib it has been held Penalty-Penalty for failure to answer question, sign statement, furnish information, returns or statements, allow inspection etc .- Assessee is an individual and having business of Building construction and dealing real estate and after construction completed sold flats as per market price-Assessing Officer initiated penalty proceedings 272A (1)(c)-CIT upheld penalty-Held, there is no finding of AO based on some contradictory evidence to disapprove that explanation offered by assessee was false or assessee was not able to substantiate explanation furnished or fails to prove that such explanation is not bona fide and that all facts relating to same and material to computation of his total income has not been disclosed by him- Ignorance of law is certainly no excuse for a default committed but, at same time, there is no presumption in law that everybody knows law-Application of this rule would differ from case to case and person to person-In a given case, there may be a person who is quite illiterate, living in remote village, rarely coming in touch with law enforcing machinery and not required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of facts the provisions of section 69A/69C should not be invoked and consequently, why tax should not be imposed under section 115BBE of the Act of the act. Further, the assessee also filed a detailed reply in response to the aforesaid show cause notice and upon consideration of the same, the reply of the assessee was accepted by the AO. Further we observe that the Indore ITAT in the case of DCIT v. Punjab Retail private Ltd. in ITA number 677/Ind/2019 has held that since applicability of section 115BBE of the Act of the Act was amended with effect from 15-12- 2016, it will not apply to search/survey conducted prior to 15- l2-2016. Further, the Gauhati Tribunal in the case of Abdul Hamid v. ITO 83 ITD 711 (2020) held that assessment order could not be held to be erroneous and prejudicial to the interest of' the revenue on account of non-invocation of section 115BBE of the Act. In the case of Balvinder Singh v. PCIT in ITA number 570/Del/2022 dated 22-08-2022, the Delhi ITAT observed as below: 9. And amendment has not brought in section 115BBE of the Act w.e.f. 2017-18 but the same was not therein the Statute on the date of survey. Taking a leaf out of amended provisions, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hajihasan(Supra) wherein investment in an assets or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any head. Therefore, the Hon'ble Coordinate Bench held that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case stock was part of the stock. The revenue has not pointed out that excess stock has any nexus with any other receipts. Therefore we do not fine any fault with the decision of the ld. CIT(A) directing to the AO to treat the surrendered amount as excess stock qua the excess stock." The principal of the above judgment is also applicable in the present case. Reliance in this regard is placed on the judgment in the case of Daulat Ram Rawatmull vs. CIT [1967] 64 ITR 593, wherein Calcutta High Court held as under: " 59/61. In the instant case the assessee is a firm formed for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO invoked provision of sec. 115BBE merely on suspicion which was not desirable in the eye of law and invoking provision of section 69 invalid ignoring the true and correct facts of the case. The provision of section 69 cannot be made applicable as primary condition for invoking of the provision is that the assets should be separately identifiable and it should have independent physical existence of its own. Since sundry debtors is a result of suppression of profit from business over the years and has not been kept identifiable separately, the investment in the sundry debtors has to be treated as business income. Once sundry debtors is treated as business/profession income (although not denied by the AO and no comments thereon) then provision of Sec. 115BE is not applicable. Hence the provisions of Sec. 115BBE so applied by the Ld. AO is not justified hence deserves to be deleted. 8. Affidavit wrongly rejected by the ld. CIT(A): As at the time of recording of statement there was no issue regarding the rate of taxes nor any provisions at that time that the tax rate shall be charged at higher rate on which the ld. AO taxed. Hence during the course of appellate hearing assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT(A) can proceeded on different issues or observations, which were neither part of the assessment order nor any dispute raised by the ld. AO on the same. When there was no case of cash advances then why the Id. CIT(A) is saying it cash advances repeatedly. Hence the order of the ld. CIT(A) on wrong issues and wrong observation is liable to be quashed 10. Alternatively and without prejudice to above it is also submitted as under: Wrongly applied the provisions of Sec. 115BBE and charging the tax rate at higher side with retrospective effect and others. 10.1 Gross breach of principal of promissory or contract: The survey team has not stated at the time of survey that in future the tax rate shall be at the rate of 60% +25% Surcharges + 3% cess. The assessee has surrendered the income on the basis of rate of tax applicable or privileged at that time i.e. on the date of surrender on04/05.07.2016. And it was not know by the assessee or by any other person that after the surrender, from the December 2016 the tax rate shall be changed under these circumstances. The surrender made by the assessee firm at rate of tax applicable on the date of surrender on 05.07.2016 as a promis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year or the provision proposed in the Bill then before Parliament, whichever is more favourable to the assessee, were actually in force. In the present case on the 1st of April 2016 (which is First day of April of A.Y. 2017- 18) Amendment provisions of Sec. 115BBE has not been made for A.Y. 2017-18. Hence the amended provision in December 2016 is not applicable for the A.Y. 2017-18 as per clearly provided in the Act itself and still there is no change in the provision. And very important to note that in this provision itself provided whichever is more favourable to the assessee, were actually in force. Thus the favourable rate of charging the tax was 30% not 60% +25% +cess. 10.3 Not applicable retrospective effect: Further, it is submitted that the amendment provisions of section 115BBE of the Act as amended by the Taxation (Second Amendment) Act,2016 are applicable from 15.12.2016 and are not retrospective in operation and therefore, not applicable to the survey operation conducted in case of the assessee on 4thand 5thof July, 2016.It is submitted that the tax laws as the Taxation(Second amendment) Act, 2016 was amended on15.12.2016 and received the ascent of Presiden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d take effect retrospectively from 1st day of July, 1995. When it comes to amendment to Section 113 of the Act, this very circular provides that the said amendment along with amendments in Section 158BBE, would be prospective i.e. it will take effect from 1st June, 2002. Finance Act, 2003, again makes the position clear that surcharge in respect of block assessment of undisclosed income was made prospective. Such a stipulation is contained in second proviso to sub- section (3) of Section 2 of Finance Act, 2003. This proviso reads as under: "Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part iii of the First Schedule of the Finance Act of the year in which the search is initiated under section 132 or requisition is made under section 132A of the income-tax Act." "Provided further that the amount of income-tax computed in accordance with the provisions of section 113 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may be, of Part iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rospective effect. In the case of Shri Hari Narain Gattani vs. DCIT in ITA No. 186/JP/2020 9th October, 2020 (2021) 186 ITD 0434 (Jaipur-Trib). It has been held that "If we look at the provisions of section 115BBE, it provides that where the total income of the assessee includes any income referred to in section68, section69, section69A, section69B, section69 Corsection 69D,the income tax payable shall be at the rate of 30% on income so referred in said sections. Further, in terms of amended provisions of section 115BBE by the Taxation Laws (Second Amendment Act), 2016, it provides that where the total income of the assessee includes any income referred to in section68, section69, section69A, section69B, section69C or section69D and reflected in the return of income furnished under section139 or the total income of the assessee determined by the Assessing Officer includes any income referred to in section68, section69, section69A, section69B, section69C or section69D, if such income is not reflected in the return of income furnished under section139 of the Act,the income tax pay able shall be at the rate of 60% on income so referred in said sections. Thus, both the pre- amended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 35883- 35884 of 2016) Dated: - 11 August 2021 Held that a retrospective provision in a tax act which is "for the removal of doubts" cannot be presumed to be retrospective, even where such language is used, if it alters or changes the law as it earlier stood. This was stated in Sedco Forex International Drill. Inc. v. CIT, (2005) 12 SCC 717 as follows: As was affirmed by this Court in Goslino Mario [(2000) 10 SCC 165] a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute and Industries Ltd. v. CIT [(1980) 1 SCC 139].)An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section [See Sonia Bhatia v. State of U.P., (1981) 2 SCC 585, 598]. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24 (para 44); Brij Mohan Das Laxman Das v. CIT, (1997) 1 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -77 which would be done in A.Y. 1977-78 as the amending act introducing a new tax liability which came into force w.e.f. 01.04.1976 could not be given a retrospective effect and be made applicable to assessment year 1976-77. The relevant part of the judgment reads as under: "2. The point for consideration in the reference is whether the Appellant Tribunal was correct in law in holding that the share income of minor sons of the assesses, including the share in interest on capital credited to the minor sons out of the partnership firm was to be computed in the hands of their father under Section 64(1) (iii) in the Assessment year 1976-77. The said provision was introduced in the income Tax Act by the Taxation Law (Amendment) Act 1975 with effect from 1.4.1976, whereas the accounting year of the assessee(s) in the instant case(s) came to an end on 10.08.1975 and on 31.12.1975 in Taxation Case No. 126 of 1983 and Taxation Case No.28 of 1986 respectively. 17. Reading the judgment of the Apex Court in the case of Kesoram Industries and Cotton Mills Ltd. as Wealth Tax Commissioner (Central), Calcutta AIR Y966 SC 1370 harmoniously with the Constitution Bench judgment of the Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018-19. Hence the substituted section 115BBE is not applicable for AY 2017-2018. 6. Under identical facts various other Tribunals have held that invocation of higher rate of tax is not proper. Reliance is placed upon: * Hon'ble ITAT, Indore Bench in the case of DCIT v. Punjab Retail Pvt. Ltd. vide its order in ITA 677/Ind/2019 dated 08.10.2021 has held: 14. if is also a fact that the Ld. AO has not brought on record any evidence or material to establish that the assessee was involved in any other activities or having any other source of income. While deleting the addition made by the Ld. AO the Ld. CIT(A) observed as follows: "First of all let me discuss whether the provisions of section 15BBE are applicable to this case or not. The provision of disallowance of any loss with the income as computed under clause (a) of sub section (1) of section 115BBE came into force w.e.f 01.04.2017. Hon'ble Supreme court in the case of CIT vs Vatika Township Pvt Ltd (2014) 24 ITJ 532 (SC); (2014) 271 CTR 1: (2014) 227 Taxmann 121 has held that "An amendment made to the taxing statute can be said lo be intended to remove 'hardships' only of the assessee, not of the depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s Silver Wings Life Spaces. 61-69 AO 7. In support of the grounds so raised, ld. AR for the assessee vehemently argued that a survey was conducted wherein a diary was found wherein entry of debtor was found for an amount of Rs. 2,05,00,000/- which was not recorded in the books of accounts of th easessee. The assessee disclosed that income for the year under consideration and had paid the tax in accordance with the law. The assessee group concern M/s. Silver Wings Life Spaces wherein the similar issue was dealt with the co-ordinate bench wherein it was held that amount surrendered by the assessee at the time of survey could not be subjected to tax under the deeming provision of section 68,69,69A of the Act, when the source and nature of the income had not been disputed. 8. Per contra, ld. DR has relied upon the findings of the Assessing Officer as well as that of ld. CIT(A), and submitted that the income that has been disclosed by the assessee in the ITR is undisclosed income and the same was disclosed only before the survey team. The ld. DR also argued that the assessee had deposited the Specified Bank Notes [ SBN ] for higher amount and the assessee cannot take the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance with section 115BBE of the Act. After examination the reply and documents submitted by the assessee, the assessment proceedings were concluded accepting the return of income but while doing so ld. AO considered that income disclosed on account of debtors recorded in the diary as income chargeable to tax as per provision of section 69 of the Act and charged tax in accordance with the provisions of section 115BBE of the Act. The bench noted in the survey proceeding neither the question as to source or the details of the debtors were asked, the assessee on being questioned offered the income for the current year and the same has been accepted and not question was raised about the year of earning that income and thereby the accounted as debtors of the assessee. Since that finding is missing from the time of survey till the completion of the assessment proceeding. Without bringing anything contrary ld. AO could not charge that income chargeable to tax as per provision of section 69 of the Act. Ld. AR of the assessee relied upon the decision of the co-ordinate bench in the case of Silver Wings Life Spaces in ITA no. 511/JP/2024 wherein the bench held that : 11. As is evident f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allu Knitwers vs. DCIT, in ITA No. 21/Chd/2023, on December 1, 2023. Therein, it has been held as under :- "18. We have heard the rival contentions and purused the material available on record. The AO has invoked the deeming provisions of section 69B and brought to tax excess stock found during the course of survey which is under challenge before us. It is a settled legal proposition that there is difference between the undisclosed income and unexplained income and the deemingprovisions are attracted in respect of undisclosed income however, the condition before invoking the same is that the assessee has either failed to explain the nature and source of such income or the AO doesn't get satisfied with the explanation so offered by him. 19. In particular, for the deeming provisions of section 69B to be attracted in the instant case, there has to be a finding that the assessee has made investments in the stock during the financial year and such investments are not fully recorded in the books of accounts so maintained by the assessee, and the assessee offers no explanation about the nature and source of the investments or the explanation so offered is not found satisfactory in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee recorded during the course of survey holistically, and other documents and findings of the survey team which are very much part of the records. Further, in the surrender letter dated 30/08/2018, the assessee has stated that during the course of survey operations, certain discrepancy out of excess stock of Rs 50 lacs has been found and to purchase piece of mind and to avoid litigation, they offer additional business income of Rs 50 lacs out of excess stock found out of their normal business income for the current financial year 2018-19 over and above normal business income. We therefore find that the nature and source of such unaccounted stock is nothing but arising out of assessee's business operations. 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 conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independently. Once this is so then what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset. 13. Thus in a case where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should thus be treated as business income. 23. In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the income of Rs 50 lacs surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69B of the Act and the same has to be assessed to tax under the head "business income". In absence of deeming provisions, the question of application of section 115BBE doesn't arise and normal tax rate shall apply. The AO is thus directed to assess the income of Rs 50 lacs under the head "Income from Business/profession" and apply the normal rate of tax. In the result, the appeal of the assessee is allowed." 13. For the foregoing reasons and in view of the findings recorded by the co- ordinate Bench, the amounts surrendered by the assessee at the time of survey could not be subjected to tax under the deeming provisions of section 69 & 69A of the Act. When the source and nature of income had already been considered and accepted, the subject amounts were required ..... X X X X Extracts X X X X X X X X Extracts X X X X
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