Loading judgment…
Facts
The assessee, running a tent house business, filed a return of income. During a survey under Section 133A, advances, investment in house construction, tent equipment, and excess cash were found. The assessee surrendered income, offering it as undisclosed business income.
Held
The Tribunal held that the income offered for tax was business income and not unexplained investment or money under Section 69/69A. Therefore, taxing it under Section 115BBE was not justified. The additions made by the AO and confirmed by the CIT(A) were set aside.
Key Issues
Whether income surrendered during a survey, offered as business income and recorded in books, can be treated as unexplained investment and taxed under Section 115BBE, or if it should be assessed as normal business income.
Sections Cited
133A, 139, 142(1), 143(3), 69, 69A, 115BBE, 250, 14, 68, 69C, 69B, 28
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 208/JPR/2025
vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M.
This is an appeal filed by the assessee against the order of ld. CIT(A), Udaipur-2 dated 11.12.2024 passed under section 250 of the I.T. Act, 1961, for the assessment year 2018-19. The assessee has raised the following grounds of appeal :-
Shri Dilip Kumar, Kota. “1. The ld. CIT (A) has erred on facts and in law in upholding the finding of AO that unexplained advances of Rs.10,80,000/- and unaccounted investment in house construction of Rs. 12,38,854/- found in survey which has been offered by the assessee in his return of income is undisclosed investment u/s 69 of the Act taxable u/s 115BBE of the Act by not properly appreciating the statement recorded during survey and the fact that same is duly incorporated in the books of accounts.
The appellant craves to alter, amend and modify any ground of appeal
3. Necessary cost be awarded to the assessee. “
The brief facts of the case are that the assessee is running a tent house under his proprietorship concern M/s. Mahaveer Tent House. The assessee filed his return of income under section 139 for the year under consideration on 31.03.2019 declaring total income of Rs.45,06,720/-. The case of the assessee was manually selected for compulsory scrutiny as per guidelines dated 05.09.2019 issued by CBDT. Notice under section 143(2) was issued to the assessee on 23.09.2019 and served through ITBA Portal. Further notice under section 142(1) of the IT Act, 1961 along with questionnaire was issued on 07.01.2021 and served to the assessee through ITBA Portal. In response to these notices, the assessee filed submissions which were examined accordingly. A survey under section 133A was conducted in case of assessee on 08.02.2018. During the survey proceedings certain documents by way of exhibits were found. As per these documents, assessee has given advances of Rs. 10,80,000/- to various persons, made investment in construction of house for Rs. 12,38,854/- (Rs. 4,59,000 + Rs. 7,79,854/-), purchased tent equipment of Rs.
Shri Dilip Kumar, Kota. 12,50,000/- and excess cash of Rs. 4,34,140/- was found. In statement recorded under section 133A dated 08.02.2018, assessee stated that his only source of income is income from tent house and except this he has no other source of income. Therefore, the income of Rs. 40,02,994/- surrendered by him is his undisclosed business income. Accordingly such income of Rs.40.02,994/- was incorporated in the Profit & Loss account under the name of “Exception Business Income Surrender in Survey”. The AO while completing the assessment proceedings, held that the income offered for tax during survey is assessable under the head “Income from Other Sources” instead of Income from Business and Profession” as per the provisions of section 69/69A of the Act chargeable to tax under section 115BBE of the Act. The AO accordingly assessed the total income of the assessee at Rs. 45,06,720/- under section 143(3) of the IT Act, 1961 vide his order dated 17.05.2021. Aggrieved by the order of the AO, the assessee filed appeal before the ld. CIT (A). The ld. CIT (A) at para 4.3.3 pages 18-19 in respect of tent equipment and excess cash held that same is to be added as Business income of the assessee which has already been offered for tax in the return of income. Therefore, the same cannot be added under section 69/69A of the IT Act, and thus section 115BBE is not applicable. However, in respect of advances and investment in house, ld. CIT(A) held that if the argument of assessee that since he is engaged in business activity, all accounted asset or income should be considered Shri Dilip Kumar, Kota. as earned from business activity is accepted, then there will be no addition u/s 68, 69, 69A or 69C. Further the decisions relied by the assessee was distinguished stating that in those decisions ITAT accepted that the nature & source of amount surrendered was explained by assessee but in the present case the nature & source of these amounts remains unexplained as the claim of assessee is not supported by any evidence. Accordingly addition of Rs.23,18,854/- made by AO u/s 69 of the Act was confirmed and taxability of the same u/s 115BBE of the Act was upheld. Against this order of the ld. CIT (A), the assessee has come in appeal before the Tribunal.
3. At the time of hearing before us, the ld. AR reiterated the submissions as made before the ld. CIT (A). He further submitted his written submission which are being reproduced hereunder : “At the outset it is submitted that AO has accepted that assessee in the statement has stated that the source of income was from the business of tent house and except this he has no other source of income. However, it is incorrectly stated that assessee has not submitted any documentary evidences to sustain this claim that the surrendered income was earned from business activities ignoring that the same is incorporated in the books of accounts and clearly explained by the assessee in the statement recorded during survey. Once it is stated in the statement u/s 133A, the same cannot be ignored unless any contrary evidence of any other source of income is brought on record by AO. It is a settled preposition of law that an income can be considered under the head ‘Income from Other Sources’ only when it do not fall in any of the specific head of the income specified u/s 14 of the Act. In the present case, the income is earned from the business of tent house as stated in the statement recorded during survey and therefore it is a business receipt which can be assessed only under the It is further submitted that AO has considered the income of Rs.40,02,994/- offered for tax as unexplained investment/unexplained money/amount of investment not fully disclosed in the books of accounts as per the provisions of section 69 and 69A of the Act. These sections applies where assessee has made investment or found to be owner of any money, jewellery etc. and the same is not recorded in the books of accounts maintained by the assessee. In the present case, there is no dispute as to the fact that assessee has recorded the amount of Rs.40,02,994/- in books of accounts. The income so offered for tax is income from the business of tent house as stated in the statement recorded during survey. Therefore such income cannot be categorized as undisclosed/unexplained within the meaning of section 69/69A of the Act. The Ld. CIT(A) has partly accepted such explanation to the extent it relate to the tent equipment and excess cash found in survey but has incorrectly not accepted the same in respect of advances given and investment in house ignoring that the statement of assessee in respect of all these four items is that the source of same is out of the business receipt of the current year.
It may be appreciated that an income is undisclosed if it is not disclosed in the return of income. The first opportunity of disclosure of income arises only at the time of filing the return of income. In the present case, on the date of survey, the due date of filing the return of income has not expired. The assessee has incorporated the impugned income in its books of accounts and has offered the same for tax in the regular return filed u/s 139 on 31.03.2019 (PB 26). Hence, the income so offered for tax is not in the nature of section 69/69A of the Act and consequently section 115BBE is not applicable. This explanation of the assessee is not controverted by Ld. CIT(A).
The Ld. CIT(A) has incorrectly distinguished the decisions of various ITAT relied by the assessee whereas the fact of these cases is similar to the facts of assessee and the decision of Hon’ble ITAT Chandigarh Bench in case of Veer Enterprises Vs. DCIT (2024)
Reliance in this connection is placed on the following cases:-
Smt. Rekha Shekhawat Vs. PCIT (2022) 218 DTR 161 (Jaipur) (Trib.) In view of the fact that the unrecorded trade advances and cash in hand admitted during the course of survey u/s 133A emanated from and related to the real estate business carried on by the assessee and the same were later incorporated in the regular books of accounts, the additional income was in the nature of business income and did not fall u/s 68 and/or sec. 69 and therefore, Principal CIT was not justified in invoking the provisions of sec. 263 by holding that the assessment order was passed without considering that such additional income fell under the purview of ss. 68 and 69 and that tax was chargeable u/s 115BBE as against normal rates.
Sh. Surendra Kumar Patni Vs. ACIT order dt. 21.11.2024 (Jaipur) (Trib.) (PB 39-53)
In this decision Hon’ble ITAT at Para 7 of the order after holding that revenue was not able to advance any evidence during assessment proceeding that the said income is not connected with the business income of theassessee, hence all the income earned by the assessee relate to business income only and after relying on various decisions directed the AO to calculate tax without applying section 69B r.w.s. 115BBE of the Act as the income of assessee is chargeable to tax as normal business income u/s 28 of the Act.
M/s Orthopaedics and Trauma Center Vs. DCIT order dt.20.02.2025 (Jaipur) (Trib.) (PB 54-66)
Shri Dilip Kumar, Kota. In this decision Hon’ble ITAT at Para 22 of the order after observing that revenue has not pointed out any other activity or source of income of appellant and after relying on various decisions, at Para 24 of the order held that revenue was not justified in invoking provisions of section 115BBE of the Act.
Smt. Sheela Dhakar& Smt. Ranu Malav Vs. DCIT & 1445/JPR/2024 order dt. 26.03.2025(Jaipur) (Trib.) (copy enclosed)
By following the above decisions and the decision of Hon’ble Rajasthan High Court in case of Bajrangan Traders, it was held at Para 20 that revenue was not justified in invoking provisions of section 115BBE of the Act, in place of the normal rate of tax, stated to have already been deposited by the assesseeson the basis of disclosure during the survey.
In view of above, AO be directed to tax the amount of Rs.23,18,854/- under normal provisions of the Act and quash the finding of Ld. CIT(A) to tax the same u/s 115BBE of the Act.”
On the other hand, the ld. DR supported the orders of the Revenue Authorities.
We have heard the rival submissions, perused the material on record and gone through the orders of the lower authorities and the case laws cited before us. We note that during the course of survey u/s 133A dated 08.02.2018 assessee stated that his only source of income is income from tent house and except this he has no other source of income. He surrendered income of Rs.40,02,994/- as his undisclosed business income comprising of unrecorded advances of Rs.10,80,000/- , unrecorded investment in construction of house Rs.12,38,854/-, unrecorded Shri Dilip Kumar, Kota. purchase of tent equipment Rs.12,50,000/- and excess cash found Rs.4,34,140/-. Such income is incorporated in the profit and loss account under the name of “Exception Business Income Surrender in Survey” and the net profit as per P&L A/c of Rs.48,56,715/- was offered to tax under the head “Income from Business or Profession”. On the surrendered income, tax was paid by assessee at normal rate of taxation but AO charged the tax on the same u/s 115BBE of the Act. The ld. CIT(A) accepted that income declared by way of purchase of tent equipment of Rs.12,50,000/- and excess cash found Rs.4,32,140/- is business income taxable at normal rate but the income surrendered on account of unrecorded advances of Rs.10,80,000/- and on account of construction of house Rs.12,38,854/- is assessable u/s 69A of the Act liable for taxation u/s 115BBE of the Act. We found that revenue has not pointed out any other activity or source of income of the appellant. Had the revenue relied on any reliable, cogent and convincing material in proof of the fact that assessee had any other source of income, then the revenue would have been justified in covering the matter u/s 115BBE of the Act. But, in the given facts and circumstances, it cannot be said that ld. CIT(A) was justified in invoking the provisions of section 115BBE of the Act on part of the surrendered amount. The coordinate bench of ITAT in case of M/s Orthopedics and Trauma Center in for AY 2019-20 vide order dated 20.02.2025 by following the order of the coordinate bench in case of Surendra Kumar Patni v/s Shri Dilip Kumar, Kota. ACIT in order dated 21.12.2024 has held that revenue was not justified in invoking provisions of section 115BBE of the Act, in place of normal rate of tax, stated to have already been deposited by the assessee on the basis of disclosure during the survey. 5.1 In view of above discussion, reasons and respectfully following the decisions of coordinate benches of ITAT, the assessee deserves to succeed. The impugned order passed by ld. CIT(A) is therefore, hereby set aside.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 26/05/2025.
Sd/- Sd/- ¼ jkBkSM+ deys'k t;UrHkkbZ ½ ¼MkWa-,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 26/05/2025 *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Sh. Dilip Kumar, Kota 2. izR;FkhZ@ The Respondent- DCIT, Central Circle, Kota. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File { vkns'kkuqlkj@By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत