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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
आदेश / ORDER PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2017-18, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), (in short “ld. CIT(A)”], /National Faceless Appeal Centre (NFAC), Delhi, in Appeal No. ITBA.NFA/S/250/2021- 22/1035024251(1), dated 23.08.2021, which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) dated 21.12.2019. 2. Grounds of appeal raised by the assessee are as follows: “1. The leaned CIT(A) grossly erred in confirming the addition of Rs.52,80,000/- on account of rent received from Shailja Tex Prints (P) Ltd and Raghukul Tex Prints (P) Ltd as undisclosed income instead of rent income. 2. The learned CIT(A) grossly erred in confirming the application of provisions of section 115BBE of the Act. 3. The appellant reserve right to add, alter and withdraw any grounds of appeal.”
155/SRT/2021/AY.2017-18 Divya Fashions Pvt. Ltd. 3.Succinct facts are that assessee before us is a Private Limited Company and filed its original return of income for Assessment Year 2017-18 on 23/08/2017 declaring total income to the tune of Rs.49,72,606/-. The case was selected for scrutiny assessment and a notice under section 143(2) of the Income Tax Act, 1961 dated 26/09/2018 was issued and duly served on the assessee. The assessee`s case was selected for scrutiny assessment through CASS. Further, for the purpose of assessment, notice under section 142(1) of the Income Tax Act, 1961 along with detailed questionnaire calling certain details was duly served upon the assessee. In the meantime, the assessee filed a revised return on 02/03/2019, revising the total income to Rs.92,610/-. However, the assessing officer noted that the revised return was filed by assessee after the due date and therefore, is invalid and hence the same was not considered by assessing officer.
In response to the notices issued u/s 143(2) and 142(1) of the income Tax Act, 1961, the assessee furnished details and documents before the assessing officer. The assessee- company is engaged in the business of trading and manufacturing of cloth. The company is doing job-work of dyeing and printing of cloth as well as sale of own production, that is, sarees and dress material. In assessee`s case, a survey action u/s 133A of the Income Tax Act, 1961 was carried out at the business premise of the assessee on 16.09.2016. During the course of survey proceedings, small pocket diary annexured as BF-1, as well as copy of the rent agreement with M/s Shailja Tex Prints Private limited and M/s Shree Raghukul Tex Prints Private Limited was found and impounded. The statement of the director of the company, Shri Sushilkumar Fatehpuria was recorded on oath u/s 131 of the Income Tax Act, 1961 in which he has stated that the assessee, M/s DIVYA FASHION PRIVATE LIMITED, has entered into rent agreement in respect of a part of the premises to the M/s Shailja Tex Prints Private limited and M/s Shree Raghukul Tex Prints Private Limited, since September 2015. The rental agreement is made only for the amount of Rs.20,000/- per month with respect to M/s Shailja Tex Prints Private limited and Rs.40,000/- per month with respect to, M/s Shree Raghukul Tex Prints Private limited. These rental receipts
155/SRT/2021/AY.2017-18 Divya Fashions Pvt. Ltd. are duly received through cheque. However, apart from this, the extra rental income is also received from M/s Shailja Tex Prints Private limited amount of Rs.1,50,000/- per month and Rs.2,90,000/- from M/s Shree Raghukul Tex Prints Private limited, in cash over and above the amount received through cheque. The same amount has been recorded in the diary found and impounded. In view of the above, assessee admitted the undisclosed income received in cash of Rs.52,80,000/- during the assessment year 2017-18. The assessee considered this amount at the time of filing of the Income Tax Return for assessment year 2017- 18, as income from house property and claimed the standard deduction as per the provisions of the Act. On perusal of the diary impounded, it was noted by the Assessing Officer that assessee mentioned the name of the party and amount in the said diary, so the nature of the transaction cannot be ascertained. Further, in the due course the informational respect of M/s Shailja Tex Prints Private limited and M/s Shree Raghukul Tex Prints Private Limited was also shared with the respective assessing officers, for necessary verification and action. However, on verification none of the parties has accepted these payments of rental income in cash in respect of the property, however, the assessee has duly recorded these transactions in the cash book and considered it as income from house property. In view of the above, the nature of the transaction as explained by the assessee in the statement in not established.
5.The Assessing Officer observed that the sum is found credited in the books of account impounded at the premises of the assessee and during the verification, director of the assessee- company, M/s DIVYA FASHION PRIVATE LIMITED accepted receipt of the amount in cash. Further on verification of the cash book produced before this office during the assessment proceedings, the cash received is duly credited from time to time. So there is no denial for the amount credited and received by the assessee. However, in order to explain the nature and source of the cash credited, the assessee has been claimed it to be rental receipts from M/s Shailja Tex Prints Private limited and M/s Shree Raghukul Tex Prints Private Limited. However, the corresponding parties during the assessment
155/SRT/2021/AY.2017-18 Divya Fashions Pvt. Ltd. proceedings denied these transactions. In view of the above, assessee did not able to explain the nature and source of the cash credits satisfactorily and hence the Assessing Officer noted that the same cannot be taxed under the head ‘income from the house property’ and therefore Assessing Officer made addition of Rs.52,80,000/- u/s 68 of the Income Tax Act 1961.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before Ld. CIT(A), who has confirmed the action of the Assessing Officer. Aggrieved, the assessee is in appeal before us.
Learned Counsel submits that in all the circumstances and the impounded records apparently shows that there is undisclosed income under the head income from house property. Therefore, undisclosed income pertains to rent income which has to be taxed as per the provisions of section 24 of the Act. Therefore, ld Counsel contended that the said sum of Rs.52,80,000/-, is the rental receipt from M/s Shailja Tex Print Private Limited and M/s Shree Raghukul Tex Prints Private Limited. It is seen that these impounded ‘diaries’ only contain the name of the party and the amount, however, the statement recorded clearly mentioned that these undisclosed receipts pertains to ‘income from house property’. Therefore, ld Counsel prays the Bench that the undisclosed receipt of Rs.52,80,000/- should be assessed under the head ‘income from house property’ and necessary deduction may be provided to the assessee as per the provisions of section 24 of the Act.
On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 9.We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that Assessing Officer
155/SRT/2021/AY.2017-18 Divya Fashions Pvt. Ltd. assumed the rental income of Rs.52,80,000/- as income from other sources instead of rent (house property income) merely because the diary found and impounded in the survey proceedings contains name of the party and amount thereof and there was no reference of any nature of transactions. Further, the Tenants viz. Shelja Tex Prints (P) Ltd and Raghukul Tex Prints (P) Ltd had not accepted the contents of the dairy and they stated that no rent in cash was paid to the assessee. On appeal, Ld C1T(A) confirmed the action of the Assessing Officer and had not accepted the transactions of dairy as rent income and accordingly, the amount was taxed as cash credit invoking provisions of Section 68 of the Act. 10. Based on these facts, we note that solitary grievance of the assessee in this appeal is that undisclosed income should be assessed under the head “Income From House Property” and not under the head “Income from other sources”. In order to examine the nature of undisclosed income of Rs.52,80,000/-, first of all, we should examine the statement recorded during the survey proceedings, which is reproduced below:
155/SRT/2021/AY.2017-18 Divya Fashions Pvt. Ltd.
155/SRT/2021/AY.2017-18 Divya Fashions Pvt. Ltd.
From the above statement, it is vivid that assessee received unaccounted rent from M/s Shailja Tax Print Private Limited of Rs.1,50,000/- per month in cash in assessment year 2017-18, and total unaccounted rent for twelve months comes to Rs.18,00,000/-. Likewise, assessee received unaccounted rent from M/s Shree Raghukul Tax prints Private Limited of Rs.2,90,000/- per month in cash in assessment year 2017-18, and total unaccounted rent for twelve months comes to Rs.34,80,000/-. Thus, total unaccounted rent from both these companies comes to Rs.52,80,000/-(Rs.18,00,000 + Rs.34,80,000). During the survey proceedings, the statement of Anil K. Beria, son of Kailashchand Beria, who was working as a production manager categorically accepted in a question / answer no. 13 while replying on contents of the pocket diary impounded and rent agreement, that unaccounted income pertains to income from house property. We note that the entire discussion in the statement was in connection with the rental income. Hence, such income cannot be assessed under the head “income from other sources”. We note that the contents of the statement matched with the diary and the monthly payments apparently show that they were payment against rent. We also note that there is no retraction of the statement and it is not an afterthought statement as the same was recorded during the survey proceedings itself and therefore, we are of the view that total unaccounted rent from both these companies at Rs.52,80,000/- should be assessable under the head “Income from
155/SRT/2021/AY.2017-18 Divya Fashions Pvt. Ltd.
house property”. Hence, based on this factual position, we direct the Assessing Officer to assess undisclosed income of Rs.52,80,000/- under the head “Income from house property” and also allow permissible deduction under section 24 of the Act. 12. In the result, the appeal filed by the assessee is allowed
Order is pronounced in the open court on 22/08/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat �दनांक/ Date: 22/08/2022 DKP (Sr. PS Outsourcing) Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat