JASVIR SINGH CHANDI,PATIALA PUNJAB vs. ACIT CIRCLE PATIALA, PUNJAB, PATIALA PUNJAB

आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “ए” , चǷीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH

HEARING THROUGH: PHYSICAL MODE

ŵी िवŢम िसंह यादव, लेखा सद˟ एवं ŵी परेश म. जोशी, Ɋाियक सद˟
BEFORE: SHRI. VIKRAM SINGH YADAV, AM & SHRI. PARESH M. JOSHI, JM

आयकर अपील सं./ ITA NO. 828/Chd/2024
िनधाŊरण वषŊ / Assessment Year : 2017-18

Jasvir Singh Chandi
30/1-S, Sant Nagar
Patiala 147001, Punjab
बनाम

The ACIT
Circle Patiala
˕ायी लेखा सं./PAN NO: AJPPS1573E
अपीलाथŎ/Appellant
ŮȑथŎ/Respondent

िनधाŊįरती की ओर से/Assessee by :
Shri Tejmohan Singh, Advocate
राजˢ की ओर से/ Revenue by :
Shri Vivek Vardhan, Addl. CIT, Sr. DR

सुनवाई की तारीख/Date of Hearing :
28/01/2025
उदघोषणा की तारीख/Date of Pronouncement : 19/02/2025

आदेश/Order

PER VIKRAM SINGH YADAV, A.M. :

This is an appeal filed by the Assessee against the order of the Ld
CIT(A)/NFAC, Delhi dt. 14/06/2024 pertaining to Assessment Year 2017-18. 2. In the present appeal, the Assessee has raised the following grounds of appeal:
1. The Ld. CIT(A) has erred in confirming order of Ld. AO in invoking the provisions of Section 115BBE and issuing Show Cause Notice with the intent to subject the additional income of Rs.55,00,200/- to tax at the tax rates of 60
percent plus surcharge and cess.
2. The Learned CIT(A) has erred in confirming the order of AO in which the provisions of section 115BBE of the I.T. Act, 1961 have been misconstrued and misapplied in the case of Appellant so much so that the investments made by the appellant in furniture, interior Decoration, air-conditioners etc. has been held as un-explained investments.
3. The Learned C1T(A) has erred in confirming the order of AO in which The provisions of section 115BBE of the I.T. Act, 1961 have again been misconstrued and misapplied in the case of Appellant and recoverable advances given by the appellant have been held as un explained investments.

The Section 69 reads as follows:

"Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year."

At the cost of repetition, it is stated that the Assessee was Lecturer in Government
School and after retirement started this institute in 2016.The Assessee initiated the purchase of assets and fittings and given advances during the year 2014 to 2016
before the classes were started. The assessee started his business during the year
2016-17 and all investment including the above mentioned investments were duly recorded in the books of accounts and reflected in Income tax return on 4

completion during the year 2016-17 by adding to assets and crediting the Capital account as the investments were made by the Proprietor mainly before the start of classes.

It is of much importance to draw your kind attention to the fact that there was no requirement to maintain and produce books of accounts and records as the assessee had returned business income of Rs 2,20,853/ which is more than 8% of the total turnover and therefore was covered under section 44AD of the IT Act.
Rather, the assessee has voluntarily maintained regular books of accounts and records.

Further stated that during the Survey, the Assessee was under severe mental stress and offered to surrender the amount to buy peace of mind. This fact is also mentioned in the surrender letter given at the time of survey. It is nowhere mentioned that the assessee had stated or mentioned that these investments are without any source. On the other hand, the Assessee got support from his wife,
Father and Father in law and other relatives to start his this business adventure and for making needful investments. It is again reiterated that there is complete sources of these investments which are given as follows:

Name of Bank
Account No Date
Amt Drawn
Remarks
Pnb
8493
27-5-15
325000
Father- Mr Charan Singh
Pnb
8493
6-5-15
400000
Father- Mr Charan Singh
Pnb
8493
7-4-15
80000

Father- Mr Charan Singh
Pnb
8493
14-10-14
230000
Father- Mr Charan Singh
Pnb
8493
11-12-15
500000
Father- Mr Charan Singh
Pnb
8493
20-4-16
300000
Father- Mr Charan Singh
Pnb
8493
15-7-16
200000
Father- Mr Charan Singh union bank
3098
23-2-16
100000

Gurcharan Singh-father in law union bank
3098
10-3-16
100000

Gurcharan Singh- father in law
PSB
992
20-2-16
100000

Gurcharan Singh- father in law
SBI
373537
3-3-16
100000
Jasvir Singh
SBI
373537
5-3-16
100000
Jasvir Singh
SBOP
71967
7-4-14
200000

Jasvir Singh & Amandeep Kaur
SBOP
71967
10-4-14
400000
Jasvir Singh & Amandeep Kaur
OBC
3189

26-2-14
150000
REETMAN-son
PNB
6125
10-5-14
300000
Jasvir Singh & Amandeep Kaur
OBC
132
26-2-14
300000
DALJEET KAUR & AMANDEEP
OBC
132
7-3-14
300000
DALJEET KAUR & AMANDEEP
OBC
10903
10-3-15
120000
Jasvir Singh
OBC
10903
14-3-15
90000
Jasvir Singh
OBC
10903
27-3-14
125000
Jasvir Singh
OBC
10903
26-2-14
250000
Jasvir Singh
Pnb
8493
26-2-14
345000
Father- Mr Charan Singh
Pnb
8493
22-4-14
230000
Father- Mr Charan Singh

Total Rs

53,45,000

Thus it can be seen that the Assessee has used the funds by withdrawing from his own bank accounts or of his immediate family members and out of cash savings of self and wife. The copies of the Bank statements reflecting these withdrawals are attached herewith for your kind reference.

In view of the above, it is stated that the amount invested is not unexplained and there is proper source of these payments and as such it does not attract section 69 of the IT act. Since the investment is fully explained and does not attract section 69 of the Act, accordingly section 115BE is also not applicable.

Similarly, the Cash amount of Rs 150000/ surrendered is duly recorded in the books of accounts and the source as explained in the para above and as such section 69 A is not applicable and consequently Section 115BE.

You are requested to not invoke section 115BE for the reason that the section 69
and Section 69 A is not applicable in the present circumstances for the reasons mentioned in above paragraphs.

Evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programmes. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of Rs.500 and Rs. 1000 [Specified Bank Notes(SBN)] have been recently withdrawn the Reserve Bank of India.
Concerns have been raised that some of the existing provisions of the Income- tax Act, 1961 (the Act) can possibly be used for concealing black money. The Taxation Laws (Second Amendment) Bill, 2016 (‘the Bill’) has been introduced in the Parliament to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision.

Further, in the wake of declaring specified bank notes “as not legal tender”, there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy.
In this backdrop, an alternative Scheme namely, ‘Taxation and Investment
Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax
@ 30% of the undisclosed income, and penalty @10% of the undisclosed income.
Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’ @33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the ‘Pradhan Mantri
Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality.
An overview of the amendments proposed in the Bill are placed below:
PARTICULARS
EXISTING PROVISIONS
PROPOSED PROVISIONS

General provision for penalty
PENALTY (Section 270A)
Under-reporting - @50% of tax
Misreporting - @200% of tax
(Under-reporting/
Misreporting income is normally difference between returned income and assessed income)
No changes proposed
Provisions for taxation
&
penalty of unexplained credit, investment, cash and other assets

TAX (Section 115BBE)
Flat rate of tax @ 30% +
surcharge+cess (No expense, deductions, set-off is allowed)
TAX (Section 115BBE)
Flat rate of tax
@60%+surgcharge @ 25% of tax (i.e. 15% of such income).
So total incidence of tax is 75% approx. (No expense, deductions, set-off is allowed).

PENALTY (Section 271AAC)
If Assessing Officer determines income referred to in section 115BBE, penalty @10% of tax payable in addition to tax
(including surcharge) of 75%.
Penalty for search seizure cases
Penalty (271AAB) i) 10% of income, if admitted returned and taxes are paid
Penalty (271AAB)
(i) 30% of income, if admitted returned and taxes are paid

(ii) 20% of income, if not admitted but returned and taxes are paid
(iii) 60% of income in any other case

(ii) 60% of income in any other case

Taxation and Investment
Regime for Pradhan Mantri
Garib Kalyan
Yojana, 2016’
(PMGKY)
New Taxation and Investment
Regime
Undisclosed income in the form of cash and bank deposit can be declared:
(A) Tax. Surcharge. Penalty payable

Tax @ 30% of income declared
Surcharge @ 33% of tax
Penalty @ 10% of income declared
Total @50% of income (aprox)
(B) Deposit
25% of declared income to be deposited in interest free
Deposit Scheme for four years.

It was accordingly submitted that the necessary relief be allowed to the assessee.
4. Per contra, the Ld. DR has relied on the findings of the lower authorities.
5. We have heard the rival contentions and pursued the material available on record. It is an admitted fact that the income surrendered during the course of survey has been duly offered to tax by the assessee in the return of income wherein such income has been offered to tax by applying normal rate of tax. In the show-cause, the AO has stated that since income has been surrendered during the course of survey, the provisions of section 115BBE are applicable and the income so surrendered has to be brought to tax at the rate of 60% as per amended provisions as against rate of 30% as so offered by the assessee in the return of income. It has been contended by the ld AR that given the fact that the survey was conducted at the business premises of the assessee on 23/08/2016, the rate of tax at the relevant point in time was 30% only, the rate at which the income has been offered in the return of income and as far as the amendment which has been brought about in Section 115BBE of the Act is concerned, the same is applicable in respect of transaction effective on or after
01/04/2017 and in support, reliance was placed on the decision of Hon’ble
Madras High Court in case of S.M.I.L.E Microfinance Ltd. Vs. ACIT (Supra). In the said decision where the alleged transactions were for the period 8/11/2016 to 30/12/2016, the Hon’ble Madras High Court, rejecting the contention raised on behalf of the Revenue that the amendment was with effect from 1/04/2017 and applicable for A.Y 2017-18, held that the Revenue is empowered to impose 60%
rate of tax for the transactions from 01.04.2017 onwards and not prior to the said cut-off date and for prior transactions, the Revenue is empowered to impose only 30% rate of tax. We find that in absence of any contrary or higher authority brought to our notice, we are clearly guided by the said decision of the Hon’ble
Madras High Court and the said decision thus supports the case of the assessee and the contention raised on behalf of the assessee deserve to be accepted.
The action of the AO in applying 60% tax rate is accordingly set-aside.
6. In view of the same, where there is no change in the rate of tax, the applicability of deeming provisions and the various contentions raised by the assessee have become academic in nature and we donot deem it necessary to examine the same and the same are thus left open. In the result,
7. Regarding the disallowance of Rs. 95,706/- on account of Petrol, Diesel
Expenses and refreshment expenses, our reference was drawn to the submissions made before the lower authorities and the contents thereof read as under :
“2. It is stated that payment in various dates amounting to Rs 17170/- out of total payment of Rs 137702/ is proposed to be disallowed on account of unverifiable expenses. This is due to the reason that only payment vouchers are available but not the cash memo or bill. It is hereby submitted that it is a normal practice to get the bill memo for alt purchases as is evident from the records produced before you. In a very few cases, the receipts/memos are not traceable at the moment as these receipts are of very small size. These very small memos might have been torn or misplaced in the file. The total amount of such vouchers is Rs 17170/ is only about 12% of the total expenses. There are all genuine expenses incurred and duly recorded.

Without Prejudice to the above, it is submitted that the assessee has returned business income of Rs 220853/ which is more than 8% of the total turnover and is covered under section 44AD of the IT Act wherein there is no requirement to maintain and produce books of accounts and records. The Assessee has voluntarily maintained regular books of accounts and records.

In view of the above, it is prayed that the proposed addition be not made on non availability of very small number of cash memos amounting to Rs 17170/ and looking in to the fact that the assessee is covered u/s 44AD of the act.

Without Prejudice to the above, it is submitted that the assessee has returned business income of Rs 220853/ which is more than 8% of the total turnover and is covered under section 44AD of the IT Act wherein there is no requirement to maintain and produce books of accounts and records. The Assessee has voluntarily maintained regular books of accounts and records.

In view of the above it is requested not to disallow 1/5th of the expenses for personal use.

Without Prejudice to the above, it is submitted that the assessee has returned business income of Rs 220853/ which is more than 8% of the total turnover and is covered under section 44AD of the IT Act wherein there is no requirement to maintain and produce books of accounts and records. The Assessee has voluntarily maintained regular books of accounts and records.”
8. Per contra the Ld. DR has relied on the findings of the lower authorities.
9. We have heard the rival contentions and pursued the material available on record. Out of petrol and diesel expenses totaling to Rs 137,702/-, expenses amounting to Rs 17,170/- has been disallowed for the reason that the assessee couldn’t produce the bills/receipts for necessary verification and Rs 19,306/- as personal usage cannot be ruled out. The explanation of the assessee that it is normal practice to collect bills/memo for all such purchases, however, given the small quantum of payment involved in respect of subject individual bills and where the factum of incurrence of expenditure for the purposes of business and the payment has not been disputed, is found reasonable and addition so made is hereby directed to be deleted. Regarding disallowance on account of personal usage, we find that the same has been done merely on presumption and no material has been brought on record to substantiate the said findings and the same is directed to be deleted. Further, regarding pantry expenses which admittedly relates to milk procurement from the milk vendor, the explanation of the assessee that the milk vendor doesn’t give any bill for supply of milk and there is no dispute that the expenses have been incurred for the purposes of business is found acceptable and the addition so made is hereby directed to be deleted.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 19/02/2025. परेश म. जोशी

िवŢम िसंह यादव
(PARESH M. JOSHI)

( VIKRAM SINGH YADAV)

Ɋाियक सद˟ / JUDICIAL MEMBER

लेखा सद˟/ ACCOUNTANT MEMBER

AG

आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to :

आदेशानुसार/ By order,
सहायक पंजीकार/