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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Shri R.K. Panda, Vice- & Shri K. Narasimha Chary
आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Shri R.K. Panda, Vice-President AND Shri K. Narasimha Chary, Judicial Member Assessment Year: 2019-20 Shri Mohd. Mujeeb UR Vs. ACIT, Rahman, Hyderabad Central Circle 2(2) PAN:AAJPU8580G Hyderabad (Appellant) (Respondent) Assessee by: Shri P. Murali Mohan Rao, CA Revenue by: Smt. TH Vijaya Lakshmi, CIT (DR) Date of hearing: 23/08/2023 Date of pronouncement: 19/10/2023 ORDER
Per R.K. Panda, Vice-President
This appeal filed by the assessee is directed against the order dated 27/06/2022 of the learned CIT (A)-12, Hyderabad relating to A.Y.2019-20.
Although a number of grounds have been raised by the assessee, however, these all relate to the order of the learned CIT (A) in confirming the action of the Assessing Officer in taxing the amount of Rs.70.00 lakhs admitted as additional income in the return of income by invoking the provisions of section 69A r.w.s. 115BBE of the I.T. Act.
Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 31.3.2019 admitting total income of Rs.1,04,30,240/-. A search & seizure operation u/s 132 of the Act was conducted in the Red Rose Group of cases on 12.07.2018 during which the case of the assessee was also covered. Since this being the A.Y relevant to the search year, notice u/s 143(2) dated 9.1.2020 was issued and served on the assessee. Subsequently, notice u/s 142(1) was also issued calling for certain information in response to which the assessee filed the requisite information.
3.1 The Assessing Officer noted that during the course of search at the residence of Shri Mujeeb UR Rahman on 12.07.2018 cash of Rs.70,30,000/- was found. Since the assessee could not explain the source of cash so found, the same was admitted as additional income over and above his regular income for the financial year 2018-19 relevant to A.Y 2019-20. Since the assessee had admitted the additional income of Rs.70.00 lakhs and could not explain the source of the same, the Assessing Officer brought the same to tax u/s 69A r.w.s. 115BBE.
Before the learned CIT (A), the assessee challenged the action of the Assessing Officer in invoking the provisions of section 69A r.w.s. 115BBE to the additional income of Rs.70.00 lakhs declared in the return of income. It was argued that the assessee in the return of income has declared the same as current year’s business income and the provisions of section 68/69/69A/ 69B/69C or 69D r.w.s. 115BBE are not applicable.
4.1 However, the learned CIT (A) was also not satisfied with the arguments advanced by the assessee and upheld the Page 2 of 12 action of the Assessing Officer in taxing the cash found @ 60% u/s 115BBE of the I.T. Act. The relevant para of his order reads as under:
Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal.
The learned Counsel for the assessee strongly challenged the order of the learned CIT(A) in confirming the action of the Assessing Officer in invoking the provisions of section 69A r.w.s. 115BBE to the additional income declared at Rs.70.00 lakhs. He submitted that the search in the instant case took place on 12.07.2018 and the accounting year had not completed which completed on 31.3.2019. Further, the assessee had admitted the additional income of Rs.70.00 lakhs under the head “income from business” which is not controverted by the Revenue. Under these circumstances, invoking the provisions of section 69A r.w.s. 115BBE is not justified.
Referring to the provisions of section 69A he drew the attention of the Bench to the same which reads as under: “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 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.”
7.1 He submitted that in the instant case, the assessee had declared the same amount of Rs.70.00 lakhs in the return of income as business income. Since the assessee is engaged in the business of the real estate and the assessee has offered his explanation about the nature and source of earning of that income of Rs.70.00 lakhs, therefore, invoking the provisions of section 69A r.w.s. 115BBE is not justified. Referring to the decision of the Coordinate Bench of the Tribunal in the case of ACIT vs. Devender Rao Gorukanti in dated 31.5.2023 for the A.Y 2021-22, he submitted that under identical circumstances, the Tribunal had upheld the order of the learned CIT (A) directing the Assessing Officer to tax such amount under normal provisions of the Act and not u/s 69A r.w.s. 115BBE.
The learned DR, on the other hand, heavily relied on the order of the Assessing Officer and the learned CIT (A). She submitted that when the assessee could not explain the cash of Rs.70,30,000/- found at the time of search, he offered the same amount to tax as additional income and therefore, the learned CIT (A) was fully justified in upholding the action of the Assessing Officer in bringing to tax the amount of Rs.70.00 lakhs u/s 69A r.w.s. 115BBE.
We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find a search & seizure operation u/s 132 of the I.T. Act was conducted in Red Rose Group of cases on 12.7.2018 and the case of the assessee was also covered on the same date. During the course of search at the residence of the assessee cash of Rs.70,30,000/- was found. Since the assessee could not explain the source of cash so found, the same was offered as additional income over and above his regular income for the financial year 2018-19 relevant to A.Y 2019-20 and the assessee admitted the amount of Rs.70.00 lakhs as additional income in the return of income filed. The Assessing Officer taxed the additional income of Rs.70.00 lakhs by invoking the provisions of section 115BBE Page 6 of 12 treating the additional income admitted as in the nature of income contemplated u/s 69A of the I.T. Act. We find the learned CIT (A) upheld the action of the Assessing Officer the reasons of which are already reproduced in the preceding paragraph. It is the submission of the learned Counsel for the assessee that since the assessee is engaged in real estate business and the accounting year had not ended on 12.07.2018, the amount of Rs.70.00 lakhs found on the date of search was from business income which the assessee has also declared in the return of income as “business income of the current year” and there cannot be any other source for the assessee.
9.1 We find under somewhat similar circumstances, the Coordinate Bench of the Tribunal in the case of ACIT vs. Devender Rao Gorukanti (Supra) has observed as under: “12. We have heard the rival arguments made by both the sides, perused the orders of the AO and the ld.CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case made addition of Rs. 5,08,98,100/- u/s.69C r.w.s. 115BBE on the ground that certain loose sheets were found and seized during the course of search operation conducted in the case of Yashoda group on 22.12.2022 which represent cash receipts/payments of Rs. 5,08,98,100/- and the assessee could not explain the source of the above expenses. We find the ld.CIT(A) deleted the addition made by the AO, the reasons of which have already been reproduced in the preceding paragraph. We do not find any infirmity in the order of the ld.CIT(A) on this issue. We find the AO in the instant case at para 3.4 of the order has mentioned that Yashoda group, apart from providing health care services, has invested in real-estate through number of legal 14 Devender Rao Gorukanti entities who are regularly filing returns of income. Further, the assessee during the course of search proceedings, in his statement recorded u/s. 132(4) has stated that he has earned business income from real-estate. We find Shri Bommanagiri Jaipal, Shri Circoori Prabhakar and Shri Srinivas Telugu have filed their affidavits individually before the AO stating that the assessee Shri G. Devender Rao is into real-estate business since past 10 years and was involved in the real- estate settlements deals for purchase and sale of lands situated at Velimela, Vikrabad, Sangaraddy etc. We find the AO thereafter, has not conducted any further enquiry to disprove the various evidences filed by the assessee during the course of assessment proceedings as well as before the DDIT(Inv.). Further, the assessee has paid advance tax thereon prior to the date of search. Therefore, under these circumstances, once the assessee has proved the initial burden that he is engaged into real-estate business and has earned income from such real-estate, therefore, without making any further enquiry to disprove the various evidences filed before him, the AO could not have treated the amount of Rs. 5,08,98,100/- as unexplained expenditure. In our opinion, the provisions of section 115BBE are applicable when the source of income is not disclosed or source of expenditure is not disclosed. However, in the instant case, the assessee has disclosed the income after considering the expenditure and had paid advance tax thereon prior to the search. No new fact has surfaced during the course of search since the assessee has paid advance tax on such business activity prior to the date of search. Therefore, we find merit in the argument of ld.counsel for the assessee that the real-estate business income does not fall in the ambit of sections 68 to 69D and therefore, the provisions of section 115BBE cannot be invoked. The various decisions relied on by the ld.counsel for the assessee also supports his case.
13. We find the Hon’ble Madras High Court in the case of A.J.Ramesh Kumar (supra) at para 7 of the order has observed as under:- “7. Coming to the substantial questions of law relating to admissibility, relevancy and evidentiary value of statement obtained under section 132(4) of the Income-tax Act, 1961 this court is of the view that the same are no longer res integra. In the decision of the Supreme Court in the case of Bannalal Jat Constructions Pvt.Ltd. v. Asst.CIT reported in [2019] 413 ITR (St.) 322 (SC) ; [2019] 106 taxmann.com 128 (SC), after referring to the judgment of Pullangode Rubber Proudce co.Ltd. v. State of Kerala reported in [1973] 91 ITR 18 (SC), the legal position in relation to a statemetn under section 132(4) of the Income-tax Act, 1961 was set out as under:- (a) An admission is an extremely important piece of evidence though it is not conclusive. (b) A statement made voluntarily by the appellant could form the basis of assessment. (c) The mere fact that the appellant retraced the statement could not make the statement unacceptable. (d) The burden lay on the appellant to show that the admission made by him in the statement earlier at the time of survey was wrong. Such retraction, however, should be supported by a strong evidence stating that the earlier statement was recorded under dress and coercion, and this has to have certain definite evidence to come to the conclusion that indicating that there was an element of compulsion for the appellant to make such statement. (e) However, a bald assertion to this effect at much belated stage cannot be accepted. Applying the aforesaid legal proposition herein, we are of the opinion that once a statement is recorded, it is open to the Assessing Officer to rely and proceed on the basis that such statement is correct and represents the true state of affairs and the burden is on the deponent to demonstrate by letting cogent, convincing and material evidence that the statement was incorrect. Therefore, the statement made under section 132(4) of the Income tax Act, 1961 has a strong evidentiary value and is binding on a person, who makes it.
13. We find the Chandigarh Bench of the Tribunal in the case of Bhuwan Goyal (supra) while deciding an identical case at para 10 of the order has observed as under:- 10. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is not in dispute that the assessee surrendered the income of Rs. 3.64 Crores in the statement recorded under section 132(4) of the Act the said surrender was made on the basis of the entries in the pocket diary found & seized during the course of search in which certain transactions relating to the Real Estate business were noted and profit as well as commission was earned thereon. The aforesaid facts had been mentioned by the A.O. at page no. 4 of the assessment order dt. 30/12/2018 wherein copy of the show cause notice dt. 26/12/2018 has been reproduced. However, the A.O. considered only an income of Rs. 2.64 Crore earned from the Real Estate Business but did not accept Rs. 1 Crore and added the same separately under section 69 of the Act. The A.O. charged the tax @ 60% under section 115BBE of the Act. The provisions contained in the said section i.e; 115BBE of the Act read as under: 115BBE. (1) Where the total income of an assessee, - (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). From the aforesaid provisions it would be clear that the provisions of Section 115BBE (1)(a) of the Act are applicable to the income which is referred in section 68, 69, 69A, 69B, 69C or 69D reflected in the return of income furnished under section 139 of the Act. However, in the present case no such income was reflected in the return filed under section 139 of the Act rather the income was declared in the return filed under section 153A of the Act after the search. The assessee declared the income under section 132(4) of the Act and disclosed the same in the return of income filed under section 153A of the Act. The assessee explained the source of investment of Rs. 1.10 Crore in the reply to Question No. 11 which has been reproduced at page no. 8 of the impugned order by the Ld. CIT(A) and read as under: Page 9 of 12 “ Q.
11. Do you want say anything else ? Ans: yes, one agreement dated 05/04/2016 was found from residence at the time of search on 31/08/2016 which was executed by Mr. Sumit Thaper on my behalf and Sh. Hernek Singh S/o Sh. Daulat Singh for an amount of Rs. 1,10,00,000/-. Out of this amount of Rs. 10 Lacs was transferred from my bank account to Mr. Sumit Thaper which is duly accounted for (proof of this will be submitted later on) and rest of the amount has been paid in cash. The source of Rs. 1 Cr. Paid in cash are out of commission income and profit earned from real estate transaction in past. However, no documentary evidence is available with me. Hence to BUY peace of mind and to avoid litigation. I hereby voluntarily offer Commission income as well as profit earned on real estate transactions as an additional income of Rs. 1 Cr. (One Crore) over and above my normal income for the F.Y. 2016-17 relevant to A.Y. 2017-18 subject to no penal action. I hereby reiterated that these transactions were entered by me in Individual capacity and nothing to do with the company i.e. M/s A.P. Refinery Pvt. Ltd.” The said explanation given by the assessee to the Ld. CIT(A) has not been rebutted, therefore the provisions of Section 69 of the Act were not applicable as the business transactions were recorded in the books of account and the assessee either earned commission or profit on all those Real Estate transactions. The income earned from the Real Estate transactions was claimed to be utilized for making the investment in the property. In the present case it is not brought on record to substantiate that the said income was utilized by the assessee elsewhere and not in the investment of the property. Therefore, we are of the view that the A.O. was not justified in taxing the aforesaid income of Rs. 1 Crore separately particularly when nothing is brought on record to substantiate that the assessee had made separate investment different from the income earned on real estate transactions recorded in the pocket diary found & seized during the course of search. Accordingly, the impugned order passed by the Ld. CIT(A) on this issue is set aside and the A.O. is directed to tax the entire surrendered income of Rs. 3.64 at the normal rate of tax.
We find the Bangalore Bench of the Tribunal in the case of Ragavs Diagnostic & Research Centre Pvt.Ltd.(supra) while deciding an identical issue has observed as under:- 12. We will look at the provisions of section 69C which are as follows:- “69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year : Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.”
From the plain reading of the section, it is clear that when an assessee offers no explanation or the explanation offered is not satisfactory in the opinion of the AO, then the amount of such expenditure is to be taxed as income u/s. 69C of the Act. The satisfaction to be recorded by the AO should not be objective satisfaction exercised at his discretion, but a subjective satisfaction based on the facts of the case. It would then mean that justification for exercise of the power has to be found by the authority by making a subjective satisfaction on the basis of objective material and such satisfaction must be reflected in the reasons recorded in writing while exercising the power. (Vide: Dee Vee Projects Ltd. v/s. Union of India & Ors., Writ Petition No.2693/2021, dated 11.02.2022 (Bombay High Court)). In the present case, the assessee is in the business of running a diagnostic centre and the only source of income is the receipts from patients which is stated to be the source for unexplained expenditure. That being the case the AO has not brought any contrary material on record to state that the source for the expenditure was other than from business income and has formed the opinion based on conjectures and surmises. While exercising the quasi-judicial functions, the administrative authorities have to reach satisfaction on the basis of material available and not on conjectures and surmises. The test of reasonableness has to be satisfied which in our view failed in the case under consideration. Therefore, we are of the view that the additional income offered cannot be taxed u/s. 115BBE and the impugned addition is hereby deleted. Accordingly, the assessee is allowed to set off the current year loss against the additional income offered to tax as business income.
The various other decisions relied on by the ld.counsel for the assessee also support his case to the proposition that provisions of section 69C r.w.s. 115BBE are not applicable to the facts of the present case. In view of the above discussion and in view of the detailed reasoning given by the ld.CIT(A) on this issue, we do not find any infirmity in his order directing the AO to tax the amount of Rs. 5,08,98,100/- under normal provisions of the Act. Accordingly, the same is upheld and the grounds raised by the revenue are dismissed.”
Since the assessee in the instant case has declared the amount of Rs.70,00,000/- as his business income and the books of account were not closed on the date of search i.e. on 12.07.2018 and the assessee is engaged in business, therefore, following the decision of the Coordinate Bench of the Tribunal cited (Supra) we hold that the additional income of Rs.70,00,000/- cannot be taxed u/s 115BBE. The order of the learned CIT (A) is accordingly set aside and the grounds raised by the ass are accordingly allowed.
In the result, the appeal of the assessee is allowed.