ASHOKKUMAR KESHERCHAND PANDE,AURANGABAD vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, AURANGABAD

This is an appeal filed by the assessee directed against the order of ld. Commissioner of Income Tax (Appeals)-12, Pune [‘the CIT(A)’] dated 03.02.2023 for the assessment year 2019-20.

Briefly, the facts of the case are that the appellant is an individual deriving income under the head “business”. It is engaged in the business of dealing in agricultural equipments i.e. seeds and pesticides in the name and style of “M/s. Chetan Sheti Sahitya”. The appellant had filed the Return of Income for the assessment year 2019-20 on 17.10.2019 declaring total income of Rs.1,44,78,720/-. The survey operations under the provisions of section 133A of the Income Tax Act, 1961 (‘the Act’) were conducted on 06.03.2019 at the business premises of the assessee. During the course of such survey operations, on physical verification of the stock, the value of stock-in-trade was found of Rs.1,65,87,189/- as against the value shown in the Trading Account of Rs.1,83,75,152/-. The difference in the value of stock in the form of deficit of stock of Rs.17,87,963/- was agreed to offer to tax and the same was offered to tax by crediting the said sum to the Trading Account. Similarly, it was found that the assessee had incurred expenditure in construction of the property i.e. “Pande Square” of Rs.32,58,608/-, the source of same was not explained and it was agreed to offer to tax. In the return of income, the appellant had offered this income by crediting the same to the Profit & Loss Account. The Assessing Officer, while accepting the income 115BBE of the Act. 3. Being aggrieved by the above order of assessment, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the action of the Assessing Officer placing reliance on the decision of the Hon’ble Madras High Court in the case of M/s. SVS Oils Mills vs. ACIT, 113 taxmann.com 388 (Madras). 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. The ld. AR submits that the income offered during the course of survey proceedings was also offered to tax by crediting the same to the Trading Account and Profit & Loss Account respectively. He submits that the Assessing Officer assessed the said income under the head “Income from business”. Therefore, he submits that having assessed the additional income under the head “Income from business”, he cannot subject such income to tax u/s 115BBE of the Act. He also placed reliance on the decision of the Hon’ble Rajasthan High Court in the case of CIT vs. Bajargan Traders, 86 taxmann.com 295 (Rajasthan).

On the other hand, ld. Sr. DR placed reliance on the orders of the lower authorities.

We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the applicability of provisions of section 115BBE of the Act in respect of income declared during the course of survey proceedings and offered to tax in the return of income. There is no dispute about the amount of addition to be made nor was there any dispute regarding the head of income under which the same was assessed to tax. The dispute is only with regard to the applicability of provisions of section 115BBE of the Act. Admittedly, the income offered during the course of survey proceedings was credited to Profit & Loss Account and the additional income offered on account of deficit in the physical stock was credited to Trading Account. The income offered on account of alleged expenditure incurred on construction of the commercial building was offered to tax by crediting the same amount to the Profit & Loss Account. Thus, the income was offered Assessing Officer also assessed the same under the head “Income from business”. Therefore, the presumption is to be drawn that the additional income was derived from the business. Thus, it cannot be said that the source for the additional income remain unexplained and, therefore, the provisions of section 115BBE have no application to the present case. The ratio of the decision of the Hon’ble Rajasthan High Court in the case of Bajargan Traders (supra) is squarely applicable to the facts of the present case. The reliance placed by the ld. CIT(A) on the decision of the Hon’ble Madras High Court in the case of M/s. SVS Oils Mills (supra) have no application to the facts of the present case, inasmuch as, in the said case, no explanation as to the source of excess stock was offered, whereas, in the present case, it is undisputed fact that the additional income was derived from business. Therefore, the orders of the Assessing Officer as well as the ld. CIT(A) are reversed and direct the Assessing Officer not to tax the additional income under the provisions of section 115BBE of the Act. The Assessing Officer shall tax the additional income under the normal rate of income tax.