SH. AMBRISH SHARMA PROP. M/S PUNJAB HANDLOOM,LUDHIANA vs. DCIT, CC-2, LUDHIANA

This is an appeal filed by the assessee against the order of Ld.CIT(A)-5, Ludhiana, dated 24.05.2023 pertaining to Assessment Year 2019-20. The following grounds of appeal have been taken:

Facts in brief are that the assessee is engaged in the business of wholesale and retail trade of suiting, shirting, handlooms products and other apparels under the name and style of M/s Punjab Handloom for the past many years. The assessee has been maintaining regular books of accounts which are duly audited and returns have been filed year after year on the basis of such audited books of accounts. During the assessment year under consideration, a survey action was carried out at the business premises of assessee on 06.09.2018 and the assessee surrendered vide letter, dated 07.09.2018, an amount of Rs. 50,00,170/- i.e. Rs. 45 lacs was surrendered on account of expenditure incurred on account of construction of building and Rs. 5,00,170/- was surrendered on account of excess cash in hand. The surrender letter was filed on 07.09.2018 and the said income was declared while filing the return of income. An amount of Rs. 50,00,170/- was 3 credited as additional business income in the Trading and Profit and Loss Account, for which, a copy has been placed before us at page 22 of the Paper Book submitted.

Further to that, the amount of Rs. 45 lacs was debited to building account and the assessee has offered this sum as additional income over and above the normal business income vide letter dated 07.09.2018. No other activity was noticed by the department during survey other than the activity, which has been disclosed in the return of income.

The return declaring an income of Rs. 57,31,730/- was filed, including Rs.50,00,170/- as offered during survey. During the course of assessment proceedings, a query was raised also why the surrendered income should not be in the nature of income referred to section 68, 69, 69A, 69B, 69C and 69D and as such surrendered income was charged to tax as per the provisions of section 115BBE.

The assessee responded to that query during the course of assessment proceedings that he has been engaged in the business of wholesale and retail trade of suiting, shirting, handlooms products and other apparels under the name and style of M/s Punjab Handloom for the past many years. No other activity was being carried out by the assessee and the Assessee also stated that since the surrendered amount was part and parcel of the same business, the offer was made out of the additional business income so, the provisions of section 115BBE was not applicable. However, the Assessing Officer has treated 4 the sum of Rs. 50,00,170/- as surrendered during survey as deemed income u/s 115BBE of the Income Tax Act.

Against the order of the AO, the assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A) by way of order, dated 25.06.2024 upheld the order of Assessing Officer. According to CIT(A), the nexus and source have not been established and the Assessing Officer has rightly treated the surrendered amount of Rs. 50,00,170/-as unaccounted investment during survey and taxed the same as per the provisions of section 115BBE of the Act, since the amount was not recorded in the books of accounts.

Against the order of the Ld. CIT(A) the assessee is in appeal before us.

The Ld. Counsel for the assessee argued before us and referred to surrender letter as filed during survey and copy of the same has been placed in the Paper Book, wherein, additional income had been offered and that sum has been credited to Profit and Loss Account. Copy of the surrender letter is being reproduced as under:- Dated 7.9.2018 “To The Joint Commissioner of Income, Central Range, Ludhiana. Sub: Voluntary offer of additional income consequent to survey u/s 133-A of the Income Tax Act 1961 on 6/9/2018. Respected Sir, With regard to the captioned subject, it is hereby submitted that survey u/s 133-A of the I.T.Act, 1961 was conducted by the Worthy Deputy Director of Income Tax at the premises of M/s Punjab Handlooms Prop. Sh.Amrish Sharma, Link Road

It was further argued by the Ld, Counsel that no other source of income was noticed by the department during the course of survey and the CIT(A) has wrongly confirmed the action of the Assessing Officer in charging to tax the amount of Rs. 50,00,170/- u/s 115BBE and, which is not justified.

The Ld. Counsel of the assessee invited our attention to the case of M/s DDK Spinning Mills Vs DCIT, where the amount surrendered was on account of construction of building and no other source of income was identified by the department and such surrendered income was held to be business income by the Hon'ble ITAT, Chandigarh Bench, Chandigarh in the decision reported in [2024] 109 ITR (Trib.) 619 (Chd.), wherein, it was held as under: -

Further, the reliance was also placed in the following other judgments:-

The Ld. DR argued that since the source of income has not been identified during the course of such survey, the Id. CIT (A)has very rightly held the sum of Rs. 50,00,170/- lacs as deemed income and rightly confirmed taxing the same as per the provisions of section 115BBE. The ld. DR relied upon the order of Ld. CIT(A) and 7 also relied upon the judgments as quoted by the CIT(A) in his order..

In rejoinder to the argument of the (DR), the Ld. Counsel of the assessee stated that all the judgments in the cases quoted by the Ld. CITA) in his order like Kim Pharma Pvt. Ltd. v CIT 216 Taxman153 (PEtH), Famina Knit Fab v ACIT 176 ITD 246 (Chandigarh Trib.),Pr. CIT v. Khushi Ram & Sons Foods (P) Ltd. have been discussed and analyzed in the judgment of M/s Khurana Rolling Mills Pvt. Ltd., in as well as another judgment of Hon'ble Bench of the ITAT in the case of M/s Bindas Foods Pvt. Ltd. in ITANo.409/Chd/2021 and copies of the judgments of M/s Khurana Rolling Mills Pvt. Ltd. and M/s Bindas Foods Pvt. Ltd. have been placed before us in the Judgement Set.

We have gone through the order of Ld. Assessing Officer and the appeal order of the CIT(A), arguments of both sides and have also gone through the Brief Synopsis, Paper Books, judgement set filed by the Ld. Counsel of the assessee during the course of proceedings before us. We have also gone through the letter as submitted by the assessee during the course of survey which has been reproduced above, wherein, the assessee has offered the additional business income. No other activity / source of income was noticed by the department.

We find that all the judgments as cited by the Ld.CIT (A) have been considered by the Chandigarh Bench of the ITAT in the case of M/s Khurana Rolling Mills Pvt. Ltd. and M/s Bindas Foods Pvt. Ltd.as quoted 'supra'. Under similar facts and circumstances, the amount surrendered was spent on the factory building in the 8 case of M/s DDK Spinning Mills as cited above. We find that issue is also squarely covered by the judgment of Sh. Gandhi Ram in ITA.121/Chd/2021.

Further reliance on the other judgments as cited by the Ld. Counsel of the assessee are also quite apt as under:- i). Smt. Renu Singla Vs PCIT in videorder, dated 26/11 /2024. ii). M/s Veer Enterprises asreported in [2024] 158 Taxmann.com 655 (Chd.Trib.). iii). Sh. Krishan Kumar, as reported in [2024} 162taxmann.com 518 (Chd.Trib.). iv). Judgement in the case of Sh. Gandhi Ram in ITA.121/Chd/2021. In the case of M/s Veer Enterprises, the following findings have been given by Tribunal as under:-

Thus, as per the findings given in the above cases and in the case of Sh. Gandhi Ram as cited supra, we hold that the amount

In the result, appeal of the Assessee is allowed. Order pronounced in the open Court on 07 /07/2025.