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Facts
The assessee company, engaged in gold jewelry trading, declared income for AY 2017-18 and during a survey action on March 23, 2017, admitted additional income of Rs. 6,00,000/- which was offered under the Pradhan Mantri Garib Kalyan Yojna (PMGKY). However, in its return, the assessee reduced this amount from its total income, which the Assessing Officer (AO) disagreed with.
Held
The Tribunal held that the amount declared under the PMGKY scheme is not to be included in the total income for any assessment year as per statutory provisions and CBDT circulars. The Tribunal accepted the assessee's submission that showing this amount in the computation of income was an inadvertent mistake.
Key Issues
Whether income declared under the PMGKY scheme should be included in the total income of the assessee for the relevant assessment year, or if it was an inadvertent mistake in computation.
Sections Cited
133A, 131, 254(1), 250, 199-I, 199C
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(AY: 2017-18) Lajayems Jewellers Private Limited, Assistant Commissioner of G-28, Simla House, Nepean Sea Vs. Income Tax, Circle 5 (2) (2), Road, Mumbai - 400036 Mumbai - 400020. PAN – AAACL 1458 J (Appellant) (Respondent) Present for: Assessee by : Ms. Dinkle H. Hariya - Advocate Revenue by : Shri Bhagirath Ramawat, SR. D.R. Date of institution of appeal : 10.01.2025 Date of Hearing : 17.12.2025 Date of Pronouncement : 23..12.2025 Order under section 254(1) of Income Tax Act Per : Pawan Singh, Judicial Member: 1. This appeal by the Assessee is directed against the order of CIT (A) dated 13.12.2024 vide Assessment Year 2017-18. The Assessee has raised following grounds of appeal:-
I. “a) The learned Additional/Joint Commissioner of Income-tax (Appeals) erred in confirming an addition of Rs. 6,00,000/- made by the Assessing Officer on the ground that the amount of income declared (and credited to Profit & Loss Account) under the Pradhan Mantri Garib Kalyan Yojna 2016 cannot reduced while computing the total income. b) The Appellant submits that on the facts and circumstances of the case as well as in the law, the said addition is illegal and unwarranted and therefore, the same is required to be deleted. c) The Appellant further submits that Additional/Joint Commissioner of Income Tax (Appeals), on the facts and circumstances of the case, ought to have directed to delete the said addition. II. The Appellant prays for appropriate relief.
Brief facts of the case are that the Assessee is a company, engaged in the business of trading of Gold Jewelry. Assessee filed its return of income for AY 2017-18 on 20.10.2017 declaring income of Rs.2,58,760/-. Case was selected for scrutiny. During the assessment, the Assessing Officer (AO) noted that a survey action under Section 133A was carried out on Assessee on 23.03.2017. During the survey action the Assessee admitted additional income of Rs. 6,00,000/- and agreed to offer under Pradhan Mantri Garib Kalyan Yojna (PMGKY). The AO noted that while filing return of income, the Assessee reduced the amount of Rs.6,00,000/- from total income. The AO was of the view that the income declared under PMGKY during the survey action was not to be reduced from total income. The AO issued show cause notice as to why it should not be added in the income of assessee. The AO further recorded that show cause notice was given to the Assessee but there was no compliance. The AO held that the Assessee has no material to explain and added Rs.6,00,000/- in the income Assessee.
Aggrieved by the addition in the assessment order, the Assessee filed appeal before ld CIT(A). On appeal before the Ld. CIT (A) the Assessee filed detailed statement of fact. The such statement of facts are recorded in para 2 of order of CIT (A). In the statement of fact, the Assessee stated that during relevant financial year, the Assessee was in the business of diamond and gold jewelry. The financial year includes demonetization period. During demonetization, the Assessee deposited cash in its bank accounts. On 23.03.2017 a survey action under Section 133A was carried out. During survey action, the Assessee was asked to substantiate the cash deposit. Statement of Rita Mehta, Director of assessee was recorded under Section 131. In the statement she stated that cash deposit was out of sale proceeds of its goods. The Assessee in order to buy mental peace and avoid litigation, agreed to offer income of Rs. 6,00,000/-under the provision of PMGKY Scheme-2016. The Assessee also referred the relevant part of statement of Rita Mehta. The income declared by the PMGKY was forming part of sale of Assessee. In the audited statement in Note-25, the Assessee clearly mentioned that income of Rs. 6,00,000/- out of cash deposit in bank is from sale of products offered in PMGKY and paid tax of Rs.2,99,400/- in accordance with the scheme. In audited statement the Assessee calculated total profit before tax on Rs.9,19,903/-. After reducing the income declared in PMGKY, the remaining amount was offered for tax. The Assessee has not received any notice during assessment. Neither any notice through e-mail or nor any intimation was received. The Assessee came to know about the Assessment order only on verification on login account ITBA Portal. The assessee on receipt of notice under Section 250, also filed its detailed written submission. In the written submission the Assessee submitted that they deposited cash of Rs. 32,43,000/- out of cash balance with the Assessee which was from sale profit of jewellery. The Assessee also submitted explanation about non-compliance before the AO during assessment proceeding. On merit, the Assessee by referring relevant provision of PMGKY Scheme– 2016 submitted that as per Section 199-I of Taxation Law (Second Amendment Act) – 2016, the amount of undisclosed income declared in accordance with law under sub- section (1) of Section 199C shall not be included in the total income of declared for any assessment year under the Income Tax Act. It is absolutely clear that amount disclosed under the said scheme cannot be taxed under normal provision of Income Tax Act. The rate of Tax prescribed under the scheme was higher than the normal rate of tax applicable. Further, CBDT in its circular no. 43 of 2016 also clarified that amount of income declared in PMGKY shall not be included in the total income of the declarer under the Income Tax Act of any assessment year. Copy of Circular No. 43 of 2016 by CBDT was also furnished.
The Ld. CIT (A), on considering the submission of Assessee and the assessment order noted that the AO made addition of Rs.6,00,000/- on the ground that amount declared under PMGKY-2016 cannot be reduced while computing the total income. The Assessee offered Rs.6,00,000/- under PMGKY during survey action. The amount of Rs.6,00,000/- in cash deposit in the bank account was disclosed under PMGKY – 2016, which is stated to be part of accounted sales. The Ld. CIT (A) by referring certain provisions of PMGKY held that the provision of PMGKY specified that any person willing to declare their undisclosed income in the form of cash or deposit in the account with bank or post office or specified entity can opt for this scheme. Accordingly, stand of Assessee is not correct in deducting the disclosed amount of Rs.6,00,000/- declared under PMGKY – 2016 from its books of accounts. The disclosure under PMGKY scheme is undisclosed income and it has nothing to do with the books of account and must be treated outside the ambit of business income shown in the books of accounts. On the basis of such observation upheld the action of AO. Further aggrieved, the Assessee has filed the present appeal before the Tribunal.
We have heard the submission of Ld. Authorized Representative (Ld. AR) for the Assessee and Ld. Departmental Representative for the Revenue. The Ld. AR of the Assessee submits that a very short question is involved in the present appeal. It is an admitted fact that in post demonetization period, a survey was carried out on 23.03.2017. During survey action statement of Rita Mehta, Director of the Assessee was recorded under Section 131. Copy of statement of Rita Mehta is filed at Page 46 to 58 of Paper Book. The Ld. AR of the assessee by referring the statement of Rita Mehta referred answer to the question no.21 wherein the disclosure of Assessee is recorded, wherein the assessee specifically stated that Rs. 6.00 lacs is part of her sales. The Ld. AR of assessee submit that Rs.6,00,000/- was offered under PMGKY with the condition that no adverse inference be drawn. The Assessee while computing the income inadvertently shown Rs. 6.00 lacs in the taxable income. The Assessee has already paid tax of about Rs.300 lacs (approximately). The declaration made under PMGKY was accepted and certificate of declaration in Form No. 2 was issued by the Ld. PrCIT, Mumbai on 13.04.2017. In the audited accounts, specific disclosure was made at Sr. No. 24 of Notes to the final statement specifying that in order to avoid litigation, the company voluntary offered Rs.6,00,000/- out of deposits in bank from sale of products under PMGKY – 2016 and paid tax. The Ld. AR of assessee by referring Section 199-I of Second Finance Bill, 2017 about scheme of PMGKY that as per statutory provision if any, amount is declared in the scheme, such amount will not be included while computing total income under the Income Tax Act for any assessment year. The AO wrongly considered the income declared during survey action as additional income over and above the income forming part of audited financial statement. In fact, the income declared by Assessee was not additional income. The amount of sales shown in the books of accounts inclusive of Rs.6,00,000/- of cash deposit declared under PGMKY, if this amount is not reduced form the total income, it will amount to double taxation. As the Assessee has already declared/ offered Rs.6,00,000/- in PMGKY.
On the other hand, the Ld. Sr. DR. for the Revenue supported the order of lower authorities. The Ld. Sr. DR for the Revenue submitted that any income declared under PMGKY -2016 is not to be considered income of the relevant financial year. Such income declared in PGMKY is not to be included in the total income as per the statutory provision of Section 199-I. The Assessee wrongly included the income declared under PMGKY as income of the year and reduced the same from its taxable income. The treatment given by the Assessee in its computation of total income is not in consonance with the statutory provision of scheme.
We have considered the rival submission of both the parties and have gone through the orders of the lower authorities carefully. There is no dispute that during survey action, the Assessee declared Rs. 6,00,000/- under PGMKY – 2016. The income declared by Assessee was accepted by competent authority/PCIT-5, Mumbai. A short question before us is whether the income declared under PGMKY – 2016 is to be included in the total income of the current financial year or not. As per statutory provision prescribed under Section 199-I, such income is not to be included in the total income of assessee. We find that while making statement under section 131, the assessee specifically stated that amount offered during survey action under PMGKY is part of sales. We Find that in para 11 (a) CBDT Circular-No. 43, which prescribe “that the amount of undisclosed income declared shall not be included in the total income of the declarant under the Income Tax Act for any assessment year”. On perusal of computation of income, copy of which is available at page no. 2 of paper book (PB), we find that the assessee wrongly made such computation, in reducing such additional income, which may be ignored. Thus, considering the peculiar facts of the case, we accept the submissions of ld AR of the assessee that is was inadvertent mistake on the part of assessee in showing Rs.6,00,00/- in the computation of income. Hence, we do not find any justification in addition made by assessing officer. In the result, the ground of appeal raised by the assessee is allowed. In the result, appeal of the Assessee is allowed. Order pronounced in the open court on 23.12.2025.