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Facts
The assessee, engaged in wholesale and retail trade, surrendered Rs. 50,00,170/- during a survey, comprising Rs. 45,00,000/- for building construction and Rs. 5,00,170/- as cash in hand. This was offered as additional business income. However, the Assessing Officer and CIT(A) treated it as deemed income under Section 115BBE.
Held
The Tribunal held that the surrendered amount, offered voluntarily during a survey and stated to be part of the business income, should be taxed as normal business income. The Tribunal relied on various High Court and ITAT judgments where similar situations were treated as business income.
Key Issues
Whether income surrendered during a survey, offered as business income, can be taxed as deemed income under Section 115BBE when no other source of income was identified.
Sections Cited
69A, 69B, 115BBE, 133A, 68, 69C, 69D, 28(i)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH “A”, CHANDIGARH
Before: SHRI. RAJPAL YADAV, VP & SHRI. KRINWANT SAHAY, AM
Order
PER KRINWANT SAHAY, AM:
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:
1. That the Ld. CIT(A) has erred in confirming the action of the Ld. A0 in taxing an amount of Rs. 50,00,170/- as offered during the survey as business income u/s section 69A & 69B of The Income Tax Act, 1961.
2. That the Ld. CIT(A) has erred in confirming the action of the Assessing Officer in taxing the amount of Rs. 45,00,000/- surrendered on account of investment in building during survey u/s 69B read with section 115BBE of the Income Tax Act, 1961.
3. That the Ld. CIT(A) has erred in confirming the action of the Assessing Officer in taxing the amount of Rs.5,00,170/- surrendered on account of cash found during survey u/s 69A read with section 115BBE of the Income Tax Act, 1961.
4. That the Ld. CIT (A) has failed to appreciate the various judgments of the Jurisdictional Bench of the ITAT, Chandigarh 2 Bench in many cases, where the amount offered during survey under similar circumstances have been taxed at the normal rate of tax.
5. That the Ld. CIT(A) has failed to appreciate that during the course of survey, no other income was noticed by the department and, as such, taxing the amount offered as deemed income, is against the facts and circumstances of the case.
6. That the Ld. CIT(A) has erred in not relying on the judgments of Chandigarh Bench of ITAT in the case of M/s. Khurana Rolling Mills Pvt. Ltd. in W/s. Famina Knit Fab as reported in 176 ITD 246(Chandigarh-Tribunal), M/s. Bindas Foods Pvt. Ltd. in and has placed his reliance on some other judgments which have been duly been considered in the above judgments.
7. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed-off.”
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
5 Near,Petrol Pump, Ludhiana on 6.9.2018. Consequent to the discrepancies found in our books and records, we voluntary offer an amount of Rs. 50,00,170/- (Fifty Lacs One Hundred and Seventy only, as an additional income over and above normal business income under the following heads for the financial year 2018-19:- i). Cash in Hand 5,00,170.00 ii). Building under construction 45,00,000.00
The above surrender offer has been made without any undue pressure and coercion and is voluntary with subject to no penal action. Best regards, Yours faithfully, For PUNJAB HANDOOM
For Punjab Handloom Proprietor”
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: -
"Section 69B, read with section 115BBE, of the Income-tax Act, 1961Undisclosed investment (Building) - Assessment year 2018-19 6 – Assessee firm was engaged in business of spinning mills - During course of survey conducted upon assessee, one of its partners surrendered certain amount on account of addition made to factory building Assessing Officer was of view that said amount was to be considered as unexplained investment under section 69B and was subject to taxation as per provisions of section 115BBE - It was noted that assessee had treated said surrendered amount as normal business income in its P&L account and had paid tax at normal rate on same - There was no material /documentation on record which even remotely demonstrated that assessee had expended certain sum of money on construction of building over and above amount which had been recorded in its books of accounts - Further, only statement of one of partners of assessee firm without any corroborative evidence could not come to aid of Assessing officer for purposes of invoking deeming provisions of section 69B - Even taking into consideration said statement on a standalone basis, it was found that source of investment had been stated to be out of business income and that surrendered amount had been duly honored by assessee while filing return of income wherein said amount was offered to tax under head "business income" -Whether, on facts, provisions of section 69B read with section 115BBEcould not be invoked in instant case - Held, yes [Paras 8, 10 and 11] [In favour of assessee]"
Further, the reliance was also placed in the following other judgments:-
i). Judgement of Chandigarh Bench in the case of Sh. Ravinder Kumar Bansal in ITA No. 319/Chd/2023. ii). Judgement of Chandigarh Bench in the case of M/s Montu Shallu Knitwears, reported in 159 taxmann.com 677. Thus, it was argued that the surrendered income be taxed at the normal rate of tax.
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:-
"Section 69A, read with sections 69B and 28(i), of the Income-tax Act, 1961 - Unexplained money (Amount disclosed at survey) - Assessment year 2019-20 During course of survey under section133A, assessee surrendered excess stock, cash and receivables, stating that same was to be taxed as business income – Assessing Officer, however, treated said surrendered amount as unexplained investment under sections 69A and 69B and charged same to tax asper provisions of section 115BBE - Whether since during survey proceedings, assesse was confronted not only with discrepancies found but also with nature and source thereof and it had emerged that source of income of assessee was from its business operations, income surrendered by assessee during survey could not be brought to tax under deeming provisions of section 69A and 69Band same had been rightly offered to tax by assessee under head of business income - Held, yes [Paras 29 and 30] [In favour of assessee]."
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
9 surrendered to the tune of Rs. 50,00,170/- lacs during survey was to be taxed as per the normal business income of the assessee.
In the result, appeal of the Assessee is allowed. Order pronounced in the open Court on 07 /07/2025.