ANKUSH GOEL ,DELHI vs. ITO WARD 59(8) , DELHI

The Ld. AR submits that there is a difference between undisclosed income and unexplained income and a deeming provision is applicable with regard to the undisclosed income where the assessee has either failed to disclose the nature of the source or there was no valid source is explained. He submits that in the instant case, the assessee has duly stated the source of the said cash as earned from the speculative business transactions in the preliminary statement recorded u/s 132(4) of the Act.

The Ld. AR finally submits that the assessee has included the said income under the head “Income from business or profession” in the computation of income filed before the AO during the course of assessment proceedings, in reply to show cause notice vide reply dated 09.04.2021. Ld. AR thus, prayed that the AO has wrongly invoked the provisions of section 69A of the Act by treating the said cash as earned out of undisclosed sources and further erred in invoking the provisions of Rajesh Bubna vs. ACIT section 115BB of the Act which deserves to be held bad in law and the income so declared by the assessee must be treated as business income of the assessee.

On the other hand, the Ld. CIT-DR vehemently supported the orders of lower authorities and submits that the assessee has failed to file any details with respect to source of cash found out of the speculative business. Ld. CIT-DR further submits that the assessee has failed to produce any information such as demat account, details of the platform and interface through which such speculation transactions in commodity market were carried out and further failed to file any other documentary evidence to establish his contention w.r.t. speculation transaction. He thus prayed that the AO has rightly made the additions under section 69A of the Act and applied the provisions of section 115BBE of the Act which action deserves to be sustained.

Heard both the parties and perused the materials available on record. In the instant case, the search and seizure action was carried at the M/s Faquir Chand Lockers and Vaults Pvt. Ltd on 06.12.2018. During the course of search, two Lockers bearing No.171 and 190 were admitted as owned by the assessee which were opened and cash of Rs.46 lacs were found in Locker No.177 and cash of Rs.1,65,00,000/- was found in Locker No.190. In the statements recorded of the assessee u/s 132(4) of the Act, with regard to the source of such cash, assessee in reply to question No.8 explained the source as speculative trading transactions in wheat, food grains, pulses, oil etc. and further in reply to question No.9, it is stated that assessee has no documents with respect to these speculative transactions. The relevant questions and answer are reproduced as under:

The AO has invoked the provisions of Section 69A of the Act which reads as under: “69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.

The provisions of Section 69A are applicable where the assessee was found the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the same or the explanation offered is not satisfactorily then the same may be treated deemed income of the assessee.

In the instant case, the assessee from the beginning of the proceedings, as observed above, in the statement recorded u/s 132(4) of the Act stated that the said cash was accumulated from the speculative transactions of food grains, pluses and oil wheat and rice which remained to be included in the return of income filed. It is further stated by the assessee that since these transaction remined unrecorded in the books of accounts, the assessee has not maintained any details nor any documentary evidences were kept and available with the assessee. It is further a matter of record that assessee has offered the amount of Rs.3.11 Crs. as business income in his hands and during the course of assessment proceedings necessary letter was filed which is available in the PB filed by the assessee. It is settled law that where the AO invoked the provisions of Section 69A of the Income Tax Act, the burden of proof lies on the Rajesh Bubna vs. ACIT AO to establish the source of alleged unexplained money. The AO must provide evidence to justify claims of undisclosed income, as outlined by Section 101 of the Indian Evidence Act. Section 115BBE does not apply if the excess cash is proven to be business income.

The Co-ordinate Chandigarh Bench of the Tribunal in the case of Baljinder Kumar vs. DCIT reported in [2023] 157 taxman. Com 739 (Chandigarh-Trib.) held that once the assessee has surrendered the amount of the income and explained the source of same as sales which are not recorded in the books of accounts, the source of the same stood explained. The Co-ordinate Bench further observed that no other source of income of the assessee is on record, therefore, the provisions of Section 69A could not be invoked and the income should be treated as business income. Further the Co-ordinate Bench of the ITAT, Chandigarh in the case of Shri Kirshan Kumar vs. DCIT report 162 taxmann.com 518 (Chandigarh-Trib.) has held as under: “18. We therefore find that through various questions raised during the course of survey, the Assesse has been asked about the nature and source of his income and various discrepancies so found during the course of survey. In response, the Assessee has stated that he is running a sole proprietorship business concern in name of M/s Riwaz Jewellers, Khanna and allied products wherein he is engaged in the business of trading of various kind of jewellery, i.e., gold, silver and diamond and related productsand all along, the same is his only source of income and thereafter, he has been confronted with discrepancies in terms of cash found excess as compared to what has been recorded in the books of account, certain advances relating to his business written in a rough diary and excess value of stock as compared to what has been recorded in the books of account. Therefore, we find that the Assessee has been confronted with not just the discrepancy so found during the course of survey but the nature and source thereof during the course of survey proceedings and it is clearly emerging that the source of such income is from his business operations. There is a clear statement of the Assessee that the advances are related to his business, however since the same have not been recorded in the books of account, he has offered the same to taxation. Similarly, the stock physically found has been valued and then, compared with stock as recorded in the books of account, thus, there is clear nexus of stock with the Assessee's business. 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 Rajesh Bubna vs. ACIT 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.

In our view, 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/search 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.”

Further the statements recorded during the course of search played the decisive role and was to be considered as the admission of assessee with respect to the source of the income found during the course of search. In the instant case, the assessee in the statements recorded u/s 132(4) at the time of search, has very categorically stated that cash was accumulated out of speculative transactions carried on by him. It is also a matter of fact that the AO has not brought on record any other source of income nor any other source was found during the course of search except the speculative business as admitted by the assessee. Therefore, in our considered opinion, the income declared by the assessee of Rs.3.11 Crs. as speculative business income could not be held as undisclosed income under the provisions of section 69A of the Act and, accordingly, we hold the same as business income of the assessee.

Once, the additional income so declared is treated as business income of the assessee, provisions of section 115BBE of the Act are not applicable. Accordingly, we hereby direct the AO to treat the additional income declared on account of cash found in lockers as business income and the provisions of section 115BBE of the