THE DCIT, CIRCLE-1 (1), RAJKOT, RAJKOT vs. SHRI SAMIRBHAI MAGANBHAI KALARIYA AND OTHERS, RAJKOT
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER PER: WASEEM AHMED, ACCOUNTANT MEMBER:- This Revenue’s appeal for A.Y. 2018-19, arises from order of the CIT(A)-11, Ahmedabad dated 04-08-2021, in the proceedings under section 250 of the Income Tax Act, 1961, in short “the Act”.
I.T.A No. 185/Rjt/2022 A.Y. 2018-19 Page No 2 DCIT vs. Shri Samirbhai Maganbhai Kalariya 2. The Revenue has raised the following grounds of appeal:-
“1. The learned CIT(A) has erred in law and on facts in determining the undisclosed income of Rs. 1,75,00,000/- as regular business income. 2. The learned CIT(A) has erred in law and on facts in deleting the addition u/s 69C of Rs. 1,75,00,000/- & directing that the said income should be treated as normal business income. 3. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the AO be restored to the above extent.” 3. The only issue raised by the Revenue is that the ld. CIT(A) erred in treating the unexplained expenditure u/s 69C of the Act an income under the head of business and profession.
Briefly stated facts of the case are that the assessee in the present case is an AOP and engaged in the business of real estate activity. The assessee in the year under consideration has developed the real estate project namely M/s Shilpan. There was a survey operation u/s 133A of the Act at the business premises of the assessee dated 18th July 2018. During survey operation, a diary was found containing the details of the expenditure not recorded in the books of accounts. However, the assessee in the statement furnished u/s 131 of the Act during survey proceedings agreed to offer additional income of Rs. 1,75,00,000/- on account of unrecorded expenses. The assessee in the return filed has disclosed such an income of Rs. 1,75,00,000/- as income under the head business and profession. However, the Assessing Officer was of the view that the amount of unexplained
I.T.A No. 185/Rjt/2022 A.Y. 2018-19 Page No 3 DCIT vs. Shri Samirbhai Maganbhai Kalariya expenditure should be brought to tax under the provision of section 69C of the Act. Accordingly, the same is liable to tax at the higher rate specified u/s 115BBE of the Act. The Assessing Officer in holding so has also made a reference to the judgment of Hon’ble Gujarat High Court in the case of Fakir Hazi Hasan reported in 247 ITR 290 and Hon’ble Panjab & Haryana High Court in the case of Kin Farm Pvt. Ltd. reported in 216 taxmann.com 153. Thus, the Assessing Officer calculated the income tax on the income admitted by the assessee under the provisions of section 115BBE of the Act.
Aggrieved assessee preferred an appeal before the ld. CIT(A). The assessee before the CIT(A) submitted that at the time of survey operation, there was no question raised about the nature of income recorded in the diary based on which the income of Rs. 1,75,00,000/- was offered to tax. It was also submitted by the assessee that the transactions recorded in the diary relate to the business expenses such as cement, iron, labour expenses. The assessee has also furnished the affidavit stating that the income offered during the survey operation was related to the business only. The assessee also pointed out that there is no income brought on record by the Revenue at the time of survey operation other than the business income. The assessee further contended that even a survey was conducted in the year 2016 wherein also the income, only under the head business was accepted. Thus, as per the assessee in absence of any contrary information, the amount offered at the time of survey should be treated as income under the head business and profession. The ld. CIT(A) after considering the submission of the assessee, the order of the Assessing Officer treated the income offered during survey operation as income under the head business and profession.
I.T.A No. 185/Rjt/2022 A.Y. 2018-19 Page No 4 DCIT vs. Shri Samirbhai Maganbhai Kalariya Thus, as per the ld. CIT(A), the income tax on such income was to be taxed at the normal rate and not at the rate specified u/s 115BBE of the Act as alleged by the Assessing Officer. The relevant finding of the ld. CIT(A) is reproduced on pages 28 to 38 of his order.
Being aggrieved by the order of ld. CIT(A), the Revenue is in appeal before us. Before us, both the ld. Departmental Representative and the Authorized Representative vehemently supported the orders of authorities below as favourable to them.
We have heard the rival contentions of both the parties and perused the material on record. The issue in the present case relates whether the income admitted by the assessee during survey operation is to be taxed under the head business and profession or u/s 69C of the Act. From the preceding discussion, we note that the entire thrust of the Revenue of making the addition to the total income of the assessee was the diary impounded during the survey operation. There is no doubt that the diary compiled during the survey operation contained the details of the expenses relating to the business. This fact was also accepted and communicated by the assessee in the affidavit furnished during the assessment proceedings. All these facts have not been controverted by the ld. Departmental Representative appearing on behalf of the Revenue. The Hon’ble Gujarat High Court in the case JK Chokshi vs. ACIT in Tax Appeal No. 149 of 2003 has observed as under:-
I.T.A No. 185/Rjt/2022 A.Y. 2018-19 Page No 5 DCIT vs. Shri Samirbhai Maganbhai Kalariya
Whether on the facts and in the circumstances of the case, the Tribunal is justified in treating undisclosed income offered during survey u/s. 133A as "income from other sources" and not an income from "profits and gains of business or profession" especially when the assessee is not having any other source of income? 7.1 The above question was answered by the Hon’ble High Court by treating the undisclosed income under the head business and profession. In view of the above, we are of the view that the income of the assessee should be taxed as normal business income.
7.2 The provisions of section 115BBE of the Act deals with the rate of tax at which the income u/s 69C of the Act should be charged. As such the provision of section 115BBE of the Act does not define the income which needs to be taxed u/s 69C of the Act. Nevertheless, the provisions of section 69C has to be seen before invoking the provisions of section 115BBE of the Act. The provisions of section 69C of the Act provide that the expenses incurred by the assessee, the source of which has not been explained, will be subject to tax under the provisions of section 69C of the Act. In the present case, the contention of the assessee that the income admitted during survey operation is business income which is also evident from the nothings of the impounded diary. Undeniably, the contents of the diary have not been controverted by the ld. DR appearing on behalf of the Revenue. Thus, we are inclined to uphold the finding of ld. CIT(A)
7.3 The case laws referred to by the Assessing Officer in his order are distinguishable from the facts of the case at hand. In those cases, the
I.T.A No. 185/Rjt/2022 A.Y. 2018-19 Page No 6 DCIT vs. Shri Samirbhai Maganbhai Kalariya assessee failed to justify the source of income in his hands and therefore the provisions of section 69C were attracted but it is so in the case on hand. Accordingly, we do not find any infirmity in the order of the ld. CIT(A). Hence, the appeal of the Revenue is hereby dismissed.
In the result, the appeal of the Revenue is hereby dismissed.
Order pronounced in the open court on 21-09-2023.
Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad : Dated 21/09/2023
