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Income Tax Appellate Tribunal, “DB” BENCH, JODHPUR
(A.Y: 2014-15) Shri Gopal Soni Prop Vs. The ACIT, Circle – 1 Durga Silver Home Bikaner. katla Chowk Nokha Rajasthan. Bikaner-334803, Rajasthan. PAN/GIR No. : AEMPS5097M Appellant .. Respondent Assessee by : None Revenue by : Ms. Nidhi Nair, JCIT -DR Date of Hearing 10.08.2023 Date of Pronouncement 11.08.2023 आदेश / O R D E R
PER PAVAN KUMAR GADALE JM:
The assessee has filed the appeal against the order of the Commissioner of Income Tax (Appeals), Bikaner passed u/s 154 and 250 of the Income Tax Act, 1961. The assessee has raised the following grounds of appeal.
1. On the fact & circumstances of the case LdCIT (A) has erred in confirming the order of the AO t u/s 154 of the IT Act. As it was not a fit case to frame order U/S 154 of the IT Act 1961.
Shri Gopal Soni, Bikaner - 2 -
On The fact and circumstances of the case Ld. CIT(A) has erred in Confirming the order of Id. AO because charging of tax @30% u/s 115BBE was not applicable in this case. He has erred in to do so.
3. On the fact & circumstances of the case Ld.AO has erred in charging Interest u/s 234C it should be deleted. 4. That the appellant craves leave to add, alter, amend, substitute modify or delete any of the grounds here in above taken on or before the hearing. 5. The appellant, therefore, most respectfully prays that its appeal may kindly be allowed by deleting abovementioned additions/disallowances and cancelling the impugned order. 2. The brief facts of the case are that the assessee is engaged in the business and there was a survey operation u/s 133A of the Act was carried out at the premises of the assessee on 25.02.2014, the survey team found certain discrepancies in the books of accounts of the assessee and incriminating documents were found and the assessee has surrendered a sum of Rs. 50 lakhs as undisclosed income for the year under consideration. The assessee has filed the return of income for the A.Y 2014-15 including the additional income of Rs. 50 lakhs surrendered post survey operations and the return of income was processed u/s 143(1) of the Act. Subsequently the AO has issued notice u/s 154 of the Act stating that the income which was surrendered in the course of survey attract the provisions of Sec. 69 of the Act and as per the provisions of Sec. 115BBE of the Act tax should be calculated at 30% and whereas no explanations were filed by the assessee and the A.O made detailed discussions at Para 2,
Shri Gopal Soni, Bikaner - 3 - and observed that the surrendered income shall be taxed as per the provisions of section 115BBE of the Act and passed the order u/s 154 of the Act dated 12.01.2018
Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the AO but finally confirmed the action of the AO and dismissed the assessee appeal. Aggrieved by the order the assessee has filed an appeal before the Hon’ble Tribunal.
4. At the time of hearing none appeared on behalf of the assesseee. The Ld. DR submitted that the CIT(A) order is correct in law as the money surrendered in the course of survey has to be taxed as per the provisions u/s 115BEE of the Act and relied on the CIT(A) order.
We heard the Ld. DR submissions and perused the material on record. The sole disputed issue as envisaged by the Ld. AR in the grounds of appeal that the CIT(A) erred in sustaining the order of the AO in charging tax at 30% u/s 115BBE in respect of income surrendered in the return of income filed in the post survey operations. Further on considering the written submissions filed by the assessee, it was brought to the knowledge of the Bench on the similar and identical issue for the A.Y 2014-15 in the assessee’s family cases, the Hon’ble Tribunal has considered
Shri Gopal Soni, Bikaner - 4 - these facts and granted relief. We considered it appropriate to refer to the decision of the Hon’ble Tribunal in the case Shiv Ratan Soni and Others in 402 & 405/Jodh/2019 dated 23.11.2021 A.Y 2014-15 where the Hon’ble Tribunal has observed at page 3 Para 7 to 14 of the order as under:
7. The main grievance of the assessee in the shape of ground No. 1 relates to challenging the order of the Id. CIT(A) in confirming the order of the A.O. in framing order u/s 154 of the Act. In this regard, the Id AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the Id. CIT(A) and also relied on the written submissions filed before the Bench and the same is reproduced below: 5 "Ld. AO has grossly erred in passing the order u/s 154 and levying 30% on surrender income u/s 115BBE. The said order u/s154 was deserve to be deleted because order u/s 154 was passed few days after the order of 143(1) it was not a mistake of record. It is well settled law that any mistake apparent from record may rectify b the order u/s 154. In the present case there was no mistake which authorize the AO to reassess the income u/s 154. The said mistake is not of record That was a debatable matter so no order this section should be made. The power conferred by provisions of Sec. 154/155 is a power to correct mistakes and not a power of review U/S 154, an A.O. cannot be permitted to revise or review his earlier order, there being no change in facts or circumstances and when entire material is before him during the course of original proceedings whether completed u/s 143(3) or u/s 250. It has been held by Hon'ble Apex court in case of CIT Vs. Hero Cycles Pvt. Ltd. (1997) 228 ITR 463 (SC) that rectification is not possible, if the question is debatable. In the present case it was totally a debatable.
The mistake in question was neither specific nor apparent from the record was duly considered and found to have no merit. The principle governing the applicability of section 154 has been laid down in the Shri Gopal Soni, Bikaner - 5 - decision of the Supreme Court in the case of T. S. Balaram, Income- tax Officer v. Volkart Brothers. The Supreme Court observed that a mistake apparent on the record must be an obvious and patent mistake and not something which had to be established by a long- drawn process of reasoning on points on which there might be conceivably two opinions. A decision on a debatable point of law was not a mistake apparent from the record. Here reference may also be made to the decision of the apex court in the case of Harbans Lal Malhotra & Sons Private Ltd. v. Income- tax officer, where it was held that a question which involved interpretation of law and determination of controversial facts could not be rectified under section 154 of the Income-tax Act, 1961. 3.3Now the issue to be examined is, whether the view taken by the Assessing Officer previously and the present view are two conceivable different possible views or whether the previous view of the Assessing Officer was a view which was not possible but was only a mistake.
Section 154(1) of the Income-tax Act permits rectification of any mistake apparent from the record, by an Income Tax Authority, of any order passed by it under the provisions of the Income-tax Act. The term Shiv Ratan Soni Vs ACIT & 2 Ors: 'mistake apparent from record" is by now well understood with the help of the numerous Court decisions including the decision of the Supreme Court in the case of Balaram v. Volkart Bros., 82 ITR 50. An order passed in situation in respect of which two views are possible, cannot be said to be the case of a 'mistake apparent from the record". Such an order cannot be the subject matter of rectification.
Reliance was also placed by the Revenue on the decision of the Supreme Court in the case of M. K. Venkatachalam, ITO v. Bombay Dyeing and Manufacturing Co. Ltd., 34 ITR 143 (SC), where the Court observed that if a mistake of fact apparent from the record of the assessment order could be rectified, there was no reason why a mistake of law which was glaring and obvious could not be similarly rectified. The Court in that case observed, that though prima facie it might appear somewhat strange that an order which was good and valid when it was made should be treated as patently invalid and wrong by virtue of the retrospective operation of the amendment, such a result was necessarily involved in the legal fiction about the Shri Gopal Soni, Bikaner - 6 - retrospective operation of the amendment. Reliance was also placed by the Revenue on the decisions of the Supreme Court in case of S. A. L. Narayan Rao v. Ishwarlal Bhagwandas, 57 ITR 149, and of the Calcutta High Court in the case of Amalgamated Coal Fields Ltd. v. CIT, 116 ITR 383.
Reliance was placed on the decisions of the Calcutta High Court in case of Jiyajeerao Cotton Mills Ltd., of the Andhra Pradesh High Court in the case of Pingle Madhusudan Reddy v. CED, 156 ITR 45, and of the Punjab and Haryana High Court in the case of CIT v. Haryana State Cooperative Supply and Marketing Federation Ltd., 182 ITR 53.
He surrender it only to buy peace to cooperate with the department nothing else. There was no surrender declaration made by the appellant so all in all this is not a fit case to assess u/s 154 of the income tax act 1961. So please cancel the order and quash the order."
On the other hand, the Id. DR has vehemently supported the 8. orders of the authorities below.
Having considered the rival contentions and carefully perused the material placed on record. As per the facts of the present case, we found that there is some weight in contention of the A/RIt is a fact that applicability of rate of tax on the extra surrender income is not simple and is purely a debatable issue. On carefully consideration of the material facts, we noticed that the AO had levied 30% tax u/s 115BBE of the Act on the surrender income of Rs. 10.00 lacs for the year under consideration. In this regard, it was submitted by the Id. AR that the surrender made at the time was for purchase of peace of mind and to cooperate with the department Whereas on the merits, it was submitted that no mistake or incriminating document was found by the survey authorities as neither any difference in stock nor in cash in hand was found by the survey authority and apart from that not even a single penny was found to be invested out of books was caught our found by the Income tax authorities. It was further submitted that in the present case, no loose papers were ever found by the I.T. authorities and even no mistake was pointed out in the books of account of the assessee. It was also submitted that the Shri Gopal Soni, Bikaner - 7 - order of assessment was passed a few days before passing of order U/s 154 of the Act by the A.O. and thus apparently, there was no mistake from the record. The power conferred by provisions of Sec. 154/155 of the Act is a power to correct mistakes and not a power of review U/s 154, thus, in this way, the A.O. cannot be permitted to revise or review his earlier order, more particularly when there being no change in facts or circumstances and when entire material was before the A.O. during the course of original proceedings whether completed u/s 143(3) or u/s 250 of the Act. In this regard, the Id. AR has heavily relied upon the decision of the Hon'ble Apex court in case of CIT Vs. Hero Cycles Pvt. Ltd. (1997) 228 ITR 463 (SC). On perusal of the records, we also found that the assessee no where himself has admitted any extra surrender income rather the father of the assessee had surrendered the income to buy peace and to cooperate with the department. Thus, the assessee himself has not admitted any extra surrender income. Apart from the above, the Id. AR has specifically argued that the surrender so made by the assessee was his business income and does not attract the provisions of Section 115BBE of the Act, therefore, the tax so levied during the assessment proceedings was fair and no charge of tax at the flat rate of 30% U/s 115BBE of the Act was warranted. From the record, we also found that no incriminating documents regarding any income was recovered by the survey team which could prove that the assessee had evaded any income which fall within the ambit of Section 115BBE of the Act. The assessee has already disclosed this amount as income from business and credited in profit & loss account. In this regard, the Id. AR has relied upon the decision of Hon'ble Jurisdictional High Court in the case of Principal Commissioner of Income tax, Alwar vs. Bajrang Traders C/o Kalani & Co. C.A. Jaipur (2017 Tax Pub (DT) 4814 (Raj HC) clearly held that excess stock surrender during survey covered under the head income from business not income from other sources. The Hon'ble High Court has held as under:
Shri Gopal Soni, Bikaner - 8 - "The real issue in this case is whether the excess stock surrendered should be made as a part of business income or not and if so, assessee can claim deduction on account of payment of remuneration to partners on account u/s.40b(v). In this regard, our reference was drawn to the decision of Co- ordinate Bench in case of Shri Ramnarayan Birla (in dated 30.09.2016. In that case, the question before the coordinate Bench was "whether the CIT(A)-2, Udaipur has erred in directing the A.O. to assessee the unexplained investment surrendered by the assessee under the head income from Business" ignoring the decision of the Hon'ble Gujarat High Court in the case of Fakir Mohd. Hazi Hasan 247 ITR 290 that unaccounted income ought to be categorized under the residuary head of Income from other sources'. In respect to the said issue, the findings of the Coordinate Bench are as follows:
"We have heard the rival contentions and perused the material available on record. Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed that assessee is engaged in the business of jewellery. During the course of survey excess stock valuing Rs.77,66,887/ was found in respect of gold and jewelleryThe coordinate the Coordinate Bench in the case of Choksi Hiralal Mangnlal vs. DCIT 131, TTJ (Ahd.) 1 has held that in a cases 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 u/s 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 Shri Gopal Soni, Bikaner - 9 - satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon’ble Gujarat High Court in the case of Fakir Mohd. Jajihasan (supra) where investment in an asset 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 other 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 the excess stock was part of the stock. The revenue has not pointed out that the excess stock has any nexus with any other receipts. Therefore, we do not find any fault with the decision of the ld. CIT(A) directing the AO to treat the surrendered amount as excess stock qua the excess stock found.” 2.10. We have heard the rival contentions and perused the material available on record. During the course of survey, the assessee has surrendered an amount of Rs. 70,04,814/- towards investment in stock of rice which had not been recorded in the books of accounts. Subsequently, in the books of accounts, the assessee has incorporated this transaction by debiting the purchase account and crediting the income from undisclosed sources. In the annual accounts, the purchases of Rs. 70,04,814/- were finally reflected as part of total purchases amounting to Rs. 33,47,19,658/- in the profit and loss account and the same also found included as part of the closing stock amount to Rs. 1,94,42,569/- in the profit/loss account since the said stock of rice was not sold out. In addition to the purchase and the closing stock, the amount of RS. 70,04,814/- also found credited in the profit and loss account as income from undisclosed sources. The net effect of this double entry accounting treatment is that firstly the unrecorded
Shri Gopal Soni, Bikaner - 10 - stock of rice has been brought on the books and now forms part of the recorded stock which can be subsequently sold out and the profit/loss therefrom would be subject to tax as any other normal business transaction. Secondly, the unreco4rded investment which has gone in purchase of such unrecorded stock of rice has been recorded in the books of accounts and offered to tax by crediting the said amount in the profit and loss account. Had this investment been made out of known source, there was no necessity for assessee to credit the profit/loss account and offer the same to tax. Accordingly, we do not see any infirmity in assessee’s bringing such transaction in its books of accounts and the accounting treatment thereof so as to regularise its books of accounts. In fact, the same provides a credible base for Revenue to bring to tax subsequent profit/loss on sale of such stock of rice in future. 2.11. Having said that, the next issue that arises for consideration is whether the amount surrendered by way of investment in the unrecorded stock of rice has to be brought to tax under the head “business income” or “income from other sources”. In the present case, the assessee is dealing in sale of foodgrains, rice and oil seeds, and the excess stock which has been found during the course of survey is stock of rice. Therefore, the investment in procurement of such stock of rice is clearly identifiable and related to the regular business stock of the assessee. The decision of the Co- ordinate Bench in case of Shri Ramnarayan Birla (supra) supports the case of the assessee in this regard. Therefore, the investment in the excess stock has to be brought to tax under the head “business income” and not under the head income from other sources”. In the result, ground No. 1 of the assessee is allowed.
Thus, if we take into consideration the entirety of facts, we found that the decision in the case of PCIT Vs. Bajrang Traders (supra) is squarely applicable to the facts of the present case as the excess stock of Gawar Gum and etc. surrendered during the Shri Gopal Soni, Bikaner - 11 - course of survey can be taken as income from business and not income from other sources U/s 69 of the Act. Even otherwise, the said amount was surrendered by the father of the assessee and not by the assessee and as per the Id. AR, the said amount was surrendered only to cooperative with the department and to purchase peace of mind and in this regard, we draw strength from the decision of Coordinate Bench of ITAT Ahmedabad Bench 'C' in the case of Ashok Manilal Thakkar vs. ACIT [2005] 97 ITD 361 (AHD.) wherein the Coordinate bench had affirmed the AO's action where he did not make any addition after failure to bring on record any evidence to prove that the assessee had earned to the extent of additional income offered by him pursuant to survey operation carried out at assessee's premises. We also draw strength from the decision of the Coordinate Bench of ITAT Mumbai Bench 'D' in the case of Jain Trading Co. Vs. ITO [20071 17 SOT 574 (MUM.) wherein it was held that "whether an assessee who makes an offer of additional income during course of an enquiry by income tax authorities is not bound by his offer of additional income for all time to come, and can retract from his offer by furnishing complete details of his trading activity and his income in course of assessment proceedings, and discharge his burden. It was held in the affirmative along with the finding that in such circumstances, additional income cannot be added to income of assessee".
ITA 382/Jodh/2018 Shiv Ratan Soni Vs ACIT & 2 Ors The A.O. has not established by bringing any documentary evidence on record that the assessee had earned any additional income. Similarly issue was also decided by the Coordinate Bench of ITAT, Jodhpur in to 146/Jodh/2018 for the A.Y. 2014-15 and the Coordinate Bench while relying upon the decision of the Hon'ble Jurisdictional High Court in the case of PCIT Vs Bajrang Traders (supra) in IT appeal No. 258/2017 dated 12/09/2017 had held that where income is found to be Shri Gopal Soni, Bikaner - 12 - taxed under the head' Business and profession", there is no justification for taxing such income u/s.115BBE of the Act. Thus, in the instant case, there is no dispute that surrendered income / additional income offered by the assessee at Rs. 10,00,000/- had already been shown as business income of the assessee, therefore, there was no justification for taxing such income u/s.115BBE of the Act. Thus, considering the totality of facts and circumstances we are of the view that provision of section 154 empowers the AO to rectify mistakes, which are apparent from record. The expression "mistakes, which are apparent from record" was well explained by the Hon'ble Apex court in the case of CIT Vs. Volkart Brothers (82 ITR 50) wherein it was held that a mistake apparent of record must be obvious and patent and not something which can be established by long drawn process of reasoning on points on which there may be conceivable two opinions. A decision on a debatable issue of law is not a mistake apparent from record. The AO passed an order u/s 154 for levying tax 30% u/s 115BBE on surrender Shiv Ratan Soni Vs ACIT & 2 Ors. income and interest thereon itself a debatable question and would require verification of facts and record, which is not permissible in the proceedings u/s 154 of the Act. Matters of debatable interpretations of law can't be rectified u/s 154 as is evident from the decision in the case of CIT Vs. Krishak Bhrati Co-operative society Limited reported in 266 ITR 208 wherein the Hon'ble high court observed as under:
Interpretation of section 801 is a mater, which should be ordinarily be taken not a matter of rectification. Here the interpretation is debatable. An attempt to withdraw relief granted u/s 80 I u/s 154 was held to be invalid
Shri Gopal Soni, Bikaner - 13 - The Hon'ble Rajasthan High Court in the case of Rajasthan Financial Corporation Vs CIT- 163 ITR 278 pointed out that mistake which requires to be established by a complicated process of investigations, arguments or proof, cannot be regarded as a mistake apparent on record.
We also draw strength from the decision of the Hon'ble Delhi High Court in the case of CIT Vs Food Specialties Limited - 256 ITR 790 wherein it was observed that "One must be able to look at the sorder or the record and say, here is a mistake, If one cannot say this one and has to prove or investigate into the facts to be determined where the mistake is, It will not be a mistake apparent from the record but one arrived at by a process or reasoning. Such an error is not be rectified." Considering the entire facts and the discussion as above, we hold that on the given facts, the AO was not justified in passing rectification order u/s 154 of the Act, which is hereby quashed and the ground raised
by the assessee regarding this issue is allowed. Shiv Ratan Soni Vs ACIT &
2. Ors.
The second ground of appeal also relates to the taxability u/s 115BBE of the Act. Since the ground no1 with regard to legality of the order framed u/s 154 of the Act has been quashed by us, therefore, this ground of appeal is become infructuous and needs no adjudication.
Now we take and 405/Jodh/2019 for the A.Y. 2014-15.
In both these appeals, grounds, facts and submissions of both the parties are identical to the grounds, facts and submissions
Shri Gopal Soni, Bikaner - 14 - of both the parties of for the A.Y. 2014- 15. Therefore, our finding given in ITA No. 382/Jodh/2018 for the A.Y. 2014-15 shall apply mutatis mutandis in both these appeals also
We found that the facts of the present case are similar to the decision rendered by the Hon’ble Tribunal and we respectfully follow the ratio of the decision on this disputed issue and set aside the order of the CIT(A) and allow the grounds of appeal in favour of the assessee.
In the result the appeal filed by the assessee is allowed.
Order pronounced in the open court on 11.08.2023.