NATWAR LAL SHARDA,JAIPUR vs. DCIT, CIRCLE-6, JAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “A” BENCH, JAIPUR BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI UDAYAN DASGUPTA, JUDICIAL MEMBER ITA No.1216/JPR/2025 (Assessment Year:2017-18) Natwar Lal Sharda Vs. The DCIT, M-38/39 Tonk Road Circle-6, Mahesh Colony, Jaipur. Jaipur-302015. �थायीलेखासं./जीआइआरसं./PAN/GIR No:ANAPS6999R Appellant .. Respondent Appellant by : Sh. Tarun Mittal, C.A. Respondent by : Sh. Ajey Malik, CIT (Thr. V.C.)

Date of Hearing 29.06.2026 Date of Pronouncement 02.07.2026 O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: The present appeal has been filed by the assessee against the order passed by the Office of the National Faceless Appeal Centre, Delhi (hereinafter referred to as “Ld. CIT(A)”), dated 23.07.2025under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). 2. Brief facts of the case are that a survey u/s 133A of the Act was conducted in the case of M/s Sanwaria Sweets (P) Ltd. on 01.07.2016, wherein the assessee is one of the directors. In course of the said survey

P a g e | 2 ITA No. 1216/JPR/2025 Natwar Lal Sharda operation, statement of the assessee was recorded u/s 131 of the Act. Some documents were found related to advances made by the assessee in his individual capacity. The said documents in the form of loose papers were impounded during the course of survey. On being questioned, the assessee admitted that the advances noted in the impounded documents were not recorded in his regular books of accounts. An amount of Rs. 15,05,00,000/- was offered as additional income based on the loose papers. A further sum of Rs.29,28,700/- was admitted as interest income on the undisclosed advances, making a total disclosure of undisclosed income of Rs.15,34,28,700/-. The assessee filed his return of income for the AY 2017-18 on 26.10.2017, declaring a total income of Rs. 20,02,67,130/-. The case was selected for compulsory manual scrutiny. While the assessee had returned the surrendered income as its Business income, under the head Income from Business & Profession, the AO held the same to be in the nature of undisclosedinvestment assessableas income from other sources .The AO observed that no evidence was provided by the assessee that these undisclosed loans advanced by the appellant were actually proceeds of undisclosed business income; that no evidence of any unrecorded sales or business were provided by the appellant. He found the disclosure made by the assessee was on account of undisclosed investment in the form of undisclosed loans and interest earned thereon. Accordingly he recharacterized the income surrendered by the assessee under the head “Income from Business & Profession “ as unexplained investment as per section 69 of the Act and invoked the provisions of section 115BBE of the Act ,which prescribes a tax rate of 60% on the undisclosed income. The total income of

P a g e | 3 ITA No. 1216/JPR/2025 Natwar Lal Sharda the assessee was accordingly computed at Rs.20,04,96,710/- , after recharacterization of the income surrendered by the assessee and subjecting the said income to higher rate of tax as specified u/s 115BBE of the Act . 3. Before the Ld.CIT(A) the assessee challenged the findings of the AO both with regard to re-characterizion of income surrendered as business income as unexplained investment u/s 69 of the Act and alsothe invocation of Section 115BBE of the Act to the income surrendered by the assessee applying tax rate of 60% thereto. All grounds raised by the assessee were dismissed by the Ld. CIT(A) and the appeal filed by the assessee was accordingly dismissed. 4. Aggrieved by the same, the assessee has come up in appeal before usraising following grounds:- “1. On the facts and the circumstance of the case and in law, the Id. CIT(A) has erred in confirming the action of ld.AO in taxing the business income shown in the return of income and also offered during the course of survey by applying the provisions of Section 115BBE of the Act. 2. On the facts and the circumstances of the case and in law, the Id. CIT(A) has erred in misinterpreting the submission made by assessee and accordingly arbitrarily confirming the action of Id.AO in assuming the income from business of Rs.15,34,28,700/- shown in the return of income consequent to the surrender of current year's income made during the course of survey as income earned from other sources and further erred in holding that such income offered as current year's income, is covered within the definition of section 69 of the Act and thereby erred in applying the provisions of section 115BBE arbitrarily. 2.1. That the Id. CIT(A) has further erred in contradictorily confirming action of ld.AO in assuming that the income of the assessee which is applied in unsecured loans advanced and the interest earned thereon as undisclosed investments u/s 69 ignoring the fact that the loans have been advanced out of income earned from profits of business as was clarified by assessee in statements recorded u/s 131 during the course of survey itself. Thus, invocation the provisions of section 115BBE on such addition is not in accordance with law.

P a g e | 4 ITA No. 1216/JPR/2025 Natwar Lal Sharda 3. Without prejudice to the earlier grounds the Id. CIT(A) has further erred in confirming the tax rate of 60% and surcharge of 25% while applying the provisions of section 115BBE instead of tax rate of 30% and surcharge of 15%. 3.1 That the Id. CIT(A) has erred in ignoring the fact that the amended provisions of section 115BBE as amended by the Taxation Laws (Second Amendment) Act, 2016 changing the tax rate u/s 115BBE and also the surcharge on such tax from 30% and 15% respectively to 60% and 25% respectively was given assent by the Hon'ble President of India on 15.12.2016 without any explicit mention of retrospective effect to be given to it. Therefore, the income earned prior to the survey conducted on 01.07.2016 deserves to be taxed @ 60% and also applying surcharge @ 25%. 4. The appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing the appeal.”

With respect to the first contention, he stated that the assessee in his statement recorded during survey had categorically submitted that the surrender of Rs.15.06 Crore was being made out of his business income. In this regard he drew our attention to question posed to him at question No. 14 and his reply ,which is reproduced at page no. 9 of the order of Ld. CIT(A) which reads as under:-

P a g e | 5 ITA No. 1216/JPR/2025 Natwar Lal Sharda “iz'u 14 vkius tks udn jkf’k vFkkZr~ 15-05 djksM+ m/kkj ns j[khgSA bl jkf’k dk svftZr djus dk L=ksr D;k gSA mRrj ;g esjh O;kikj dh gh vftZr vk; gSsA tks esjh fu;fer ys[kk iqLrdks aes antZ ugh gSA bl vk; vFkkZr~ :i;s 15-05 djksM+ tks jkf’k eSusa m/kkj ns j[kh gs mls pkyw for o"kZ dh vk; ekurs gq, fu;ekuqlkj dj nsus ds fy, lefiZr djrk gwWaA”

Learned Counsel for the assessee fairly conceded that the undisclosed loans surrendered by the assessee of Rs.15.34 Crores were stated to be sourced from his undisclosed business income of his commodity future transaction. Thereafter the assessee was asked to submit copy of his return of income filed along with his audited financials for the impugned year. The

P a g e | 6 ITA No. 1216/JPR/2025 Natwar Lal Sharda same was placed before us and it was noted thereform that the assessee had surrendered business income in the form of commodity future transaction to the tune of Rs.15,34,28,700/-. On being asked whether the assessee had ever conducted such business in the past,Learned counsel for the assessee replied in the negative. It was further noted by us that no particulars of the transactions carried out by the assessee in the form of commodity future transaction was furnished to the authorities below. 7. In the light of the above facts, we see no reason to agree with the Learned counsel for the assessee that the income surrendered by the assessee of Rs. 15.05 Crore was by way of his business income. The said income had been disclosed on account of commodity future transaction which admittedly the assessee has never done in the past and no evidence of conducting such transaction has also be filed to the authorities below. The assessee, therefore we hold , has miserably failed to prove its claim of the surrendered income of Rs.15.05 Crs. arising from any business activity conducted by him. We have no hesitation thereforein confirming the order of the Ld CIT(A) that the said income constitutes its income from other source and not its income from business. 8. Having held so therefore the assesses explanation of loans advanced to the tune of Rs.15.05 Crs. as being sourced from his above business income surrendered, fails .And in the absence of a valid explanation of the source of advancing loans, we hold, that the Ld.CIT(A) has rightly upheld the treatment of the same as investment made from undisclosed sources u/s 69 of the Act.

P a g e | 7 ITA No. 1216/JPR/2025 Natwar Lal Sharda 9. Grounds of appeal ground no. 1 and 2 are accordingly dismissed. 10. With respect to the assessee’s contention of incorrect invocation provisions of Section 115BBE of the Act for the purpose of levy of tax @ 60% on the undisclosed income of the assessee, Learned counsel for the assessee pointed out that the Hon’ble Jurisdictional High Court in the case of Deepak Maratha in D,B. Civil Writ Petition No. 3625/2020 dated 27.05.2026 has categorically held that the amendment to Section 115BBE of the Act ,prescribing enhanced tax @ 60%, be applicable for Financial Year 2017-18 on wards i.e. effective assessment year 2018-19. He drew our attention to the findings of our Hon’ble High Court at para 17 of his order reads as under:- “17. SUMMARY/CONCLUSION As an upshot of the discussion and analysis, as above, in our opinion, the Correct Legal Position which emerges is summarized as below :- (i) The law applicable to an assessment year is the law in force on the first day of that year-i.e., 01st April. A provision coming into force after that date, without express retrospective language, cannot be applied to assessments for that year. (ii) Changes in law occurring after the commencement of a financial year cannot govern the tax liability for that year unless the amendment is expressly made retrospective. (iii) The amendment to Section 11588E came into force on 01.04.2017 i.e. the first day of financial year 2017-18. For FY 2016-17, the law in force on 01.04.2016, prescribing a rate of 30%, must govern. The enhanced rate of tax 60% came into force on 01.04.2017 and can apply only from that date, i.e. for financial year 2017-18 onwards. (iv) The Taxation Laws (Second Amendment) Act, 2016 contains no express language for it's retrospective effect of section 115BBE.”

P a g e | 8 ITA No. 1216/JPR/2025 Natwar Lal Sharda the fact of the case on the addition made under section 69A of the Act to the income of the assessee. 12. Learned DR was unable to distinguish the decision of the Hon’ble Jurisdictional High court pointed out by the Learned Counsel for the assessee before us. 13. In the light of the above, following decision of the Hon’ble Jurisdictional High Court in the case of Deepak Maratha (supra), holding that the enhanced tax rate of 60% provided in Section 115BBE of the Act is applicable from the assessment year 2018-19 on wards and the impugned assessment year before us being assessment year 2017-18 , we hold that the enhanced rate applied is in the facts of the present case is against low. Ld. AO is accordingly, directed to levy of tax @ 30% on the income surrender by the assessee and assessed as income from other sources u/s 69 as per section 115BBE of the Act. Ground No. 3 of the assessee’s appeal is allowed. 14. In effect, the appeal of the assessee is partly allowed. Order pronounced in the open court on 02.07.2026. Sd/- Sd/- (UDAYAN DASGUPTA ) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Jaipur Dated 02.07.2026 *Santosh

P a g e | 9 ITA No. 1216/JPR/2025 Natwar Lal Sharda Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT By Order,

Asst. Registrar ITAT, Jaipur