Loading judgment…
No AI summary yet for this case.
Order PER PARESH M. JOSHI, J.M. : This is an appeal filed by the Assessee under section 253 of the Income Tax Act, 1961 as they are aggrieved by the Order No. 10782/2018-19/IT/CIT(A)- 5/Ldh/2021-22 dt. 21/08/2023 of the Ld. CIT(A) passed under section 250(6) of the Income Tax Act, 1961. The document identification number provided at last page of the said order dt. 21/08/2023 is ITBA/APL/M/250/23-24/1055256806(1) which is hereinafter referred to as the “impugned order” passed in the first appellate proceedings under the Income Tax Act, 1961. Factual Matrix 2. That Assessee are both manufacturer’s and traders of cattle feed at Khanna, Punjab during the assessment year under consideration i.e; 2019-20 corresponding to the previous year 01/04/2018 to 31/03/2019.
That on 10/10/2018 a survey under section 133A of the Income Tax Act, 1961 was carried out by the Income Tax Authorities.
That it is contended during the said survey proceedings no incriminating material was found at the business premises of the assessee. All the books were found to be in order. Stock of raw material and finished goods were also found to be in order. However Department impounded a challan pad from the business premises on which the trade recoveries on the account of sale of cattle feeds amounting to Rs. 73,70,480/- were noted down and that there was difference in cash in hand vis a vis books and physical counting of Rs. 4,38,870/- found at the business premises during the survey.
It is contended that in order to buy peace of mind and to avoid any kind of litigation, the assessee made a surrender of income to the tune of Rs. 73,70,480/- on account of trade recoveries and Rs. 4,38,270/- on the account of excess cash in the business income as per surrender letter dt. 10/10/2018.
It is further averred that the assessee case was taken up for the scrutiny assessment by DCIT/ACIT, CC-1, Ludhiana, Punjab and the assessment order in respect of the surrendered income as income from other sources invoking the provisions of Section 69 / Section 69A of the Income Tax Act, 1961 read with Section 115BBE was done / made.
The assessee then against the assessment order passed by DCIT / ACIT filed an appeal before the learned CIT(A) Ludhiana. The learned CIT(A) allowed relief to the assessee on the account of trade recoveries considering that to be taxed as business income of the assessee but on issue of cash surrendered Ld. CIT(A) was not in the agreement with the contentions of the assessee and agreed / conquered with the findings of the Ld. Assessing Officer as income from other sources as per 69/69A of the Income Tax Act, per impugned order.
The Assessee being aggrieved by the impugned order of Ld. CIT(A) is before us only on surrender of cash amounting to Rs. 4,38,870/- as the same was not considered towards business income of the assessee. Thus they are aggrieved by part order of Ld. CIT(A).
In appeal before us which is second appeal by virtue of Section 253 of the Income Tax Act, the issues in light of above factual backdrop the assesse has raised grounds of appeal
in Form No. 36:
1. That invoking the provisions of Sec 69A on the difference of cash found during the course of survey amounting to Rs. 4,38,870/- and taxing the same as per provisions of Sec 115BBE is against the facts and provision of law, so the demand created by Assessing Officer and confirmed by the CIT(A) should be deleted and same should be taxed as normal business income only.
2. That the Assessing Officer and CIT(A) completely ignore the written submission filed during the course of assessment as well during appellate proceedings and documents impounded during the course of survey and taxed the difference of cash from books of accounts amounting Rs. 4,38,870/- as per provisions of Sec 69A read with Sec 115BBE of Income Tax Act, which is against the provisions of Law, so the demand created by AO and confirmed by CIT(A) o this account should be deleted and the same should be taxed as normal business income as shown by assessee while filling his ITR. 3. The provisions of Sec 69A and 115BBE are not applicable to facts of our case specially when the surrender was made in the business income only and assessee is not doing anything else other then this business, so demand created by AO is against the provisions of law and should be deleted. 4. That the assessee seeks the permission to alter, add, amend any of the grounds of appeal.
10. We also record as below the core finding of Ld. AO in the assessment order dt. 26/09/2021 on ground challenged before us:
In view of the above discussion, I am of the considered view that the excess cash of Rs. 4,38,870/-, and receivables/debtors of Rs.73,70,480/-being unaccounted/unexplained is not taxable under the head business income unless the same is duly corroborated by bills/ challans/transport details/labour charges/debit/credit notes/vouchers/receipts, funds being received/ transferred through banking channels, etc. even though not recorded in books till the date of survey. In the case in hand, no such details have been found available on the record which substantiate the claim of the assessee. Accordingly, after examining the evidences and the materials on the record, the surrendered income of Rs. 78,09,350/- being unaccounted/unexplained cash and receivables being not found duly corroborated by bills /challans / transport details / labour charges / debit / credit notes/vouchers/receipts, funds being received/transferred through banking channels, etc., and in the absence of complete details of buyers and the year to which the receivables relate, the unaccounted/ unexplained cash is to be assessed under Section 69A of Income Tax Act, 1961 and unaccounted / unexplained receivables to be assessed u/s 69 of the Income Tax Act, 1961. Further the surrendered income of Rs. 78,09,350/- is to be taxed as per the provisions of section 115BBE of the Income Tax Act, 1961. Penalty proceedings u/s 271AAC of the Act on account of unexplained/ unaccounted cash and unaccounted/unexplained receivables are initiated separately.
11. We also record as below the core finding of Ld. CIT(A) in the impugned order dt. 21/08/2023 on ground challenged before us:
Hence, the action of the AO in applying the rate as prescribed u/s 115BBE on the surrendered income included in the ITR, treated by the AO as income u/s 69A in the assessment order, is found sustainable. Keeping in view the above facts and discussion, it is held that the AO has' rightly treated the surrender of Rs. 4,38,870/- on account of unexplained/unaccounted cash found during the survey as deemed income u/s 69A and to be taxed as per provisions of Section 115BBE of the Income Tax Act, 1961 and hence the same is confirmed
We have perused the surrender letter dt. 10/10/2018 and we reproduce the same as below:
To, Date 10/10/2018 The Joint Commissioner of Income Tax Range Khanna, Sub: Additional Income to be reported / declared for the current financial year 2018- 19. Sir, Reference to above cited subject it is hereby submitted that a survey under section 133(A) has been conducted on our business premises, by a survey team comprising of the income tax officers and staff of range Khanna. During Survey two pads containing 18 slips (1. Kanchan Notepad containing 11 slips, 2. Kanchan Duplicate book containing serial numbered slips 1 to 7) totalling to Rs. 73,70,480/- were found, these pads containing 18 slips are the amount of receivable trade recoverable and these relates to our business. These are the recoverable pertaining to the financial year 2018- 19 and are yet to be updated in our books of accounts. Further there is also difference in cash as per physical verification and the cash in hand as per books amounting to Rs. 4,38,870/-. The said cash also relates to our business and is yet to be updated in our account books. However to avoid any dispute and litigation, I hereby declare that the said amounts are in any case to be included in the income for the current financial year and I hereby undertake to report the same as income for the current financial year in the Income Tax Return for the assessment year 2019-20 over and above my normal income. I also undertake to pay the due taxes thereon at the normal tax rate for the current assessment year. The due taxes shall be deposited well in advance. Thanking you Yours faithfully Record of Hearing 13. (i) The hearing in physical mode took place before us on 30/05/2024 when Ld. DR appeared and stated Ld. CIT(A) has allowed the appeal of the assessee partly save and except the cash component of Rs. 4,38,870/-. She contended that order of Ld. CIT(A) is correct in law and that the same should be upheld. The assessee however has filed written submission for hearing on 30/05/2024 and has requested the Tribunal to decide present appeal based on written submission so filed. We have perused the written submission of the assessee and we notice as below: “Whether difference of Cash as per Trial Balance and Physical counting surrendered during survey is to be taxed as Business Income or other sources Income as per Sec 69/69A of Income Tax.” Especially when it was specifically stated in surrender letter that discrepancy in cash relate to business only and further identity of the person from whom cash was received was also provided during assessment.”
In support of aforesaid the assessee has contended that during the course of survey, a surrender letter (supra) dt. 10/10/2018 was given. They have laid emphasis on following: “ further there is also difference in cash as per physical verification and the cash in hand as per books amounting to Rs. 4,38,870/-. The said cash also relates to our business and is yet to be updated in our account books”.
Further emphasis is laid on “ I also undertake to pay the due taxes thereon at the normal tax rate for current assessment year” (ii) The assessee has also placed reliance on statement of Jatinder which was recorded on 10/10/2018 wherein it clearly pointed out to the Department that excess cash is on account of business income only and nothing else. The reason for excess of Rs. 4,38,870/- the adjudged amount is given in a commercial way which shows source is related to business income only. (iii) Further it is contended that if Department is to accept surrender letter then whole of it’s contents should be accepted or liberty is with the Department to reject it. Reliance is placed on CIT Vs. Smt. Sudarshan Gupta (2008) 10 DTR (P&H) 184 which is a judgement of jurisdictional High Court in support. (iv) Moving forward they have contended in their written submission that everything was verified by Ld. AO and no defects were noticed. (v) The assessee has contended that lower authorities have not given any weightage whatsoever to material evidences which they had produced in respect to excess cash of Rs. 4,38,870/- adjudged which were against despatches made to one Shri Bhup Singh, Jasvir Singh and Ganesh Verma where by the goods were delivered to them against challans and the amount received and reflected in book as additional income against cash difference on account of business only. It has been there contentions that challans are issued first with condition that if accepted and cash paid then only final sale bill would be produced / generated. It is only thereafter entries made in books of account. Aadhar Card, Challans, entries are in books of account nature of goods supplied, identify of person, etc all were disclosed before lower authority and same were just not considered. Sources is sufficiency explained as business income consequently invocation of Section 69A r.w.s 115 BBE is wrong and illegal, reliance is placed on few orders of ITAT including of Chandigarh Benches. (vi) Finally it is contended that impugned order should be set aside in totality in so far cash of Rs. 4,38,870/- is concerned which was found to be in excess in the assessment proceedings before Ld. AO and Ld. CIT(A) under section 69A / 115BBE. Finding & Conclusions
We now in view of foregoing decide legality, validity, proprietary of the impugned order of the of the Ld. CIT(A) dt. 21/08/2023 which has upheld and sustained the findings of the Ld. AO on the issue of excess cash of Rs. 4,38,870/- found during the course of survey proceedings and later adjudged and adjudicated as falling within section 69A of the Act r.w.s 115BBE.
We reproduce below the provision of Section 69A of the Income Tax Act, 1961 which read as under: [Unexplained money etc. “ 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 money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the AO, satisfactorily 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 ] 15.1 We at the outset lay emphasis on few aspect of Section 69A which assessee on bare reading of it is to follow and or meet alongwith our considered view on it: i) Assessee must be found to be owner of any money → which is established in this case undisputedly. ii) Such money is not recorded in the books of account , if any, maintained by him for any source of income → which on date of survey by surrender letter dt. 14/10/2018 and statement of Jatinder dt. 14/10/2018 is identified as from business income, in so far as source is concerned. iii) Assessee offers no explanation → explanation is offered as that of business income i.e; surrender letter, statement, challans, when sale bill is generated, when accounting is done in books of accounts, name and identity of person and to whom goods were delivered, statement of account – an extract evidencing challan, amount, name of person from whom received etc. Whether above explanation satisfactory or not in opinion of AO → This iv) satisfaction of explanation is most important determinative factor. Fiscal proceedings are quasi judicial in nature. Hence satisfaction cannot be arbitrary, or capricious it must be a reasonably determined and much depends on material on record and same must be read in the context and true meaning ought to be discovered out of it. It requires just fair and reasonable way. Material cannot be ignored, satisfaction recorded should be speaking with reasons. Ignoring material and not examining it is just ruled out. Be that as it may, after carefully perusing papers and proceedings of the case very minutely including orders of the lower authority. We hold that excess amount of cash of Rs. 4,38,870/- cannot fall within the mischief words under section 69A of the Income Tax Act, for more than one reasons. The assessee herein is admittedly a business enterprise in khanna in Punjab. They deal as manufacturer’s of high class calf starter, heifer meal cattle feed, cattle feed etc. They are both manufacturer’s of cattle feed machineries and supply cattle feed too i.e; traders. A survey took place on 14/10/2018 at their business premises which was followed by a surrender letter dt. 10/10/2018 which in so far as present case is concerned of Rs. 4,38,870/-, found to be in excess, the following was recorded in it “ Further there is also difference in cash as per physical verification and the cash in hand as per books amounting to Rs. 4,38,870/-. The said cash also relates to our business and is yet to be updated in our account books”. It is further recorded in the said letter of surrender that “ However to avoid any dispute and litigations, I hereby declare that the said amounts are in any case to be included in the income for the current financial year and I hereby undertake to report the same as income for the current financial year in the Income Tax Return for the assessment year 2019-20 over and above my normal income. I also undertake to pay the due taxes thereon at the normal tax rate for the current assessment year.” This surrender letter dt. 10/10/2018 on bare reading of it describes the source of fund/cash which in the proceedings below i.e; AO and CIT(A) is / are found to have been accepted by the lower authorities. It speaks of business income on very day of survey i.e; 10/10/2018 . We therefore hold that perse reading of this surrender letter dt. 10/10/2018 establishes the source as that of business/business income. The surrender letter perse at least confirm that difference in cash in hand as per books of accounts and physical counting is related to business and yet to be updated in books of account of assessee. (v) Moving forward, statement of partner of the assessee Shri Jatinder dt. 10/10/2018 further corroborates surrender letter dt. 10/10/2018 which is on oath, administered that the difference in cash is due to non updation of books of accounts maintained by them in regular course of business and excess cash found during survey is having close and proximate relationship with business of the firm. To be precise we observe and notice that in statement dt. 10/10/2018 the answer to Question 7 is “ the discrepancy could be due to non updation of books. However I hereby undertake to include the same in the income of the firms for the current year over and above the income for the preceding year” meaning thereby that excess is of current year and is not accumulated on from previous year/years. Excess is thus attributed to business income of the year in question and nothing else. It will be out of place to mention that different business establishment uses different method for updating their books of account as per practice and convenience of the business. There is no express stipulation that as soon as business proceeds are realised the same should be recorded or updated forthwith in books of account. It is also required to be noted that in books of account of M/s J.R Agrovet the assessee the amount of Rs. 4,38,870/- is expressly shown against business of the assessee firm alongwith dates of challans and with names of their clients. We observe that supporting in respect of such books of account were shown to lower authorities with Aadhar Card details of their clients. We further observed that same were not further inquired into by the Department. The details have been provided to us in paper books. (vi) The Ld. CIT(A) finding briefly can be summarised as follows alongwith our corresponding findings: a) The contention of assessee on the issue of applicability of the provisions of section 69A to the unexplained cash are not found acceptable as no source for the same could be explained. We do not subscribe to this view in view of what we have held supra. The source of cash /excess fund as found by us on the basis of surrender letter dt. 10/10/2018; statement on oath of partner of assessee firm dt. 10/10/2018, extract of books of account, giving date of challans, name and identity of buyers with their Aadhar Card, no inquiry done by AO/ or CIT(A) or both on this are all acceptable contentions showing enough explanation within the meaning of section 69A to officers of the Department to get convinced satisfactorily. The linkage is established with business income of the assessee and that too directly by giving genuine explanation supra including methodology adopted by them with regard to time when such booking or updation in accounts are done.
b) Merely having a known business activity is not sufficient perse to render any explained income as business income. In the present case source is described and Department ought to have verified whether transactions in question and credit worthiness of persons (buyers of goods) are all genuine or not. Upon assertion by assesse to establish a fact the burden of proof shifts to Revenue to find out whether such assertions is / are correct or not of the assessee. Failure is of Department and not of assessee, we hold source, nexus, identity etc were asserted by assessee but Department failure to move forward to ascertain the truth and genuineness of transactions no fault of assessee can be found with it. The details when, how and from whom such income was derived is from page 50 to 60 of Paper Book which was not verified by the Department while submitting Paper Book it is certified by the assessee that paper book does not contain any new evidence or documents and that all the documents mentioned in paper book have already been furnished before CIT/AO. The paper book was served on Ld. DR too but in counter nothing is no record or by contention or explanation to rebut the same and above all the Ld. AO and Ld. CIT has not dealt with this crucial aspect, in addition to what we have observed and held (supra). We also hold disallowing set off consequentially is incorrect and so also provisions of Section 115BBE as material ingredients of Section 69A are all met and explanation offered is satisfactory, therefore deeming provision fails.
In brief we hold that cash of Rs. 4,38,870/- found in excess is business income of the assesse for relevant A.Y. 2019-20 corresponding to previous year 2018-19 and that upon cumulative analysis of above paras we have no hesitation in holding that the excess amount of Rs. 4,38,870/- partakes the character of business income and rightly declared. Order 17. Before parting, we observe that above material as analysed by us as a whole ought to have been analysed by Tax Authorities as assessee had said at what point of time books are updated and sales are recorded. According to practice followed by them first the goods are despatched on challans as many times goods comes back and so also payments consequently does not come. When goods do not come back and payments are received a sale bill is generated and later accounted for in the books of account as per their convenience. This important