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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & DR. MANISH BORAD, HON’BLE
आदेश /O R D E R
PER DR. MANISH BORAD, ACCOUNTANT MEMBER:
These two appeals filed by different assessees are directed against the order passed by the Commissioner of Income Tax (Appeals)-18, Chennai, dated 24.11.2022 and
:-2-: ITA. No: 1011 & 1012/Chny/2022 pertains to assessment year 2021-22 and the assessment order passed by the ACIT u/s. 143(3) r.w.s. 153A of the Act dated 02.03.2022 & 01.03.2022, respectively.
Since, the facts are identical and issues are common in both the appeals, for the sake of convenience, and at the request of both the parties these appeals are heard together and are being disposed off by this consolidated order.
Common grounds of appeals raised by all the assessee(s) reads as follows: “ (i) The order of the Assessing Officer/CIT(A) is erroneous, is contrary to law and opposed to the facts and circumstances of the case and principles of natural justice. No Opportunity to Explain Commission Receipts: (ii) The Learned AO/CIT(A) ought to have examined the details pertaining to the commission receipts before disallowing the same. (iii) The Learned AO/CIT(A) has not provided any opportunity and has merely made the addition without issuing a show-cause notice or a 2° hearing, (iv) The Learned CIT(A) has also failed to adjudicate grounds raised in the Appeal. Cash already Recorded in Books - Addition_uls 69A Bad In Law: (v) Without Prejudice to the above, the Learned AO/CIT(A) should have noted that the Appellant has fully recorded the commission receipts earned in the books of accounts and has also offered the same to tax.
:-3-: ITA. No: 1011 & 1012/Chny/2022 (vi) The Learned AO/CIT(A) failed to note that addition u/s 69A can only be made when Cash/Assets are not recorded in the books of accounts. (vii) The Order of Learned AO/CIT(A) is opposed to the very basis of Section 69A, which is meant only for Unexplained Assets not recorded in the Books of Accounts. Cash Of Family Members Living In The Same Residence Not Considered - Only Excess Cash to be Added (viii) Without prejudice to the above, the Learned AO/CIT(A) has failed to consider that the Appellant lives in a joint-family and all residents have kept their cash in safekeeping in the same house. (ix) The Learned AO/CIT(A) ignored the submission of the Appellant presented during the course of search itself where the cash in hand details of other residents of the house were furnished along with the cash recorded in their books of account of Rs.10, 14,084/-. (x) The Learned AO/CIT(A) ought to have noted that addition can be made only to the extent of excess cash not recorded in the books of accounts of the Appellant which exclusively belongs to him. Addition of cash of other relatives is not allowed. (xi) Any other ground that may be raised at the time of personal hearing.”
Brief facts of the case as culled out from the records are that both the assessee(s) namely Shri. Gautham Chand Jain and Shri. Sumermal Kanthilal Jain, are individuals and were subjected to search proceedings u/s. 132 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) on 31.03.2021, along with other family members, which were carried out at their residence and office premises. During the course of
:-4-: ITA. No: 1011 & 1012/Chny/2022 search, cash was found and vide letter dated 04.05.2021, Mr. Kanthilal Jain submitted that the cash of Rs. 85 lakhs seized on 31.03.2021 was not accounted in the books of accounts and the same is undisclosed income, which is now offered to tax. It was also stated that the alleged excess cash is on account of commission income from various activities. Thereafter, proceedings u/s. 153A of the Act initiated and notices was duly served upon the assessee(s). In compliance to notice, return of income filed for AY 2021-22 and the assessee(s) disclosed Rs. 85 lakhs (Rs. 35 lakhs of Shri. Gautham Chand Jain and Rs. 50 lakhs of Shri. Sumermal Kanthilal Jain), as income from other source. During the assessment proceedings, the ld. AO asked the assessee(s) to submit detailed clarification with supporting document to explain the income from other source of Rs. 85 lakhs, claimed to have been earned from commission income. However, both the assessee(s) failed to explain the source and as a result of which the ld. AO treated the income of Rs. 85 lakhs as unexplained income u/s. 69A of the Act in the respective hands of the assessee(s) which were subjected to tax as per provisions of section 115BBE of the Act.
:-5-: ITA. No: 1011 & 1012/Chny/2022 4. Aggrieved, assessee(s) preferred appeal before the CIT(A), challenging the action of the ld. AO stating that the search was carried out on the last day of financial year. The excess cash accepted to be a commission income and therefore, it should not have been assessed as income u/s. 69A of the Act. An alternate argument was also taken that the assessee lives in a joint family, where there are 17 income tax assessees and the cash seized during the search belongs to all the family members. The reference was also made to the names of 17 family members and cash recorded in their books of accounts. However, submission made by the assessee did not satisfy the ld. CIT(A) and he observed that the assessee has miserably failed to furnish the details of the commission income, if any earned during the year and the activity undertaken by him to earn such income and in absence of such details, the ld. AO has rightly held it to be unaccounted cash u/s. 69A of the Act. In so far as, alternate plea of the assessee that the cash belongs to various family members, ld. CIT(A) did not touch upon this issue, since the assessee(s) sumoto has offered the income in the return filed in compliance to notice u/s. 153A of the Act.
:-6-: ITA. No: 1011 & 1012/Chny/2022 5. On the other hand ld. Departmental Representative vehemently argued supporting the findings of both the lower authorities.
We have heard the rival contentions and perused the records placed before us. We observe that in the course of search carried out at the office and residential premises of various family members including two assessee’s in appeal before us namely Shri. Gautham Chand Jain and Shri. Sumermal Kanthilal Jain, was unaccounted cash at Rs. 85 lakhs was seized by the Income Tax authorities. Further, during the course of search itself, Mr. Kanthilal Jain accepted that the excess cash belongs to him and his brother, which is earned from commission income from various activities and they accepted to pay the tax on the excess cash found. Further, on 04.05.2021 Mr. Kanthilal Jain, submitted that alleged cash seized on 31.03.2021 was not accounted in the books of accounts and is an undisclosed income. Thereafter, both the assessees Shri. Goutham Chand Jain and Shri. Sumermal Kanthilal Jain, offered the income of Rs. 35 lakhs and Rs. 50 lakhs, respectively in their return of income for AY 2021-22 as “income from other source”. Since, during in the
:-7-: ITA. No: 1011 & 1012/Chny/2022 course of assessment proceedings, assessee(s) failed to explain source of alleged income from other source, ld. AO treated it as an unexplained income u/s. 69A of the Act, which is liable to be taxed u/s. 115BBE of the Act. Further, ld. CIT(A) confirmed the action of ld. AO.
Before us, ld. Counsel for the assessee made three fold contentions, firstly stating that no opportunity was granted to explain commission receipts. Second fold of contention that since the search was conducted on the last day of the financial year and return of income was not filed, the assessee during the course of search itself has accepted that it as earned commission income and the alleged cash is a commission income earned from carrying out various activities. Further, it is contended that since the source for alleged unaccounted cash is commission income, provisions of section 69A of the Act ought not to have been invoked. The third fold of contention is that the assessee lives in a joint family, which includes 17 persons who are assessed to tax. The excess cash belongs to various family members and it was not related only to Shri. Goutham Chand Jain and Shri. Sumermal Kanthilal Jain. He also submitted that ld. CIT(A) has not adjudicated
:-8-: ITA. No: 1011 & 1012/Chny/2022 the issue even though complete details were filed including cash in hand available with some family members.
So far as, first fold of contention that no opportunity was granted by ld. CIT(A), we fail to find any merit as sufficient opportunity was given by both the lower authorities.
So far as, second fold of contention is concerned that ld. AO erred in treating the income from other source as unexplained income u/s. 69A of the Act and proceeding ahead to tax the alleged income u/s. 115BBE of the Act, we will first go through the provisions of section 69A and section 115BBE of the Act for the sake of examining the instant case.
Section 69A of the Act: Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the 4 Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.] Section 115BE of the Act: (1) Where the total income of an assessee,—
:-9-: ITA. No: 1011 & 1012/Chny/2022 (a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or (b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of— (i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) and clause (b) of sub-section (1).
Now in order to bring the assessee under the net of section 115BBE of the Act, it has to be examined that whether ld. AO was justified in invoking provisions of section 69A of the Act which refers to unexplained money. Now, from the perusal of above provisions, we note that the assessee(s) were found to be owner of excess cash and it was accepted by the assessee(s), that has not been recorded in the books of accounts and secondly, the assessee(s) offered no explanation about the nature and source of alleged cash or the explanation offered by them was not found to be satisfactory in the opinion of the Assessing Officer. Now, reverting to the facts before us,
:-10-: ITA. No: 1011 & 1012/Chny/2022 we notice that excess cash of Rs. 85 lakhs was found and it was accepted by Shri. Sumermal Kanthilal Jain, that the said sum is undisclosed income which is earned from commission from various activities. So, there is an express acceptance by both the assessees before us that Rs. 85 lakhs is undisclosed income, but the source of the same is from commission income. Now, a step further we notice that the assessee in compliance of notice u/s. 153A of the Act has filed return of income and included the said income i.e., Rs. 50 lakhs in the hands of Shri. Sumermal Kanthilal Jain and Rs. 35 lakhs in the hands of Shri. Goutham Chand Jain, showing it under the head income from other source. Admittedly, assessee has not shown it as business income, but as income from other source. Now, even if this is shown as income from other source, ld. AO is within his jurisdiction to call for the source of said income, because, the assessee in order to avoid from falling under provisions of section 69A of the Act is bound to explain the source of such income which was admitted to be not recorded in the books and was expressly conveyed as undisclosed income. Even at that stage, assessee had all fair chances to explain the source of said commission income. Assessee(s) were required to furnish documentary evidence in support of
:-11-: ITA. No: 1011 & 1012/Chny/2022 its claim that it had earned commission income and also to show that what was the activity carried out by them by which they earned commission income. Though, they may not have filed contracts or agreement for earning such income, but basic details are must that commission income was received from which parties and what was the basis of calculating the commission income and also what was the activity undertaken by the assessee.
It is not in dispute that at any stage i.e., before the Assessing Officer, before the ld. CIT(A) nor even before us, there is no iota of evidence filed by the assessee to explain source of said commission income. There is a complete silence on this issue. Only by saying that the alleged unaccounted cash is commission income will not serve the purpose in this case. The assessee in order to not to fall under provisions of section 69A of the Act has to explain the source of said income to the satisfaction of the Assessing Officer, but the assessee has not filed any detail, what to talk about the satisfaction of the Assessing Officer. In our considered view and under the given facts and circumstances of the case, the alleged income of Rs. 85 lakhs i.e., Rs. 50 lakhs in the hands of Shri.
:-12-: ITA. No: 1011 & 1012/Chny/2022 Sumermal Kanthilal Jain and Rs. 35 lakhs in the hands of Shri. Goutham Chand Jain, shown under the head income from other source has rightly being treated by both lower authorities as unexplained money u/s. 69A of the Act. Since, we have held that the alleged income is an income u/s. 69A of the Act, then automatically provisions of section 115BBE of the Act will be invoked and therefore, grounds raised on this issue are decided against the assessee.
As far as third fold of contention that the alleged cash belongs to the income tax assessee family members living in the same residence as a joint family, we fail to find any merit in this ground. The situation of the assessee is like sailing on two boats which is always very risky and thus, never advisable. Though, during the course of survey, assessee has stated both the reasons but then the assessee(s) should have stick to one reason. If they had taken the route that the cash belongs to all the family members, then those details has to be filed in the respective income tax returns of all those assessees. However, it seems that assessee(s) may have thought that it is not advisable to include all other family members in this search proceedings, on this issue, therefore
:-13-: ITA. No: 1011 & 1012/Chny/2022 Goutham Chand Jain along with Shri. Kanthilal Jain unanimously decided to offer it as undisclosed income at Rs. 35 lakhs and Rs. 50 lakhs respectively. Once they stated on oath during the search proceedings, they duly complied it and offered it as income from other source in their return of income and paid taxes and have expressly conveyed as their own income under the head income from other source, the alternate plea taken at this stage cannot be entertained. We therefore, fail to find any merit in the third fold of contention raised by the assessee(s) in the instant appeals.
We therefore, under the given facts and circumstances of the case are inclined to hold that ld. CIT(A) has rightly held the income of Rs. 35 lakhs and Rs. 50 lakhs as unexplained income u/s. 69A of the Act in the hands of assessee(s) namely Shri. Gautham Chand Jain and Shri. Sumermal Kanthilal Jain, and has rightly sustained the action of ld. AO invoking the provisions of section 115BBE of the Act, since the assessee has miserably failed to explain the source of alleged commission income. Thus, no interference is called for in the finding of ld. CIT(A) and all the grounds of appeals raised by both the assessee(s) in the instant appeals are dismissed.
:-14-: ITA. No: 1011 & 1012/Chny/2022
In the result, appeals filed by both the assessees in ITA No. 1011 & 1012/Chny/2022 are dismissed. Order pronounced in the court on 19th April, 2023 at Chennai. Sd/- Sd/- (वी दुगा� राव) (मनीष बोराड) (V. DURGA RAO) (MANISH BORAD) �ाियकसद�/Judicial Member लेखासद�/Accountant Member चे�ई/Chennai, �दनांक/Dated: 19th April, 2023 JPV आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु�/CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF