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Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI A.D. JAIN & DR KRINWANT SAHAY
आयकर अपील�य अ�धकरण,च�डीगढ़ �यायपीठ, च�डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, ‘A’, CHANDIGARH BEFORE SHRI A.D. JAIN, VICE PRESIDENT & DR KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ �नधा�रण वष� / Assessment Year : 2017-18 Abhishek Bansal, Vs. Pr. Commissioner बनाम Prop. M/s Lifeline Multi Income Tax, Specialilty Hospitality, 25 Acre Patiala Extn., Near Fountain Chowk, Barnala, Punjab �थायी लेखा सं./PAN No: ACGPB5740E अपीलाथ� ./ Appellant ��यथ� / Respondent ( HYBRID MODE ) �नधा�रती क� ओर से/Assessee by : Sh. Sudhir Sehgal, Advocate राज�व क� ओर से/ Revenue by : Shri Rohit Sharma, CIT DR सुनवाई क� तार�ख/Date of Hearing : 09.05.2024 उदघोषणा क� तार�ख/Date of Pronouncement : 13.06.2024 आदेश/Order Per Dr. Krinwant Sahay, A.M.:
The appeal in this case has been filed by the Assessee against the order dated 25.03.2022, passed u/s 263 of the Income Tax Act, 1961 (in short 'the Act') by the ld. Principal Commissioner of Income Tax, Patiala [ herein referred to as ‘PCIT’ ].
131-Chd-2023 – Shri Abhishek Bansal, Barnala 2
2. At the very outset, the ld. Counsel of the Assessee submitted that there is a delay of 292 days in filing the appeal. The ld. Counsel further submitted that the reason for the delay in filing of appeal was because earlier the case was being handled by Shri Ashok Singla, Advocate, who passed away on 30.4.2022. In fact, all correspondence was being sent either on I.T. portal or in the e-mail address of Shri Ashok Singla. Because of the death of the Counsel Mr. Singla, there was no communication received by the Assessee regarding the order passed u/s 263 of the Act, therefore, there was a delay in filing the appeal. The ld. counsel also filed a Death Certificate of Mr. Ashok Singla.
The ld. DR had no objection on this issue.
We have considered the submissions of the ld. Counsel of the Assessee. In view of the explanation furnished by the Assessee which is supported by the Death Certificate of Mr. Ashok Singla, the delay in filing the appeal is hereby condoned and we proceed to hear the appeal on merits.
5. The appeal has been filed on the following grounds: - 1. That the Ld. PCIT, Patiala has erred in issuing notice u/s 263 and, thereby, holding that the assessment as framed by the Assessing Officer
131-Chd-2023 – Shri Abhishek Bansal, Barnala 3 vide order, dated 21.07.2019 was erroneous and prejudicial to the interest of revenue.
That the Ld. PCIT has failed to appreciate the fact that the Assessing Officer at the time of assessment proceedings had duly applied his mind to various issues and raised specific queries and has framed the assessment, after consideration of all the replies and, thus, the assessment as framed by the Assessing Officer is neither erroneous and nor prejudicial to the interest of revenue.
3. Notwithstanding the above said ground of appeal, the Ld. PCIT has erred in holding that the surrendered professional income of Rs.1.50 crores during survey conducted on 26.09.2016 was to be assessed as per the provisions of section 115BBE of the Income Tax Act and not realizing the fact that the survey was conducted on 26.09.2016 i.e. prior to the passing of bill with regard to demonetization.
4. That the Ld. PCIT has erred in not following the judgment of Jurisdictional Bench of the ITAT in the case of Surya Hatchery Vs PCIT (2023) 102 ITR (Trib.) 186 Chd and Surinder Kumar & Others reported in (2023) 102 ITR (Trib.) 247 and others, in which, on similar facts and circumstances, the order u/s 263 as passed by Ld. PCIT has been quashed.
That the order has been passed against the facts and circumstances of the case.
6. That the appellant craves leave to add, amend, alter any of the above grounds during the appellate proceedings have been considered.
131-Chd-2023 – Shri Abhishek Bansal, Barnala 4
During the proceedings before us, the ld. Counsel informed that he is not pressing Ground No.3, which is regarding the effective date of applicability of provisions of section 115 BBE of the Act. Accordingly, appeal on this Ground is dismissed as ‘not pressed’.
Appeal on Ground Nos. 1 and 2 are against the passing of order u/s 263 of the Act by the ld. PCIT, Patiala on the ground that the assessment order framed by the Assessing Officer was erroneous and prejudicial to the interest of Revenue.
Brief facts of the case are that there was a survey u/s 133 of the Act conducted at the professional premises of the Assessee on 26.9.2016. During the survey, certain discrepancies were found and statement of the Assessee was recorded. In the said statement, in order to cover up the discrepancies found during the survey, the Assessee surrendered an amount of Rs. 1.50 Crores, details of which are as under:-
S. No. Particulars Amount 1. Surrender in Loans & Advances 1,00,00,000 2. Surrender in Cash 9,25,000 3. Surrender in Construction and 15,00,000
131-Chd-2023 – Shri Abhishek Bansal, Barnala 5
Renovation 4. Surrender in Medicine stock 8,25,000 5. Surrender in Professional Fee 17,50,000 TOTAL SURRENDER DURING 1,50,00,.000 SURVEY
9. This is a case of an assessee who is an individual engaged in medical profession. The assessee owns a hospital named Life Line Multispecialty Hospital. The assessee is engaged in their profession since past many years. During the year under consideration as well, the assessee was engaged in such profession and hence, he has earned "Income under head business / profession", "Income under head house property" & "Income under head other sources". It is pertinent to mention here that for the said business, the assessee maintains complete set of books of account which are duly audited by a chartered accountant. On the said audited set of financial statements, the assessee files his income tax return.
For the relevant year, the assessee filed his ITR on 29.10.2017 declaring total income amounting to Rs. 1,74,99,840/-. In the said return of income, the assessee declared an amount of Rs. 1,66,09,183/- under the head “income from business / profession’, Rs. 20,902/- under the head "Income from House Property" and Rs.
131-Chd-2023 – Shri Abhishek Bansal, Barnala 6 10,76,719/- under the head "Income from Other Sources." It is submitted that a survey action was conducted at the professional premises of the assessee on 26.09.2016. During the said survey, certain discrepancies were found and statement of the assessee was recorded. In the said statement, the assessee in order to cover up the discrepancies found during the course of survey, surrendered an amount of Rs. 1,50,00,000/-, the details of which have already been shown in the table furnished above.
Thereafter, the assessee filed his ITR for AY 2017-18 on 29.10.2017 on the basis of audited set of financial statements. It is pertinent to mention here that the assessee credited its Profit & Loss Account prepared for the year ending 31.03.2017 with the surrendered amount of Rs. 1,50,00,000/- and declared a net profit of Rs. 1,77,08,798.70/- for the year ending 31.03.2017. Hence, on all such amount of net profit of Rs. 1,77,08,798.70/-, the assessee paid taxes at normal rate of tax applicable to the assessee. Thereafter, the case of the assessee was selected for Compulsory scrutiny and a notice u/s 143(2) of the Act dated 12.09.2018 was issued to the assessee intimating the assessee of the selection of the case of the assessee for scrutiny. Notice u/s 142(1) of the Act was issued upon
131-Chd-2023 – Shri Abhishek Bansal, Barnala 7 the assessee. In the said notice, various details including the details w.r.t. business activities of the assessee were asked by the Assessing Officer. In response to the said notice, the assessee filed a detailed reply dated 12.01.2019 wherein, the point wise reply to the details as required by the Assessing Officer were filed. On 21.01.2019, another specific questionnaire was issued to the assessee, wherein, in point 1, 2 & 3 the the AO asked specific query with respect to the amount of Rs. 1,50,00,000/- surrendered during the course of survey action. The assessee vide his reply dated 13.02.2019, duly filed his reply in response to the notice dated 21.01.2019 a reply was submitted and the assessee duly explained every query pertaining to survey which had been put up by the Assessing Officer.
Consequently, after taking cognizance of all the material available on record and after the books of account had been produced by the assessee; the Assessing Officer consciously framed the assessment in the case of the assessee u/s 143(3) of the Act vide order dated 01.07.2019 and accepted the returned income of the assessee without passing any adverse inference.
131-Chd-2023 – Shri Abhishek Bansal, Barnala 8
After the assessment has been concluded by the Assessing Officer, a Show-Cause Notice u/s 263 of the Act was issued to the assessee on 08.11.2019 wherein, it has been show caused as to why the assessment order dated 01.07.2019 would not be set aside and the case of the assessee should not be assessed afresh on account that the Assessing Officer has not applied the provisions of section 115BBE of the Act on the amount surrendered by the assessee. Further, it was also stated the order dated 01.07.2019 is erroneous and prejudicial to the interest of revenue. Thereafter, on 10.08.2021, another show cause notice u/s 263 of the Act was issued to the assessee. In response, the assessee filed his detailed reply dated 16.08.2021 and submitted that the assessee has no other source of income and further, the surrender of Rs. 1,50,00,000/- has been made by the assessee to cover up the discrepancies found during the course of survey and all such amount has been offered over and above the normal business income of the assessee.
Again, on 22.02.2022, another show cause notice was issued to the assessee u/s 263 of the Act. In response to the said notice, the assessee duly filed a reply dated 28.02.2022. In the said reply, the assessee duly submitted the journal entries passed in the books of the 131-Chd-2023 – Shri Abhishek Bansal, Barnala 9 assessee for the surrender made by the assessee. In addition to this, the assessee has also submitted that the provisions of section 115BBE of the Act are not applicable on the assessee as the assessee has surrendered the amount of Rs. 1,50,00,000/- as business income and further, he has no other source of income other than the profession carried on by him. The ld. Counsel further stated that the detailed replies filed by the assessee against the show cause notice have not been considered by the ld. Pr. CIT and order u/s 263 of the Act was passed on 25.03.2022 wherein, the case of the assessee was set aside to the file of the Assessing Officer on the issue of chargeability of tax @ 60% as per the provisions of section 115BBE of the Act on income surrendered by the assessee.
The ld. Counsel of the Assessee submitted that the only issue involved in the order u/s 263 of ld. PCIT is regrading charging of tax on the surrendered income at a special rate of tax u/s 115BBE. In this regard, the ld. counsel of the Assessee has argued that the Assessee is a Doctor and running a hospital under the name and style of M/s Lifeline Multi Specialty Hospital at Barnala. During the course of survey, the Assessee not only surrendered Rs.1.50 cores but also explained the different components of the surrendered amount. The ld.
131-Chd-2023 – Shri Abhishek Bansal, Barnala 10 Counsel further stated that there was due application of mind by the Assessing Officer and he referred to the extract of the statement in which it has been stated by the Assessee that the only source of income was from the hospital and there was no other source of income and the income was offered from same source. It was apparent from the assessment of the Assessee. It is also evident that income so offered is over and above the normal business income from the same profession. The ld. Counsel also referred to the reply of the Assessee filed during the course of assessment which indicated that the income surrendered during the survey was only from the same profession as per the regular books of account and no other source of income has been noticed during the survey. As there was no concealed sources of income, the Counsel has stated that the Assessing Officer duly applied his mind during the course of assessment proceedings and taxed the income surrendered at normal rate and therefore, the assumption of jurisdiction u/s 263 by the ld. PCIT on this issue (applicability of Section 115BBE of the Act) is bad in law.
16. The ld. DR relied on the order of the ld. Pr. CIT.
In support of his arguments, the ld. Counsel of the Assessee relied on the order of the Chandigarh Bench of the ITAT in the case of 131-Chd-2023 – Shri Abhishek Bansal, Barnala 11 ‘Surender Kumar and Others vs. PCIT’, to 400/Chd/2022, order dated 30.12.2022 and in the case of ‘Gandhi Ram, Sangrur Vs. PCIT’, ITA No. 121/Chd/2022, order dated 4.8.2021. In the case of ‘Surender Kumar and Others vs. PCIT’, (supra), the Chandigarh Bench of the Tribunal has given the finding as under:- “10. We have considered the rival contentions and have gone through the record. As per the provisions of Section 115BBE of the Act, the income tax on income referred to in Section 68 or Section 69 or Section 69A or Section 69B or Section 69C or Section 69D are chargeable to tax at a higher rate. Now a perusal of the provisions of Section 68, 69, 69A, 69B, 69C and 69D would reveal that those provisions are attracted in respect of the credits, cash, expenditure, investment etc. regarding which the assessee offers no explanation about the nature and source thereof. It is to be pointed out that the income is to be assessed u/s 68 wherein any sum is found credited in the books, of which the assessee offers no explanation about the ‘nature and source thereof’ or the explanation offered by him is not found satisfactory by the AO. Section 69 is attracted to the unexplained investments of which the assessee offers no explanation about the ‘nature and source’ thereof or the explanation is not found satisfactory. Similarly, Section 69A is attracted in case of money, bullion, jewellery or other valuable articles, Section 69B refers to the investments, Section 69C refers to the expenditure and Section 69D refers to the amount borrowed or repaid on hundi. The provisions of these Sections are attracted and the income is assessed under these Sections, if, the assessee fails to give the 131-Chd-2023 – Shri Abhishek Bansal, Barnala 12
explanation about the ‘nature and source’ of such undisclosed income. The ld. PCIT in our view, in this case has confused himself between the ‘undisclosed income’ and the word ‘unexplained income’. As per provisions of Section 68 to 69D are attracted in respect of the undisclosed income but the condition for assessing such income under the said provisions is that the assessee has either failed to disclose the nature and source of such income or the AO does not get satisfied with the explanation offered by him…….” “….that since the same was undisclosed income of the assessee which was surrendered by the assessee during the survey action and therefore, the same was to be assessed under the provisions of Section 68 to 69D of the Act. The above reasoning of the survey party is not in accordance with the relevant provisions of the Act. Therefore, we do not find any justification on the part of the ld. PCIT in invoking the Revisionary jurisdiction in this case…..”
The other case cited by the ld. Counsel is of ‘Gandhi Ram vs. PCIT’, (supra) wherein, the Tribunal has held as under:- “7. We have heard the rival contentions and purused the material available on record. For exercise of jurisdiction u/s 263 of the Act, the order passed by the Assessing officer should satisfy the twin tests of being erroneous as well as prejudicial to the interest of the Revenue. As per ld PCIT, 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 and the income referred therein is chargeable to tax at rate prescribed under section 115BBE Act. As per ld PCIT, the Assessing officer has failed to enquire about the source of income in order to assess the income under the appropriate head of income or the relevant deeming provisions and accordingly, the order so passed has been held as erroneous and prejudicial to the interest of Revenue. Thereafter, the ld PCIT has gone ahead
131-Chd-2023 – Shri Abhishek Bansal, Barnala 13 and held that income of the assessee is income referred in the aforesaid deeming provisions and chargeable to tax under section 115BBE of the Act.
8. 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.
Now, coming to the findings of ld PCIT that the Assessing officer has failed to enquire about the source of income in order to assess the income under the appropriate head of income or the relevant deeming provisions of the Act. In this regard, we find that there are documents in form of statement of the assessee recorded u/s 133A during the course of survey and the surrender letter dated 21.10.2016 submitted
131-Chd-2023 – Shri Abhishek Bansal, Barnala 14 by the assessee at the time of survey and these documents are very much part of the records which is available at the time of assessment as well as at the time of examination by the ld PCIT. In the statement so recorded at the time of survey, the assessee was specifically asked about the source of his income and in response, he has submitted that he is getting income from Gandhi General Store and share of profit from partnership firm, M/s Gandhi Soap and Detergent Industries. Thereafter, in respect of excess cash found at the time of survey, the assessee was asked a specific question to explain the difference and in response, he has submitted that the difference or the excess cash is on account of sales realization during the previous days which he offers over and above his normal business income. Thereafter, in respect of difference in stock of Rs 25,50,000/-, he has submitted that the difference is on account of higher gross margins in the earlier period and which he surrenders in addition to his normal business income. Similar questions have been raised regarding nature and source of cost of construction of building amounting to Rs 25,00,000/- and advances given to various persons. We therefore find that the assessee has been asked specific questions regarding not just the discrepancy but the nature and source thereof during the course of survey and it is clearly emerging that the source of such income is his business income. Further, the said fact is corroborated by the surrender letter dated 21.10.2016. Apparently, the ld PCIT has failed to take into consideration these documents which are very much part of the records. Following the surrender so made, the assessee has offered the additional income as business income in his return of income and paid due taxes thereon. During the course of assessment proceedings, the Assessing officer has specifically taken cognizance of these facts, as apparent on the face of the assessment order, that assessee has voluntarily surrendered Rs 1,02,00,000/- over and above the normal business income in his return of income and has accordingly not drawn any adverse inference. We therefore find that the Assessing officer has duly taken cognizance of statement of the assessee recorded during the course of survey, the surrender letter and the return of income, and 131-Chd-2023 – Shri Abhishek Bansal, Barnala 15 after examination thereof and due application of mind has not drawn any adverse inference and income has been rightly assessed under the head “business income”. In light of the same, we are of the considered view that the order so passed by the Assessing officer cannot be held as erroneous due to lack of enquiry or for that matter, requisite enquiry on the part of the Assessing officer. Where the Assessing officer after due appreciation of facts and circumstances of the case, assessed the income under the head “business income” and didn’t invoke the deeming provisions as so suggested by the ld PCIT, we do not believe that there is any error on part of the Assessing officer and the order so passed by him cannot be held as erroneous. As we have stated above, the ld. PCIT without recording any specific findings as to the applicability of deeming provisions has gone ahead and held that the deeming provisions are applicable in the instant case. Even for sake of argument, where such a view is taken on face value, it would be a case where a different view has been expressed by the ld PCIT, however, the same doesn’t lead to the conclusion that the view taken by the Assessing officer as erroneous as the AO has taken into consideration the entirety of facts and circumstances of the case, the explanation offered by the assessee during the course of survey regarding the source of such income and thereafter, has assessed the income under the head “business income”. The view so taken by the Assessing officer is after due application of mind and therefore cannot be held as unsustainable in the eyes of law. In the facts and circumstances of the present case, where there are specific questions asked during the course of survey regarding the nature and source of income and which has been adequately responded to by the assessee and thereafter acted upon in terms of disclosing the income in the return of income under the appropriate head of income and where the same is duly examined and taken into consideration by the Assessing officer during the course of assessment proceedings, the order so passed by the Assessing officer cannot be held as erroneous in nature.
10. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, the order so passed by 131-Chd-2023 – Shri Abhishek Bansal, Barnala 16
the ld PCIT u/s 263 cannot be sustained in the eyes of law and is hereby set-aside and that of the Assessing officer is sustained.
In the result, the appeal of the assessee is allowed.”
In view of the discussion made above, the revision order passed by the ld. PCIT u/s 263 of the Act, in our view has been passed by wrongfully exercising the jurisdiction u/s 263 of the Act and the same is, therefore, held as bad in law and is accordingly, quashed.”
The ld. DR relied upon the order of the ld. CIT(A) and argued that particularly the surrendered loans and advances to the tune of Rs. 1 Crore was required to be taxed as per the provisions of section 115 BBE as the source of income was not explained properly. He also referred to the judgement of the Hon'ble Jurisdictional High Court in the case of ‘CIT vs. Khushi Ram & Sons Foods (P) Ltd.’, in of 2015 dated 29.7.2016.
The ld. Counsel for the Assessee has cited two more cases of Chandigarh Bench of the Tribunal, i..e Famina Knit Fab, ITA 745 & 1134/Chd/2016 and he has stated that the judgement of ‘CIT vs. Khushi Ram & Sons Foods (P) Ltd.’, (supra) has already been considered and analyzed by various judgements of the Chandigarh Bench of the ITAT and argued that as per cited judgement in the case
131-Chd-2023 – Shri Abhishek Bansal, Barnala 17 of ‘Gandhi Ram vs. PCIT’ (supra), there cannot be an automatic application of sections 68 / 69A / 69B of the Act.
We have considered the findings of the ld. PCIT in his order dated 25.03.2022 passed u/s 263 of the I.T. Act, 1961 and the case laws put forth by the ld. DR. We have also considered the reply filed by the ld. counsel of the Assessee on this issue and various case laws passed by the Chandigarh Bench of the Tribunal (supra) on the same issue. We find that the Assessee has not only surrendered its undisclosed income of Rs. 1.50 Crores during the survey but at the same time he has also pointed out different other heads under which such undisclosed income fall. Most importantly, the Assessee has categorically stated in his statement recorded during the course of survey operation that the only source of his income is from the running of a hospital, namely Lifeline Multi Speciality Hospital at Barnala and there is no other source of income. Even the Department did not find any other source of income of the Assessee during the survey nor in the post-survey investigation any other source of income has been brought on record or mentioned in assessment order or PCIT’s order passed u/s 263 of the Act.
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22. We, therefore, are of the view that the applicability of sections 68 or 69A / 69B of the Act may not be relevant sections for taxing the income of the Assessee and accordingly the applicability of special provision of section 115BBE of the Act is not applicable here. So Pr. CIT’s order passed u/s 263 in this case is quashed. Accordingly, the Assessee succeeds on the issue.
In the result, the Assessee’s appeal is partly allowed.
Order pronounced on 13.06.2024.