BHOOP SINGH POONIA,NOHAR vs. ITO WARD, NOHAR, NOHAR

ITA 405/JODH/2024Status: DisposedITAT Jodhpur17 June 2025AY 2014-15

AI SummaryN/A

Facts

The assessee appealed against an order from the CIT(A) for AY 2014-15. A survey under section 133A was conducted at the assessee's business premises (Brick Kiln), revealing discrepancies and leading the assessee to surrender Rs. 70 lacs as undisclosed income. The dispute centers on an addition of Rs. 25 lacs for excess stock, disallowance of direct/indirect expenses, an addition of Rs. 48,000/- for rental income, and whether the surrendered income should be taxed as business income or deemed income under sections 69/69A/69B/69C, affecting the applicability of section 115BBE.

Held

The Tribunal condoned the delay in filing the appeal. It held that the surrendered income, including Rs. 25 lacs for excess stock, had a direct nexus with the assessee's business operations and should be treated as business income, not deemed income under sections 69/69A/69B/69C, rendering section 115BBE inapplicable. Consequently, the Tribunal deleted the additions for excess stock, disallowed expenses (Rs. 10,67,531/- and Rs. 4,21,933/-), and the addition for rental income (Rs. 48,000/-), directing the AO to tax the income at normal rates.

Key Issues

1. Whether income surrendered during a survey operation (including for excess stock) should be taxed as business income or deemed income under sections 69, 69A, 69B, or 69C of the Income Tax Act. 2. Whether the provisions of Section 115BBE of the Income Tax Act are applicable to such surrendered income. 3. Whether disallowances of direct/indirect expenses and an addition for rental income were justified.

Sections Cited

Section 133A, Section 142(1), Section 115BBE, Section 69, Section 69A, Section 69B, Section 69C, Section 132, Section 132(4), Section 158BB, Section 14, Section 40(b), Section 71, Section 263

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JODHPUR

Before: SHRI RAJPAL YADAVSHRI MITHA LAL MEENA, ACCOUNTNT MEMBER

Hearing: 30.04.2025Pronounced: 17.06.2025

PER RAJ PAL YADAV, VP The assessee is in appeal before the Tribunal against the order of ld. CIT(A) dated 29.07.2023 passed for assessment year 2014-25. 2. The Registry has pointed out that appeal filed by the assessee is time barred. The assessee has filed the appeal physically as well as electronically, therefore, period of delay is at a variance. In order to explain the delay, assessee has filed application which reads as under : Sub; Regarding acceptance of application for condonation of delay in case of Shri Bhoop Singh Poonia having appeal No. ITA No. 405/JODH/2024 (PAN: AKNPP9785A). Respected Members, With reference to above subject we request you that:-

That appellant is an individual and belong to a rural area.

That appellant filed an appeal before Hon'ble ITAT, Jodhpur Bench on 17.05.2024 against the ex-parte order passed by Ld. CIT(Appeals), NFAC on 29.07.2023 (i.e. with a delay of 201 days). The appeal No. is ITA 405/JODH/2024. 3. That at the time of filing of appeal before CIT(Appeals), the email address mentioned in Form No. 35 for communication was KUKIVINAY@YAHOO.COM NFAC.

That CIT (Appeals) issued 3 hearing notices on 10.02.2021, 05.06.2023 and 06.07.2023 and all notices were communicated to email address (i.e. KARWA.ADVOCATE@GMAIL.COM).

That the email address (i.e. KARWA.ADVOCATE@GMAIL.COM) was not operated by me &b the email holder is not in my touch.

That in the beginning of Month of May, 2024, appellant got a call from the officials of Income Tax Department regarding the payment of outstanding demand.

That then appellant informed them that he was in appeal before CIT(Appeals) and they informed appellant that your appeal was dismissed by CIT(Appeals).

That appellant called his counsel regarding the status of appeal and then counsel of appellant informed appellant about the ex-parte order of CIT (Appeals) dated 29.07.2023. 9. Then, thereafter appellant engaged a new counsel CA Raghuveer Singh Poonia and filed the appeal immediately before Hon'ble ITAT, Jodhpur Bench on 17.05.2024 against the order passed by Ld. CIT (Appeals), with a delay of 201 days.

10.

That the delay of 201 days was due to due to unaware about the adverse order dated 29.07.2023. 11. That appellant was unaware about the adverse order passed by CIT (Appeals) and same is the bonafide reason of delay in filing of appeal which is beyond control of appellant. In view of above submission you are requested that kindly consider this as reasonable cause to condone the delay of 201 days. So, that proper inquiry can be conducted and substantial justice may be delivered to the appellant. The assessee prays accordingly. Thanking You Yours Faithfully, ( ) (Bhoop Singh Poonia) Appellant Enclosed: Affidavit dated 06.03.2025. 3. With the assistance of ld. Representative, we have gone through the record carefully. In the light of above, if we peruse the application filed by the assessee, then it would reveal that ld. counsel for the assessee who has filed the appeal before CIT(A), has given his e-mail address, upon whom assessee cannot have a control. Therefore, he could not lay his hand on the status of his appeal before the CIT(A). In our opinion, there is no deliberate attempt at the end of the assessee to delay his appeal because by making the appeal time barred, he will not gain anything. Thus, it was not a strategy adopted by the assessee for litigating with the Department. Therefore, we condone the delay and proceed to decide the appeal on merit.

The assessee has taken six grounds of appeal. In Ground No.1, grievance of the assessee is that ld. CIT(A) has erred in confirming the addition of Rs.25 lacs made by the AO on account of disallowance of excess stock claimed by the assessee.

The brief facts of the case are that assessee has filed his return of income on 18.09.2015 in response to a notice u/s 142(1) by ITO, Ward Nohar. In this return, assessee has declared an income of Rs. 72,61,700/- and agriculture income of Rs.3,63,246/-. The AO thereafter observed that a survey u/s 133A was carried out in the business premises (Brick Kiln run in the name and style of M/s Ram Intt Udyog) of the assessee on 28.05.2023. According to the AO, there were discrepancies such as non-maintenance of books of accounts, Stock Register, Production Register etc. and assessee has surrendered undisclosed income of Rs.70 lacs for taxation which assessee has offered in his return and paid the taxes also. In the return, assessee has shown Rs.25 lacs as stock of finished bricks. This claim of the assessee has been rejected by the AO which has been upheld by the ld. CIT(A).

The ld. counsel for the assessee has filed copy of written submissions filed before the CIT(A). The contentions of the assessee on this issue read as under :

Ground No. 2 :- (Addition of Rs. 25,00,000/-) That the Ld. Assessing officer is erred in making the addition of Rs, 25,00,000/- on account of excess stock surrendered during the survey is wrongly entered into books of account. In this connection it is stated that the assessee has correctly entered and admitted this amount on account of excess stock surrendered during the course of survey. To understand the how and why the surrendered is required and made, we have to see the statements of the assessee recorded during the course of survey, which is annexed herewith for your ready reference. In reply to the question No. 11 at Page 7 of the statement, the assessee categorically stated that he is not position to explain the mistakes in documents and loose papers found at his place and therefore to avoid further litigation and just to buy mental piece and relax he is surrendering Rs. 70,00,000/- (Seventy Lacs only) to cover all kinds of mistakes. Even in his surrender note it is specifically mentioned that the surrender in made on the understanding that no penal consequences will Mow the said surrender. This clearly goes to show that the surrender made to cover all kinds of possible revenue leakage on account of mistake found in loose paper and stock etc. Hence after the surrender no further addition should be made.

As regards the entry of Rs. 25,00,000/- which is the estimated cost of 1000000 (Ten Lacs) bricks is concerned, there is some difference in the stock found physically and in the books of account, after surrender the total amount there is necessity to enter the stock into books of account just to make it equal to the physical stock. For this purpose only the entry is made and separately shown as "Declare excess stock" in the Trading account. As such the difference has already been surrendered as income which is part of surrender of Rs. 70,00,000/-

therefore the amount belongs to the difference in stock should not be taxed again, because by the act of Ld. Assessing officer it amounts to double taxation, which is not permissible in the Income Tax Laws. Therefore, it is hereby humbly prayed that the addition of Rs. 25,00,000/- may kindly be deleted. Alternatively if this entry of debit of Rs. 2500000/- not made in the trading account then the Gross profit would be 32,57,413/-and the amount of surrender to be credited into books would be 45,00,000/-. The net result would be same. Therefore, according to this aspect also the act of the assessee is correct for making the entry into the books of accounts out of the surrendered income. Hence the addition of Rs. 25,00,000/- may kindly be requested to be deleted."

On the strength of above submissions, he pleaded that this addition be deleted.

On the other hand, ld. DR relied upon the orders of Revenue Authorities.

We have duly considered the rival contentions and gone through the record carefully. A perusal of the assessment order would reveal that AO has not referred any material which was discovered during the course of survey and seized by the Department: His whole reasoning is based on general observation, namely, loose papers were found, proper record was not maintained, therefore, assessee has surrendered. Let us evaluate the evidentiary value of the statement given by the assessee for surrendering this sum of Rs.70 lacs. This position has been analytically examined by the Hon'ble Chennai 300 ITR 157 (Madras). The Hon'ble Court has made reference to the judgement of Hon'ble Kerala High Court in the case of Paul Mathews & Sons Vs. CIT 263 ITR 101. The questions formulated by the Chennai High Court for consideration, which are being reproduced as under: ii) Whether, on the facts and in the circumstances of the case, the Income-tax Tribunal is right in not considering the fact that the branch contractors' agent account book in which entries were made subsequent to the survey and not found during the survey nor proceed the survey, could be relied upon ? (iii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in not considering the fact that the voluntary statement made without any coercion or duress given during the course of survey action under section 133A could form the basis of the assessment ?

10.

A perusal of these questions would indicate that issue before the Hon'ble Court was whether on the strength of the statement recorded during the course of survey and an admission made by the deponent in his statement, addition could be made in the hands of the person upon whom survey was conducted. After a detailed examination and reference to Section 132, where search is being conducted, Hon'ble Court has replied these questions in favour of the assessee and against the Revenue. We deem it appropriate to take note of the observations of the Hon'ble Court on page No. 165 of the Journal, which read as under: "What is more relevant, in the instant case, is that the attention of the Commissioner and the Tribunal was rightly invited to the circular of the Central Board of Direct Taxes dated 10.3.2003 with regard to the confession of additional income during the course of search and seizure and survey operations. The said circular dated 10.3.2003 reads as follows: " Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders." From the foregoing discussion, the following principles can be culled out:- (i) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18]; (ii) In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 263 I.T.R. 101]; (iii) The expression "such other materials or information as are available with the Assessing Officer" contained in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A, vide Commissioner of Income-tax v. G.K.Senniappan [(2006) 284 I.T.R. 220]; (iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this Court in T.C.(A) No.2620 of 2006 (between Commissioner of Income-tax v. S.Ajit Kumar); [2008] 300 ITR 153 (Mad) (v) Finally, the word "may" used in Section 133A (3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself. For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated 10.3.2003, extracted above, for arriving at the conclusion that the materials collected and the statement obtained under Section 133A would not automatically bind upon the assessee, we do not see any reason to interfere with the order of the Tribunal. Accordingly, finding no substantial question of law arises for consideration, the tax case appeal stands dismissed."

11.

The Hon'ble Kerala High Court has held that whatever statement is recorded under Section 133A, during the course of survey, it has no independent evidentiary value. It is only a corroborative piece of evidence. If Section 133A is being perused, it does not empower the authorized officer to administer the oath.

11.

1 Thus, in support of the stand of Revenue for corroborating the surrender of the assessee, the Revenue should have seized the papers or included the physical working of the stock. The whole assessment order is totally silent about the exact number of bricks possessed by the assessee at the time of survey and expenditure debited by him in the books for such a finished stock. The stand of the assessee is that stock available with him has already been offered for taxation. Now, in future, as and when assessee would make sales, he has to again pay the taxes on that stock. Therefore, the stock which is found physically and not reflected in the books, as alleged by the AO, ought to be recognized in the books. Therefore, there is no evidence with the Revenue to doubt the claim of the assessee. The whole case of the AO is based on general observation instead of any concrete material found and recovered during the survey. Even the actual details found during the course of survey has also not been taken into consideration by the AO. Therefore, we allow

this ground of appeal and delete the addition. GROUND NOS. 2 TO 4

12.

In these grounds of appeal, grievance of the assessee is that ld. AO has disallowed claim of direct and indirect expenses. The assessee has made a claim of direct expenses to the extent of Rs. 10,67,531/- and indirect expenses of Rs. 4,21,933/-. The ld. AO has disallowed this claim for want of verification. A perusal of the record would indicate that inspite of survey carried out at the premises of the assessee, the ld. AO was unable to pin-point as to why direct and indirect expenses are not required for earning a huge income of more than Rs.72 lacs which has been offered for tax. The AO has nowhere pointed out that expenses representing alleged surrendered income was already debited by the assessee in the books of accounts which were found at the time of survey. In such situation, either AO ought to have computed income of the assessee on an estimated basis, but once an income to the extent of Rs.70 lacs has been assessed to tax, then relevant necessary expenditure incurred by the assessee for earning the income at such a magnitude deserves to be allowed to the assessee. Therefore, we allow this ground of appeal and delete both the additions.

13.

In the next ground of appeal, grievance of the assessee is that ld. AO has made an addition of Rs.48,000/- which was alleged to be a rental income. There is no discussion in the assessment order regarding the alleged rental income earned by the assessee. It is straight away available in the computation of income. Hence, this type of addition is not sustainable, accordingly, deleted.

13.

The assessee has raised an additional ground of appeal vide which he has submitted that AO has erred in applying the rate of tax u/s 115BBE of the Income Tax Act.

14.

The ld. AO in the bottom of the assessment order has observed that out of the total income computed by him, Rs.70 lacs will be taxed at maximum marginal rate u/s 115BBE and remaining income of Rs.42,99,164/- is to be taxed on normal rates. As far as this remaining income is concerned, we have already deleted the additions made by the AO, but short question is whether this surrendered income is to be taxed u/s 115BBE or under the normal provision. It is pertinent to note that the assessment year involved herein is accounting year for assessment year 2014-15. 15. On due consideration of the facts and circumstances, we find that this issue, whether surrendered income during the course of survey deserves to be treated as an undisclosed income for the purpose of Section 69A automatically or its characters to be determined on the basis of facts and circumstances of a particular case. The ITAT Chandigarh Bench in the case of Veer Enterprises Vs DCIT reported in 158 taxmann.com 655/206 ITD 289 has examined this issue very lucidly and we cannot do better than taking note of the extensive discussion made by the Tribunal on the position of law as well as test required to be applied for determining this transaction. Therefore, for facility of reference, we take note of the finding of the Tribunal from this judgement from para 13 onwards:

13.

Heard. To appreciate the aforesaid rival positions, we refer to the provisions of Section 69A of the Act. Section 69A provides that 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. As per Section 69B where in any Financial Year, the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the AO finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the hands of the AO, satisfactory, the excess amount may be deemed to be the income of the assessee for such Financial Year.

14.

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. Similarly, for the deeming provisions of section 69A to be attracted, there has to be a finding that the Assessee was found to be owner of cash so found at the time survey, such cash has not been recorded in the books of account so maintained by the Assessee, and the Assessee offers no explanation about the nature and source of the cash or the explanation so offered is not found satisfactory in the opinion of the AO. Likewise, for the deeming provisions of Section 69B to be attracted. There has to be a finding that the amount expended on making investment in or acquiring any bullion, jewellery or other valuable article exceeds the amount recoded in this behalf in the books of account maintained by the assessee for any source of income and that the assessee has not offered any explanation about such excess amount, or that, in the hands of the AO, the explanation offered by the assessee is not satisfactory.

15.

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.

16.

We therefore find that through various questions raised during the course of survey, the Assessee has been asked about the nature and source of its income and various discrepancies so found during the course of survey. In response, Shri Veer Prakash, partner of the assessee firm, on behalf of the, the assessee, has stated that he is a partner in the Assessee firm, which is engaged in the business of manufacture of clothes for small children, like suits, knickers, pyjamas, etc. and 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 its business operations. There is a clear statement of the partner of the assessee that the advances are related to its 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 partner 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 partner 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 has offered the additional income as business income in its return of income and has paid due taxes thereon.

17.

We find that through various questions raised during the survey, partner of 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 (copy at APB 1-11), recorded during the survey, on 10.10.2018, Shri Veer Prakash, Partner of M/s Veer Enterprises, the assessee stated that their firm comprised of two partners including the assessee; that their firm manufactures garments for small children, like suits, knickers, pyajama, etc.; that there was no other source of income. He was confronted with the discrepancies found in terms of excess cash, excess stock and receivables. We find that 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.9 lacs, thus amount being the difference between the amount of Rs. 23,19,000/- found at the premises and the amount of Rs. 14,90,000/- shown in the books of account as cash in hand. The assessee offered, for surrender, an amount of Rs. 10 lacs on account of stock not entered in the books of account, relating to debtors. The assessee further offered an amount of Rs.21 lacs representing the amount entered in the books of account towards stock as against the excess stock found in the books of account towards stock as against the excess stock found in the physical verification during the survey. 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.

18.

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.

19.

In case of Gandhi Ram(ITA No. 121/CHD/2021 dated 04/08/2022), speaking through one of us, it was held by the Chandigarh Bench of the Tribunal, that 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 and the relevant findings read as under:

"Firstly, how the ld PCIT has arrived at a conclusive finding that the discrepancies found, confronted and accepted by the Assessee during the course of survey attract the deeming provisions of section 68, 69, 69A, 69B & 69C is not apparent from the impugned order. Merely stating that excess cash is clearly covered u/s 68 or 69A, excess stock is covered u/s 69 or 69B, construction of Shed/Godown is covered u/s 69B or 69C and advances made to Sundry Parties is covered u/s 69, 69B or 69D 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 to our mind 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 ld PCIT 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 PCIT himself is not clear about the applicability of relevant provisions and in the same breath holding the Assessing officer to task by not invoking the said provisions is clearly shooting in the dark which cannot be sustained in the eyes of law and the order so passed therefore cannot be held as erroneous in the eyes of law."

20.

In case of ChokshiHiralalMaganlal Vs. DCIT(Supra), briefly, the facts of the No. 1634(Ahd.) of 2006, dt. 12/02/2010) wherein the Tribunal had observed as under:

11.

But this does not mean that loss computed under any of the five heads mentioned in section 14 - (i) 'salary', (ii) 'income from house property', (iii) 'profits and gains from business or profession', (iv) 'capital gains' and (v) 'income from other sources' cannot at all be adjusted against unexplained investment or expenditure. What is necessary as per Hon. Gujarat High Court is that source of acquisition of asset or expenditure should be clearly identifiable. In the case before Hon. Gujarat High Court the source of gold confiscated was not identifiable and hence adjustment was not permitted.

12.

Thus the important aspect that emerges from the entire discussion is that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable asset or expenditure. In the present case we find that entire physical stock of Rs. 25,14,306/- was part of the same business. Both kind of stock i.e. what is recorded in the books and what was found over and above the stock recorded in the books, were held and dealt uniformly by the Assessee. There was no physical distinction between the accounted stock or unaccounted stock. No such physical distinction was found by the Revenue either. The Assessee has repeatedly claimed that unaccounted business income is invested in stock and there is no amount separately taxable under section 69. The department has ignored this claim of the Assessee and sought to tax the difference between book-stock and physical-stock as unaccounted investment under section 69 without considering the claim of the Assessee that first the business receipt has to be considered and then investment should be treated as coming out of such unaccounted income. The difference in stock so worked out by the authorities below had no independent identity of its own and it is part and parcel of entire lot of stock. The difference between declared stock in the books and what is physically found would only be a mathematical expression in terms of value and not a separate independent identifiable asset. Therefore, it cannot be said that there is an undisclosed asset existed independently. Once this is so then 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.

13.

Thus in a case where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the Assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is only where no nexus is established with any head then it should be considered as deemed income under section 69, 69A, 69B & 69C as the case may be. It is because when Assessee fails to explain satisfactorily the source of such investment then it should be taxed under section 69, 69A, 69B & 69C as the case may be. It should not be done at the first instance without giving opportunity to the Assessee to establish nexus. Therefore, there is no conflict with the decision of Hon. Gujarat High Court in the case of Fakir Mohmed Haji Hasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, we hold that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment.

14.

To conclude sum of Rs.8,10,011/- being difference in stock is represented by undeclared business income. It does not have a separate physical identity. It is to be only taxed under the head 'business'. Other assets have separate physical identity being furniture and fixtures, air conditioners etc. They cannot have a direct nexus with business and therefore investment therein has to be considered under section 69 only."

15.

In view of the above, AO is directed to consider the sum of Rs. 8,10,011/- as undisclosed business income assessable under the head 'business' and other two sums under section 69. The business income including application of section 40(b) has to be considered accordingly. For calculation of income in view of our above observations, we restore the matter to the file of AO.

21.

We find that in the present case, the difference in stock found by the authorities has no independent identity and it is part and parcel of the entire stock. Therefore, it cannot be said that there is an undisclosed asset which existed independently and thus, what has been declared before the Department is received from business and it is not any investment, since it cannot be co-related with any under:

"4. 3. We have heard rival contentions and perused the material available on record. Undisputed facts emerged from the record that at the time of survey excess stock was found. It is also not disputed that the Assessee is engaged in the business of jewellery. During the course of survey excess stock valuing Rs. 77,66,887/- was found in respect of gold and silver investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment/expenditure then first what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with the known head, give opportunity to the Assessee to establish nexus and if it is satisfactorily established then first such investment should be considered as undeclared receipt under that particular head. It is observed that there is no conflict with the decision of Hon'ble Gujarat High Court in the case of Fakir Mohd. HajiHasan (supra) where investment in an asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, the Hon'ble Coordinate Bench held that where asset in which undeclared independent identity but is integral and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. In the present case the excess stock was part of the stock. The revenue has not pointed out that the excess stock has any nexus with any other receipts other than the business being carried on by the Assessee. The relevant findings are contained at para 4.3 which read as under: