MUKESH KUMAR AHUJA,KOTA vs. ACIT, CENTRAL CIRCLE, KOTA

आयकरअपीलीय अधिकरण] जयपुरन्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR

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BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 109/JPR/2025
fu/kZkj.k o"kZ@Assessment Year : 2019-20

Mukesh Kumar Ahuja
1-SA-3, Vigyan Nagar,
LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABKPA3722C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Rajendra Sisodia, C.A.
jktLo dh vksj ls@Revenue by : Mrs. Swapnil Parihar, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 18/02/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 07/04/2025

vkns'k@ORDER

PER: DR. S. SEETHALAKSHMI, J.M.

This appeal is filed by the assessee against the order of the Ld. CIT(A)-2,
Udaipur dated 22.01.2025 for the assessment year 2019-20, which in turn arise from the order dated 30.09.2021 passed under section 143(3) of the Income Tax
Act, 1961[hereinafter referred to as “Act” ] by the ACIT/DCIT, Central Circle,
Kota.
2. The assessee has raised following grounds:-

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Mukesh Kumar Ahuja, Kota.

“1. That the order of the Ld. CIT (A) is erroneous, arbitrary, opposed to the facts of the case and thus untenable.
2. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in treating the income of Rs.1,35,21,090/-surrendered during the course of survey to be deemed income u/s 69 and 69A of the Act as against business income, which is arbitrary and unjustified.
3. That the Ld. Commissioner of Income Tax (Appeals) has further erred in law as well as on facts in upholding the charging of tax @ 60% applying the provisions of Section 115BBE which are not applicable in the facts of the case and as such the order is arbitrary and unjustified.
4. The Ld.CIT(A) has not given any finding on the following additional grounds of appeal raised before him-
 The Ld. AO completed the assessment accepting the returned income, notwithstanding the fact that the assessee had inadvertently included all discrepancies found during survey, believing them to constitute his income.
 The Ld. AO failed to appreciate that the income included in his ITR by the assessee, under a mistaken belief, was not the legitimate income which ought to have been taxed.
 The Ld. AO has erred in not levying the tax lawfully on the income of the assessee comprised in the items of surrender and taking the benefit out of ignorance of the assessee.
 The Ld. AO instead of taxing the income to the extent of gross profit comprised therein, in respect of unrecorded debtors which represented unrecorded credit sales, taxed the entire amount of debtors thereby benefiting the Revenue.
 The Ld. AO has erred in taxing the undisclosed debtors of Rs.61,50,000/- u/s 69, ignoring the fact that the undisclosed debtors represented unrecorded credit sales on which only the gross profit rate ought to have been taxed.
 The ld. AO has erred in taxing both the shortage of stock of Rs. 16,00,000/- as well as unrecorded debtors of Rs. 61,50,000/-, whereas the unrecorded debtors are generated out of sale of stock and in that view of the matter, the benefit of telescoping of stock to that extent, ought to have been given.
5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”

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Mukesh Kumar Ahuja, Kota.

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Mukesh Kumar Ahuja, Kota.

documents, it is also found that many transactions related to cash payment made by the assessee to various creditors & debtors and investments in construction of hostel were also not recorded in the regular books of accounts of the assessee. In his statement recorded during the survey proceedings, the assessee had accepted these discrepancies and offered total undisclosed income of Rs. 1,60,11,143/- under the various head for the A.Y 2019-20. The details of the same are as under:-
1. Unaccounted cash

Rs, 8,90,053/-
2. Unaccounted sales

Rs. 16,00,000/-
3. Unaccounted cash payments to creditors

Rs. 33,71,090/-
4. Unaccounted cash payment to debtors

Rs. 61,50,000/-
5. Unaccounted investment in Rs. 40,00,000/-
Construction of hostel

Total :

Rs.1,60,11,143/-

The assessee had included this offered income of Rs. 1,60,11,143/- in his total income under the head "Income from Business or Profession" in ITR filed for the relevant year and paid tax at normal rate thereon. As the unaccounted/unexplained investment in cash payment to creditors/debtors & investment made in construction of hostel are covered u/s 69 and unexplained excess cash is covered u/s 69A of the I.T. Act, therefore tax should be charged as per the provision of section 115BBE of I.T. Act 1961. 5
Mukesh Kumar Ahuja, Kota.

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Mukesh Kumar Ahuja, Kota.

made in construction of hostel are covered u/s 69 and unexplained cash is covered u/s 69A of the IT Act.
3.3
Considering the facts of the case, the reply submitted by the assessee is not found satisfactory. Therefore, the unaccounted cash advances to debtors of Rs.
61,50,000/-, unaccounted cash payment to creditors of Rs, 33,71,090/- and unaccounted investment in construction of hostel of Rs. 40,00,000/- are considered as unexplained investment as per provision of section 69 of the I.T. Act. Similarly, unaccounted excess cash of Rs. 8,90,053/- is considered as unexplained money as per provision of section 69A of the IT Act. Therefore, tax is charged on this offered income as per provision of section 115BBE of the I.T. Act, 1961. Since, the assessed income includes income chargeable to tax as per provision of section 115BBE of the I.T. Act, 1961, therefore, the AO satisfied to initiate penalty proceeding u/s 271AAC of the I.T. Act, 1961. Being aggrieved by the order of AO, the assessee preferred appeal before the ld. CIT (A). The ld. CIT (A) after considering the submissions of the assessee, partly allowed the appeal of the assessee and deleted the addition on account of excess cash found for Rs.
8,90,053/-.
4. Aggrieved from the order of the ld. CIT(A), the assessee has preferred this appeal before the us, on the grounds as mentioned in para 2 above. In support of 7
Mukesh Kumar Ahuja, Kota.

the grounds of appeal, the ld. AR of the assessee has submitted the following written submission:-
“ Submission on the grounds of appeal

Ground No. 1 to 3 being interrelated, have been taken together, which are - That the order of the Ld. CIT (A) is erroneous, arbitrary, opposed to the facts of the case and thus untenable. The Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in treating the income of Rs.1,35,21,090/- surrendered during the course of survey to be deemed income u/s 69 and 69A of the Act as against business income, which is arbitrary and unjustified. That the Ld.
Commissioner of Income Tax (Appeals) has further erred in law as well as on facts in upholding the charging of tax @ 60% applying the provisions of Section 115BBE which are not applicable in the facts of the case and as such the order is arbitrary and unjustified.
The assessee in his statements recorded during survey, after question no. 22, in very explicit terms, during verification stated that the entire income surrendered during survey was acquired out of business activities and the learned AO has not controverted this statement of the assessee. The declaration to this effect by the assessee on the conclusion of the recording of statements is reproduced hereunder
–
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During the course of assessment proceedings, the AO issued a show cause notice dated 30.11.2019 stating that the assessee had included this offered income of Rs.1,60,11,143/- in his total income under the head “Income from Business or Profession” in ITR filed for the relevant year and paid tax at normal rate thereon.

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Mukesh Kumar Ahuja, Kota.

As the unaccounted/unexplained investment in cash payment to creditors/debtors
& investment made in construction of hostel are covered u/s 69 and unexplained excess cash is covered u/s 69A of the I.T. Act, therefore tax should be charged as per the provision of section 115BBE of I.T. Act 1961. In response to the show-cause, the assessee filed his submissions stating that “The declaration by the assessee in the statements taken by the department are in the direction that the income surrendered during survey relates to business of electrical and electronics of the running financial year in which the survey proceeding were carried out by the department. The survey officers had verified that the assessee has godown and sale points in business which is his source of income and there are no other sources that were noticed and thus not questioned and recorded by them in the statements. There is no material found which could indicate in the direction that there are other inexplicable sources of income. The only source of income which the assessee has is the business run by him and is quite evident and may also be verified from the departmental sources as well. All the amount related to payments to creditors, debtors, advances for construction were made from the shop of the assessee from where the income was earned by the assessee, it can be conveniently understood that the income was generated from the place from where the payments were made and since there were no documents to infer otherwise, the source of these was from the commercial establishment run by the assessee. Thus, since the income has been declared in the return of income under the business head, it is quite clear that the same is from sources which are explainable, recorded in the register. The source is definite and understandable and thus section 69,69A, 69B are not applicable to these in the understanding of the assessee which is why it is requested not to deem the same as taxable under section 115BBE.
It is submitted that after the survey, the entries in the books of account has been passed and the books have been accordingly updated. Cash has been increased in the books of account, amount of debtors has been entered in the books of account as due from parties, the creditors have been reduced, the value of construction made has been increased and entry relating to the stock has also been passed in the books of account. So, once all the entries have been incorporated in the books of account, the same will be out of the preview of the Sections 69 & 69A. While

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assessing the income of the assessee, the Assessing Officer has wrongly applied the sections, as when he was assessing the income, entries in the books of account existed and the assessee has given the proof of the same during assessment proceedings by producing complete books. As regards asking for the source of investment by the Assessing Officer, it has been submitted that the source of investment was purely from the business in which the assessee is engaged. The assessee having disclosed the income and having filed the return including the income offered during survey, there arises no question of undisclosed income.
For the above proposition the assessee relies on the decision of the Ahemdabad
Tribunal in the case of DCIT vs. Dr Satish B Gupta (2011) 49 DTR 262, order dated 06.08.2010. In this case the assessee declared income in the return of income as offered during the course of survey under section 133A - held section 133A is an action for calling of information, in itself it is not a proceeding. There can be no undisclosed income until there is duty to disclose. The duty to disclose income arises only at the time when the assessee furnishes return of income. If assessee furnishes return of income including income offered during survey then there remains no undisclosed income
Reliance is further placed on the decision of Hon’ble Delhi High Court in the case of CIT vs. SAS Pharmceuticals (2011) 335 ITR 259 (Delhi HC) ".........We, thus, answer the questions as formulated above, in favour of the assessee and against the Revenue finding no fault with the decisions of the CIT (A) as well as the Tribunal.
As a result, this appeal is dismissed"
In the aforesaid decisions, it has been held that penal provisions are applicable unless otherwise specified w.r.t. return of income. Penal provisions of section 69/115BBE cannot be made applicable on the ground that if there had been no survey the assessee would not have disclosed income or would have succeeded in concealing the income. It has been held in these decisions that assesseee cannot be penalized on the basis of guess work, conjectures and surmises. In view of this, the provisions of section 69/115BBE are not applicable in the case of the assessee and not in the least in respect of income surrendered in the return of income. It is submitted that in the case of the assessee, the source of income was apparent and openly known to the Ld. Assessing Officer. Even during the course of survey, no 10
Mukesh Kumar Ahuja, Kota.

material or evidence was found that except business, the assessee was having any other source of income.
In the instant case, for the deeming provisions of section 69 to be attracted, there has to be a finding that the assessee has made investments during the financial year in the stock and by way of advances, such investments are not recorded in the books of account so maintained by the assessee, and the assessee offers no explanation about the nature and source of the investments or the explanation so offered is not found satisfactory in the opinion of the AO. Therefore, the foundational requirement before invoking the deeming provisions is not that there were certain survey operations u/s 133A and some undisclosed income has been detected and surrendered by the assessee and thus, the deeming provisions are automatically attracted. Rather the foundational requirement is whether the assessee has made the investment/has been found to be owner of cash and the explanation offered by the assessee explaining the nature and source of such undisclosed income and the reasonability of the explanation so offered by the assessee keeping into account the facts and circumstances of the relevant case. In fact, if we look at the provisions of section 133A, clause (iii) of sub-section (3) provides that an income tax authority acting under this section shall record the statement of any person which may be useful for or relevant to any proceedings under this Act. Therefore, what explanation has been offered by the assessee as part of his statement recorded u/s 133A needs to be analyzed and examined before drawing any conclusions in this regard.
Through various questions raised during the survey, the assessee was asked about the nature and source of its income and the various discrepancies found during the survey. In response, vide his statement recorded during the survey, on 11.09.2018, the assessee stated that he is the proprietor of Monica Electricals and his firm deals in electric & electronic goods and that there was no other source of income.
He was confronted with the discrepancies found in terms of excess cash, short stock, receivables, payables and investment made in construction of hostel.
Rather, the assessee was confronted with not just the discrepancies so found during the survey, but the nature and source thereof and it is clearly emerging that the source of such income is the business operations of the assessee. The assessee offered the amount of Rs. 8,90,053/-, thus amount being the difference between

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the amount of Rs.9,67,800/- found at the premises and the amount of Rs.77,747/- shown in the books of account as cash in hand. The assessee offered, for surrender, an amount of Rs. 16 lacs on account of stock found short. The assessee further offered an amount of Rs.33,71,090/- representing the payment made to creditors found noted in the diary. He also offered Rs.61,50,000/- on account of amount realisable from debtors not recorded in books and another Rs.40 lacs on account of advance paid for construction of hostel found noted in the diary. The statement of the assessee is available on record and related documents so found during the course of survey are stated to be in possession of the Revenue authorities. Apparently, the AO has failed to take into consideration the statement of the assessee recorded during the course of survey holistically, and other documents and findings of the survey team which are very much part of the records. Following the surrender so made during the course of survey, the assessee has honored the surrender so made and offered the additional income as business income in his return of income and paid due taxes thereon.
As held by various judicial forums, what is relevant before invoking the deeming provisions is not just the factum of survey action but besides that, what is the explanation so offered by the assessee explaining the nature and source of income so found during the course of survey proceedings and which has not been recorded in the books of account and the same is the essence of the statutory provisions as duly recognized by the Courts and various Benches of the Tribunal and which has been reiterated from time to time. The statement of the assessee has to be read as a whole and not in piecemeal especially where the Revenue is relying on the same statement and in such circumstances, the defence available to the assessee in terms of part of the statement not been considered by the Revenue cannot be ignored. The mere fact that survey proceedings have been initiated at the business premises of the assessee doesn't mandate the Assessing officer to automatically invoke the deeming provisions and before invoking the deeming provisions, he has to call for the explanation of the assessee and only where the explanation so offered is not found satisfactory, he can proceed and invoke the deeming provisions.
Firstly, how the Ld. AO has arrived at a conclusive finding that the discrepancies found, confronted and accepted by the assessee during the course of survey attract

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the deeming provisions of section 69 & 69A, is not apparent from the impugned order. Merely stating “As the unaccounted/unexplained investment in cash payment to creditors/debtors & investment made in construction of hostel are covered u/s 69 and unexplained excess cash is covered u/s 69A of the I.T. Act, therefore tax should be charged as per the provision of section 115BBE of I.T. Act
1961” is like an open ended hypothesis which is not supported by any specific finding that the matter shall fall under which of the specific sections and how the conditions stated therein are satisfied before the said provisions are invoked. It is like laying a general rule, which is beyond the mandate of law, that wherever there is a survey and some income is detected or surrendered by the assessee, the deeming provisions are attracted by default and by virtue of the same, provisions of section 115BBE are attracted. The AO has to record his specific findings as to the applicability of the relevant provisions and how the explanation called for and offered by the assessee is not acceptable in the facts of the present case, which is clearly absent in the instant case. Therefore, where the ld AO himself is not clear about the applicability of relevant provisions, is clearly shooting in the dark which cannot be sustained in the eyes of law and the order so passed is arbitrary.
Further, the surrender made by the assessee was on account of cash found during the course of survey, unrecorded expenditure in the cost of construction of hostel, discrepancy in stock and unrecorded receivables and unrecorded payments made to creditors. By no stretch of imagination, any of these incomes apart from cash can be considered as income under any head other that the 'business income'.
Nowhere in his order the Assessing Officer has been able to bring on record the fact that the income surrendered during the course of survey was not out of the business of the assessee. Also nowhere he has objected to the heads under which the assessee had surrendered these amounts, i.e. cash, construction of building, discrepancy in stock and discrepancy in receivable and payables. Further, even the survey team has not found any source of income except the business income. In the background of the facts of the present case, it can safely be inferred that all income surrendered may be brought to tax under the head 'business income.
It is submitted that the survey authorities present during the course of survey thereafter had in principle agreed to the offer of the assessee of additional business

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income and survey operations were concluded after calculating the estimated tax liability by applying the normal tax rates as applicable at the relevant point in time and they have also collected three cheques - (i) Cheque No.301174 dated
15.09.2018 for Rs.23,00,000/- (ii) Cheque No.301175 dated 15.12.2018 for Rs.11,50,000/- and (iii) Cheque No.301176 dated 15.03.2019, towards tax from the assessee for payment of advance income tax calculated at the normal rate of tax on such additional business income. These cheques were later returned to the assessee by the department after the due tax had been fully deposited by the assessee. It is further submitted that the additional business income was duly recorded in the Profit & Loss Account which has been duly audited by the Chartered Accountant and on the basis of the same, the business income as per the Profit & Loss Account has been reflected under the head 'Profit & Gains of business and profession' and tax return has, accordingly, been filed. The book results of the assessee have been accepted by the department.
It is further submitted that the names of the creditors found noted in the diary to whom payments have been made and those appearing in the regular books are the same. This clearly proves that the income pertains to the Electric/electronic business of the assessee. In terms of applicability of Section 69 , it is submitted that these provisions are not attracted in the instant case as the assessee during the course of survey proceedings had disclosed the source of income in relation to the above income and this disclosure forms part of the statement recorded by the authorities during the course of survey and also the fact that the assessee had only source of income that is, from his business activity of trading in electric/electronic goods in his proprietary concern Monica Electricals. It was submitted that during the course of survey so conducted, no other source was noticed/detected/brought on record by the Revenue Authorities. It is, accordingly, submitted that the source of income so surrendered was not inexplicable but was rather earned out of the business of the assessee being carried on in the name and style of M/s Monica
Electricals, which is the only source of income and as such, provisions of Section 69 are not attracted. It is further submitted that the tax liability has been rightly discharged as per the law.
The assessee places reliance on the following case laws to support his case-
Parmod Singla v. ACIT[2023] 154 taxmann.com 347 (Chd. - Trib.)In this case, survey under section 133A was carried out at the business premises of the assessee during which certain discrepancies were noticed and assessee surrendered a sum towards advances, unaccounted stock and cash in hands. Thereafter, the assessee

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filed his return of income, declaring certain income including the surrendered income. During assessment proceedings, the A.O. issued SCN stating that the income surrendered during survey had been offered in the return of income at the rate of 30 per cent, however, as per the provisions of section 115BBE read with sections 69 and 69A, the amount so surrendered was taxable at the rate of 60 per cent. The assessee submitted that the business of the assessee was the only source of assessee's income and the source of income so surrendered was not unexplained hence the provisions of sections 69 and 69A were not attracted. The A.O. did not accept the submission of the assessee and accordingly, the income so surrendered was brought to tax as deemed income under sections 69 and 69A and tax at the rate of 60 per cent was computed under section 115BBE. The assessee filed an appeal before Hon'ble CIT (A) and the Hon'ble CIT (A) sustained the additions made by A.O. The Hon'ble ITAT held that in the instant case, the difference in stock so found out by the authorities has no independent identity and is part and parcel of entire stock, and therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset and the difference should, thus, be treated as undeclared business income. In the instant case, the surrender on account of advances were relating to the business being carried on by the assessee. The Commissioner (Appeals) has also returned a finding that the advances were admitted as being related to business activity of the assessee. Where the same has been found unrecorded in the books of account, the same has to be brought to tax under the head "business income". The income surrendered during the course of survey cannot be brought to tax under the deeming provisions of sections 69 and 69A and the same has been rightly offered to tax under the head "business income". In absence of deeming provisions, the question of application of section 115BBE doesn't arise for consideration.
Famina Knit Fabs vs. ACIT[2019] 176 ITD 246/104 taxmann.com 306 (Chd -
Trib) In this case, the Hon'ble ITAT held that where during the course of survey, a surrender was made by the assessee on account of debtors/receivables which was based on a diary found during the course of survey and the Revenue had accepted that the surrender was on account on account of receivables, it followed that the debtors were generated from the sales made by the assessee during the course of 15
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carrying on the business of the assessee which was not recorded in the books of the assessee. The Hon'ble ITAT went on to further hold that though the said income was not recorded in the books of the assessee but the source of the same stood duly explained by the assessee as being from the business of the assessee and even otherwise no other source of income of the assessee was on record either disclosed by the assessee or unearthed by the Revenue. The Bench further held that the preponderance of probability, therefore, is that the debtors were sourced from the business of the assessee. Therefore, there was no question of treating it as deemed income from undisclosed sources u/s 69, 69A, 69B, or 69C of the Act and the same was held to be in the nature of business income of the assessee.
Chokshi Hiralal Maganlal v. DCIT [2011] 9 taxmann.com 300/141 TTJ 1
(UO)/45 SOT 349 (Ahd.) In this case there was a survey u/s 133A at the premises of the assessee. Excess stock of gold and silver ornaments were found. The excess stock was included in the closing stock of the inventory while filing the return of income subsequently but the AO observed that the disclosure was not consistent with the provisions of sections 69B of the Act and same was accordingly brought to tax u/s 69B. The Hon'ble CIT (A) confirmed the additions. The Hon'ble ITAT
Ahmedabad held that the excess stock found during the survey is not separately and clearly identifiable but is part of mix lot of stock found at the premises which included declared stock as per books and also excess stock as computed by survey officers and therefore the provisions of section 69B cannot be made applicable as primary condition for invoking the said provision is that the asset should be separately identifiable and it should have independent physical existence of its own and since excess stock as a result of suppression of profit from business over the years and has not kept identifiable separately but as a part of overall stock found, the investment in excess stock has to be treated as business income.
Gaurish Steels (P.) Ltd. v. ACIT[2017] 82 taxmann.com 337 (Chd. - Trib.) In this case the assessee surrendered an amount of Rs. 70 lacs as additional income during the course of survey conducted at its premises on account of following heads:
I. Discrepancy on account of cash found

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II. Discrepancy on cost of construction of building
III. Discrepancy in stock
IV. Discrepancy in advances and receivable
The issue before the Hon'ble ITAT was whether the income of Rs. 70 lacs surrendered is to be taxable as business income or income from other sources or as deemed income under sections 69A, 69B and 69C of the Act as held by the A.O. It was held that Nowhere in his order the A.O. has been able to bring on record the fact that the income surrendered during the course of survey was not out of the business of the assessee. Also nowhere he has objected to the heads under which the assessee had surrendered these amounts, i.e. cash, construction of building, discrepancy in stock and discrepancy in advances and receivable. Further, even the survey team has not found any source of income except the business income. Now, following the judgment of Juri ictional High Court, in the background of the facts of the present case, we can safely infer that apart from cash all other income surrendered may be brought to tax under the head 'business income' while the cash has to be taxed under the head deemed income under section 69A of the Act.

Veer Enterprises vs. Deputy Commissioner of Income-tax [2024] 158
taxmann.com 655 (Chandigarh - Trib.)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 section 133A, 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 as per 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 69B and same had been rightly offered to tax by assessee under head of business income - Held, yes [Paras 29 and 30] [In favour of assessee]

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Tejpal Singh vs. Deputy Commissioner of Income-tax [2024] 158
taxmann.com 679 (Amritsar - Trib.)Where assessee claimed that entire amount of excess cash found from business premises was generated from undisclosed sale of medicine, since revenue was unable to show any other sources related to excess cash, excess cash was from business of assessee and, thus, application of section 115BBE on amount of excess cash was bad in law.
Further reliance is placed on the juri ictional Jaipur Benches decision in case of DCIT Vs. Shri Ram Narayan Birla (ITA No. 482/JP/2015 dt. 30/09/2016), and Bajargan Traders Vs. ACIT (in ITA No. 137/JP/2017 dt. 17/03/2017) which has subsequently been affirmed by the Hon'ble Rajasthan High Court in case of PCIT vs. Bajargan Traders (ITA No.258 of 2017).
Adverting now to the facts of the instant case, it is seen that when survey proceedings were conducted at the business premises of the appellant, a diary was found from the shop, which contained entries of receivables amounting to Rs.
61,50,000/- on page nos. 9 to 13, which were not recorded in the regular books of accounts. When these entries were confronted to the appellant while recording of the statement on 11.09.2018, it was stated: "that these entries are sundry receivables which has not been accounted for in the books of accounts, these cash receipts is surrendered as income under the head business for F.Y.2018-19 Clearly, it is evident from the above that the surrender was on account of debtors/receivables relating to the business of the assessee only. The Revenue has accepted the surrender as such, as being on account of receivables. It follows that the debtors were generated from the sales made by the assessee during the course of carrying on the business of the assessee, which was not recorded in the books of the assessee. Though the said income was not recorded in the books of the assessee but the source of the same stood duly explained by the assessee as being from the business of the assessee. Even otherwise no other source of income of the assessee is there on record either disclosed by the assessee or unearthed by the Revenue.
Similar is the position with creditors found recorded in this diary at Page 3 to 6. The assessee had stated that cash payments have been made to these creditors and the payment so made has not been recorded in my books. It would also be pertinent to mention that the names of the parties appearing as creditors is the same which further establishes that the payment relates to electric/electronic business of the 18
Mukesh Kumar Ahuja, Kota.

assessee. The preponderance of probability therefore is that the debtors and creditors were sourced from the business of the assessee. As for the advance of Rs.40,00,000/- given for construction of the hostel, the source of the same was realization from debtors which has already been shown to be business receipts.
Moreover, in reply to Q.No.21, the assessee had in very explicit terms stated that the source of his contribution in construction of hostel, i.e.Rs. 40,00,000/- was from his business income. Further, in the final deposition made by the assessee in his own hand writing, he has reiterated the fact that the surrendered amount has been earned from his business activities. Therefore, there is no question of treating it as deemed income from undisclosed sources u/s 69 of the Act and the same is held to be in the nature of Business Income of the assessee.
It is, accordingly, submitted that in light of the aforesaid submissions, the amounts so surrendered during the course of survey proceedings is clearly in the nature of business income and it has been duly offered to tax under the head "income from business & profession". The additional income was conceded in the course of survey operations at the business premises of the assessee. The income surrendered was sort of lump sum figures offered in the form of excess cash, unaccounted debtors, unaccounted payment to creditors, etc. from business operations. Such additional income confessed in survey at business premises gives a facial impression of business attributes. In the light of assertions made in statement in survey proceedings, the assessee has made out an arguable case that such income is concomitant of business activities and thus impressed with the character of business income as correctly disclosed in the ROI.Therefore, the action of the AO in treating the business income so offered by the assessee as deemed income u/s 69
and bringing the same to tax under the amended section 115BBE deserves to be set aside and necessary relief be provided to the assessee.

The CIT(A) while deciding the issue has held- The cash advances given to the various persons of Rs. 61,50,000/-, cash payments to creditors of Rs. 33,71,090/- and investment made in construction of hostel of Rs. 40,00,000/- are nowhere related to business activity(Page-14) It may be mentioned that the assessee never gave cash advances to anybody. The Ld.CIT(A) has completely misjudged the issue. The impugned amount of Rs.61,50,000/- were his debtors on account of 19
Mukesh Kumar Ahuja, Kota.

goods sold to them. This can be very well inferred from the fact that all the names mentioned in the list of creditors in impounded diary are the same as appearing as Creditors in his regular books. He has finally held - The argument of the appellant are not found to be acceptable. The decisions relied upon by the appellant is not found to be applicable on the facts of the case(Page-16) He has failed to distinguish a single case out of the 10 odd cases relied upon by the assessee. The order of Ld.CIT(A) is erroneous, arbitrary and perverse.

The assessee finally relies on the latest judgement rendered by the juri ictional
Jaipur Bench on 01.08.2024, in the case of Mukesh Kumar Saini vs.
PCIT(Central), in ITA No. 477/JP/2024. In view of the above submission and judicial decisions, it is prayed that the order of Ld.CIT(A) may be set aside and the income surrendered during survey be taxed at normal rates.

Ground No.4 as stated in the Memorandum of Appeal and which was not adjudicated upon by the Ld.CIT(A), is being revised as under, with a request to the Hon’ble Bench to admit the same-
The Ld.AO took advantage of the ignorance of the assessee in accepting the returned income, in which the assessee without understanding the implication of surrender, had inadvertently included the payment received from the debtors as well as payment made to the creditors and investment made in construction, and paid tax on all three of them, notwithstanding the fact that the payment made to creditors and amount paid for construction were basically application of income received from debtors and sale of stock found short.
The assessee filed the return including the entire income surrendered during survey and duly paid taxes on it. The same was assessed u/s 143(3). However, after assessment, the assessee realized that he had committed a mistake in as much as the items on account of which surrender has been made, did not constitute income of the assessee. The issue was raised before the CIT(A) but he failed to adjudicate on the issue. Therefore, it is being raised brfore the Tribunal.

20
Mukesh Kumar Ahuja, Kota.

Reference may be made to National Thermal Power Co. Ltd. v. CIT [1998] 229
ITR 383, where the Supreme Court observed that (page 386):
"The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income- tax (Appeals). Both the assessees as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier."
The ground being raised is a legal ground and does not require any fresh evidence.
It is therefore, requested that the same may be admitted.
During the course of survey, in reply to Q.No.19 the assessee stated that during the year, he had paid off certain creditors in cash. He further deposed that he has paid this amount out of his undisclosed income. Thereafter, in reply to Q.No.20, he deposed that he had to receive certain amounts from these debtors. He has further deposed that he is including these cash receipts(from debtors) in his undisclosed income. In reply to Q.No.21, the assessee deposed that he had made advance payment towards labour and material for construction of hostel, which has been earned from business activities. Finally, after the conclusion of his statements, he again clarified that the income surrendered during survey has been earned from his business activity during the year.
Tax can only be levied on the legitimate income of the assessee Your Honors, the Revenue can not be allowed to take advantage of the mistake of the assessee. Tax can only be levied on the actual and legitimate income of the assessee. It is not that income and expenditure out of that income, can be taxed simultaneously. There is a marked difference between income and application of income. The assessee, in the instant case had carried out business transactions which were not found recorded in his regular books of accounts. He bought certain goods and without entering them in his books, sold them off. When the survey team struck, no goods were found for the obvious reason that the same had been sold out. The goods which had been 21
Mukesh Kumar Ahuja, Kota.

sold were procured on credit basis. These goods, in turn, were sold to different parties on credit. After realizing the amount from the debtors, the creditors were paid off. The balance cash left with the assessee was given as advance towards construction of hostel building. For a better understanding of the matter, the discrepancies found during survey are illustrated by the table given below-
Source
Amount
Application
Amount
Unrecorded debtors
61,50,000/- Unrecorded creditors
33,71,090/-
Stock found short
16,00,000/- Unrecorded investment in hostel
40,00,000/-

77,50,000/-
73,71,090/-

From the above table, it is seen that the assessee generated Rs.77,50,000/- by not recording certain sales made during the year. So, legally and lawfully,
Rs.77,50,000/- ought to have been taxed, but out of ignorance the assessee paid tax on the entire amount surrendered during survey. It is an alternate submission of the assessee that if application of income, i.e.Rs.73,71,090/- deeming it to have been invested out of income earned from unrecorded business activities, is considered as income exigible to tax, then only G.P. rate on the source, i.e.Rs.77,50,000/- be applied and the total income be worked out accordingly, as Unrecorded debtors and Stock found short are nothing but Sale of goods.
Your Honors, if the assessee is, otherwise, entitled to a claim of deduction but due to his ignorance or for some other reason could not claim the same in the return of income, but has raised his claim before the appellate authority, the appellate authority should look into the same. The assessee cannot be burdened with the taxes which he otherwise is not liable to pay under the law. Even a duty has also been cast upon the Income Tax Authorities to charge the legitimate tax from the tax payers. They are not there to punish the tax payers for their bonafide mistakes.

The assessee is aware that on account of the above adjustments, the assessed income would fall below the returned income. But then, assessed income can be lower than returned income as has been held by Hon’ble Gujarat High Court in the case of CIT vs. Milton Laminates Ltd. in Appeal No.1022 of 2010. Reference in 22
It is prayed that necessary relief may kindly be provided by ordering the AO to charge the legitimate tax. “

obtained from the assessee as security. Consequently, the assessee filed his return of income including the surrendered amount under the head “ Income from Business or Profession”, in his total income. The AO accepted the income returned by the assessee and levied tax under section 115BBE on the unexplained income instead of taxing it at the normal rate. In this regard, the learned A/R of the assessee submitted that the assessee in his statement recorded during survey, after question no. 22( Paper Book pages 15-18), in a very explicit terms, during verification stated that the entire income surrendered during survey was acquired out of business activities and the learned AO has not controverted this statement of the assessee. The declaration to this effect by the assessee on the conclusion of the recording of statement is reproduced hereunder :
mijk r c;ku eSusa i<+ o le> fy,l gSa] tSls eSusa crk;k oSls fy[kk x;k gs c;ku fcuk fdlh ncko ds gks’k gokl esa fn, x, gSaA esjs }kjk ljsaMj dh x;h jkf’k 1- jk M+
890053@& ¼vkB yk[k uCcs gtkj frjiu½ 2- LVkWd 16 yk[k 3- ØsfMVj :-3375090@&
4- nsunkj :-6150000@& vkSj gkWLVy fuekZ.k gsrq vfxze eqds’k vkgwtk 40 yk[k] jkts’k vkgwtk 40 yk[k eSa iqu% bl lEcU/k esa Li"V dj jgk gwWa fd v?kksf"kr jkf’k esjs o esjs HkkbZ
}kjk O;kolkf;d xfrfof/k;ksa ls vftZr dh xbZ gS tks fd bl foRrh; o"kZ ls lEcaf/kr gSA

The AO in the course of assessment proceedings issued a show cause notice dated
30.11.2019 stating that the assessee had included this offered income of Rs.1,60,11,143/- in his total income under the head “Income from Business or Profession” in ITR filed for the relevant year and paid tax at normal rate thereon.

24
Mukesh Kumar Ahuja, Kota.

As the unaccounted/unexplained investment in cash payment to creditors/debtors
& investment made in construction of hostel are covered u/s 69 and unexplained excess cash is covered u/s 69A of the I.T. Act, therefore tax should be charged as per the provision of section 115BBE of I.T. Act 1961. In reply to the show cause, the assessee filed his submission stating that -
“The declaration by the assessee in the statements taken by the department are in the direction that the income surrendered during survey relates to business of electrical and electronics of the running financial year in which the survey proceeding were carried out by the department. The survey officers had verified that the assessee has godown and sale points in business which is his source of income and there are no other sources that were noticed and thus not questioned and recorded by them in the statements. There is no material found which could indicate in the direction that there are other inexplicable sources of income. The only source of income which the assessee has is the business run by him and is quite evident and may also be verified from the departmental sources as well. All the amount related to payments to creditors, debtors, advances for construction were made from the shop of the assessee from where the income was earned by the assessee, it can be conveniently understood that the income was generated from the place from where the payments were made and since there were no documents to infer otherwise, the source of these was from the commercial establishment run by the assessee. Thus, since the income has been declared in the return of income under the business head, it is quite clear that the same is from sources which are explainable, recorded in the register. The source is definite and understandable and thus section 69,69A, 69B are not applicable to these in the understanding of the assessee which is why it is requested not to deem the same as taxable under section 115BBE”

25
Mukesh Kumar Ahuja, Kota.

The contention of the assessee that after the survey, the entries in the books of account has been passed and the books have been accordingly updated. Cash has been increased in the books of account, amount of debtors has been entered in the books of account as due from parties, the creditors have been reduced, the value of construction made has been increased and entry relating to the stock has also been passed in the books of account. So, once all the entries have been incorporated in the books of account, the same will be out of the preview/purview of sections 69
Reliance is also placed on the following decisions of various benches of Tribunal, as under :

Parmod Singla vs. ACIT (2023) 154 taxmann.com 347 (Chd. Trib.):
In this case, survey under section 133A was carried out at the business premises of the assessee during which certain discrepancies were noticed and assessee surrendered a sum towards advances, unaccounted stock and cash in hands. Thereafter, the assessee filed his return of income, declaring certain income including the surrendered income. During assessment proceedings, the A.O. issued SCN stating that the income surrendered during survey had been offered in the return of income at the rate of 30 per cent, however, as per the provisions of section 115BBE read with sections 69 and 69A, the amount so surrendered was taxable at the rate of 60 per cent. The assessee submitted that the business of the assessee was the only source of assessee's income and the source of income so surrendered was not unexplained hence the provisions of sections 69 and 69A were not attracted.
The A.O. did not accept the submission of the assessee and accordingly, the income so surrendered was brought to tax as deemed income under sections
69 and 69A and tax at the rate of 60 per cent was computed under section 115BBE. The assessee filed an appeal before Hon'ble CIT (A) and the Hon'ble CIT (A) sustained the additions made by A.O. The Hon'ble ITAT held that in the instant case, the difference in stock so found out by the authorities has no independent identity and is part and parcel of entire stock, and therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what is not declared to the department is receipt from business and not any investment as it cannot be co-related with 27
Mukesh Kumar Ahuja, Kota.

any specific asset and the difference should, thus, be treated as undeclared business income. In the instant case, the surrender on account of advances were relating to the business being carried on by the assessee. The Commissioner (Appeals) has also returned a finding that the advances were admitted as being related to business activity of the assessee. Where the same has been found unrecorded in the books of account, the same has to be brought to tax under the head "business income". The income surrendered during the course of survey cannot be brought to tax under the deeming provisions of sections 69 and 69A and the same has been rightly offered to tax under the head "business income". In absence of deeming provisions, the question of application of section 115BBE doesn't arise for consideration.
Famina Knit Fabs vs. ACIT[2019] 176 ITD 246/104 taxmann.com 306
(Chd -Trib) In this case, the Hon'ble ITAT held that where during the course of survey, a surrender was made by the assessee on account of debtors/receivables which was based on a diary found during the course of survey and the Revenue had accepted that the surrender was on account on account of receivables, it followed that the debtors were generated from the sales made by the assessee during the course of carrying on the business of the assessee which was not recorded in the books of the assessee. The Hon'ble ITAT went on to further hold that though the said income was not recorded in the books of the assessee but the source of the same stood duly explained by the assessee as being from the business of the assessee and even otherwise no other source of income of the assessee was on record either disclosed by the assessee or unearthed by the Revenue. The Bench further held that the preponderance of probability, therefore, is that the debtors were sourced from the business of the assessee. Therefore, there was no question of treating it as deemed income from undisclosed sources u/s 69,
69A, 69B, or 69C of the Act and the same was held to be in the nature of business income of the assessee.
Chokshi Hiralal Maganlal v. DCIT [2011] 9 taxmann.com 300/141 TTJ 1
(UO)/45 SOT 349 (Ahd.) In this case there was a survey u/s 133A at the premises of the assessee. Excess stock of gold and silver ornaments were found. The excess stock was included in the closing stock of the inventory while filing the return of income subsequently but the AO observed that the 28
Mukesh Kumar Ahuja, Kota.

disclosure was not consistent with the provisions of sections 69B of the Act and same was accordingly brought to tax u/s 69B. The Hon'ble CIT (A) confirmed the additions. The Hon'ble ITAT Ahmedabad held that the excess stock found during the survey is not separately and clearly identifiable but is part of mix lot of stock found at the premises which included declared stock as per books and also excess stock as computed by survey officers and therefore the provisions of section 69B cannot be made applicable as primary condition for invoking the said provision is that the asset should be separately identifiable and it should have independent physical existence of its own and since excess stock as a result of suppression of profit from business over the years and has not kept identifiable separately but as a part of overall stock found, the investment in excess stock has to be treated as business income.
Gaurish Steels (P.) Ltd. v. ACIT[2017] 82 taxmann.com 337 (Chd. - Trib.)
In this case the assessee surrendered an amount of Rs. 70 lacs as additional income during the course of survey conducted at its premises on account of following heads:
I. Discrepancy on account of cash found
II. Discrepancy on cost of construction of building
III. Discrepancy in stock
IV. Discrepancy in advances and receivable
The issue before the Hon'ble ITAT was whether the income of Rs. 70 lacs surrendered is to be taxable as business income or income from other sources or as deemed income under sections 69A, 69B and 69C of the Act as held by the A.O. It was held that Nowhere in his order the A.O. has been able to bring on record the fact that the income surrendered during the course of survey was not out of the business of the assessee. Also nowhere he has objected to the heads under which the assessee had surrendered these amounts, i.e. cash, construction of building, discrepancy in stock and discrepancy in advances and receivable. Further, even the survey team has not found any source of income except the business income. Now, following

29
Mukesh Kumar Ahuja, Kota.

the judgment of Juri ictional High Court, in the background of the facts of the present case, we can safely infer that apart from cash all other income surrendered may be brought to tax under the head 'business income' while the cash has to be taxed under the head deemed income under section 69A of the Act.

Veer Enterprises vs. Deputy Commissioner of Income-tax [2024] 158
taxmann.com 655 (Chandigarh - Trib.)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 section 133A, 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 as per 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 69B and same had been rightly offered to tax by assessee under head of business income - Held, yes [Paras 29 and 30] [In favour of assessee]
Further reliance is placed on the juri ictional Jaipur Benches decision in case of DCIT Vs. Shri Ram Narayan Birla (ITA No. 482/JP/2015 dt.
30/09/2016), and Bajargan Traders Vs. ACIT (in ITA No. 137/JP/2017 dt.
17/03/2017) which has subsequently been affirmed by the Hon'ble Rajasthan that the assessee’s only source of income is from proprietorship concern Monica
Electricals. No other incriminating material or document was found during the course of survey which could indicate that the assessee has any other source of income. It can thus be concluded that the alleged excess cash/short stock is part of the business income of the assessee. It is also discernable from the records that when the statement was taken during the course of survey, the assessee gave reply to various questions asked by the survey team.
The crux of the statement given during the course of survey on the facts that the alleged cash/stock was not accepted to be undisclosed income from other sources but was a part of the business income which required some reconciliation as books of account were not completed at the time of survey proceedings. We are of the view that since the income alleged excess cash/short stock found during the course of survey is part of the business income, the provisions of section 115BBE of the Act would not be applicable.
6.4
In light of aforesaid discussion and in the entirety of facts and circumstances of the case and following the decisions supra, the income of Rs 1,60,11,143/- surrendered during the course of survey cannot be brought to tax under the deeming provisions of section 69 and 69A of the Act and the same has been rightly offered to tax under the head “business income”. In absence of deeming

31
Mukesh Kumar Ahuja, Kota.

provisions, the question of application of section 115BBE doesn’t arise for consideration.
Ground No. 4 is not pressed. Hence the same is dismissed as not pressed.
7. In the result, this appeal of the assessee is allowed.

Order pronounced in the open court on 07/04/2025. jkBkSM+ deys'k t;UrHkkbZ ½

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सहायक पंजीकार@Aेेज. त्महपेजतंत