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Facts
During a survey under Section 133A, Pramod Electricals was found with excess cash of Rs. 8,81,310 and unaccounted/unexplained debtors of Rs. 96,16,000. The assessee offered both amounts as business income in its Income Tax Return (ITR) and paid tax at normal rates. The Assessing Officer, however, sought to tax these additions under Section 115BBE, which the CIT(A) upheld for the unexplained debtors.
Held
The Tribunal held that once the assessee offered the undisclosed income (unaccounted debtors) as business income in its ITR and paid tax at normal rates, and the department failed to provide any incriminating material to prove it was 'income from other sources', the Assessing Officer was not justified in treating it as such or applying Section 115BBE.
Key Issues
Whether income voluntarily offered by the assessee as business income post-survey can be reclassified as 'income from other sources' and taxed under Section 115BBE by the department without contradictory material.
Sections Cited
133A, 143(3), 142(1), 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”B-Bench” JAIPUR
Before: SHRI GAGAN GOYAL, AM & SHRI NARINDER KUMAR, JM
vkns'k@ORDER PER: NARINDER KUMAR, JUDICIAL MEMBER .
Assessee is before this Appellate Tribunal, feeling dissatisfied with the order dated 17.12.2024, passed by Learned CIT(A).
Vide impugned order, Learned CIT(A) has partly allowed the appeal filed by the assessee as regards addition relating excess cash of Rs. Pramod Electricals vs. DCIT 8,81,310/-, offered during survey, claiming the same to be its business income. As regards the other addition of Rs. 96,19,000/-on account of unaccounted/unexplained debtors , made by the Assessing Officer vide order dated 31.08.2021, relating to assessment year 2019-20, Learned CIT(A) has upheld the same and dismissed the appeal. That is how, the assessee is before this Appellate Tribunal.
Arguments heard. File perused.
Admittedly, the assessee-appellant firm is engaged in the business of transformer and installation of electrical lines. The assessee filed its ITR on 30.09.2019, declaring total income of Rs. 2,79,30,620/-. It is also admitted that on 26.02.2019 a survey action took place in respect of the assessee, u/s 133A of the Act, and, that is how, case of the assessee was manually selected for compulsory scrutiny as per guidelines issued by CBDT. Then notice u/s 143(3) of the Act was issued to the assessee on 30.09.2020. It was followed by notice u/s 142(1) of the Act.
In reply to the notices, the assessee put forth his submission. 6. Case of the department is that during survey, one diary was found at the premises of the assessee. Said diary revealed that the assessee had Pramod Electricals vs. DCIT given cash loans to the tune of Rs. 96,16,000/- to various debtors. During survey, when Pramod Kumar Gauam, a partner of the assessee’s firm was examined, he admitted that the debtors were not recorded in the regular books of accounts. The assessee, during survey proceedings offered the said undisclosed income of Rs. 96,16,000/- on account of unaccounted/unexplained debtors. However the assessee depicted the said income, so offered, under the head “Business Income”. While furnishing ITR, not only the assessee admitted the amount of unexplained debtors, it also paid tax on the said amount at normal rate. Even then, the department proceeded against the assessee, so as to charge tax as per provisions of Section 115BBE of the Act.
Ld. AR for the appellant has submitted that once the assessee offered a sum of Rs. 96,16,000/-, towards unaccounted/unexplained debtors, as found during survey proceedings , reflected the said amount under head “Business Income” in the ITR and also paid tax at normal rate, the department was not justified at all to claim tax on the said amount under the provisions of section 115BBE of the Act. In support of this Pramod Electricals vs. DCIT contention, Ld. AR has relied on all the relevant documents available on record, and also to the authorities below. Ld. AR has also relied on decision in case of Nikhaar Fashions vs. ACIT, Circle-2, ITAT No. 1020/JPR/2024 decided on 21.11.2024 and from amongst the other decisions submitted in two volumes.
Learned DR for the department has submitted that she stands by the reasons recorded in the impugned order and the impugned assessment as regards the said sole addition under challenge.
As noticed above, the assessee was also found in position of excess cash of Rs. 8,81,310/-. Said amount was also offered by the assessee, shown in the ITR, as “business income”, paid tax thereon at normal rate, but the department proceeded to charge tax u/s 115BBE of the Act. Learned CIT(A) partly allowed the appeal as regards the second mentioned addition relating to excess cash, but upheld the addition as regards unaccounted/unexplained debtors.
It is not a case of the department that the Assessing Officer was having any incriminating material against the assessee so as to establish that the said amount of Rs. 96,16,000/- formed part of “income from other sources”, and not the “income from business activity”. Had it been so, the department would have been justified in seeking explanation of the Pramod Electricals vs. DCIT assessee by putting the same to him, so as to charge tax as per section 115BBE of the Act. But, the fact remains that department has not placed on record any material to suggest that the said amount was not income from business or that it was income from other sources. During survey proceedings, when the partner of the firm offered the abovesaid amount as regular income from business, the department was required to enquire into the head under which said income fell, if not acceptable as regular income from business activity. In this regard, reliance has been placed on case titled as Satyaveer Singh v. CIT(A), (154 taxmann. Com 619 (Rajasthan), a decision by our own Hon’ble High Court. Conclusion 11. In view of the above discussion, we find merit in the contention raised by the Ld. AR for the appellant that once the assessee offered a sum of Rs. 96,16,000/-, said to have been discovered in the survey proceedings, and paid tax at normal rate, while depicting the said income in the ITR under head “regular income from business activity”, the Assessing Officer was not justified in treating the said income as income from other sources, and not as income from business.