Loading judgment…
Facts
A survey action was conducted at the assessee's business premises, during which discrepancies were found, leading to a surrender of Rs. 75,00,000/-. The assessee declared this as additional income. The Assessing Officer applied Section 115BBE of the Act to the Rs. 9,45,000/- cash surrender, treating it as deemed income.
Held
The Tribunal held that the cash surrender of Rs. 9,45,000/- was from the business of the assessee and not from any other unexplained source. Therefore, Section 115BBE of the Act was not applicable, and the assessee should not be taxed under Section 69 read with Section 115BBE.
Key Issues
Whether the cash surrendered during a survey, confirmed to be from business activities, can be taxed under Section 115BBE as deemed income.
Sections Cited
115BBE, 69, 143(3), 133A, 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
�थायी लेखा सं./PAN NO: ACJPK8675Q अपीलाथ�/Appellant ��यथ�/Respondent ( Physical Hearing ) �नधा��रती क� ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राज�व क� ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT Sr. DR सुनवाई क� तार�ख/Date of Hearing : 07.01.2025 उदघोषणा क� तार�ख/Date of Pronouncement : 29.01.2025 आदेश/Order Per Krinwant Sahay, AM :
Appeal in this case has been filed by the Revenue against the order dated 05.06.2024 of ld. CIT(A)-5, Ludhiana [hereinafter referred to as ‘CIT(A)’], for the Assessment Year 2020-21.
2. Grounds of appeal are as under:-
752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh 2 1. That the Worthy CIT-(A) has erred in confirming the order of the Id.AO and thereby, treating the amount of Rs. 9,45,000/- as unexplained in the hands of the assessee.
2. That the Worthy CIT-(A) has erred in not appreciating the fact that the excess cash surrendered by the assessee during the course of surrender relates only to the regular business of the assessee.
3. That the Worthy CIT-(A) has failed to appreciate the fact that the assessee is not engaged in any activity other than the regular business of the assessee. Hence, the amount of cash found at the business premises of the assessee at the time of survey action is related to regular business of the assessee.
4. That the Worthy CIT-(A) has erred in confirming the application u/s 115BBE of the Act on the amount of Rs. 9,45,000/- surrendered by the assessee without considering that the said amount relates to the regular business of the assessee.
5. That the Worthy CIT-(A) has erred in treating the cash surrender of Rs. 9,45,000/- as deemed income u/s 69 r.w.s. 115BBE of the Act.
6. That the Worthy CIT-(A) has erred in not considering various judgments of the Chandigarh (Jurisdictional) Bench of ITAT, wherein, the cash surrendered by the assessee during the course of survey has been treated as business income as per the 752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh
3 binding judgments in the case of M/s. New Vishavkarma Agro Industries in ITA no. 215/CHD/2023. 7. That the assessee craves, leave to add or amend any ground of appeal, before the appeal filed by the assessee is finally disposed off.
Brief facts as per the written submissions filed by the Counsel of the Assessee are as under:-
1. This is a case of an assessee which is a proprietorship firm engaged in the business of manufacturing of Sickle (Datti) which is used for harvesting of crops as well as a gardening tool. The assessee operates the said business under the name and style of M/s. K.K- Agro in the state of Punjab. The assesses has been engaged in the said business since past many years.
2. For the said business, the assessee maintains a complete set of books of account which are duly audited by a chartered accountant and on the basis of said audited set of books of account; the assessee files his return of income.
3. For the year under consideration, the assessee filed his return of income on 26.10.2020 vide acknowledgment no. 675630631261020 wherein, the assessee has declared a total income of Rs. 80,56,110/- and has paid taxes to the tune of Rs. 25,50,357/-.
752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh
4 4. It is pertinent to mention here that the return of income of the assessee has been filed on the basis of audited set of books of account. SEQUENCE OF EVENTS:
1. During the financial year 2019-20 relevant to AY 2020- 21, a survey action was carried at the business premises of the assessee on 05.03.2020. During the course of survey action, certain discrepancies were found which in aggregate amounts to Rs. 75,00,000/- only for AY 2020- 21. To cover up all such discrepancies, the assessee surrendered an amount of Rs. 75,00,000/-. The details of the surrender made by the assessee are as under:
Particulars Amount Surrender on account of 65,55,000/- excess stock Surrender on account of 9,45,000/- excess cash TOTAL AMOUNT OF 75,00,000/- SURRENDER It is pertinent to mention here that the assessee surrendered the said sum of Rs. 75,00,000/- as additional income.
3. After such surrender, the assessee credited the said amount of Rs. 75,00,000/- in his capital account prepared for the year ending 31.03.2020, and the assessee filed its return of income for AY 2020-21. In the 752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh
5 said return of income, the assessee declared a total income of Rs. 80,56,110/- and paid taxes at normal rate of tax.
3. Thereafter, the case of the assessee was selected for compulsory scrutiny and a notice u/s 143(2) of the Act was issued to the assessee on 30.06.2021. Thereafter, a notice u/s 142(1) of the Act dated 25.02.2022 along with detailed questionnaire was issued to the assessee. In response to the said notice, the assessee filed a reply dated 04.03.2022.
Subsequent thereto, another questionnaire was issued by the Ld. AO u/s 142(1) of the Act dated 20.03.2022. Further, on 23.03.2022, the assessee filed his detailed reply wherein, vide point no.3, the assessee has duly stated that he is engaged in the business of manufacturing and resale of sickle and vide point no. 21, the assessee duly submitted the explanation w.r.t. the amount of Rs. 75,00,000/- surrendered by the assessee duly mentioning that the said amount is only the additional income of the assessee and hence, deserves to be taxed as per normal provisions and not as deemed income.
During the course of assessment proceedings, the Ld. AO issued various notices and the assessee 752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh 6 filed various detailed replies in response to the notices issued by the Ld. AO wherein, the assessee has duly explained and submitted various details as required by the Ld. A.O.
6. Thereafter, a show cause notice ('SCN') dated 20.09.2022 was issued to the assessee wherein, the assessee was show caused as to why the provisions of section 115BBE of the Act should not be applied in the case of the assessee on the amount surrendered during the course of survey action. The assessee filed a detailed reply on 22.09.2022 as to non- applicability of provisions of section 115BBC of the Act.
7. Consequently, the case of the assessee was concluded and an assessment order dated 26.09.2022 was passed u/s 143(3) of the Act. In the said assessment order, the Ld. AO although did not make any additions to the total income as declared by the assessee applied the provisions of section 115BBE of the Act on said amount of 75,00,000/-surrendered during survey.
Against the order of the Ld. AO, the assessee filed an appeal before the Worthy CIT(A), and filed its detailed submissions during the course of appellate proceedings along with detailed paper book. However, the Worthy CIT(A) without considering the detailed submissions filed by the 752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh 7 assessee passed an order dated 05.06.2024. It is hereby submitted that in the said appellate order, the Worthy CIT(A) deleted the application of provisions of section 115BBE of the Act on the amount of Rs. 65,55,000/- (stock surrender) but upheld the said application of provisions of section 115BBE of the Act on the amount of Rs. 9,45,000/- i.e. the amount of cash surrendered by the assessee.
9. Now, against the order of the CIT(A) dated 05.06.2024, the assessee is in appeal and submissions in this regard are as follows: Submissions :
At the outset, it is submitted that a survey action u/s 133A of the Act was carried out at the business premises of the assessee on 05.03.2020. During the course of survey action, certain discrepancies were found w.r.t the stock and cash as per books of account of the assessee and the assessee in order to buy peace of mind, to avoid potential litigation and to cover up the discrepancies, surrendered an amount of Rs.75,00,000/- as over and above the normal income and in reply dated 23.03.2022, the assessee has duly stated that the said amount has been surrendered as additional income.
752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh 8 2. Further, it is submitted that the case of the assessee was selected for scrutiny only on the issue of amount surrendered by the assessee during the course of survey action. Now, out of the amount of Rs. 75,00,000/-, an amount of Rs. 65,55,000/- was surrendered on account of excess stock and has duly been accepted by the department to be out of the regular business of the assessee and the balance of Rs. 9,45,000/- was surrendered on account of excess cash found during the course of survey.
3. In this regard, it is submitted that the said amount is only additional income of the assessee which is only unaccounted in the books of the assessee which is evidently clear from the reply filed by the assessee as well as the statement of the assessee. Hence, additional income should be treated as business income of the assessee and the provisions of section 115BBE should not be made applicable on the case of the assessee. Reliance in this regard is placed on the judgment of the Jurisdictional Bench of ITAT Chandigarh in the case of Shri Gurdeep Singh Ubhi, in wherein, is has been held as under:
"6. Considering the overall facts and circumstances of the case, I am of the view that the aforesaid additional 752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh 9 income surrendered by the assessee was not from any other unexplained source and same was out of business proceeds of the assessee. Therefore, I do not find justification on the part of the lower authorities in applying the provisions of Section 115BBE of the Act to the surrendered business income of the assessee. Accordingly, the AO is directed to tax the assessee on the surrendered income at normal rates as applicable to the business income. It is made clear that my above findings are given in view of the peculiar facts of this case and the same will not hold any binding precedent.
In the result, the appeal of the assessee is allowed."
4. The ld. Counsel also brought on record following orders passed by the Coordinate Chandigarh and Amritsar Benches of the Tribunal:
1. ITAT Chandigarh Bench in M/s New Vishvakarma Agro Industries – ITA No. 215/Chd/2023.
ITAT Chandigarh in the case of Shri Krishan Kumar, ITA No. 175/Chd/2023.
3. ITAT Amritsar Bench in Sharp Chucks and Medicines (P) Ltd [2023] 156 taxmann.com 53 (Amritsar-Trib).
4. ITAT Amritsar Bench in Tejpal Singh, ITA No. 266/Amritsar/2023.
752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh
10 5. ITAT Chandigarh in M/s Sham Jewellers, ITA No.375/Chd/20222. 6. ITAT Chandigarh in M/s Sham Fashion Mall, ITA no. 315/Chd/2022. 7. Satrya Narayan Choudhary & Anr v ACIT & Anr – reported in [2020] 193 DTR 0353 (Jd.)(Trib.)
5. In addition to this, it was submitted by the ld. Counsel that in the order passed by the ld. CIT(A) dated 05.06.2024, CIT(A) has placed his reliance on the judgments in the cases Kim Pharma Pvt. Ltd. v CIT 216 Taxman 153 (P&H), Famina Knit Fab v ACIT 176 ITD 246 (Chandigarh Trib.), Pr. CIT v. Khushi Ram a Sons Foods (P) Ltd. In this regard, it is submitted that the said judgments are duly discussed in the judgment of the Hon'ble Chandigarh Bench of ITAT in the case of M/s Khurana Rolling Mills Pvt. Ltd. as reported in as well as in the case of judgment of the Hon'ble Chandigarh Bench of ITAT in the case of M/s. Bindas Foods Pvt. Ltd. in ITA No. 409/CHD/2021.
The ld. Counsel also submitted that it is hereby pertinent to mention that the surrender amount is only on account of business income of the assessee and the said fact has been accepted by the Department during the survey proceedings as 752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh
11 well as during the assessment proceedings wherein, no adverse remark has been passed by the A.O. neither with respect to the business of the assessee nor any other source of income other than the business of the assessee. It has also been submitted that the CIT(A) has duly accepted the excess stock found at the business premises of the assessee as related to business of the assessee but has failed to consider that the excess cash found also pertains only to the business of the assessee as duly stated by the assessee in his statement recorded during the course of survey action. Further, it is submitted that the department itself has compared the cash found at the business premises of the assessee with the cash in hand as per the books of account of regular business of assessee as on the date of survey as such, the Department itself accepted the said cash to be sourced out of the business of the assessee only. Therefore, it is submitted that when the amount surrendered pertains only with the business of the assessee then, application of provisions of section 115BBE of the Act is invalid and uncalled for.
7. The ld. DR relied on the order of the CIT(A).
752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh
12 We have heard the findings given by the ld. CIT(A) in his 8. appellate order and arguments made by the ld. DR in the proceedings before us. We have also considered the written submissions filed by the Counsel of the Assessee and his arguments made during proceedings before us. We find that in the statement recorded during the survey operation on 5.3.3030, Shri Anil Kumar Proprietor of M/s K. K. Agro Industries submitted before the survey party that the ledger account of the firm was updated only from 29.2.2020. After 29.2.2020, purchase and sales have not been recorded in the books of account. Therefore, the excess amount of cash found during the survey could be explained only after all the entries were made in the books of account. However, it was submitted that cash belonged to the business of the Assessee only. We have also considered the arguments of the Revenue but we find that the Revenue has not brought anything on record to prove that the excess cash found during the survey was from another source, other than the business of the Assessee. Therefore, it is obvious that cash found during the survey was generated from the business of the Assessee only. Keeping in view various case laws brought on record by the Counsel of 752-Chd-2024 Anil Kumar Prop. M/s K K Agro Industries, Ahmedgarh
13 the Assessee as discussed above and various orders passed by the Chandigarh Bench of the Tribunal, such as, in the case of S/Shri Bal Krishan, Kewal Krishan and M/s Bindal Foods Pvt Ltd, Moga Punjab vs. Pr. Commissioner of Income tax (Central), Ludhiana, order dated 16.3.2023, in to 409/Chd/2021 respectively (supra), excess cash found is held to be from the business of the Assessee only. Accordingly, we do not find any reason to tax the same u/s 69 read with section 115BBE of the Act. Thus, Assessee’s appeal on this issue is allowed.
In the result, appeal of the Assessee is allowed.
Order pronounced on 29.01.2025.